The Financial Intelligence Unit (FIU), an Indian government agency overseeing financial transactions, disclosed that nine global crypto exchanges, including Binance, Kraken, Kucoin, and Mexc, are operating “illegally” in India by not adhering to the local anti-money laundering regulations.
FIU issued show cause notices to these exchanges, emphasizing that global crypto platforms serving Indian users must comply with India’s anti-money laundering and counter financing of terrorism framework, despite lacking a physical presence in the country.
Although 31 crypto firms have registered with FIU, several offshore entities serving a significant Indian user base have not registered, violating the AML/CFT guidelines introduced in March. The move comes as India, last year, started taxing virtual currencies, imposing a 30% tax on gains and a 1% deduction on each crypto transaction. Many Indian traders shifted to global crypto platforms, potentially aiming to evade taxes.
Meanwhile, Indian exchanges like CoinSwitch Kuber, CoinDCX, and WazirX continue stringent know-your-customer verifications for new users, contrasting the lax procedures observed by several global platforms, leading to a decline in trading volume on some Indian exchanges. The exchanges found violating Indian laws, such as Huobi, Gate.io, Bittrex, Bitstamp, and Bitfinex, faced scrutiny, with Coinbase having halted consumer sign-ups in India previously.
Amid these developments, Sumit Gupta, CoinDCX’s CEO, stressed the importance of FIU’s directive for offshore Virtual Digital Assets Service Providers (VDA SPs) to mitigate risks and create a secure VDA ecosystem. Binance founder Changpeng “CZ” Zhao had indicated last year that the market environment in India wasn’t conducive to their expansion plans in the region, reflecting challenges in India’s crypto-friendly landscape.
