MoS Finance Answers on Crypto Legalization and Fraud Prevention

MoS Finance Answers on Crypto Legalization and Fraud Prevention

The Minister of State for Finance, Pankaj Chowdhury, replied to questions on the legalization of cryptocurrency and the steps taken to prevent crypto-related fraud in Parliament. "Crypto assets are currently unregulated in India. Frauds relating to crypto are dealt with under existing laws against fraud and cybercrime," the MoS Finance apprised the Lok Sabha, the lower house of the Parliament.

Crypto Legalization in India

The MoS Finance replied to two sets of questions on behalf of the government related to crypto in the Lok Sabha, the lower house of parliament in India, on Monday.

The first set of questions to the Minister of Finance was "whether the government is planning to legalize cryptocurrency in the country" and the "impact of cryptocurrency on the common people and especially youth."

The Minister of State for Finance, Pankaj Chaudhary, repeated his previous answer to the lower house of parliament. "Crypto assets are currently unregulated in India. Crypto assets are by definition borderless and require international collaboration to prevent regulatory arbitrage," he said, explaining:

"Any legislation for regulation or for banning can be effective only with significant international collaboration on the evaluation of the risks and benefits and the evolution of a common taxonomy and standards."

The minister further stated that the Reserve Bank of India (RBI) "has been cautioning users, holders, and traders that dealing in virtual currencies (VCs) is associated with potential economic, financial, operational, legal, customer protection, and security-related risks."

While the Indian government is still working on a cryptocurrency bill, crypto income is already taxed at 30% in India, and a 1% tax deducted at source (TDS) is levied on crypto transactions. The government included crypto transactions under the Prevention of Money Laundering Act (PMLA), last month.

Crypto Fraud Prevention

The second set of questions related to whether crypto-related frauds have increased in the last few years, the steps taken by the government to prevent such frauds, and whether all crypto exchanges operating in the country are in compliance with international financial regulations.

"Crypto assets are currently unregulated in India. Frauds relating to crypto are dealt with under existing laws against fraud and cybercrime," Minister Chaudhary replied, stating that states and union territories are responsible for investigating and prosecuting such crimes. He further explained that the Ministry of Home Affairs has launched a portal for reporting crypto-related frauds to the Cyber and Information Security Division.

"The Enforcement Directorate (ED) is investigating several cases under the provisions of the Prevention of Money Laundering Act (PMLA) and Foreign Exchange Management Act (FEMA), related to crypto assets," he said, adding:

"As of date, proceeds of crime amounting to Rs. 953.70 crores (USD 116.40 million) have been attached, seized, or frozen; five persons have been arrested; and six prosecution complaints (PCs), including a supplementary PC, have been filed before the Special Court, PMLA, in these cases."

"Further, under the Foreign Exchange Management Act (FEMA), assets valued at Rs. 289.28 crores have been seized under Section 37A of FEMA, and a show-cause notice to crypto exchange WazirX,  owned by Zanmai Labs Private Limited, and its directors have been issued under FEMA for crypto transactions valued at Rs. 2,790.74 crores," the minister stated.

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