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11-03-2023

12:00:AM

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Table of Contents


  • GS-3 Environment
    • Cryptocurrency under PMLA: What changes for those investing in VDAs now
  • Fact File
    • H3N2: What is this virus and how can it be prevented from spreading
    • The moon may get its own time zone: Here is why


Cryptocurrency under PMLA: What changes for those investing in VDAs now

GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

 

The Centre has recently included cryptocurrencies in the scope of the Prevention of Money Laundering Act (PMLA). As per the government's notification, transactions involving the conversion of virtual digital assets to fiat currenciesexchange between different types of virtual digital assets, and transfer of digital assets will now fall under the purview of anti-money laundering laws.

 

The definition of "virtual assets" would include cryptocurrencies and non-fungible tokens.

 

In essence, this implies that the Enforcement Directorate (ED) can now probe any illicit financial activity related to cryptocurrency assets.

  

Crypto-currency



  • Cryptocurrency is a type of digital or virtual currency that is secured by cryptography, which prevents counterfeiting and double-spending.
  • One of the defining characteristics of cryptocurrencies is that they are not issued by any central authority, making them theoretically resistant to government manipulation or interference.
  • Many cryptocurrencies operate on a decentralized network that uses blockchain technology to maintain a distributed ledger across multiple computers.
  • Cryptocurrencies can be used to facilitate secure online payments without the need for intermediaries.
  • They can be acquired through mining, purchasing on cryptocurrency exchanges, or earning as rewards for contributing to blockchain-based systems.
  • Bitcoin and other cryptocurrencies are made possible by blockchain technology, which is essentially a decentralized ledger that records verified transactions across a network of nodes.
  • Each block in a blockchain contains a set of transactions that must be validated by each node on the network, making it very difficult to alter transaction records.
  • The contents of a blockchain ledger are maintained by a distributed network of individual nodes.
  • Examples of famous cryptocurrencies include Bitcoin, Ethereum, and Litecoin.


Disadvantages of cryptocurrency

  • Transactions are pseudonymous
  • Pseudonymity allows for potential criminal activities
  • Tendency towards high centralization
  • Expensive to participate and earn rewards in a network
  • Potential security issues off the blockchain
  • Highly volatile prices


Advantages of cryptocurrency

  • Eliminates single points of failure
  • Facilitates easier fund transfers between parties
  • Removes the need for intermediaries
  • Can generate returns
  • Streamlines remittances

 

Are Cryptocurrencies Legal?

  • Cryptocurrencies are not backed by any public or private entities, making it difficult to determine their legal status in different financial jurisdictions worldwide.
  • The lack of backing from a central authority means that cryptocurrencies have largely functioned outside of traditional financial infrastructure.
  • The legal status of cryptocurrencies has implications for their use in daily transactions and trading.
  • In June 2019, the Financial Action Task Force (FATF) recommended that wire transfers of cryptocurrencies should comply with the requirements of its Travel Rule, which mandates AML compliance.
  • As of January 2023, only El Salvador and the Central African Republic have accepted Bitcoin as legal tender for monetary transactions.
  • Cryptocurrency regulation varies by jurisdiction in the rest of the world.

 

The legal status of Crypto in India

  • The government introduced a tax for cryptocurrencies in the Union Budget last year, but did not proceed with regulations.
  • The Reserve Bank of India (RBI) had previously proposed a ban, which was set aside by a court order. 
  • In July of the same year, Finance Minister acknowledged the RBI's concerns and said that effective regulation or a ban on cryptocurrency would require "international collaboration."
  • Starting in April 2022, India implemented a 30 percent income tax on profits from cryptocurrencies.
  • In July 2022, rules mandating a 1 percent tax deduction at source on cryptocurrency were put into effect.

