DNA Special: What steps central government took to monitor cryptocurrency transactions?

If you use cryptocurrency for transactions, you should exercise a little caution right now because money laundering regulations pertaining to cryptocurrency trading have now been implemented by the government. The Union Finance Ministry made its information public on March 7 by publishing a statement in which it was informed that cryptocurrency transactions would now be subject to regulation under the Money Laundering Act.

The central government has increased oversight of virtual digital transactions by implementing anti-money laundering measures on crypto-currencies. The government's move on cryptocurrency trading comes after Nirmala Sitharaman, the union finance minister, recently argued in favour of a global regulatory framework for cryptocurrencies.

The Enforcement Directorate, often known as ED, will now monitor any financial irregularities or fraud involving cryptocurrencies and be able to look into such cases. All Indian platforms that facilitate cryptocurrency exchange must now validate all users' account information and transaction histories. Now, cryptocurrency exchange platforms will also need to maintain KYC records for its consumers, just like any bank or other financial organisation.

Any suspected cryptocurrency transaction must be reported by Indian platforms to the Financial Intelligence Unit, or FIU. The notification stated that the organisations involved in Virtual Digital Assets, or VDA, will be regarded as reporting units under PMLA.

Now, reporting units include casinos, real estate, businesses involved in the jewellery industry, and banks and other financial organisations. All cryptocurrency transactions exceeding Rs 10 lakh must be documented and kept for at least five years by those responsible.

There are currently 17,697 different types of crypto-currencies worldwide, which began with bitcoin in the year 2008. The total market value of cryptocurrencies was only $20 billion in 2017, and it will reach $2900 billion by the year 2021 equating to an increase of 1400% in just four years.

Cryptocurrency has now overtaken traditional forms of money laundering in all major crimes throughout the world as a result of the exponential growth of the crypto market and the quadrupling number of incidents of crypto crime worldwide.

The Block Chain Analytic Company reported that in 2022, bitcoin was used in unlawful transactions totaling Rs. 1,95,000  crore which represented an increase of 68% over the year 2021. The amount of illicit cryptocurrency transactions in 2021 was Rs 1,16,000 crore which, in the year 2020, was Rs 70,000 crore.

These figures demonstrate how the market for cryptocurrency in illicit transactions is rising quickly. The majority of criminal activities, including drug trafficking, human trafficking, funding for terrorism, ransomware attacks, and loan fraud, are reportedly being carried out via cryptocurrency.

In Bitcoin, the most well-known cryptocurrency, 19% of all transactions are unlawful. 63 percent of Ethereum's cryptocurrency transactions are unlawful and illegal. Similarly, 63 percent of alt-coin transactions and 57 percent of stable coin transactions are outlawed.

These numbers are adequate to confirm that cryptocurrency is now the underworld's most popular payment method. The interesting part is that despite all of this, there is no international regulation to control the illicit crypto-currency industry. Nonetheless, the PMLA law has authorized cryptocurrency transactions in India.

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