India’s regulatory stance on cryptocurrency takes a stringent turn as the Financial Intelligence Unit (FIU) issues compliance notices to major platforms, aiming to block access to their websites. This move is part of a broader effort to bring offshore crypto entities under the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework.
Read More: Where Crypto Can Grow – Digital Asset Regulations Around the World
Offshore Exodus: FIU’s Show-Cause Notices
In a significant development, the FIU has slapped “compliance show-cause” notices on platforms such as Binance, Kraken, KuCoin, and Huobi. The FIU, in its statement, expressed concern that despite serving a substantial portion of Indian users, these offshore entities had evaded registration and remained outside the purview of AML and CFT regulations.
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
FIU Statement
Government’s Crypto Overhaul: A Year of Regulatory Changes
India’s government, in its continuous efforts to tighten oversight on digital assets, introduced money-laundering provisions in the crypto sector earlier this year. This follows the 2022 imposition of a transaction tax, a move that dealt a severe blow to local crypto exchanges and led to a significant drop in trading volumes.
A “show-cause notice” is an official step taken when there is suspicion of misconduct by an individual or entity. It serves as a formal request to demonstrate compliance with Indian laws. This move underscores the government’s commitment to ensuring that crypto platforms operating in India adhere to legal frameworks, especially in the context of recent regulatory changes.
Offshore Migration: Tax-Driven Exodus
Local exchanges have voiced their grievances, asserting that the transaction tax has compelled Indian crypto traders to shift to offshore platforms exempt from such levies. CoinDCX’s CEO, Sumit Gupta, estimated that a staggering 95% of trading volume has migrated to offshore venues, intensifying the financial strain on local exchanges.
Global Pressure on Binance
Binance, the world’s largest crypto exchange, finds itself at the center of regulatory scrutiny not only in India but globally. The FIU’s move follows reports in 2021 that India’s anti-money laundering agency was investigating Binance’s potential involvement in cases related to betting apps. Moreover, Binance agreed to a $4.3 billion settlement in November, pleading guilty to anti-money laundering and US sanction violations, leading to the resignation of its CEO, Changpeng Zhao.
More Info on CZ: СZ’s Guilty Plea, $4.3 Billion Settlement, and the Future of Crypto
Final Thoughts
India’s decisive actions against offshore crypto exchanges signal a commitment to regulatory compliance and financial integrity. As the crypto landscape evolves, global giants like Binance face increasing scrutiny, emphasizing the need for collaboration between governments and industry players to foster a secure and compliant crypto ecosystem.
More on Regulations:
- How $2.2 Billion Circumvented China’s Capital Controls via Crypto Trading Platforms
- EU Imposes Sanctions on Russian Nationals in Crypto Industry
Disclaimer: All materials on this site are for informational purposes only. None of the material should be interpreted as investment advice. Please note that despite the nature of much of the material created and hosted on this website, HODL.FM is not a financial reference resource and the opinions of authors and other contributors are their own and should not be taken as financial advice. If you require advice of this sort, HODL.FM strongly recommends contacting a qualified industry professional.
