India to block crypto exchanges Binance, Kraken websites
In a significant development, the Financial Intelligence Unit (FIU), an Indian government agency responsible for scrutinizing financial transactions, announced on Thursday that nine global cryptocurrency exchanges, including Binance, Kraken, Kucoin, and Mexc, are operating “illegally” in the country. The FIU alleges that these platforms are not complying with the local anti-money laundering (AML) regulations, prompting the agency to request the Ministry of Information Technology to block their websites.
According to the FIU, the show cause notices have been issued to all nine firms, emphasizing that global crypto exchanges must adhere to India’s anti-money laundering rules, regardless of their physical presence in the country. The agency highlighted that despite catering to a significant portion of Indian users, several offshore entities have failed to register and comply with the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework.
Cryptocurrencies were brought under the anti-money laundering and counter-financing of terrorism framework in India in March of the current year. The FIU noted that 31 crypto firms have registered with them, signaling their commitment to compliance.
The move by many Indian traders to global cryptocurrency platforms in recent quarters has been seen as an attempt to evade taxes. India initiated taxing virtual currencies last year, imposing a 30% tax on gains and a 1% deduction on each crypto transaction. This has led to a significant drop in trading volume on India-based exchanges like WazirX, which has seen a staggering 97% decrease over the past two years.
Among the exchanges found to be violating Indian law are Huobi, Gate.io, Bittrex, Bitstamp, and Bitfinex, with Coinbase having ceased consumer sign-ups in India several months ago.
While India-based crypto exchanges such as CoinSwitch Kuber, CoinDCX, and WazirX continue to enforce rigorous know-your-customer verifications, many global platforms have been less stringent in this regard. CoinDCX’s co-founder and CEO, Sumit Gupta, stated that most Indian crypto exchanges are FIU-registered entities that adhere to the Prevention of Money Laundering Act. He sees FIU IND’s recent directive to offshore Virtual Digital Assets Service Providers as a measure to mitigate risks and create a secure VDA ecosystem.
Binance founder Changpeng “CZ” Zhao previously expressed the company’s reluctance to expand in India, citing the lack of a crypto-friendly environment in the South Asian market. This recent crackdown by the FIU on non-compliant global crypto exchanges further underscores the challenges faced by the cryptocurrency industry in India.
