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The Union Ministry of Finance has included virtual digital assets (VDAs) or cryptocurrencies under the Prevention of Money Laundering Act (PMLA) through a gazette notification. This means that activities related to cryptocurrencies will be monitored to prevent money laundering and other financial crimes.

The lack of transparency in cryptocurrency transactions makes it difficult to establish a clear trail, so the responsibility is being placed on cryptocurrency markets to bring transparency to trading.

Compliance is becoming increasingly important in the crypto industry to protect investors and the interests of the country.

Governments and regulators worldwide are paying closer attention to the crypto industry, and this move is expected to aid investigative agencies in taking action against crypto firms.

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Cryptocurrency is a digital or virtual currency that uses cryptography for security and is decentralized, meaning it is not controlled by any government or institution.

Transactions with cryptocurrency are recorded on a public digital ledger called the blockchain, which is maintained by a network of computers around the world.

Cryptocurrency is acquired through mining, which involves using computer power to validate and record transactions on the blockchain.

To use cryptocurrency, individuals or businesses must first acquire a digital wallet that stores their public and private keys, which are used to send and receive cryptocurrency and verify transactions on the blockchain.

Under the PMLA Act, virtual digital asset (VDA) service providers must follow reporting standards and KYC norms like other regulated entities such as banks and payment system operators.

The activities covered under the PMLA Act include exchanging VDAs for fiat currencies, exchanging between different forms of VDAs, transferring VDAs, safekeeping/administering VDAs, and providing financial services related to VDA offers and sales.

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The Prevention of Money Laundering Act (PMLA), 2002 is a law in India that criminalizes money laundering, which is the conversion or misrepresentation of illegally obtained money.

The PMLA was enacted in response to India's commitment to combat money laundering, as stated in global agreements such as the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988 and the Forty Recommendations of the Financial Action Task Force on Money Laundering, 1990.

The PMLA applies to all persons, including individuals, companies, and associations.

The concerns related to the cryptocurrency industry in India include various factors. The lack of time given to entities to comply with new regulations is a significant worry.

Additionally, the absence of a central regulator for the cryptocurrency industry could lead to direct dealings with enforcement agencies like the Directorate of Enforcement (ED), causing further confusion and uncertainty.

According to The Hindu report, since the announcement of the tax regime in the Union Budget in February 2022, many Indian VDA users have shifted to foreign counterparts.

Indian crypto traders have moved over USD 3.8 billion in trading volume from local exchanges to international crypto platforms. This trend could result in a negative impact on tax revenues and decrease transaction traceability, which is against the central goals of the current policy architecture.

Further, the VDA tax architecture's downside impact is likely to accentuate capital outflow and deter international investors, further harming the growth of the cryptocurrency industry in India.

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The legal status of cryptocurrencies in India is somewhat ambiguous. In April 2018, the Reserve Bank of India (RBI) issued a circular prohibiting banks and other financial institutions from dealing with cryptocurrencies. However, the Supreme Court of India overturned this ban in March 2020, stating that it was unconstitutional.

In the Union Budget 2022-23, the Indian government introduced a 30% income tax on gains made from cryptocurrencies but did not proceed with framing regulations. However, in July 2022, the government introduced rules regarding a 1% tax deducted at source on cryptocurrency.

The Indian finance minister has acknowledged the concerns raised by the RBI and has stated that international collaboration would be necessary to effectively regulate or ban cryptocurrencies.

At present, there is no clear legal framework for cryptocurrencies in India, and it remains to be seen how the government will proceed in this regard.

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Bitcoin is legally recognized as a currency only in El Salvador and the Central African Republic. Some countries have acknowledged and regulated certain cryptocurrencies, while others have imposed restrictions.

Japan and South Korea have regulations for cryptocurrency exchanges, while Germany and Switzerland recognize Bitcoin as a legal means of payment.

On the other hand, countries like China and Russia have taken a more cautious approach and imposed limitations on the use of cryptocurrencies.

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Explained: Why Did The Indian Government Bring Cryptocurrency Under The PMLA Act - Indiatimes.com