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Indian Ministry Targets Offshore Crypto Exchanges With Compliance Notices

The Indian finance ministry has issued compliance show-cause notices to nine major offshore cryptocurrency exchanges accusing them of operating in India without following anti-money laundering laws.

Exchanges Face Non-Compliance Notices

The notices were served to Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex. The ministry accused the exchanges of functioning in India without adhering to the Prevention of Money Laundering Act (PMLA), 2002.

The ministry has recommended that the IT ministry block the URLs of these offshore crypto exchanges for operating illegally in India, according to a government statement released on October 2, 2022.

Registration With FIU-IND Required

The government statement clarified that virtual digital asset (VDA) service providers, including crypto exchanges, must register with the Financial Intelligence Unit-India (FIU-IND) — which monitors financial transactions to detect money laundering activities.

Registration is mandatory regardless of whether the VDA service provider has a physical presence in India, according to the finance ministry.

Many Exchanges Yet to Comply

FIU-IND said that 31 VDA service providers have registered with the agency so far, but many offshore entities operating in India have yet to comply. A significant number of Indian crypto users have reportedly moved to offshore platforms due to the new crypto tax policies.

One offshore exchange told the finance ministry it gained 450,000 new Indian sign-ups in the month after India imposed a 1% tax deducted at source (TDS) on crypto transactions starting July 1, 2022.


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