The Financial Intelligence Unit (FIU), a regulatory body under the Indian government overseeing financial transactions, declared on Thursday that nine prominent global cryptocurrency exchanges, including Binance, Kraken, Kucoin, and Mexc, are operating illegally within the country.
The FIU accused these platforms of non-compliance with local anti-money laundering (AML) regulations and has issued show cause notices to each of them, urging the Ministry of Information Technology to block their websites.
The FIU emphasized that global crypto exchanges must adhere to India’s anti-money laundering rules, regardless of their physical presence in the country. It pointed out that despite serving a significant portion of Indian users, several offshore entities were not registering and aligning with the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework.
In March of this year, India expanded its regulatory framework to include cryptocurrencies within the anti-money laundering and counter-financing of terrorism framework. Currently, 31 crypto firms have registered with the FIU, complying with the established guidelines.
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The report highlighted a trend where many Indian traders have shifted to global cryptocurrency platforms in an apparent attempt to evade taxes. India implemented cryptocurrency taxation in the previous year, imposing a 30% tax on gains and a 1% deduction on each crypto transaction.
While Indian-based exchanges such as a16z-backed CoinSwitch Kuber, B Capital-backed CoinDCX, and former Binance-partner WazirX continue to enforce rigorous know-your-customer verifications, global platforms have been found lacking in such stringent measures. This shift has impacted WazirX, experiencing a substantial 97% drop in trading volume over the past two years as many traders migrated to global applications.
Other exchanges identified as violating Indian laws include Huobi, Gate.io, Bittrex, Bitstamp, and Bitfinex. Notably, Coinbase ceased consumer sign-ups in India several months ago.
Sumit Gupta, co-founder, and CEO of CoinDCX, expressed support for the FIU’s directive, stating, “Most Indian crypto exchanges are FIU registered entities and adhere to 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.”
In contrast, Binance founder Changpeng “CZ” Zhao conveyed last year that the company was not eager to expand in India due to the absence of a crypto-friendly environment in the South Asian market.
