The government’s Notification dated 7th March clarifies that money laundering laws will apply to cryptocurrencies! - Karma Global
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The government’s Notification dated 7th March clarifies that money laundering laws will apply to cryptocurrencies!


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Karma Management Global Consulting Solutions Pvt. Ltd. one of the top 5 consultancy firms, was established in the year 2004, with headquarters in the business district of Santacruz East, Mumbai, India, and full-scale operation in all the States, having about 200 direct and indirect staff on its roll, is a leading service provider for payroll and payroll compliances, outsourcing, facility services, HR services, Training & Development, Recruitment & Talent Acquisition, Legal and Para legal services, Disputes and Litigation Handling,  Inspection Management and Liaising, Advisory Services, Social, Environment and Vendor Audits, Regulatory Compliances, and Governance.

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The government’s Notification dated 7th March clarifies that money laundering laws will apply to cryptocurrencies!
What does it mean?

The exchange between virtual digital assets and fiat currencies, the exchange between one or more forms of virtual digital assets, and the transfer of digital assets will be covered under money laundering laws.

The safekeeping or administration of virtual digital assets and the participation in financial services related to the offer and sale of virtual digital assets will also be covered.

What is Crypto? Some call it an asset, some call it a financial product. There is no underlying in the case of crypto”, “Anything without any underlying, whose valuation is dependent entirely on make-believe, is nothing but 100 percent speculation or to put it bluntly, gambling,”


What type of crypto transactions will be subject to AML laws in India?

According to the government notification, organizations that trade in virtual digital assets are considered “reporting entities” under PMLA and must keep a record of all transactions, including cash transactions over INR 1 million (US$12,191) for at least five years. Additionally, they are required to keep track of every series of cash transactions that are closely related to one another and that occur within a month, and whose combined value surpasses INR 1 million.


As per the directives, the following transactions will now be subject to PMLA, 2002:

  • The exchange between VDAs and fiat currencies
  • The exchange between one or more forms of VDAs
  • Transfer of VDAs
  • Safekeeping or administration of VDAs or instruments enabling control over VDAs
  • Participation in and provision of financial services related to an issuer’s offer and sale of a VDA


Reserve Bank of India and Government’s statement!

India is yet to finalize legislation and regulations surrounding cryptocurrencies even as the country’s central bank has cautioned against their use multiple times.

The Reserve Bank of India has said that cryptocurrencies should be banned as they are akin to a Ponzi scheme.

Extending India’s money laundering rules to cryptocurrencies will give authorities greater authority in monitoring the transfer of these assets beyond the country’s borders.

The Narendra Modi-led administration, as part of its leadership of the G-20 forum, has been pushing for a wider global agreement on dealing with the risks brought on by cryptocurrencies.

Last month, the Finance Minister told Parliament that India was discussing with the G-20 member countries the need to develop a standard operating protocol for regulating crypto assets.

The FM   said crypto assets and Web3 are relatively new and evolving sectors and require significant international collaboration for any specific legislation on these sectors to be fully effective.

Crypto assets are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation for regulation or for banning can be effective only with significant international collaboration on the evaluation of the risks and benefits and evolution of common taxonomy and standards.

In the Budget for 2022-23, the FM had brought a 30 percent tax on income from transactions in such assets. Also, to bring such assets under the tax net, she introduced a 1 percent TDS (tax deducted at source) on transactions in such asset classes above a certain threshold. Gifts in crypto and digital assets were also taxed. 


What are the global standards for AML legislation concerning crypto?

Global standards for AML laws are set by the Financial Action Task Force (FATF).

Policymakers in FATF member states moved swiftly as a result of the FATF’s publication of cryptocurrency AML Guidelines in 2014, which have been updated several times since.

Most of the FATF’s cryptocurrency AML recommendations have already been legally enacted by the European Commission, the United States Financial Crimes Enforcement Network (Fin CEN), and several other regulatory bodies.

According to the guidelines, the FATF classifies a variety of organizations as VASPs (Virtual Asset Service Providers), including cryptocurrency exchanges, stable coin issuers, and, under certain conditions, some DeFi protocols and NFT marketplaces.

These VASP organizations are responsible for ensuring compliance with AML regulations. VASP’s Compliance Officers must necessitate KYC checks and frequently monitor for suspicious activity to thwart dubious transactions that could be connected to money laundering and terrorism financing.

Additionally, VASPs are required to report suspicious activity to the appropriate regulators and agencies, who are in charge of tracking down illegal conduct employing a wide range of tools, such as blockchain analysis, and evaluating the flow of money.


CONCLUSION –  How has the industry responded to this development ….!

Following the release of the notification, the Crypto Industry has lauded the move. The notification to include VDA transactions under PMLA is a step in the right direction toward recognizing the sector.

It is also reported that it is a positive start toward regulating the cryptocurrency business in India. The requisite KYC, transaction monitoring, etc., must be performed by all cryptocurrency businesses as part of their process.

After this, Indian crypto exchanges will have to report suspicious activity to the Financial Intelligence Unit India (FIU-IND).

The move is in line with the global trend of requiring digital-asset platforms to follow anti-money laundering standards similar to those followed by other regulated entities like banks or stock brokers.

Digital currency and assets like NFTs (non-fungible tokens) have gained traction globally over the last couple of years. Trading in these assets has increased manifold with cryptocurrency exchanges being launched.

However, India till last year, did not have a clear policy on either regulating or taxing such asset classes.


Karma Global is a fully homegrown successful Outsourcing and Labour Laws Organization, operating both with contract employees as well as with permanent types of employees who are placed in numerous locations of global and domestic clients.

Karma Global has traditionally been a dynamic Regulatory Compliance driven organization with an integrated and up to mark the approach to HR Services.

Karma Global has always set its sights on keeping a tab and interpreting the regulatory changes in the manner required by authorities with a focus on the implementation of these new rules coupled with the adeptness to sophisticated technology, which has placed them in the top 5 consulting organizations today as far as HR Service Organization is concerned.

Karma Global’s experts sitting in various offices and catering to over 500 clients are fully intertwined with the workflow and processes that are leading most of its clients to convert their value drivers into the transformation of their businesses and objectives for effective results.

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The greatest satisfaction comes from the outflow of communication to clients for future reviews and analysis of the monthly work done with data visualization tools that surface their activities done by the professional teams of Karma Global in its Corporate Headquarters in Mumbai and Branch Offices in Bangalore, Tamil Nadu, Gurgaon, Gujarat, Pune, etc.


Proprietary blog of Karma Global Tech Management LLC

This blog has been collated and compiled by the internal staff of Karma Global with the knowledge and expertise that they possess, besides adaptation, illustration, derivation, transformation, and collection from various sources, for its monthly newsletter Issue 10 of April   2023 and in case of specific or general information or compliance updates for that matter, kindly reach out to the Marketing Team – /

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