The Financial Intelligence Unit, an Indian government agency that investigates financial transactions, said Thursday that nine global crypto exchanges, including Binance, Kraken, Kucoin, and Mexc, are operating “illegally” in the country and have asked the IT Ministry to block their websites.
The FIU said that it has sent show cause notices to all nine businesses. Global cryptocurrency exchanges must follow India’s anti-money laundering regulations and cannot avoid them just because they do not have a physical presence in the country, according to the government agency.
“However, several offshore entities, though catering to a substantial part of Indian users, were not getting registered and coming under the Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) framework,” the report stated.
In March of this year, cryptocurrency was included in India’s anti-money laundering and counter-terrorism funding framework. According to the FIU, 31 crypto businesses have registered.
In recent quarters, many Indian dealers have shifted to global cryptocurrency platforms, ostensibly to avoid taxes. Last year, India started taxing virtual currencies, imposing a 30% tax on profits and a 1% deduction on each crypto transaction.
While India-based crypto exchanges such as a16z-backed CoinSwitch Kuber, B Capital-backed CoinDCX, and erstwhile Binance partner WazirX continue to conduct strict know-your-customer verifications before enrolling new customers, many worldwide platforms have not. (Trading volume on WazirX has decreased by 97% in two years, owing in part to the migration of many traders to worldwide applications.)
Huobi, Gate.io, Bittrex, Bitstamp, and Bitfinex are among the other exchanges found to be in violation of Indian law. (Several months ago, Coinbase ceased signing up new customers in India.)
“Most Indian cryptocurrency exchanges are FIU-registered entities that follow the Prevention of Money Laundering Act.” “The recent directive from FIU IND to offshore Virtual Digital Assets Service Providers (VDA SPs) will help mitigate risks and create a secure VDA ecosystem,” said Sumit Gupta, co-founder and CEO of CoinDCX, in a statement.
Last year, Binance founder Changpeng “CZ” Zhao told Eltrys that the company was not interested in growing into India since the South Asian market has not built a crypto-friendly climate.