The Indian government agency Financial Intelligence Unit declared on Thursday that nine global crypto exchanges, including Binance, Kraken, Kucoin, and Mexc, are operating illegally in India without complying with the local anti-money laundering act and asked the IT Ministry to block their websites.
FIU has issued show cause notices to all nine firms for failing to comply with India's anti-money laundering regulations. Global crypto exchanges cannot avoid these guidelines simply because they do not have a physical presence in the country, according to the government agency.
The report stated that although some offshore entities were serving a large number of Indian customers, they were not being registered and falling under the AML and CFT framework.
In March this year, cryptocurrencies were included within the scope of anti-money laundering and countering the financing of terrorism (AML/CFT) framework in India. A total of 31 crypto companies have registered with FIU, according to the statement.
In recent months, Indian traders have shifted their focus to global cryptocurrency platforms in an apparent attempt to avoid paying taxes. India began taxing virtual currencies last year, imposing a 30% tax on gains and a 1% deduction on each crypto transaction.
Despite India-based crypto exchanges such as CoinSwitch Kuber, CoinDCX, and WazirX requiring 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.)
India's law has been violated by several other exchanges, including Huobi, Gateio, Bittrex, Bitstamp, and Bitfinex (Coinbase stopped signing up consumers in India months ago).
The FIU IND's recent directive to offshore Virtual Digital Assets Service Providers (VDA SPs) will help mitigate risks and create a secure VDA ecosystem, according to Sumit Gupta, co-founder and chief executive of CoinDCX.
In an interview with TechCrunch last year, Binance founder CZ Zhao stated that the company was not interested in entering the Indian market due to the lack of a crypto-friendly environment in the region.
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