Union Finance Minister Nirmala Sitharaman recently said that the biggest risk of cryptocurrency among the pioneering fintech revolution is its use for money laundering and terrorism financing.
Sitharaman said this in a session during the ongoing spring meeting of the International Monetary Fund (IMF). He was of the opinion that “the greatest risk for all countries on the board will be the money laundering aspect as well as the aspect of currency used for terrorism financing”.
Additionally, the Finance Minister also said that the only solution is to regulate the use of technology.
However, she added that the only way to deal with cryptocurrencies is technology-based regulation, adding that it should be “so efficient” that it is “not behind the curve, but on top of it”.
The minister emphasized India’s success in the digital world and the government’s efforts to build the country’s digital infrastructure infrastructure over the past decade, adding that the government has increased the rate of technology adoption during the COVID-19 pandemic. .
“If I use 2019 data, the digital adoption rate in India is around 85 percent. But globally in the same year it was only close to 64 percent. So the times of the pandemic really helped us test it for ourselves and prove that it’s easy to use, ordinary people can use it, and adoption was really proven,” she said.
During a high-level panel discussion organized by the IMF, Sitharaman said digital assets used for non-governmental reasons would be practically difficult to regulate through unhosted wallets.
Sitharaman explained that taxing money generated by virtual asset exchanges is a way to verify the source and trace of funds, but not to legitimize them.
crypto and crime
According to Chainalysis’s 2022 Crypto Crime Report, money laundering is one of the most common crimes in the crypto sector, with cases increasing by more than 30 percent between 2020 and 2021.
According to the same analysis, criminals laundered $8.6 billion in cryptocurrencies in 2021. In 2020, it was $6.6 billion. Between 2017 and 2021, the year 2019 saw the biggest money laundering of $10.9 billion.
In India’s case, Minister of State for Finance Pankaj Choudhary said in March that the Center is aware of digital assets being used for money laundering by cybercriminals.
He said in Parliament: “Reports have been received from Law Enforcement Agencies (LEAs) regarding use of cryptocurrency by cybercriminals. Directorate of Enforcement (ED) is probing 07 cases under PMLA (Prevention of Money Laundering Act), 2002 In which cryptocurrency has been used for money laundering.
“The cases investigated by the ED under PMLA reveal that the accused have laundered the Proceeds of Crime (POC) through cryptocurrency exchanges,” he said.
So far, the ED investigation has revealed that some foreigners and their Indian associates have used cryptocurrency accounts on select exchange platforms to launder proceeds of the crime.
In one such case, the ED in 2020 detained an accused who converted money received through criminal activity into cryptocurrencies to help foreign-related accused firms legitimize PoCs and then transfer it abroad. transferred.
It is claimed that criminals only use certain crypto coins when they target certain crypto services for their illegal money laundering activities.
According to Chainalysis, altcoins received the largest percentage of all illegal transactions (68%), while bitcoin received the least (19 percent). Money laundering was found 63% in Ethereum and 57% in stablecoins.
However, while discussing digital assets, Sitharaman talked about the benefits of central bank digital currencies over cryptocurrencies. He said that India’s CBDC program will happen this year.
Sitharaman’s remarks come weeks after India imposed a 30 per cent tax on digital assets in an attempt to discourage investors from trading in bitcoin. Last month, the Indian government said it had no plans to introduce cryptocurrencies.
‘serious concern’
Notably, the Reserve Bank of India has raised “serious concerns” about private digital assets and warned that they could cause financial instability.
However, Sitharaman attended an event at a think tank Atlantic Council in Washington DC, US earlier this week, apart from formal engagements with the World Bank, IMF, G20 and Financial Action Task Force (FATF).
As announced by the Finance Ministry, the visit will include bilateral talks with Indonesia, South Korea, Sri Lanka and South Africa as well as a high-level meeting with World Bank President David Malpass.
After meetings in Washington, Sitharaman will travel to San Francisco on April 24, where she will meet business leaders and join academics and students from Stanford University.
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