The government has imposed money laundering provisions on cryptocurrencies or virtual assets as it looks to tighten oversight of digital assets.
- In a gazette notification, the Finance Ministry said the anti-money laundering legislation has been applied to crypto trading, safekeeping and related financial services.
- 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.
About cryptocurrencies –
- Cryptocurrencies are digital or virtual currencies in which encryption techniques are used to regulate the generation of their units and verify the transfer of funds.
- These currencies operate independently of a central bank.
- The economic transactions underlying cryptocurrency are decentralised, distributed and disbursed.
- The first and most famous cryptocurrency, bitcoin was introduced in 2009.
- Technology —
- Most cryptocurrencies of the world are built on blockchain technology.
- Blockchain is a decentralised and distributed database on a peer-peer network which works on the basis of a consensus mechanism involving every node (computer) on the network.
- Blockchain is a peer-to-peer distributed network that records a public history of transactions without actually recording identities of the parties or the transaction details.
About the Prevention of Money Laundering Act, 2002 –
- PMLA was enacted to curb money laundering and to provide for seizure of property derived from money-laundering.
- Objective –
- To prevent and control money laundering.
- To confiscate and seize the property derived from, or involved in, money laundering.
- To provide punishment for the offense of money laundering.
- To appoint the Adjudicating Authority and Appellate Tribunal to deal with the matter connected with money laundering.
- To put obligations on banking companies, financial institutions, and intermediaries to maintain records.
- To deal with any other issue connected with money laundering in India.
- The act has undergone various critical changes from time to time in order to give itself more strength and meaning. The latest amendment was done in 2019.
- For example, the definition of Money Laundering under the act was broadened via amendments done in 2012 and again in 2019.
- PMLA empowers certain officers of the Directorate of Enforcement to carry out investigations in cases involving the offence of money laundering and also to attach the property involved in money laundering.