India's FIU Targets Major Cryptocurrency Exchanges, Stresses the Need for Clear Regulations
Summary:
India's Financial Intelligence Unit has served noncompliance notices to several major crypto exchanges for operating illegally in India. As a result, they have been pulled from digital stores within weeks and their websites blocked, stranding $4B on offshore platforms. These actions highlight the lack of clear regulations for domestic exchanges, which has created a precarious landscape for cryptocurrency trade in India. Observers argue the Indian government needs to establish fair taxation and regulation to bring certainty to the market and attract crypto exchanges to conduct business in the country.
India's Financial Intelligence Unit (FIU), a finance ministry agency, has served Binance, HTX, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, Bittrex and Bitfinex, noncompliance notices, accusing them of carrying out unauthorized operations in India in violation of the Prevention of Money Laundering Act on December 28, 2023. The companies have been given 12 days to align with the Indian customer identification and anti-money laundering rules. On January 10, two weeks following the FIU announcement, Apple’s App Store in India suspended the foreign crypto exchanges involved in the FIU allegations. Within the week, these crypto exchanges were also pulled from Google's Play store and their URLs and alternative URLs were prohibited.
The privacy of foreign crypto exchanges was a shock to Indian crypto traders, many of whom had turned to these platforms due to the 30% tax on crypto trading profits enforced by the Indian government. The Economic Times reports nearly $4 billion in crypto assets are frozen on offshore platforms, with Binance holding an estimated 80% of these assets. The report also highlighted how these practices have cost the Indian government about 30 billion rupees (approximately $361 million) in annual tax revenue. The Indian government's recent retaliation against foreign crypto exchanges is set amid a regulatory landscape with uncertain guidelines for national exchanges.
Despite ongoing calls for transparent regulations, the Indian government remains vague. According to Siddharth Sogani, CEO of blockchain analytics company Crebaco Global, the government needs to prioritize domestic exchanges. He referred to instances where crypto exchange users reported being unable to withdraw their funds, and criticized the government’s focus on foreign exchanges prior to establishing clear rules for Indian circulars.
However, Rajagopal Menon, VP of Indian exchange WazirX, agreed with the FIU's actions, condemning foreign exchanges for taking advantage of Indian exchanges due to regulatory and tax disparities. Being a signatory to the G20 Delhi declaration, where a clear agenda for crypto management was outlined, regulatory reforms for India are inevitable.
India's stance on crypto regulations is reportedly unclear, creating an unstable environment for crypto exchanges despite its vast potential. The 30% crypto tax has discouraged foreign crypto firms from setting up operations in India and led to flourishing Indian companies and traders exploring better prospects outside the country.
CEO of Indian crypto exchange CoinDCX, Sumit Gupta, views the FIU ban as a crucial step towards implementing regulations and believes a framework exists for offshore exchanges to register and serve Indian customers in line with FIU rules. Gupta stated that the FIU’s action would protect government investors from bad actors and tax-related noncompliances, and pave the way for supportive regulations and fairer taxation.
Binance, Kraken, KuCoin, MEXC, Bitfinex and Huobi declined to comment on their future plans in India. However, a Binance spokesperson stated that the company will strive to comply with local laws and regulations. A spokesperson from HTX also reiterated that they have no current operations in India and that they aim to follow regulations and requirements in various global regions.
OKX, a foreign crypto exchange, was one of the first to adhere to existing compliance requirements and reinitiate Indian customer identification processes. However, OKX did not respond to requests for comment. Indian crypto influencer Aditya Singh reported most crypto exchanges already complying with the FIU requirements. Singh also proposed that foreign crypto exchanges could begin registration with FIU once general elections in India are concluded in July 2024.
Published At
2/20/2024 5:31:00 PM
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