Indian Finance Ministry Issues Compliance Notices to Offshore Crypto Exchanges
The Indian finance ministry has sent compliance show-cause notices to nine offshore cryptocurrency exchanges, including Binance, Kucoin, Huobi, and others. These exchanges are accused of operating illegally in India without adhering to local money laundering laws. The affected exchanges have been asked to explain their non-compliance with the Prevention of Money Laundering Act (PMLA) and the ministry has requested the information technology ministry to block their URLs for operating illegally in the country.
Foreign Exchanges Required to Register with FIU-IND
In a statement, the finance ministry stated that virtual digital asset (VDA) service providers engaged in activities such as exchanging virtual digital assets and fiat currencies must register with the Financial Intelligence Unit-India (FIU-IND). The FIU-IND is responsible for monitoring and regulating financial activities in the country. The ministry emphasized that registration and compliance are not dependent on physical presence in India.
No Implementation of 1% TDS on Foreign Exchanges
Currently, there is a direct 1% tax on every crypto transaction in India on local exchanges, which has led many users to switch to foreign exchanges. The implementation of this tax has resulted in significant revenue loss for the Indian government. Between February and July 2022, three to five million Indian users shifted to offshore platforms. One offshore exchange reported 450,000 sign-ups in the month following the implementation of the tax.
Hot Take: Indian Government Cracks Down on Offshore Crypto Exchanges
The Indian finance ministry is taking action against major offshore cryptocurrency exchanges for operating illegally in the country. By issuing compliance notices and requesting URL blocks, the government aims to enforce local money laundering laws and ensure compliance with the Prevention of Money Laundering Act. Additionally, foreign exchanges are required to register with the FIU-IND to monitor and regulate financial activities. The implementation of a 1% tax on crypto transactions in India has led users to switch to offshore platforms, resulting in significant revenue loss for the government. This crackdown highlights the Indian government’s efforts to regulate the crypto industry and prevent illicit financial activities.
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