Money laundering controls are facing difficulty in enforcing due to one of the key risks being identified by regulators all over the world. The reasons for this are, first private crypto assets are not issued by financial institutions but are typically issued by decentralized blockchain. This makes them extremely difficult to regulate. KYC norms or requirements linked to suspicious transaction report is not subjected to the blockchain. Second, the crypto ecosystem is not confined to geographical boundaries. A person in India could transfer a crypto asset value to a person in any part of the world. In this scenario, the crypto asset owner does not need any formal banking channel or fiat currency, or identity verification.

Anonymous transactions are there on the blockchain. Transaction tracing and implementing foreign exchange controls become very difficult. At the time a crypto asset is converted to fiat currency and the functioning of intermediaries are the two regulatory touch points within a crypto ecosystem that can be leveraged to enforce and implement the regulation. The recent amendments to PMLA (Prevention of Money Laundering Act,2022) as the basis of amendments seek to use these touch points. The set of transactions that have been brought under the scope of PMLA include,

• The exchange between virtual digital assets and fiat currencies
• Transfer of virtual digital assets
• Safekeeping or administration of virtual digital assets
• Participation in and provision of financial services related to an issuer’s offer and sale of a virtual digital asset