The Financial Intelligence Unit-India (FIU-India) plans to review the ban on offshores crypto exchanges operations in India after compliances with anti-money laundering laws and Know Your Customer (KYC) norms.
India has 48 registered crypto entities which the FIU and other economic intelligence and regulatory agencies closely monitoring cryptocurrency (crypto)-related hacks and frauds including $230-million loss suffered by WazirX in July cyberattack.
The offshore crypto exchanges were flagged by the FIU for not reporting suspicious transaction (STR) and providing users data to the Indian agency to monitor money laundering activities.
A crypto exchange works like a stock exchange to trade in digital currencies such as Bitcoin, Tether and Ethereum on digital marketplaces similar to e-brokerages or mobile applications providing trading and investment tools for users.
The financial watchdog tightening the grip on money laundering and terrorist funding had ordered ban on offshore crypto exchanges leading into to Apple and Google removal of the crypto exchange mobile application from their app and play store.
Last December Financial Intelligence Unit of India (FIU IND) had sent a show cause notice to nine offshore crypto exchanges after they were found to be “illegally operating” and not compliant with the Indian anti-money laundering law leading to ban on the crypto exchanges operations.
The Director FIU IND wrote to the Secretary of Ministry of Electronics and Information Technology (MeitY) to ban the crypto exchanges illegally operating without following the provisions of the anti money laundering act in India and led to URLs of nine cryptocurrency exchanges blocked for illegal operations of the offshore exchanges without following KYC norms.
The nine crypto exchanges banned in India include Binance, Huobi, Kraken, Gate.io, Kucoin, Bitstamp, MEXC Global, Bittrex and Bitfenix after notices by the FIU for illegal operations. “As a segment of compliance action against the nine offshore entities, FIU India (FIU IND) has issued compliance notices to the virtual digital assets service providers (VDA SPs) of the PMLA. The regulation casts record reporting and other obligations on the VDA SPs under the 2002 act, which includes registration with the FIU IND too,” states the FIU notice to the Crypto Exchanges.
The rule states that virtual digital asset service providers, whether operating outside or within the country, are involved in activities such as virtual digital asset transfers, virtual digital asset-to-fiat currency, facilitating control over virtual digital assets, or safekeeping or administering virtual digital assets and need to register with FIU IND as a “Reporting Entity” with only 31 VDA SPs registered with the Indian regulator.
“ Many offshore entities serve a significant portion of Indian users, avoid registration, and fall outside the purview of the anti-money laundering (AML) and counter-financing of tourism (CFT) framework,” explained a senior tax official monitoring the crypto exchanges operating without regulatory approval.
Last month Binance registered itself as a reporting entity with FIU-India after payment of Rs 18.82 crore penalty for violating anti-money-laundering regulations while ban on KuCoin was lifted after of penalty of Rs 34.5 lakhs payment on the offshore cyrpto exchange.
