Indian users of the OKX cryptocurrency exchange woke up to a surprising message on March 21, 2024. The platform informed them that it would no longer be available in India due to “local laws and regulations.” Indian users received a notice to close accounts and withdraw funds by April 30. This decision by OKX which is the world’s second-largest crypto exchange by trading volume comes amidst heightened regulatory scrutiny in India’s burgeoning cryptocurrency market.
The move follows warnings from the Indian government. In December 2023, the Financial Intelligence Unit (FIU) issued compliance notices to nine foreign crypto exchanges including OKX for allegedly operating illegally and violating Anti-Money Laundering (AML) regulations.
Cryptocurrency exchanges Binance, Huobi, and Kraken were deemed “illegally operating” and violated India’s anti-money laundering laws. Under the Prevention of Money Laundering Act 2002, the FIU called for compliance with record reporting and other obligations. This included mandatory registration with the FIU and adherence to stipulated requirements.
However, many offshore entities serving a significant Indian user base had managed to operate without proper registration placing them outside the purview of anti-money laundering and counter-financing of terrorism frameworks. The FIU also requested these exchanges to register and comply with KYC (Know Your Customer) guidelines.
While OKX implemented stricter KYC procedures after authorities blocked its app and website in January, the exchange ultimately decided to exit the Indian market. This highlights the challenges faced by cryptocurrency exchanges in complying with local regulations across different jurisdictions.
The shutdown leaves Indian users who relied on OKX for cryptocurrency trading in a lurch. It remains unclear how other cryptocurrency exchanges will respond to this development and whether they will modify their offerings to comply with evolving regulations.
India’s decision to crack down on unregulated crypto activity reflects its growing concern about money laundering and other illegal activities. The country is currently developing a comprehensive crypto regulatory framework expected to be released in 2024. This framework aims to establish clear KYC rules, real-time audits and a uniform tax policy for crypto transactions.
The future of cryptocurrency in India remains to be determined. While regulations are essential for protecting consumers and preventing illegal activity they can also stifle innovation and hinder market growth. Only time will tell how India’s evolving regulatory landscape will impact the future of cryptocurrency adoption in the country.
