Crypto transactions to come under anti-money laundering laws
Recently, the Government of India has brought the trading of cryptocurrencies and digital assets under the purview of the Prevention of Money Laundering Act (PMLA) through a gazette notification.
- This means that any financial wrongdoing involving crypto assets can now be investigated by the Enforcement Directorate (ED).
- The Department of Revenue, Ministry of Finance, in a gazette notification dated March 7, said that activities related to trading of cryptocurrencies and digital assets would be brought under the ambit of the PMLA.
- This means that exchange between virtual digital assets and fiat currencies; exchange between one or more forms of virtual digital assets; transfer of virtual digital assets; safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets; and participation in and provision of financial services related to an issuer’s offer and sale of a virtual digital asset will fall under the purview of the PMLA Act.
Virtual Digital Asset (VDA)
- The notification further states that ‘virtual digital asset’ (VDA) shall have the same meaning as assigned to it in clause (47A) of section 2 of the Income-tax Act, 1961 (43 of 1961).
- VDA is defined as any information or code or number or token generated through cryptographic means or otherwise that can be transferred, stored or traded electronically.
- The definition of VDA also specifically includes non-fungible tokens, ie NFTs, or any other token of similar nature.
- An NFT is a digital asset that exists on a blockchain, and whose authenticity can be verified by anyone who holds it.
- Digital art, paintings, videos, text, music, and even virtual real estate and in-game items can be bought and sold as NFTs.
What is crypto currency?
- Cryptocurrency is a digital currency, an alternative form of payment created using encryption algorithms.
- Cryptocurrencies operate on a distributed public ledger called a blockchain.
- The blockchain keeps a record of all transactions, updated and conducted by currency holders.
- The use of encryption techniques means that cryptocurrencies act as both a currency and a virtual audit system.
- To use cryptocurrencies, you need a cryptocurrency wallet.
- A decentralized system is used to record cryptocurrency transactions and issue new units, and there is no central regulatory authority.
- Cryptocurrencies are stored in digital wallets. The first cryptocurrency was bitcoin, which was established in 2009 and remains the most popular today.
Source – Indian Express