- India has cracked down on overseas crypto exchanges, like Binance and Kraken, accusing them of illegal operations
- The Financial Intelligence Unit issued show-cause notices and has sought URL blocks
- The authorities allege that offshore exchanges failed to register under AML and CFT frameworks
India has taken stringent measures against overseas cryptocurrency exchanges, including Binance, Kraken, KuCoin, and Huobi, accusing them of operating illegally in the country. The country’s Financial Intelligence Unit (FIU) issued compliance show-cause notices to the platforms and requested the information ministry to block their URLs, with the FIU pointing out that despite serving a significant number of Indian users, these offshore entities were not registering and adhering to the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework. The move is part of India’s broader efforts to enhance oversight of the cryptocurrency sector, aligning with global trends.
Users Were Pushed Offshore
India has had a fractious relationship with crypto, making it all but illegal in years gone by, and last year authorities dealt a blow to local crypto exchanges by imposing a 30% tax on transactions. This led to a significant drop in trading volumes, with local exchanges arguing that the tax pushed Indian crypto traders toward offshore platforms that did not levy such charges, exacerbating the decline in their revenues.
As a result of this move toward offshore exchanges, the FIU has taken the step of issuing show-cause notices, which indicate suspicions of misconduct and constitute an official request for the accused entities to demonstrate compliance with Indian laws. This gives retail traders an unpleasant choice between continuing to use exchanges that may well pull out of the country or facing higher taxes by using national exchanges.
Regulatory Plans Were Rejected
The move comes a month after India’s Supreme Court rejected a petition urging the government to establish regulations for cryptocurrency trading and mining. The public interest litigation filed by film director Manu Prashant Wig, who is currently in custody on charges of involvement in a scheme to solicit investments, sought guidelines and prosecution directions for digital assets.
However, the court viewed his petition as an attempt to seek bail and was unconvinced, citing that he had other motives other than the growth of the crypto sector in the country.
