The Financial Intelligence Unit, India’s government agency that oversees financial transactions, said on Thursday that nine global crypto exchanges — including Binance, Kraken, Kucoin and Mexc — were operating “illegally” in the country without complying with the local anti-money laundering law. income from illegal activities and asked the Ministry of Information Technology to block their websites.
MHP he said has issued show cause notices to all the nine companies. Global crypto exchanges are required to comply with India’s anti-money laundering rules and cannot avoid the guidelines just because they do not have a physical presence in the country, the government agency said.
“However, several offshore entities, though catering to a significant portion of Indian users, were not registered and subject to the Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) framework,” it said.
Cryptocurrencies were brought under India’s Anti-Money Laundering / Anti-Terrorism Financing Framework in March this year. A total of 31 crypto companies have registered with FIU, it said.
Many Indian traders have turned to global cryptocurrency platforms in recent quarters in an apparent tax evasion move. India began taxing virtual currencies last year, imposing a 30% tax on profits and a 1% discount on every crypto transaction.
While India-based cryptocurrency exchanges, including a16z-backed CoinSwitch Kuber, B Capital-backed CoinDCX and former Binance partner WazirX, continue to require strict customer-driven verifications before onboarding new users, the same is not the case for many global platforms. (Trading volume on WazirX has fallen by a staggering 97% in two years, in part because many traders have moved to global apps.)
Other exchanges found to be violating Indian law are Huobi, Gate.io, Bittrex, Bitstamp and Bitfinex. (Coinbase stopped signing up consumers in India several months ago.)
“Most Indian crypto exchanges are FIU registered entities and comply with the Anti-Money Laundering Act. The recent FIU IND directive on offshore Virtual Digital Asset Service Providers (VDA SPs) will help mitigate risks and create a secure VDA ecosystem,” Sumit Gupta, CoinDCX co-founder and CEO, said in a statement.
Binance founder Changpeng “CZ” Zhao told TechCrunch last year that the company was reluctant to expand to India because the South Asian market had not created a crypto-friendly environment.
