The Government of India has brought the trading of cryptocurrency and digital assets within the ambit of the Prevention of Money Laundering Act (PMLA) through a gazette notification.
- This means that any financial wrongdoing involving cryptocurrency assets can now be investigated by the Enforcement Directorate.
Key points
- In a gazette notification dated March 7, the Ministry of Finance’s Department of Revenue stated that activities related to the trading of cryptocurrency and digital assets would be covered within the ambit of PMLA.
- These include an exchange between virtual digital assets and fiat currencies, 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 such assets, and participation in and provision of financial services related to an issuer’s offer and sale of a virtual digital asset.
What are virtual digital assets?
- The notification said that ‘virtual digital asset’ (VDA) shall have the same meaning assigned to it in Clause (47A) of Section 2 of the Income-Tax Act, 1961 (43 of 1961).
- VDA has been defined to mean any information or code or number or token generated through cryptographic means or otherwise. And which can be transferred, stored or traded electronically.
- The definition of VDA also specifically includes non-fungible token, i.e. NFT, or any other token of similar nature, by whatever name is called.
Non-fungible token
- An NFT is a digital asset that exists on a blockchain, allowing anyone to verify its authenticity and who owns it.
- Digital art, images, videos, text, music and even virtual real estate and in-game items can be bought and sold as NFTs.
About cryptocurrency
- A cryptocurrency is a digital currency, which is an alternative form of payment created using encryption algorithms.
- Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions updated and held by currency holders.
- The use of encryption technologies means that cryptocurrencies function both as a currency and as a virtual accounting system.
- To use cryptocurrencies, you need a cryptocurrency wallet. Cryptocurrencies don’t have a central issuing or regulating authority, instead using a decentralized system to record transactions and issue new units.
- Cryptocurrency is stored in digital wallets. The first cryptocurrency was Bitcoin, which was founded in 2009 and remains the best known today.
