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On March 7, 2023, the Indian government imposed anti-money laundering provisions on the cryptocurrency sector. Crypto intermediaries will now come under the Prevention of Money-laundering Act, 2002 (PMLA). As per the Act, crypto entities will be obligated to record transaction and client data, monitor compliance, and report suspicious activities while empowering the Enforcement Directorate (ED) to investigate suspected crypto-related financial wrongdoings.
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Indian crypto exchange platforms have been brought on par with banks in terms Know-Your-Customer (KYC) norms and compliance.
Essentially, exchanges are treated as offering a financial product that is liable for misuse under anti-money laundering (AML) norms.
This is a recognition of the growing importance of the sector and the need for accurate activity tracking. This does indicate that the government is not planning to ‘ban’ the sector, as some speculate.
The message from the government seems to be: Invest safe and declare your taxes.
All user records and transactions will be stored for 5 years by exchanges. This will enable retrospective analysis and tracking of money flow by enforcement agencies and allow Income Tax authorities to track IT obligations.
Indian exchanges have been highly compliant so far – but with their own set of practices related to KYC. Now, the direction has been given to the industry to follow a uniform scheme. All exchanges will follow similar procedures for record-keeping and notifying the agencies when required. This move will make Indian crypto platforms official ‘reporting’ players to alert the government to any suspicious transactions. This should strengthen trust among crypto investors and make the ecosystem robust.
Founders of top crypto platforms are seeing the move as a positive step in recognizing the sector and believe that these moves will strengthen collective efforts by exchanges to prevent crypto assets from being misused by bad actors.
Global exchanges do not currently follow Indian local norms with respect to TDS deduction and record keeping. It is always on the investor to ensure that he/she is abiding by local laws. Therefore, we suggest you make your trades in Indian exchanges which have adopted the requisite measures as explained above. These KYC steps are indeed a pain point – but remember that once you cross the first hurdle, it should be smooth. Looking at it another way, if it’s easy for you to create an account and transact instantly on a platform, it is mostly not compliant.
In fact, trade volumes on big Indian exchanges have increased post this announcement (also accounting for the market being bullish). As per the data shared by Crebaco, a crypto market analysis firm, trade volumes for the top Indian exchanges, WaxirX, Coindcx, and Zebpay rose by 125 per cent, 131 per cent, and 108 per cent, respectively in the week after the PMLA was passed.
| Indian Platform |
Increase in trade volume a week after PMLA Act |
| WazirX | 125% |
| Coindcx | 131% |
| Zebpay | 108% |
| Giottus | 21% |
| Bitbns | -23% |
Source: Crebaco, Giottus
The government is now tracking all your trades and can do them retrospectively in the future as well. Declare all your gains in crypto and NFTs in your IT returns.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.