In March 2023, the Finance Ministry extended the Prevention of Money Laundering Act (PMLA) to include Virtual Digital Assets (VDAs). It involves crypto businesses to comply with AML regulations and Know Your Customer (KYC) norms. This move aimed to prevent the misuse of cryptocurrencies for illicit activities.
In March 2023, the Finance Ministry extended the Prevention of Money Laundering Act (PMLA) to include Virtual Digital Assets (VDAs). It involves crypto businesses to comply with AML regulations and Know Your Customer (KYC) norms. This move aimed to prevent the misuse of cryptocurrencies for illicit activities.
Additionally, a 1% tax deducted at source (TDS) was introduced for every crypto transaction. It is implied on transfers of cryptocurrency assets that occur on or after July 1, 2022, for an amount of Rs.50,000 or Rs.10,000.
The Securities and Exchange Board of India (SEBI) proposed a multi-regulator framework for overseeing cryptocurrency activities, reflecting the complexities of the market. This approach involves multiple regulatory bodies, including the RBI and SEBI, to ensure comprehensive oversight.
The stringent regulatory measures have had a mixed impact on the cryptocurrency industry in India. On one hand, they have brought a level of legitimacy and stability to the market, potentially enhancing investor confidence and protecting consumers from fraud and market manipulation. On the other hand, the high tax rates and strict compliance requirements have been seen as deterrents to innovation and growth.
Many industry stakeholders argue that the 30% tax on crypto profits and the 1% TDS are particularly restrictive. These measures not only reduce the profitability of crypto investments but also create significant administrative burdens for traders and exchanges.
Prime Minister Narendra Modi has emphasized the need for a balanced approach, recognizing the potential of blockchain technology and cryptocurrencies to drive economic growth and innovation. However, achieving this balance requires ongoing dialogue between regulators, industry stakeholders, and the broader community to ensure that regulations are fair, transparent, and conducive to innovation.