Seven offshore crypto exchanges to make their case for re-entry in India

Seven cryptocurrency exchanges are expecting to return to India after being restricted for non-compliance with the country’s Prevention of Money Laundering Act (PMLA).

According to a September 12 report from the ET, officials familiar with the matter claim that India’s Financial Intelligence Unit (FIU) is expected to hear the pleas of seven foreign cryptocurrency exchanges that were compelled to cease operations in India late last year.

The hearing is set to be held this week, where crypto exchanges Bitfinex, MEXC Global, Kraken, Huobi, Gate.io, Bittrex, and Bitstamp will seek approval to re-enter the Indian market. 

On December 28, the FIU sent compliance show-cause notices to these exchanges alongside Binance and KuCoin, for failing to comply with India’s anti-money laundering policies and operating illegally. 

As a part of the crackdown, the watchdog also restricted access to these platforms by blocking ​​the URLs to their websites. This was followed by a ban on the respective applications on both the app store and Google’s playstore.

The notice came as a by-product of a March 2023 mandate from India’s Finance Ministry, demanding that all Virtual Digital Assets Service Providers must be registered to be able to offer their services.

By the time the offshore exchanges were warned, 28 domestic cryptocurrency firms like CoinDCX, and WazirX, had already registered.

Strict compliance measures

Now, the exchanges are looking to re-enter the Indian market by confirming compliance with local regulations, including conducting strict customer due diligence and adhering to KYC norms and AML protocols.

The exchanges would also have to shift their servers to India. They must also ensure timely reporting of suspicious transactions and maintain detailed records to meet the requirements set forth by the FIU  as a reporting entity.

Further, the exchanges will also be required to pay fines for their illegal operations, with the exact penalty to be decided “based on their submission,” an official added.  

Even after complying with the requirements, it could “take a while” before the exchanges are allowed to resume operations.

Besides the non-compliance penalty, the seven exchanges reportedly owe the Indian government approximately INR 2900 crores in goods and service taxes. This tax must be paid before the ban is revoked.

The GST authority also plans to send notices to other exchanges that operated in India previously.

At the time of writing, Binance and KuCoin were the only offshore exchanges to have received FIU approval to offer services in India. Binance was ordered to pay a fine of $2.25 million in June, while KuCoin had to pay $41,000.

While exchanges are being regulated, India currently has no regulatory clarity around cryptocurrencies other than the fact that they cannot be used as legal tender.

However, the nation collects a 1% TDS for every transaction and a 30% capital gains tax on profits generated from the sale or transfer of cryptocurrencies.

The post Seven offshore crypto exchanges to make their case for re-entry in India appeared first on Invezz