India Declares Nine Major Offshore Crypto Exchanges “Illegal”
India’s Financial Intelligence Unit (FIU IND) has issued a notice deeming nine major offshore cryptocurrency exchanges “illegal”. The agency cited a failure to comply with local Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) regulations as the reason for the decision. As a result, all nine exchanges will have their URLs blocked in the country, potentially impacting their Indian user base. The exchanges included in the notice are Binance, KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex.
Foreign Exchanges and Indian Regulations
The decision to block access to these exchanges follows amendments made in March 2023 to India’s Prevention of Money Laundering Act. These amendments brought cryptocurrencies under the country’s AML and CFT regulatory framework. The notices state that foreign exchanges can operate legally in India by registering with FIU IND as Reporting Entities. This requires compliance with reporting, record-keeping, and other bureaucratic procedures.
FIU IND reveals that 31 Virtual Digital Asset Service Providers (VDA SPs) have registered with them so far. However, the nine exchanges mentioned in the notice cater to a significant number of Indian users without registering at all.
Indian Investors Seek Foreign Exchanges
The introduction of crypto taxes in India led many investors to move their funds to foreign exchanges in search of better returns. Over $3.8 billion of trading volume originating from India went to foreign exchanges within six months of the tax announcement. This resulted in significant financial losses for local exchanges as major foreign platforms accounted for over 67% of Indian volumes.
One reason for Indian investors’ preference for foreign exchanges was the lack of KYC regulations, allowing for more anonymous trading. DeFi also provided an opportunity to evade regulations.
India Tops Global Crypto Adoption
India ranked first in Chainalysis’ “2023 Global Crypto Adoption Index” report, leading in terms of centralized service value received, retail centralized service value, DeFi value received, and retail DeFi value received. The country is among those with high grassroots adoption of cryptocurrency. However, the government has been skeptical, with the RBI Governor even calling for a ban on crypto.
Hot Take: India’s Regulatory Crackdown on Crypto
India’s decision to declare major offshore crypto exchanges illegal and block their URLs reflects the government’s efforts to regulate the crypto industry. While some investors and enthusiasts see this as a negative move that could lead to the downfall of crypto, others believe it can bring about positive change and institutional adoption. With India joining other countries in regulating crypto, 2024 will be a crucial year for the technology. Only time will tell how these regulations will impact the future of cryptocurrency in India.
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