Lok Sabha Question No. 474 (UNSTARRED), answered on 2023-02-06
Subject: Regulation of Virtual Digital Assets
Ministry: FINANCE
Asked by: Sujay Radhakrishna Vikhepatil, Shrikant Eknath Shinde, Heena Vijaykumar Gavit, Unmesh Bhaiyyasaheb Patil, Krishna Pal Singh Yadav, Rita Bahuguna Joshi

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS LOK SABHA UNSTARRED QUESTION NO.474 TO BE ANSWERED ON 06.02.2023

## Regulation of Virtual Digital Assets

474. DR. SUJAY RADHAKRISHNA VIKHE PATIL: DR. SHRIKANT EKNATH SHINDE: DR. HEENA GAVIT: SHRI UNMESH BHAIYYASAHEB PATIL: DR. KRISHNA PAL SINGH YADAV: PROF. RITA BAHUGUNA JOSHI:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has any plans for regulating virtual digital assets in the country and if so, the details thereof;
- (b)  whether  the  Government  plans  to  provide  investor  protection  to  those  trading  virtual digital assets and if so, details thereof;
- (c) whether the Government plans to address the risks related to money laundering and terror financing using crypto-currencies and if so, the details thereof; and
- (d)  whether  there  have  been  cases  of  money  laundering  and  terror  financing  using  crypto currencies and if so, the details thereof?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a) to (d): Crypto Assets are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation for regulation or for banning can be effective only with significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.

RBI has been cautioning users, holders and traders of Virtual Currencies (VCs) vide public notices  on  December 24, 2013, February 01, 2017 and December 05, 2017 that dealing in VCs is associated with potential economic, financial, operational, legal, customer protection and  security  related  risks.  RBI,  vide  its  circular  dated  May  31,  2021  has  also  advised  its regulated entities to continue to carry out customer due diligence processes for transactions in VCs, in line with regulations governing standards for Know Your Customer (KYC), AntiMoney Laundering (AML), Combating of Financing of Terrorism (CFT), obligations under Prevention of Money Laundering Act (PMLA), 2002, etc. in addition to ensuring compliance with  relevant  provisions  under  Foreign  Exchange  Management  Act  (FEMA)  for  overseas remittances.

The  Directorate  of  Enforcement  is  investigating  several  cases  related  to  crypto  currency frauds wherein a few crypto exchanges have also been found involved in money laundering. Necessary action as per provisions of Prevention of Monyt Laundering Act, 2002 (PMLA) has  been  taken  by  The  Directorate  of  Enforcement.  As  on  31.01.2023,  proceeds  of  crime amounting to Rs. 936 crore have been attached/seized/freezed, 05 persons have been arrested and 06 prosecution complaints (PCs) including 01 supplementary PC have been filed before the Special Court, PMLA in these cases.

Further, under Foreign Exchange Management Act, 1999 (FEMA) assets amounting to Rs. 289.28 crores have been seized under section 37A of FEMA and 01 Show Cause Notice to cryptocurrency  exchange  Zanmai  Labs  Pvt  Ltd,  known  as  WazirX  and  its  directors  under FEMA for transactions involving cryptocurrencies work Rs. 2790 crore has also been issued.

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