India issues compliance notices to nine offshore exchanges, including Binance.
India issues show cause notices to Binance, Kucoin and others for PMLA violations. The Finance Ministry has urged blocking of URLs of offshore exchanges operating illegally in India. A 1% tax on domestic exchanges will prompt 3-5 million Indian users to migrate to offshore platforms.
In a landmark move, India's finance ministry has issued show cause notices to nine major offshore cryptocurrency exchanges, including industry giants such as Binance, Huobi and Kucoin. The government accuses these platforms of operating illegally within the country's borders without complying with local money laundering laws.
This development is a major step in India's efforts to regulate the crypto industry, with a focus on enforcing compliance with the Indian Money Laundering Act (PMLA), 2002.
Demonstration of compliance-cause notices and URL blocking
India's Ministry of Finance issued notices to nine major players, namely Binance, Kucoin, Huobi, Kraken, Bittrex, Gate.io, Bitstamp, MEXC Global, and Bitfinex. The nine were accused of violating the Money Laundering Act (PMLA).
They ask for an explanation because the advertisements do not comply with the established rules. Similarly, the Ministry urged the Ministry of Information Technology to block the URLs of these exchanges citing the illegal activities they are doing in the country.
The move underscores India's commitment to bring offshore crypto exchanges under regulatory control, marking a major shift in the country's regulation and control of digital asset transactions. The lack of a specific time limit or consequences in the announcements leaves the crypto community and the exchanges in question in doubt, which has far-reaching implications for their activities in the Indian market.
Financial Intelligence Unit-India (FIU-IND)
The Ministry of Finance of India has emphasized the need for Virtual Digital Asset (VDA) service providers to register with the Financial Intelligence Unit-India (FIU-IND). This includes activities such as the exchange of virtual digital assets and fiat currencies, obligations that extend beyond physical presence in India.
While 31 service providers are registered with FIU-IND, the ministry pointed out that several entities serving the legitimate overseas Indian user base have failed to comply with the Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) frameworks.
The implementation of a 1% tax on crypto transactions in India on local exchanges has led to a migration of users to foreign platforms. In the year Between February and July 2022, three to five million Indian users switched to overseas exchanges, causing potential revenue loss to the government. One offshore exchange reported a record increase following the implementation of the tax, demonstrating the impact of regulatory measures on consumer behavior.
