India to block access to global cryptocurrency exchanges including Binance

India’s Financial Intelligence Unit (FIU) wants to block the URLs of nine cryptocurrency exchanges for “operating illegally” and failing to comply with the Prevention of Money Laundering Act.

The FIU has urged the Ministry of Electronics and Information Technology to block the URLs of Binance, Bitfinex, Bitstamp, Bittrex, Gate.io, Huobi, Kraken, KuCoin and MEXC Global.

Lack of compliance with AML/CFT guidelines

In its statement, the FIU said that Virtual Digital Asset Service Providers (VDA SPs) operating in India must be registered with the regulator and comply with set obligations to prevent money laundering.

“Till date 31 VDA SPs have registered with FIU IND,” the FIU said.

However, several offshore entities though catering to a substantial part of Indian users were not getting registered and coming under the Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework.

The FIU did not issue a specific timeframe within which these crypto exchanges must comply. It has also not mentioned any other consequences for these companies besides blocking their URLs.

In March 2023, the Finance Ministry in India required all cryptocurrency businesses to register with the FIU to meet anti-money laundering requirements. This directive mandated crypto exchange to verify user details through Know Your Customer (KYC) processes.

Changing crypto regulations in India amid growing adoption

Crypto adoption in India has been snowballing, as seen in the Chainalysis global crypto adoption index 2022. India is the second-largest crypto market globally in terms of trading volumes. This growth has attracted regulatory scrutiny.

India is currently developing a crypto regulatory framework based on the recommendations of the International Monetary Fund and the Financial Stability Board. This framework is set to launch in 2024 and could include comprehensive KYC and tax policies.

In August 2023, India’s Prime Minister Narendra Modi advocated for a global crypto regulatory framework. He said that these regulatory frameworks for emerging technologies should not belong to a single country but to a group of countries.

While crypto usage in India remains high, the country’s regulators have taken a harsh stance towards the industry. India imposed a whopping 30% capital gains tax on profits made from cryptocurrency transactions. This tax rate is higher than investments in equities.

The governor of the Reserve Bank of India has also attacked the crypto industry publicly, saying that investing in cryptocurrencies is similar to speculative gambling.