YEREVAN (CoinChapter.com) — In what comes as a major blow to the cryptocurrency industry, the Indian Government is intensifying its crackdown on a list of crypto exchanges. The country’s Financial Intelligence Unit (FIU), working under the Ministry of Finance, has asked the Ministry of Electronics and Information Technology (MeitY) to block the URLs of nine offshore crypto exchanges. The list includes industry giants like Binance, Kraken, and Huobi.
This haphazard attempt on the part of the Modi Government, while aimed at achieving proper crypto regulations, may not yield the desired results. Regulations and laws, more often than not, remain only on paper. If one thinks humans have mastered it, it is the art of finding loopholes to circumvent these laws.
For example, the Narcotic Drugs and Psychotropic Substances Act of 1985 prohibits the cultivation, possession, sale, and purchase of Marijuana and other similar substances. Despite the legislation, buying drugs may not prove to be as difficult.
According to data by Statista, the Cannabis market in India will reach S$100.80 million this year. Moreover, it is expected to grow annually at a rate of 14.80% between 2024 and 2028. Should that happen, the market volume will reach $175.10 million in 4 years.
Another reason why the crackdown on Indian crypto exchanges will not work is the incompetence of officials at the Indian Tax Office (ITO). Unfortunately, they are not up to date with the details of the crypto industry. This was recently made evident when an Indian crypto trader faced harassment at the hands of Indian tax officials.
Moreover, the Income Tax authorities and law enforcement do not have the resources, experience, and workforce to successfully track and nab blockchain criminals. While the crypto community will face challenges, it is unlikely that the Financial Intelligence Unit will achieve much at least in the coming months.
Binance, Kraken operated illegally in India
Along with the order to cease the business activities of these exchanges, the FIU also issued show-cause notices to them under the stringent Prevention of Money Laundering Act (PMLA). The Indian Government has accused them of “operating illegally” within its jurisdiction.
“Virtual Digital Asset Service Providers (VDA SPs) operating in India (both onshore and offshore)… are required to be registered with FIU IND as Reporting Entity and comply with a set of obligations as mandated under the Prevention of Money Laundeing Act (PMILA) of 2002,”
the notice reads.
Besides Binance, Kraken, and Huobi, the list includes Kucoin, Bittrex, Gate.io, Bitstamp, Bitfinex, and MEXC Global.
Several crypto service providers in India
One interesting takeaway from the Finance Ministry’s notice is the official number of registered entities in the country. According to the document, there are currently 31 Virtual Digital Asset Service Providers that have complied with the FIU mandate.
However, although these offshore crypto exchanges catered to a substantial part of Indian users, they failed to get registered. As a result, they avoided coming under the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework.
India, which has one of the strictest crypto policies and highest taxes on profits, wants to ensure it can hold exchanges liable.
Indian crypto exchanges welcome the development
The development also comes as good news for Indian crypto exchanges. The crackdown, while concerning at large, will help boost the profits of local Virtual Digital Asset Service Providers that comply with Indian law.
Several traders who use Binance, Kraken, Huobi, and others will shift their assets to these Indian exchanges. This will push their trading volumes up, also impacting their in-house crypto tokens.
Officials from these registered crypto exchanges in India have hailed the Financial Intelligence Unit’s notice as a positive development. CoinDCX’s Sumit Gupta was among those who welcomed it. According to him, it will help foster “a healthier environment” for crypto trade in India.
Meanwhile, Nischal Shetty, the CEO of Indian crypto exchange WazirX, called the policy a “sign of a maturing regulatory ecosystem for crypto.”
“Multiple countries including India are getting serious about having a deeper regulatory control over crypto exchanges. We initially saw this with the US but now a lot more countries have started working towards greater regulatory clarity and control… These are signs of a maturing regulatory ecosystem for crypto. Learning to navigate this in 2024 will be crucial for all startups,”
he wrote on X, formerly Twitter.
The Indian Government’s crackdown on Binance, Kraken, and Huobi follows a series of regulatory troubles these exchanges have faced in Europe and the USA. Will they exit the Indian market or comply and register with the FIU IND? Time will show.
However, with India now leading the grassroot adoption of crypto, the measure is sure to come as a huge blow to them.
