India Blocks Binance and Other Major Offshore #exchanges Over Non Compliance
The Indian finance ministry has issued show-cause notices for compliance to nine offshore #cryptocurrency exchanges, including major platforms like Binance, Kucoin, and Huobi. These exchanges are accused of operating illegally in India without adhering to local money laundering laws, specifically the Prevention of Money Laundering Act (PMLA), 2002. The affected exchanges, including Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex, have been instructed to explain their non-compliance.
In response to the alleged violations, the finance ministry has requested the information technology ministry to block the URLs of these exchanges for operating illegally within the country. The ministry clarified that virtual digital asset (VDA) service providers engaging in activities like exchanging virtual digital assets with fiat currencies and administering these assets must register with the Financial Intelligence Unit-India (FIU-IND).
The finance ministry highlighted that the obligation for registration and compliance is irrespective of physical presence in India, encompassing reporting, record-keeping, and other obligations under the PMLA. While 31 virtual digital asset service providers have registered with the FIU-IND, offshore entities serving a significant portion of Indian users have reportedly failed to comply with the Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework.
It's noted that the current 1% tax on every crypto transaction in India on local exchanges has led many users to migrate to foreign platforms. The implementation of this tax has resulted in a loss of potential revenues of approximately $420 million to the Indian government. Between February and July 2022, three to five million Indian users shifted to offshore platforms, with a single offshore exchange reporting a significant surge of 450,000 sign-ups in the month following the tax implementation in July 2022.