Indian authorities in India are actively working to ensure all cryptocurrency exchanges comply with stringent Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) guidelines to strengthen oversight in the growing digital asset market.
The Financial Intelligence Unit (FIU) of the Indian government has recently designated Binance and KuCoin, two major offshore cryptocurrency exchanges, as Virtual Asset Service Providers (VASPs) in India. This decision is part of a broader effort to enforce compliance within the virtual asset sector under the Prevention of Money Laundering Act (PMLA).
KuCoin has addressed past non-compliance issues by paying a penalty of INR 41 lakhs (approximately $41,000), resulting in the lifting of the ban on its websites in India. On the other hand, Binance is currently resolving its liabilities and is expected to pay a $2 million fine, as reported by The Economic Times.
Both exchanges are now officially registered under FIU-IND, which operates under the Indian Ministry of Finance. This registration aligns with FIU’s mission to regulate the trading of virtual digital assets (VDAs) in India, with a total of 47 entities now under its oversight.
In an effort to promote a compliant virtual asset environment, the Bharat Web3 Association (BWA), a leading web3 industry body in India, recently organized a workshop to provide training for Virtual Asset Service Providers (VASPs). The workshop aimed to educate participants on compliance responsibilities and gather insights on challenges faced by VDAs.
Director of FIU-IND, Shri Vivek Aggarwal, emphasized the importance of adhering to Anti Money Laundering and Countering Financing of Terrorism (AML/CFT) guidelines. He highlighted that compliance obligations are based on the activities of VDAs rather than their physical presence in India.
The workshop saw participation from industry leaders such as CoinDCX, WazirX, and KuCoin, the first international entity to register. Sessions focused on best practices for VASPs and risk-based assessment strategies.
Chairman of the Bharat Web3 Association, Dilip Chenoy, discussed the implications of these regulatory measures. He stressed the importance of compliance with AML and CFT protocols to avoid higher costs associated with non-compliance and highlighted the challenges faced by startups due to tax regulations and ease of doing business issues.
Chenoy also mentioned the association’s involvement in initiatives like the FIU-INDIA Initiative for Partnership in AML/CFT (FPAC) and the Alliance of Reporting Entities in India for AML/CFT (ARIFAC) to enhance dialogue and cooperation with reporting entities, banks, and financial institutions.
The cooperation with FIU-INDIA has led to significant improvements in detecting and reporting suspicious activities within the sector. The workshop featured speakers like Rohan Bhandari from CoinDCX and Mr. Muthuswamy Iyer from WazirX, who shared insights on PMLA Compliance for VASPs.
India has been identified as one of the fastest-growing cryptocurrency economies globally, with the highest adoption rate in 2023. Binance’s return to India as an FIU-compliant platform makes it the second foreign cryptocurrency exchange to enter the market after KuCoin.
Prior to the ban in January, Binance accounted for over 90% of India’s cryptocurrency trading volume. The platform’s popularity grew as traders looked to evade tax measures enforced by the Indian government.
Unregistered foreign exchanges were reportedly causing an annual tax leakage of INR 3000 crores (approximately USD 361.45 million). This led to the FIU banning these exchanges in the country.
As part of the FIU registration, Binance and other exchanges will now be subject to the same rules as local cryptocurrency exchanges, including a 1% tax deduction at source (TDS), which has already been implemented by KuCoin and Indian exchanges.