Financial Intelligence Unit, an Indian government agency which scrutinizes financial transactions, said Thursday nine global crypto exchanges — including Binance, Kraken, Kucoin and Mexc — are operating “illegally” in the country without complying with the local anti-money laundering act and asked the IT Ministry to block their websites.
FIU said it has issued show cause notices to all nine firms. Global crypto exchanges are required to comply with India’s anti-money laundering rules and cannot evade the guidelines just because they don’t have physical presence in the country, the government agency said.
“However, several offshore entities though catering to a substantial part of Indian users were not getting registered and coming under the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework,” it said.
Cryptocurrencies were brought into the ambit of anti-money laundering / counter financing of terrorism framework in India in March this year. A total of 31 crypto firms have registered with FIU, it said.
Many Indian traders have switched to global cryptocurrency platforms in recent quarters in an apparent move to evade taxes. India began taxing virtual currencies last year, levying a 30% tax on the gains and a 1% deduction on each crypto transaction.
While India-based crypto exchanges including a16z-backed CoinSwitch Kuber, B Capital-backed CoinDCX and former Binance-partner WazirX continue to require rigorous know-your-customer verifications before onboarding new users, the same hasn’t been true of many global platforms. (Trading volume on WazirX has dropped by a staggering 97% in two years partly because many traders have moved to global apps.)
Other exchanges found to be violating India’s law are Huobi, Gate.io, Bittrex, Bitstamp, and Bitfinex. (Coinbase stopped signing up consumers in India several months ago.)
“Most Indian crypto exchanges are FIU registered entities and adhere with the Prevention of Money Laundering Act. FIU IND’s recent directive to offshore Virtual Digital Assets Service Providers (VDA SPs) will help mitigate risks and create a secure VDA ecosystem,” said Sumit Gupta, co-founder and chief executive of CoinDCX, in a statement.
Binance founder Changpeng “CZ” Zhao told TechCrunch last year that the firm wasn’t keen on expanding in India because the South Asian market hadn’t created a crypto-friendly environment.