India is Closing its Doors on Several Crypto Sites

India's recent crackdown on offshore virtual digital asset service providers has sparked attention, with the government issuing show cause notices to nine prominent exchanges for breaching local anti-money laundering regulations. The Financial Intelligence Unit (FIU) mandated the blacklisting of these exchanges' domains due to their unauthorized operations within the country.

The notice specifically named Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex—exchanges globally renowned for their substantial crypto trading volumes but lacking any authorization to function in India.

Expressing the gravity of the situation, the notice highlighted the Director of FIU IND's correspondence with the Ministry of Electronics and Information Technology, urging the blockage of these entities' URLs for operating in blatant disregard of India's Prevention of Money Laundering Act.

While India permits cryptocurrency exchanges to operate, stringent restrictions, particularly under anti-money laundering laws, have been imposed. Local exchanges are mandated to levy source tax on traders for each transaction, with a fixed 30 percent tax on crypto gains, devoid of any offsets against losses in alternative asset classes.

Emphasizing the expansive reach of these regulations, the notice underscored that compliance obligations aren't conditional upon physical presence within India. The regulations place significant responsibilities—reporting, record-keeping, and more—on Virtual Digital Asset Service Providers (VDA SPs) under the PML Act, including mandatory registration with the FIU IND.

Despite 31 registered crypto exchanges in India, the FIU's scrutiny revealed the pervasive presence of unregistered offshore exchanges, serving a substantial user base within the country. These entities operate without adhering to regulatory standards, causing concerns over compliance and security within the Indian crypto landscape.