India Intensifies Regulatory Measures Against Binance and 8 Other Foreign Exchanges

India intensifies regulatory measures as the Ministry of Finance takes steps to regulate the cryptocurrency landscape. The ministry is focusing on nine overseas exchanges, including Binance, Bitfinex, Bitstamp, Bittrex, Gate.io, Huobi, Kraken, Kucoin, and MEXC Global. The ministry claims these exchanges are operating without proper registration and compliance with Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) frameworks. The Financial Intelligence Unit (FIU) issued compliance show-cause notices to nine platforms, instructing the Information Ministry to block their URLs.

Also Read: 28 Cryptocurrency Firms in India Register with National Anti-Money Laundering Agency

Show-Cause Notices and Regulatory Tightening

India intensifies regulatory measures as the FIU’s move comes as part of India’s broader regulatory tightening on the cryptocurrency sector. In 2023, the government imposed money-laundering provisions on the crypto industry, aligning its oversight with international standards. The imposition of a tax on transactions in 2022 had already dealt a significant blow to local crypto exchanges, leading to a decline in trading volumes. The recent show-cause notices reflect the authorities’ concern over offshore entities catering to Indian users without proper registration.

Implications for Local Exchanges

Local exchanges have raised concerns about the impact of regulatory measures, including the tax on transactions, which allegedly drove Indian crypto traders to offshore platforms. CoinDCX CEO Sumit Gupta estimated a substantial migration of trading volume to overseas venues, affecting local exchange revenues. 

The government’s push for compliance with AML and CFT frameworks aims to bring clarity and security to the industry. Additionally, the focus on nine prominent platforms stresses the urgency with which India is intensifying regulatory measures to address potential gaps in oversight.

Also Read: G20 Finance Ministers and Central Bank Governors Embrace Roadmap for Crypto-Asset Regulation

Virtual Digital Asset Service Providers (VDA SPs) and Registration Requirements

Virtual Digital Asset Service Providers, whether operating within or outside India, are mandated to register with FIU India as ‘Reporting Entities’ if engaged in specific activities. These activities include virtual digital asset-to-fiat currency exchanges, transfers, safekeeping, administration, or facilitating control over virtual digital assets. The FIU notice reveals that 31 VDA SPs have completed registration, while several offshore entities serving a significant user base in India have been operating outside the AML and CFT framework.

Registering with the FIU is actually not a challenge. They have laid out clear instructions on how to register.

Any exchange which is willing to follow AML and KYC guidelines can register.

Having said that, I wholeheartedly agree that India is one of the powerhouses of Web3 in… https://t.co/o0a26Vcjd4

— Nischal (Shardeum) 🔼 (@NischalShetty) December 31, 2023

Role of FIU India

The FIU India serves as the primary national agency responsible for handling information related to suspicious financial transactions. Its role is crucial in sharing such information with enforcement agencies and foreign FIUs. As India intensifies regulatory measures the FIU intends to align foreign exchanges with the Indian government’s commitment to combat money laundering and illicit financial activities.

Read More: Blanket Crypto Ban Hard to Implement

Binance and Global Regulatory Scrutiny

The absence of major players like Binance from the list of registered entities has raised questions as India intensifies regulatory measures. In 2021, India’s AML agency examined Binance’s potential involvement in an investigation related to betting apps. The recent global pressure on Binance culminated in the company agreeing to a $4.3 billion settlement for AML and U.S. sanction violations, leading to the resignation of co-founder and CEO Zhao Changpeng.

Final Thoughts

As India intensifies regulatory measures to regulate the cryptocurrency sector, the crackdown on offshore exchanges reflects a broader commitment to align with international standards. The implications for local exchanges, the registration requirements for VDA SPs, and the scrutiny of major players like Binance contribute to the growth of India’s crypto landscape. The industry finds itself at a critical point, balancing regulatory compliance with the need for innovation and growth. The coming months may provide insights into the course of India’s cryptocurrency regulations and their impact on the evolving global crypto market.

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