 

Understanding PMLA, India's Law against Money Laundering

  • The Centre can seize property earned through illegal proceeds under the Prevention of Money Laundering Act, 2022 (PMLA), which aims to prevent the legalization of illegally acquired money.
  • The ED investigates these offenses, while the Financial Intelligence Unit – India (FIU-IND) under the Department of Revenue, Ministry of Finance is responsible for processing, analyzing, and disseminating information on suspect financial transactions.
  • FIU-IND is an independent body that reports directly to the Economic Intelligence Council (EIC), which is led by the Finance Minister. 
  • Individuals found guilty of money laundering can face rigorous imprisonment of at least three years and up to seven years, and there is no limit to the fine that can be imposed. Furthermore, their property can be seized and attached.

 

What Impact Will the Inclusion of Cryptocurrency in PMLA Have?

  • Investors will now face increased scrutiny by agencies, and those found using VDAs for illegal purposes will be subject to the same penalties as other money laundering activities.
  • The Anti-Money Laundering law mandates that "reporting entities" maintain the Know Your Customer (KYC) details of their clients and beneficial owners. The new notification classifies VDA entities as "reporting entities" under PMLA, and they must maintain all customer records.
  • Furthermore, the extension of PMLA grants authorities more authority to monitor the transfer of cryptocurrency outside of India.

 

[Ref- Business Standard] 



Fact File


H3N2: What is this virus and how can it be prevented from spreading

  • Two people have died due to the Influenza A subtype H3N2 virus in India, with around 90 cases reported, as the Indian Council of Medical Research linked the recent uptick in cases of cough and fever to this virus.


 H3N2 virus

  • Flu is caused by four types of influenza viruses - A, B, C, and D. 
  • Influenza A has several subtypes, including H3N2, which caused the 1968 flu pandemic that killed around one million people globally and 100,000 in the US.
  • A 2020 study published in Nature Communications revealed that the virus strains have significantly evolved over the last 50 years due to people born in the late 1960s and 1970s being infected with the virus as children.
  • According to the Indian Medical Association (IMA), individuals who are below 15 years of age or above 50 years of age are usually more vulnerable to this virus, and those with underlying health conditions such as asthma, diabetes, heart disease, weakened immune systems, neurological or neurodevelopmental conditions are at a greater risk.


How to prevent it from spreading?

  • Self-hygiene
  • Wash hands before eating or touching your face, nose, or mouth, carry pocket sanitizer, and avoid people infected with the virus or any seasonal flu.
  • healthy diet that includes fruits and vegetables can improve immunity.
  • Drinking plenty of fluids and eating home-cookedlow-spice, and low-fat food can also help.

The moon may get its own time zone: Here is why


  • At present, the time on the moon depends on the country that launched the mission, which is considered unsustainable by the European Space Agency (ESA) due to multiple upcoming lunar explorations.


Why do we need a time zone for the moon?

  • According to the ESA, the primary purpose of implementing a standardized timekeeping system for the moon is to facilitate communication between different countries and entities, whether they are public or private, that are collaborating on missions to and around the moon.


Lunar Missions in news

  • Japan's M1 lunar lander is set to arrive on the moon in April and will deploy a rover built by the United Arab Emirates, a robot built by Japan's space agency, JAXA, and other payloads. 
  • Intuitive Machines, a Houston-based company, is also planning to launch a six-legged cylindrical robot called the Nova-C lander on SpaceX's Falcon 9 and land it on the South Pole of the moon in June. 
  • NASA is preparing to send four astronauts into orbit around the moon next year and plans to pave the way for the first crewed moon landing since Apollo 17 in December 1972, currently scheduled for 2025. 
  • Additionally, the ESA is contributing to NASA's effort to build the Gateway lunar station, while China completed construction of its own space station and has hinted that Chinese astronauts would be on the moon by 2030. 
  • South Korea launched its own lunar spacecraft, Danuri, in August 2022, joining spacecraft from NASA, China, and India in its orbit around the moon.
  • India’s Chandrayaan-3 is a follow-on mission to Chandrayaan-2 to demonstrate end-to-end capability in safe landing and roving on the lunar surface. It consists of Lander and Rover configuration.


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