In a major move aimed at ensuring compliance with anti-money laundering laws, the Financial Intelligence Unit (FIU) of India has issued a show cause notice to nine offshore cryptocurrency exchanges. Allegedly operating illegally in India by failing to adhere to the country’s anti-money laundering regulations, these exchanges, including prominent names like Binance and Kucoin, have been directed to provide explanations for their actions.
The FIU, which operates under the Indian Finance Ministry, has recommended to the Ministry of Electronics and Information Technology (MeitY) that the URLs of these nine cryptocurrency exchanges be blocked in India. The FIU’s action comes in response to the perceived non-compliance of these exchanges with Indian anti-money laundering laws.
The exchanges that have received the show cause notice are Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfenex.
The show cause notice, issued under Section 13 of the Prevention of Money Laundering Act, 2002 (PMLA), states, “As part of compliance action against the offshore entities, Financial Intelligence Unit India (FIU IND) has issued compliance Show Cause Notices to the following nine offshore Virtual Digital Assets Service Providers (VDA SPs) under Section 13 of the Prevention of Money Laundering Act, 2002 (PMLA).”
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Virtual Digital Asset Service Providers, whether operating within or outside India, are required to register with FIU India as ‘Reporting Entities’ if engaged in activities such as virtual digital asset-to-fiat currency exchanges, virtual digital asset transfers, safekeeping or administration of virtual digital assets, or facilitating control over virtual digital assets. These entities must comply with the stipulated requirements mandated under the Prevention of Money Laundering Act (PMLA) of 2002.
“The regulation casts reporting, record-keeping, and other obligations on the Virtual Digital Asset Service Providers (VDA SPs) under the PML Act, which also includes registration with the FIU India,” the notice further reads.
As per the FIU notice, 31 Virtual Digital Asset Service Providers have completed registration with FIU India. However, several offshore entities, despite catering to a significant portion of Indian users, have allegedly avoided registration, placing themselves outside the purview of the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework.
The FIU India functions as the primary national agency responsible for receiving, processing, analyzing, and sharing information related to suspicious financial transactions with enforcement agencies and foreign Financial Intelligence Units. The ban on URLs is seen as a stern step to bring these offshore cryptocurrency exchanges into compliance with Indian regulatory frameworks.
