Explained: Why were crypto intermediaries brought under PMLA

moneycontrol.com:

The Indian government introduced a significant notification on March 7, 2023 bringing into coverage various crypto intermediaries within the purview of the Prevention of Money Laundering Act, 2002 (PMLA). The move comes at a time when many crypto intermediaries are already facing investigations from the Enforcement Directive (ED), the enforcing agency of the PMLA. News reports suggest that over Rs 9 billion has already been attached as proceeds of crime in connection with crypto frauds.

With the notification, the government has specified that a reporting entity (RE) under the PMLA would now include persons carrying out “for or on behalf of another natural or legal person in the course of business” the below-mentioned activities:

(i)   exchange between virtual digital assets (VDA) and fiat currencies

(ii) exchange between one or more forms of VDAs

(iii) transfer of VDAs

(iv) safekeeping or administration of VDAs or instruments enabling control over VDAs and

(v) participation in and provision of financial services related to an issuer’s offer and sale of a VDA

Entities covered

The coverage under the PMLA is borrowed from the definition of Virtual Asset Service Provider (VASP) in the Report of the Financial Action Task Force (FATF) on ‘Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers’ released in October 2021. Since the government has not given a detailed explanation about the entities that will be covered under the PMLA due to the notification, one can usefully refer to the guidance provided in the FATF report in relation to the definition of VASP. From this guidance, it may be gleaned that the following services would now be covered under the PMLA:

- Services provided by