India’s FIU Likely to Allow Two More Offshore Cryptocurrency Exchanges
Two offshore cryptocurrency exchanges may get approval to operate in India shortly. These will be in addition to Binance and KuCoin that already have, or are in the process of, getting approved by the Financial Intelligence Unit (FIU) of the country.
Crypto Crackdown in India
Last year, the FIU embarked on an aggressive crackdown on non-compliant foreign crypto exchanges. The agency had sent a show cause notice to nine popular websites, including Binance, KuCoin, Huobi, Kraken, Gate.io and others. The Indian government had blocked access to the websites and apps of these exchanges on the ground that those have failed to comply with the nation’s AML requirements.
The crackdown aligns with India’s Prevention of Money Laundering Act that requires exchanges in digital currencies to report transactions as reporting entities with the FIU. The mandate went into effect in March 2023, further clamping down on the regulatory framework for the country’s crypto market.
Possible New Entrants by 2025
Sources close to the development say the FIU is reviewing the compliance practices of the two aspirant exchanges in great detail. These exchanges would have to show strong transaction transparency and report suspicious cases while practicing strict AML norms before getting the go-ahead.
The regulators have maintained that the quantum and frequency of penalties depend on the exchanges’ pre-exercise activities and the degree of non-compliance. No exchange is to be permitted to start operation in them before a proper review is conducted.
Binance and KuCoin: At the Forefront of the Compliance Drive
This has made KuCoin be the first foreign firm to meet the FIU compliance and pay a fine of INR 3.45 lakh, or about $41,000, much far less than the $2.25 million that Binance had to offer to settle its penalties.
Other exchanges, including Bitget, are also under discussions with the FIU. Currently, India has 48 registered crypto entities, which includes significant players like Binance and KuCoin.
India’s thriving crypto economy has been attracting several global players of late. According to a report by Chainalysis, India topped the rankings for crypto adoption in 2023. Revenue churned out from the Indian crypto market is believed to have crossed well over $1 billion last year alone, thus making it a lucrative target for global exchanges.
Challenges Ahead for Foreign Exchanges
Despite these market opportunities, there are several challenges accompanying foreign exchanges. Other than setting compliance at the Financial Intelligence Unit, these exchanges are expected to sign up under GST. This might raise operation costs, as clearly depicted by the amount of $86 million that Binance was asked to pay up in unpaid GST dues on transaction fees collected from Indian users before the ban.
Conclusion
With India continuing to refine a regulatory framework on cryptocurrencies, foreign exchanges would have to show strict adherence to the local laws when re-entering the market. With more applications being reviewed by the FIU, the Indian crypto market is about to get increased participation-but only by fully complaint ones within the country’s stringent regulatory environment.
