India Charges Offshore Crypto Exchanges on Compliance

India’s Financial Intelligence Unit has notified some exchanges of the need for compliance, saying they are operating illegally in the country. 

The agency named top global exchanges including Binance, Kucoin, Huobi, Kraken,, Bittrex, Bitstamp, MEXC Global and Bitfinex among those not operating in compliance with provisions of the country’s Prevention of Money Laundering Act.

In India, the  Financial Intelligence Unit is responsible for monitoring and regulating illegal activities of financial institutions. In addition to the compliance notice issued, the unit has also asked the Ministry of Electronics and Information Technology to block the websites of the affected exchanges in the country.

“Virtual Digital Asset Service Providers (VDA SPs) operating in India (both offshore and onshore) and engaged in activities like exchange between virtual digital assets and fiat currencies, transfer of virtual digital assets, safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets are required to be registered with FIU IND as Reporting Entity and comply with the set of obligations as mandated under Prevention of Money Laundering Act 2002,” according to the notice

India is one of the countries that have not placed an outright ban on crypto, but is wary of the activities of the industry. The country attempted placing a ban on Bitcoin in the past, but this has not deterred Indians from using cryptocurrencies or exchanges.

As a second strategy, the government decided to regulate the industry, first by placing a 30% tax on crypto gains in the country. This also hasn’t deterred Indians’ participation in the industry, so the FIU seeks to bring exchanges under closer scrutiny by demanding that they register with it.

The Law is for Everyone

All the exchanges that are affected are not based in India, but Indians use the services of such exchanges. Before now, no issues had arisen, but now the FIU requires that they register with the agency.

So far, 31 crypto exchanges have registered with the FIU in India, but the offshore exchanges “catering to a substantial part of Indian users” have not registered, the agency said in its notice. The notice further stated that being offshore doesn’t exempt the exchanges from registering with the FIU.

“The obligation is activity-based and is not contingent on physical presence in India,” the statement continued. “The regulation casts reporting, record keeping and other obligations on the VDA SPs under the PML Act which also includes registration with the FIU IND.”

None of the affected crypto exchanges have responded to the notice as at the time of reporting this story.

Regulatory Pressure Mounting Globally

Crypto exchanges and other startups are facing a lot of regulatory pressure in many jurisdictions around the world. In the U.S for example, top exchanges like Binance and Coinbase are facing legal battles for not registering with the securities and exchange commission (SEC).

As time goes on, this kind of pressure is seen in other countries as well, including India now. While crypto regulation in itself isn’t a bad thing, the way regulators approach it can make or break the industry.

With the ongoing trend, more countries may adopt these strict measures which will discourage the crypto industry from thriving, while those that maintain a positive approach may continue to see the industry grow. 


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