India cracks down on 9 overseas cryptocurrency exchanges

quick take

India’s FIU IND has tightened controls on offshore cryptocurrency exchanges and issued compliance notices to nine major platforms, including Binance and Kraken, for alleged illegal operations. The crackdown highlights India’s commitment to regulating cryptocurrencies and fighting financial crime.

India’s financial watchdog cracks down on unregistered foreign cryptocurrency platforms

The Financial Intelligence Unit India (FIU IND) has taken decisive steps to strengthen regulation of offshore cryptocurrency exchanges or VDA SPs (Virtual Digital Asset Service Providers) operating in India. In an important development, FIU IND has issued show cause notices to nine prominent offshore cryptocurrency exchanges for allegedly operating illegally and failing to comply with the provisions of the Prevention of Money Laundering Act (PMLA), 2002. These measures signal the growing commitment of Indian authorities to regulate the cryptocurrency space and protect against illicit financial activities.

Commenting on the regulatory measures, Shivam Thakral, CEO of BuyUcoin “FIU’s recent actions demonstrate the government’s commitment to creating a secure and regulated digital asset ecosystem in India. The main purpose of this measure is to protect investors and prevent illegal use of digital assets. “The decision to include foreign cryptocurrency exchanges as reporting entities is an important step and has been highly anticipated by experts.”

The nine foreign cryptocurrency exchanges that received show-cause compliance notices from FIU IND are as follows: Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global and Bitfinex. According to FIU IND, these platforms failed to comply with the Anti-Money Laundering/Countering the Financing of Terrorism (AML-CFT) framework. This was extended to include VDA SP under the provisions of the PML Act in March 2023.

The decision of FIU IND to include offshore cryptocurrency exchanges within its regulatory framework has far-reaching implications, especially for trading activities on these foreign platforms. “The biggest impact will be on trading activity on foreign cryptocurrency exchanges and we will see a significant shift in trading volume towards FIU-compliant Indian exchanges,” Thakral added.

One of the most significant moves in this regulatory crackdown was the decision of the Director of FIU IND to reach out to the Department of Electronics and Information Technology. We urge you to block the URLs of these non-compliant entities. The goal of this step is to disrupt the operations of these platforms in India, effectively curbing their access to the Indian market.

However, Thakral warned that the government should adopt a calculated approach when blocking URLs of foreign cryptocurrency exchanges. “We believe the government should take a calculated approach in blocking URLs of foreign cryptocurrency exchanges as many Indian traders may have stored their digital assets on such exchanges,” he pointed out.

Considering these developments, Thakral emphasized the importance of users choosing a regulated and FIU compliant platform for trading digital assets. “Users should store their digital assets on regulated and FIU compliant platforms for a stress-free digital asset journey,” he advised.

especially, BuyUcoin recently achieved FIU compliance status. It further contributes to creating an environment of trust in the Indian digital asset ecosystem.

The crux of the issue lies in the requirement for foreign or domestic cryptocurrency platforms engaging in various cryptocurrency-related activities to register as a reporting entity with the FIU IND and comply with the obligations set out in PMLA 2002. This regulatory framework imposes strict reporting, record-keeping and compliance requirements for these service providers, regardless of their physical presence in India. The intent of these regulations is clear. This means preventing money laundering and terrorist financing through virtual digital assets.

To date, 31 VDA SPs have registered in good faith with FIU IND, expressing their commitment to comply with Indian regulatory standards. However, until now, numerous overseas companies have avoided registering while catering to a significant portion of India’s cryptocurrency user base. This regulatory gap has raised concerns about the potential misuse of virtual digital assets for illicit financial activities.

FIU IND’s action highlights India’s resolve to bring offshore cryptocurrency platforms under AML-CFT regulations. By issuing show cause notices and seeking to block URLs, the authorities are making clear that compliance with Indian laws cannot be negotiated by companies seeking to operate in the Indian cryptocurrency market.

In response to these developments, some of the affected foreign cryptocurrency platforms have expressed their willingness to cooperate with Indian authorities and ensure compliance with PMLA 2002. This willingness to collaborate with regulators signals a growing awareness of the importance of global AML-CFT compliance. Standard for the cryptocurrency industry.

Despite FIU IND communicating with the Ministry of Electronics and Information Technology to block the URLs of these nine institutions, the websites remain accessible from India at the time of this writing.

The impact of FIU IND’s actions on the broader cryptocurrency market is yet to be seen. However, the move is undoubtedly an important step towards strengthening cryptocurrency regulation in India and preventing virtual digital assets from being misused for illicit purposes. It also sends a clear message to offshore cryptocurrency exchanges that compliance with Indian laws is not optional and regulatory oversight of the cryptocurrency sector will remain.

Read: India Develops Tools to Deal with Cryptocurrency Criminals