PMLA and crypto

The Prevention of Money Laundering Act, 2002 (PMLA) is India's main anti-money-laundering law. On 7 March 2023, the Finance Ministry issued a notification bringing virtual digital asset service providers under the PMLA as "reporting entities". This covers businesses that exchange VDAs for fiat or other VDAs, transfer them, provide custody or wallets, or offer financial services related to token sales.

As reporting entities, these platforms must register with the Financial Intelligence Unit - India (FIU-IND), verify customers through KYC, maintain transaction records, appoint a principal officer and report suspicious transactions. The rules apply to offshore exchanges serving Indian users too.

In December 2023, FIU-IND issued show-cause notices to nine offshore exchanges, including Binance and KuCoin, for operating in India without registration, and the government asked for their websites to be blocked. Binance later registered and paid a penalty of ₹18.82 crore in 2024. The Enforcement Directorate also uses PMLA powers in crypto fraud investigations.