The Financial Intelligence Unit India, or FIU IND, has delivered compliance Show Cause notices to nine cryptocurrency exchange companies in total. Binance, Kucoin, Kraken, Huobi, Gate.io, Bitstamp, Bittrex, Bitfinex, and MEXC Global are the platforms’ names.
The aforementioned department has requested in writing that the URLs of the listed cryptocurrency trading sites be blocked by the Ministry of Electronics and Information Technology. This would prevent Indian citizens from using those websites or apps. The action taken by FIU IND was brought about by noncompliance with the PML Act of India.
Under the Prevention of Money Laundering Act, cryptocurrency exchanges, both onshore and offshore, must register. Activity, not a person’s actual presence in the nation, determines compliance. In other words, a platform must still register even if it is physically located outside of India and conducts business there.
The platform must, among other things, carry out transactions involving the exchange of fiat money for virtual digital assets. The administration of instruments that confer control over virtual digital assets, the transfer of virtual assets, and their safekeeping are further facets. Compliance extends beyond AML to include counter-financing of terrorism (CFT).
Publicly accessible online, the news announcement notes that 31 cryptocurrency trading platforms have already registered with FIU IND. Virtual Digital Assets Service Providers (VDA SPs), both onshore and offshore, who fail to register with the appropriate Indian departments may now be subject to a compliance Show Cause notice.
Platforms have slipped the authorities’ notice before for money laundering purposes. Federal investigations into Binance for money laundering were conducted back in 2018. The US Department of Justice announced criminal charges against the platform and Changpeng Zhao, its CEO, in November 2021. Afterwards, he entered a guilty plea and consented to pay $4.3 billion in settlements.
FIU IND has investigated 3,300 cryptocurrency accounts, specifically in India, for possible money laundering activities. The figure is from early December 2022, and there’s a chance it went up in the last 12 months. They were also identified for engaging in other illicit operations, such as drug trafficking.
Platforms were requested to block those related accounts at that point. Platforms are currently being accused of breaking local laws.
Others have been advised not to panic by members of the Indian cryptocurrency ecosystem, as the notification just requires exchange platforms to register with government agencies. Only in cases where URLs fail to register and comply will they be blocked.
That is an unrealistic expectation given that cryptocurrency exchange platforms cater to a large portion of India and generate a significant amount of revenue relative to their global reach. Before authorities take action to restrict the URLs of nine cryptocurrency exchange platforms, they can make their case. The problem should ideally end with registration with FIU IND.