• 13 July, 2024

India’s FIU Targets Offshore Crypto Platforms for Non-Compliance

The FIU-Ind has brought to task nine major offshore cryptocurrency exchanges, including industry giants like Binance, Bitfinex, and Kraken, per a Bloomberg report. This move comes as part of India’s ongoing efforts to curb money laundering and terrorist financing through digital assets. The notices issued are grounded in the provisions of the Prevention of Money Laundering Act (PMLA), a key regulatory framework in India’s fight against financial crimes.

The FIU-Ind, as the central agency overseeing financial intelligence and compliance, mandates that all virtual digital asset service providers operating in India adhere to stringent AML/CFT norms. This includes maintaining detailed Know Your Customer (KYC) records and other transaction-related documentation. The recent notice serves as a reminder that operating from a foreign country does not exempt these entities from Indian laws.

The FIU-Ind’s decision could have significant implications for the Indian cryptocurrency market. Dhruv Garg, a prominent Lawyer and tech Policy Advisor, suggests that effectively blocking these entities could render the offshore business model unviable for circumventing domestic AML laws. This move is seen as a step towards greater regulatory oversight and accountability in the burgeoning digital asset market in India.

Since March 2023, VDAs have been required to register with FIU-Ind as part of the AML-CFT framework under the PMLA Act. This regulation ensures that all entities, regardless of their physical presence in India, adhere to the mandated obligations. To date, 31 crypto exchanges have registered with FIU-Ind, signaling a growing compliance trend among VDA service providers.

The FIU-Ind has also initiated steps to secure the digital asset environment in India further. The agency has reached out to the Ministry of Electronics and Information Technology (MeitY), urging them to block the URLs of these entities. This request aims to curtail the operations of platforms that have been functioning illegally without adhering to PMLA guidelines. 

The FIU-Ind’s recent notices are a clear indication of India’s stringent stance on financial compliance within the cryptocurrency industry. By enforcing these regulations, the government aims to establish a more secure and transparent digital asset environment, aligning with global standards in financial regulation and oversight.

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