India’s Financial Intelligence Unit (FIU) is reportedly planning to approve two additional offshore crypto exchanges to restart operations in the country.
The FIU — responsible for Anti-Money Laundering (AML) compliance in India — is reportedly scrutinizing requests from four overseas crypto exchanges that were earlier banned for not adhering to the country’s AML regulations.
Following FIU registration approvals for Binance and KuCoin, “We have received requests from four more offshore crypto exchanges to operate in India, and we assume that at least two of them will be permitted to resume operations by the end of FY25,” local news media reported, quoting a source it did not identify.
“This would be after undergoing a thorough review of transaction visibility, suspicious transaction reporting, and other related issues,” the source added.
India restricted nine crypto exchanges for noncompliance
India’s FIU had blocked access to nine foreign crypto exchange’s URLs and mobile applications, including Binance, in the first week of January for failing to comply with the country’s AML norms.
So far, KuCoin and Binance have registered with India’s FIU. OKX, on the other hand, shut its operations completely, citing regulatory burden.
On Aug. 15, Binance announced it had registered as a reporting entity with India’s FIU after reportedly paying a $2 million penalty.
Binance’s announcement after registering as a reporting entity with India’s Financial Intelligence Unit. Source: Binance
Speaking to Cointelegraph, India Blockchain Alliance founder Raj Kapoor said that the clearance of two additional offshore crypto exchanges to resume operations in India will have a major impact on India’s cryptocurrency environment and a possible harbinger of this to come in the crypto space. The move is expected to increase market competition, providing Indian investors with better trading options and less dependencies.
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Looking ahead, Kapoor expects lower fees and enhanced features as well as innovative products. He also expects enhanced liquidity in the Indian cryptocurrency market, making it more appealing to institutional investors. However, this also has a flip side. Kapoor explained:
“Growing competition will undoubtedly put pressure on domestic exchanges to improve their products, potentially leading to regulatory issues as authorities strive to maintain compliance and protect investors in a quickly changing industry.”
Heavy dependence on supportive policies
India’s cryptocurrency ecosystem may also change as the Department of Economic Affairs (DEA) prepares a key consultation paper on cryptocurrency legislation. The paper, anticipated for release by October, will seek feedback from a range of stakeholders, with the government taking an active role in shaping the future of digital currencies in India.
Raj Karkara, chief operating officer of ZebPay crypto exchange, told Cointelegraph that India’s potential to become a major player in crypto is dependent on policies that support growth and technological development.
“By seeking inputs from industry experts, companies, and the public, the government is not only fostering transparency but also ensuring that the resulting regulations will be well-rounded and reflective of the needs and aspirations of all the parties involved.”
In April 2022, India established its tax regime on cryptocurrency transactions: a 30% tax on unrealized crypto gains and a 1% tax deducted at source for every crypto transaction. However, the Indian government has avoided regulating the sale and purchase of cryptocurrencies, choosing instead to focus on combating crypto-related money laundering and terrorism financing.
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