Crypto Regulation: India Sends Crucial Warning to Crypto Exchanges

Nine crypto exchanges Binance, Kucoin, Huobi, Kraken, Gate, Bittrex, Bitstamp, MEXC, and Bitfinex have been issued a warning from Indian authorities for non-compliance with registration laws. 

India Blocks URLs of Top Exchanges

According to a published statement, the Financial Intelligence Unit India (FIU IND) issued compliance Show Cause Notices to these nine offshore Virtual Digital Assets Service Providers (VDA SPs). Markedly, this notice permits the authority to take enforcement actions against the crypto exchanges for non-compliance with federal laws prevalent in the region.

This was after the crypto exchanges were brought under the scope of “Anti Money Laundering/Counter Financing of Terrorism (AML-CFT) framework under the provisions of the Prevention of Money Laundering Act (PML) Act, 2002 in March 2023,” and it was discovered that they had flouted the Act.

Consequently, the Director of the agency has asked the Secretary, Ministry of Electronics and Information Technology to block the URLs of Binance, Kucoin as well as the other crypto exchanges on the list. They will not be allowed to efficiently run their business in India until they register with the FIU IND, as is expected from all crypto exchanges that wish to offer digital asset services in the region. 

Per the announcement, overseeing activities like “exchange between virtual digital assets and fiat currencies, transfer of virtual digital assets, safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets” falls within the jurisdiction of the FIU IND. 

Notably, it was clearly stated that adhering to this framework/obligation is purely activity-based and therefore, has nothing to do with whether the crypto exchange has a physical presence in the country. Amongst all that is expected of the VDA SPs, reporting and record keeping is key. 

So far, over 30 crypto exchanges are registered with the FIU IND. 

Crypto Exchanges Seeking Solace in Different Jurisdictions

It is worth noting that regulatory uncertainty is one of the top challenges being faced by crypto exchanges in different jurisdictions globally. India is gradually moving up the ladder as one of the largest crypto markets and the growing adoption has necessitated the need for a robust regulatory framework. 

The International Monetary Fund (IMF) and the Financial Stability Board (FSB) are currently working on crypto regulations to guide players in the industry.

A number of these digital asset service providers are also seeking expansion outside the United States to other regions. However, it looks like the options are getting slimmer with other jurisdictions equally becoming stricter on crypto exchanges.