India Cracks Down on Crypto Exchanges, Blocks Nine Offshore Platforms
India’s Financial Intelligence Unit, which falls under the purview of the Ministry of Finance, has taken strict action against nine offshore crypto exchanges that are operating in India without complying with the anti-money laundering legislation.
The FIU IND issued show-cause notices to these crypto exchanges under Section 13 of the PMLA, which empowers the FIU IND to impose penalties or cancel the registration of any reporting entity that fails to adhere to the obligations under the Act.
The nine offshore crypto platforms that received the show-cause notices are Binance, KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex. These crypto exchanges are involved in activities such as converting between digital assets and traditional currencies, transferring digital assets, safeguarding or managing digital assets, or utilizing instruments that grant control over digital assets.
According to the FIU IND, these activities are subject to the PMLA provisions and require mandatory registration with the FIU IND as a reporting entity.
Ministry Asked to Block the URLs of Offshore Crypto Exchanges
India’s Financial Intelligence Unit has even written to the Ministry of Electronics and Information Technology to block the URLs of these offshore crypto exchanges, as their operations in India are illegal in compliance with the PMLA provisions.
The Ministry of Electronics and Information Technology is responsible for the administration of the Information Technology Act, of 2000, which grants the power to block any information in the interest of the sovereignty and integrity of India, defence of India, security of the state, friendly relations with foreign states, or public order.
The FIU move to block the URLs of these crypto exchanges is likely to affect the access and transactions of millions of Indian crypto users, who have been using these crypto exchanges to trade and invest in various digital assets.
The FIU IND’s action is also seen as a part of the government’s efforts to align crypto with its traditional finance sector, having mandated in March that crypto companies must collect know-your-customer (KYC) information and register with the FIU IND.
The government has also been considering a bill to ban all private cryptocurrencies and create a framework for a central bank digital currency.
Despite the regulatory uncertainty and the FIU IND’s crackdown, India remains one of the largest and fastest-growing crypto markets in the world.
According to a report by Chainalysis, India leads the world in “grassroots crypto adoption” and ranks second in terms of raw estimated transaction volume. The report also found that India has more than 100 million crypto users and over 300 crypto startups.
The Indian crypto community has been lobbying for a more favourable and clear regulatory framework that would foster innovation and growth in the sector. Several industry bodies, experts, and stakeholders have also urged the government to consult and involve the crypto industry in the policymaking process.
The crypto industry hopes that the government will adopt a balanced and progressive approach that would protect the interests of the users and the investors, while also addressing the concerns of the regulators and the law enforcement agencies.
