The Financial Intelligence Unit, an Indian government agency that audits financial transactions, said on Thursday that nine global cryptocurrency exchanges — including Binance, Kraken, Kucoin and Mexc — are operating “illegally” in the country without complying with the local anti-money laundering law and the IT Ministry has asked Blocks its websites
The Financial Intelligence Unit said it had issued show cause notices to all nine companies. The government agency said global cryptocurrency exchanges are required to comply with India’s anti-money laundering rules and cannot evade the guidelines simply because they do not have a physical presence in the country.
“However, many offshore entities, despite serving a significant portion of Indian users, are not registered and fall under the anti-money laundering (AML) and counter-financing of terrorism (CFT) framework.”
Cryptocurrencies were brought under the ambit of India’s Anti-Money Laundering/Combating the Financing of Terrorism framework in March this year. A total of 31 cryptocurrency companies are registered with the Financial Intelligence Unit, it said.
Many Indian traders have turned to global cryptocurrency platforms in recent quarters in an apparent move to evade taxes. India began taxing virtual currencies last year, imposing a 30% tax on gains and a 1% rebate on every cryptocurrency transaction.
While cryptocurrency exchanges in India, including a16z-backed CoinSwitch Kuber, B Capital-backed CoinDCX, and former Binance partner WazirX, still require strict KYC checks before onboarding new users, the same has not been true. On many global platforms. (Trading volume on WazirX has dropped by a staggering 97% in two years, partly due to many traders moving to global apps.)
Other exchanges found to be violating Indian law are Huobi, Gate.io, Bittrex, Bitstamp, and Bitfinex.
“Most Indian cryptocurrency exchanges are FIU-registered entities and comply with the Prevention of Money Laundering Act. The recent guidance issued by the FIU IND for Virtual Digital Asset Service Providers (VDA SPs) will help… In mitigating risks and creating a secure VDA ecosystem.
Binance founder Changpeng “CZ” Zhao told TechCrunch last year that the company was not keen on expanding into India because the South Asian market did not create a crypto-friendly environment.