- India is taking unprecdented action against some of the world’s biggest crypto exchanges.
- Users will no longer be able to access Binance, Kraken, KuCoin and others from the country.
- The move comes after India helped lead the way for the G20 to adopt the Crypto Asset Reporting Framework.
The crypto party in India could be coming to an abrupt end as the government cracks down on major exchanges illegally operating in the country. In a statement on December 28, India’s Financial Intelligence Unit (FIU) issued notices to several prominent crypto trading platforms, including Binance, Kraken, Bittrex, Bitstamp, KuCoin and Huobi. Coinbase stopped serving Indian customers in September 2023.
The FIU also directed the information ministry to essentially block access to these exchanges by banning their websites.
India Cracks Down on Big Crypto Exchanges
This strong arm tactic by Indian authorities delivers a blow to the country’s burgeoning cryptocurrency sector. Over the last few years, crypto trading volumes have exploded. Investors have chased highly volatile digital tokens in an attempt to make a quick buck. According to CoinDCX CEO Sumit Gupta, 95% of trading has shifted to offshore exchanges as investors try to avoid the punishing 30% transaction tax India imposed on crypto in 2022.
However, the government is clearly in no mood to let these foreign-based exchanges continue to flout the law.
FIU’s statement suggests that they believe popular offshore platforms have been ignoring regulations. These rules mandate Know Your Customer (KYC) verification and compliance with anti-money laundering laws. Authorities seem particularly miffed that, despite benefiting from Indian traders looking to avoid taxes, these exchanges have made little effort to formally register themselves in the country.
In 2021, the enforcement directorate tried to find out whether Binance (BNB), the world’s biggest exchange, had facilitated illegal betting . Now, the company finds itself back in the crosshairs just months after agreeing to pay $4.3 billion in fines to US regulators. Its legal troubles forced co-founder Changpeng Zhao to step down as CEO in 2023.
With this latest crackdown, the Indian government aims to make an example out of leading crypto exchanges. It serves as a stern warning for trading platforms to fall in line and abide by the law. The bigger question is whether blocking access to offshore exchanges provides any material relief from issues like money laundering or tax evasion. After all, crypto users have been successfully flouting “bans” from many countries for years.
India Increasingly Influential in Crypto
In September 2023, India led the G20 to endorse the Crypto-Asset Reporting Framework (CARF) and updated the Common Reporting Standard (CRS) for better tax transparency. CARF mandates standardized reporting of crypto transactions to prevent tax evasion. Meanwhile the CRS revision helps in the disclosure of foreign financial accounts.
The G20 also commended efforts by the Organisation for Economic Co-operation and Development (OECD) in increasing transparency, especially in real estate, to combat tax evasion and fraud.
India does not currently have a comprehensive set of crypto legislation similar to the European Union’s MiCa rules. Instead the country is taking a slower approach to regulating the sector, and may wait until 2025 to introduce a bill.
