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Indian Government to Seize Cryptocurrencies to Curb Crimes?

The Indian government is undergoing a significant transformation, in a direction that will redefine it as a digital economy. While this transformation may be scary for some, it will allow the government to curb crime and corruption. The push toward digitalization and the rise of the crypto market has created a perfect storm that threatens the Indian economy. It is time for the government to adopt a more digital approach to tackling the menace of crime and corruption. With cryptocurrency becoming a preferred way of laundering money, the Indian government is taking steps to regulate the crypto market and make it safe for the people of the country. But is the Indian government doing enough in this regard? Let’s take a look at some of the recent developments.

Far away in the United Kingdom, the government is currently exploring the best way to seize cryptocurrencies. The government has said that it will bring forward a piece of legislation that will enable them to seize cryptocurrencies and make them available to law enforcement agencies for investigations. [1] The UK government is investigating various models and practices to enable them to seize cryptocurrencies. Once the legislation is in place, the UK will be the first country in the world to seize cryptocurrencies. This is definitely a step in the right direction.

If the Indian government seizes cryptocurrencies it will certainly upset the market. But, it is worth noting that the government is not yet saying that anyone will be punished for holding cryptocurrencies. Instead, the government so far is only looking to confiscate the cryptocurrencies that are used for criminal activities. The government has already said that it will create a special task force to monitor the cryptocurrency exchanges and make sure that they comply with the know-your-customer (KYC) and anti-money-laundering (AML) regulations. [2] The task force will also have the authority to seize any cryptocurrency that is being traded illegally.

At the same time, the Indian government is also working on a bill to ban cryptocurrency. [3] The bill, which is still in the draft stage, has been sent to the relevant ministries for their comments. The bill proposes to ban all private cryptocurrencies and make it a criminal offense to hold, mine, issue, sell, or deal with any cryptocurrency.

The government is also looking to separately set up a committee to deal with the issue of crypto assets and bring forth policies that will protect investors.

The government notes that blockchain technology is a useful tool and it should be allowed to be exploited for the benefit of the people. At the same time, the Indian government has noticed a rise in the number of cryptocurrency-related crimes and has expressed concern over the misuse of cryptocurrencies. The government is of the view that cryptocurrencies are being used for money laundering and financing terrorism. To curb these activities, the government has proposed to amend the Finance Bill, which will enable them to regulate the cryptocurrency exchanges and make them accountable to the law enforcement agencies. [4] The government also included an explicit clarification that the loss on the sale of one virtual digital asset will not be allowed to set off against a gain made on another, dealing a big blow to investors in cryptocurrencies.

The Ministry of Finance is currently looking into the matter of seizing cryptocurrencies. As we discussed above, the tax department wants to tax the incomes that arise from the sale of cryptocurrencies. [5] The ministry has pointed out that there is a huge amount of money laundering occurring in the cryptocurrency market and wants to curb this practice. The Finance Ministry has proposed to create a new financial crime investigation agency that will be responsible for this. The government hopes that the agency’s presence in the market will help them to recover money that has been laundered by the cryptocurrency market.

The various exchanges have been asked to register with the government and comply with KYC and AML regulations. These new regulations are meant to curb money laundering. The Ministry of Electronics and IT has said that they will take strict action against the exchanges that do not comply with these regulations. [6] They will ban these exchanges from operating in the country if they do not comply.

On the other hand, the exchanges have been trying to convince the government that blockchain technology can be used for the benefit of the people. They have also been trying to convince the government that money laundering and financing of terrorism are not taking place through cryptocurrencies. The exchanges have proposed that the government should create clear regulations for the crypto market, which will help to protect investors and allow cryptocurrency businesses to thrive.

The government does not seem to be backing down. If anything, the tabling of bills and setting up of various task forces and vesting them with the authority to seize crypto assets is indicative of the government’s determination to crack down on cryptocurrencies. It remains to be seen what steps the government will take next.

Money laundering is a crime not limited to stealing money or other valuables from someone to enrich another. It is also used to finance wars, terrorism, human trafficking and modern-day slavery. The introduction of cryptocurrencies has made money laundering an even more viable option.

In summary, the Indian government has taken a number of measures to curb crime and make the Indian cryptocurrency market more secure. It has proposed a new law to tax the incomes arising from selling cryptocurrencies. It is also looking into the possibility of seizing cryptocurrencies that are used to launder money. Overall, it seems like the Indian government is taking a positive step toward regulating and seizing cryptocurrencies. However, it remains to be seen whether or not such measures will really help in curbing crime. Only time will tell.

[1] https://www.usnews.com/news/technology/articles/2022-04-27/cryptoassets-could-be-seized-to-stop-crime-uk-government-says

[2] https://economictimes.indiatimes.com/tech/technology/crypto-bill-to-give-power-to-sebi-rbi-taxman-to-scrutinise-kyc-data-of-exchanges/articleshow/88130343.cms?from=mdr

[3] https://economictimes.indiatimes.com/tech/technology/indias-crypto-law-will-allow-only-a-few-cryptocurrencies-government-says/articleshow/87873526.cms?from=mdr

[4] https://timesofindia.indiatimes.com/business/india-business/govt-proposes-amendments-to-finance-bill-seeks-to-tighten-norms-for-cryptocurrency-taxation/articleshow/90425499.cms

[5] https://www.deccanherald.com/business/economy-business/lok-sabha-passes-finance-bill-brings-in-new-tax-on-crypto-1094593.html

[6] https://www.news9live.com/technology/meity-cert-in-order-vpn-companies-to-store-user-data-for-a-period-of-at-least-five-years-168347

© Copyright 2022. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.

The government said in its response to a parliamentary inquiry into economic crime that it will bring forward legislation to enable cryptoassets to be seized and recovered more quickly, as soon as parliamentary time allows.

Tags

f-risk, data & technology, memo, financial services

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