• FIU-India plans to approve two offshore crypto exchanges by the end of 2025 after reviewing their compliance with AML laws.

  • Binance faced a $2 million fine before regaining access to India’s market, highlighting the FIU’s strict enforcement of compliance.

  • India’s crypto market may see increased competition and liquidity as more exchanges resume operations following regulatory approvals.

Two offshore cryptocurrency exchanges are expected to be approved by India's Financial Intelligence Unit (FIU-India) to reopen by the end of the 2025 fiscal year. This choice was made after a thorough analysis of their adherence to Indian anti-money laundering (AML) regulations.

Additionally, with an emphasis on increasing transparency in transactions involving digital assets, the FIU is in charge of making sure financial institutions abide by these strict regulations.

Previous Suspensions Due to Non-Compliance

Over time, India's regulatory approach to cryptocurrencies has changed, placing more emphasis on the necessity of preserving financial security while fostering innovation. Four exchanges had previously been suspended by the FIU for violating AML regulations. 

Notably, these exchanges include Binance and KuCoin, which were both later brought back in after meeting the necessary regulatory requirements. Since these platforms did not comply with Indian AML regulations, they were temporarily banned.

According to reports, the FIU is looking into requests from four more offshore exchanges currently. According to sources, it is anticipated that at least two of these platforms will be approved after a thorough assessment of their transaction transparency and suspicious transaction reporting (STR) procedures.

Compliance and Penalties to Remain Strict

Notably, the identities of the exchanges that are presently being investigated have not been made public, but the FIU has reaffirmed that it is committed to maintaining Indian financial regulations. Penalties for noncompliance are enforced as part of this. 

Furthermore, the severe penalties the FIU imposes on exchanges that do not comply were made evident earlier this year when Binance was required to pay a $2 million fine before being permitted to rejoin the Indian market.

Additionally, stricter oversight of the industry has resulted from the Indian government's emphasis on financial security in the cryptocurrency space. India implemented a 30% tax on cryptocurrency gains in April 2022, in addition to a 1% tax deducted at the source (TDS) on each cryptocurrency transaction. These regulations aim to protect the digital asset ecosystem by preventing money laundering and other illicit activities.

Increasing Market Competition

Consequently, it is anticipated that the impending approvals will heighten competition in India's expanding cryptocurrency market. Indian investors will have more trading options available to them as more exchanges start up again. Additionally, this might increase liquidity, which would help both traders and investors.

Notably, the Department of Economic Affairs (DEA) intends to publish a consultation paper on crypto legislation in October in addition to FIU's initiatives. India's long-term regulatory framework for digital assets is anticipated to be shaped by this paper, which will solicit feedback from industry stakeholders.

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