India Sends Compliance Notices to 9 Offshore Crypto Exchanges, Including Binance


India’s Finance Ministry recently issued notices of compliance and show-cause to nine major offshore cryptocurrency exchanges, including industry giants such as Binance, Huobi, and KuCoin. The government has accused these platforms of operating illegally within the country’s borders without adhering to local money laundering laws.

This move is a major step in India’s efforts to regulate the crypto industry, with a focus on enforcing compliance with the Prevention of Money Laundering Act (PMLA), 2002. The ministry has also called for the Information Technology Ministry to block the URLs of these exchanges and cite their illegal operations within the country.

This development signals a significant shift in India’s approach towards monitoring and controlling digital asset transactions. However, the lack of specific timeframes or consequences in the notices issued leaves the crypto community in suspense and could have far-reaching effects on the Indian market.

To bring offshore crypto exchanges under regulatory oversight, the ministry has required Virtual Digital Asset (VDA) service providers to register with the Financial Intelligence Unit-India (FIU-IND). 31 service providers are currently registered with FIU-IND, however, Indian users have not met Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) frameworks.

The implementation of a 1% tax on cryptocurrency transactions in India has led to a significant migration of users towards foreign platforms. Between February and July, an estimated three to five million Indian users shifted to offshore exchanges resulting in a potential loss of revenue for the government. One offshore exchange reported an increase in sign-ups after the tax was imposed, demonstrating the impact of regulations on user behavior.

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