(Source: bombolo.in)

The Financial Intelligence Unit (FIU) in India has sent official notices to several well-known cryptocurrency exchanges. These notices, known as "show cause notices," are essentially asking these exchanges to explain why they should not be considered in violation of Indian laws.

The reason behind these notices is the allegation that these cryptocurrency exchanges are operating illegally in India by using entities based outside the country (offshore entities). The exchanges that have received these notices include Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex.

The FIU, a unit focused on finding and preventing suspicious financial transactions, found that the cryptocurrency exchanges in question didn't register as per the rules of the Prevention of Money Laundering Act (PMLA) Act from 2002. In March 2023, rules were made clear that virtual digital asset service providers must follow the Anti Money Laundering/Counter Financing of Terrorism (AML-CFT) framework. Despite these guidelines, the FIU claims that these exchanges did not fulfill their duty to report financial activities to the Indian government, similar to what traditional banks are required to do. In simpler terms, these cryptocurrency exchanges are accused of not following the rules to report financial transactions and activities as they should.

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Exploring the 31 Registered Entities :

The government has sent official notices, called "show cause notices," to Binance and other cryptocurrency exchanges. These notices are issued under a specific law called the Prevention of Money Laundering Act from 2002.

In addition to the notices, the Financial Intelligence Unit (FIU) has asked the Ministry of Electronics and Information Technology (MEITY) to block the websites of these exchanges. The FIU is emphasizing that following Indian laws is not only about having a physical presence in the country; even companies operating from abroad must comply. The specific issue raised is that these companies allegedly haven't fulfilled their reporting obligations as required by Indian law.

Out of the 31 cryptocurrency companies, it's reported that they have followed the rules outlined in the Anti Money Laundering/Counter Financing of Terrorism (AML-CFT) framework. However, the Financial Intelligence Unit (FIU) notes that there are "several offshore entities," operating from outside India, that haven't registered and fulfilled reporting requirements, even though they serve a significant number of Indian users.

The rules that these cryptocurrency exchanges need to follow go beyond just signing up or registering. In simpler terms, it's not just about registering; these exchanges are expected to actively report, maintain detailed records, and adhere to the rules of the PMLA to ensure transparency and compliance with financial regulations.

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