Uncertain prospects loom over foreign cryptocurrency exchanges operating in India

India’s Ministry of Finance, through its Financial Intelligence Unit (FIU), has issued a notice of noncompliance to several foreign crypto exchanges, including Binance, Kraken, and Bitfinex, for operating illegally in the country. The notice requires the firms to comply with Indian Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations within 12 days. As a result, Apple’s App Store and Google’s Play store have blocked these exchanges, and their URLs and alternate URLs have been banned as well. This ban has surprised Indian crypto traders who had turned to foreign exchanges to avoid the high tax on cryptocurrency trading imposed by the Indian government. The ban affects nearly $4 billion worth of crypto assets, with Binance holding the majority. The use of foreign exchanges by Indian traders costs the government approximately $361 million in tax revenue annually. However, this crackdown on foreign exchanges highlights the lack of clear regulations for domestic exchanges to follow. Siddharth Sogani, CEO of Crebaco Global, emphasized the need for the government to focus on domestic exchanges and address issues, such as users being unable to withdraw funds for extended periods. Rajagopal Menon, vice president of Indian exchange WazirX, believes the FIU’s action is overdue and that regulations are inevitable due to India being a signatory to the G20 Delhi declaration. Meanwhile, Indian crypto exchange CoinDCX CEO Sumit Gupta sees the FIU ban as a step toward enforcing regulations and preparing the industry for future supportive regulations. Many foreign exchanges have remained silent on their plans in India, but OKX was reportedly one of the first to comply with regulatory requirements and restart KYC for Indian customers. It is speculated that FIU registration for foreign exchanges may start after India’s general elections in July 2024.