India’s Financial Intelligence Unit (FIU) has urged the Ministry of Electronics and Information Technology to block the URLs of nine cryptocurrency exchanges.
This list includes well-known international platforms such as Binance, Kraken, Huobi, Kucoin, Bittrex, Gate.io, Bitstamp, Bitfinex, and MEXC Global.
The FIU’s action is based on allegations that these exchanges are operating illegally in India and failing to comply with the Prevention of Money Laundering Act.
A press release from the Ministry of Finance said: “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 government has not specified a timeline for this action or detailed the consequences for the exchanges’ non-compliance.
India’s crypto regulation
In recent years, India has been integrating the cryptocurrency industry into its traditional financial regulatory framework. In March, the government required crypto companies to collect know-your-customer (KYC) information and to register with the FIU.
This rule applies to all virtual asset service providers (VASPs) with operations in India, regardless of their location.
Currently, 31 entities are registered with the FIU. However, the FIU noted that many offshore exchanges serving Indian users have not complied with these regulations. The FIU has issued “show cause notices” to the nine exchanges facing potential URL blocking, but it remains unclear what other penalties they might face.
India imposes crypto tax
The Indian crypto market faced a major setback in 2022 when the government introduced a hefty tax on crypto transactions. This move significantly reduced trading volumes on local exchanges. Prominent India-based platforms like CoinSwitch Kuber and CoinDCX have adhered to stringent KYC norms, but many global platforms have not followed suit.
The impact of these regulations has been stark. For instance, trading volume on WazirX plummeted by 97% over two years, as traders shifted to international apps that did not impose the new tax. Local exchanges have voiced concerns that the tax policy is driving Indian crypto traders to offshore platforms, adversely affecting their revenue.
The country also implemented a 30% tax on crypto gains, a rate higher than that on equities or other investments.
Despite these challenges, a report by Chainalysis earlier this year indicated that India leads in “grassroots crypto adoption” and ranks as the second-largest crypto market by estimated transaction volume.
