In a move to tighten crypto regulations in the country, the government has announced all types of crypto businesses, including trading, safekeeping and related financial services, will now come under the Prevention of Money-Laundering Act, 2002.

In a notification, the department of revenue under the finance ministry said any 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 would be covered under the said Act.

Safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets; and the participation in and provision of financial services related to an issuer's offer and sale of a virtual digital asset will also be covered under the same law, the notification issued on March 7 said.

The Centre is yet to come up with comprehensive legislation on cryptocurrencies, though it has taken some steps to curb its misuse of illegal activities. The current move will give law enforcement agencies more powers to crack down on money laundering via crypto routes.

Earlier, the government had announced a 30% tax on crypto in the Union Budget 2022. It also said a 1% TDS will also be held back each time an investor sells a virtual digital asset over a certain threshold. The new rule mandates a person, who is responsible for paying any resident any sum by way of consideration for the transfer of a virtual digital asset (VDA), to deduct an amount equal to 1% of such sum as income tax.

Despite the growing crypto industry in India, the Reserve Bank has cautioned against risks associated with virtual currency. The RBI in December 2022 said under India’s G20 presidency, one of the priorities for the government is to develop a framework for global regulation, including the possibility of prohibition of unbacked crypto assets, stablecoins and DeFi.

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