The Financial Intelligence Unit (FIU) of India has asked the Ministry of Electronics and Information Technology to restrict the website URLs of nine cryptocurrency exchanges. The aim is to restrict access to platforms such as MEXC Global, Bitfinex, Bitstamp, Binance, Gate.io, Kraken, Bittrex, Huobi and Kucoin, citing their alleged “illegal operations” and noncompliance with the Money Laundering Prevention Act.
The FIU, serving as the central national agency, is tasked with receiving, processing, analyzing and disseminating information related to suspect financial transactions, including terror financing and money laundering, to enforcement agencies worldwide.
India has been actively working to integrate the cryptocurrency sector with its conventional financial landscape. In March, the country mandated that cryptocurrency companies acquire know-your-customer (KYC) data, requiring them to register with the agency. Any virtual asset service provider (VASP) operating in India, whether offshore or domestically, is obligated to register with the FIU as a reporting entity and adhere to the Prevention of Money Laundering Act.
While the FIU now has 31 firms registered, the agency noted that several offshore entities that serve a sizable percentage of Indian users were not abiding by the laws pertaining to antimoney laundering (AML) and counterfeiting (CFT). The FIU issued show-cause notifications to the nine blocked VASPs, though the specific repercussions beyond URL blocking remain unclear.
In August, India Prime Minister Narendra Modi emphasized the necessity of global cryptocurrency regulation, asserting that regulations and frameworks should extend beyond individual countries or regional groups. India, however, has displayed a cautious approach to crypto, introducing high capital profits taxes, imposing a substantial 30% tax — surpassing rates applied to equities and other investments — and a 1% tax deducted at source (TDS). Offenders or platforms failing to adhere to TDS may face penalties, including fines or imprisonment ranging from three months to seven years, under an amendment to Section 271C of the Income Tax Act.
In October, the Financial Action Task Force (FATF) advocated for member nations to implement a travel rule tracking crypto transactions to combat terrorist financing and illicit activities. India’s stance on enforcing the travel rule remains uncertain.
India tops the globe in the adoption of cryptocurrencies among the general public, according to a Chainalysis analysis, despite the country’s central bank governor dismissing cryptocurrencies as speculative gaming opportunities. Though there are legislative obstacles, the nation has the second-largest raw estimated transaction volume in the world for cryptocurrencies.
Established crypto companies such as Stronghold Digital Mining Inc. (NASDAQ: SDIG) hope that major jurisdictions around the world enact stable crypto laws so that industry actors can be certain about the regulatory environment in which they operate.
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