How PMLA rules could affect crypto exchanges in India

Even as crypto exchanges welcomed the Finance Ministry’s decision to bring virtual digital assets (VDAs) in India under the Prevention of Money Laundering Act (PMLA), the move could be a double-edged sword for the industry. Experts said that it will obviously raise compliance burdens for exchanges, but may also lose them customers since they will have to monitor transactions, maintain records and report suspicious activities similar to how banks do. 

VDAs include assets like cryptocurrencies and non-fungible tokens (NFTs) have been losing value for almost a year now due to major firms shutting down and a global economic crisis. This has led trading volumes to drop, directly affecting exchanges’ revenues, since they earn commissions from customers’ trades. Additional reporting metrics could further hurt their customer base too.

“Firms who were already going down that path and trying to be compliant will not see much of a difference. This industry will need to invest further for compliance. Since it is also financial data they will also have to adhere to data regime under the SPDI  (Sensitive Personal Data or Information) Rules of 2011 and also the data protection laws as and when it comes,” said Abhishek Malhotra, managing partner at TMT Law Practice.

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