India’s crypto showdown: Binance faces blockade, notices sent to 8 other top crypto platforms
India's Financial Intelligence Unit, under the Finance Ministry, has issued show cause notices to major crypto exchanges, including Binance, for alleged illegal operations.
Highlights
- The FIU has slapped show cause notices to Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex
- It alleges that these exchanges failed to comply with reporting obligations to the Indian government, a requirement similar to traditional banking
The Financial Intelligence Unit (FIU), operating under the Finance Ministry’s Department of Revenue in India, has slapped show cause notices on prominent cryptocurrency exchanges, including Binance, for allegedly operating illegally in the country through offshore entities. The notices were also extended to other major platforms such as Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex.
The move comes as part of the government's efforts to regulate virtual digital asset service providers under the Anti Money Laundering/Counter Financing of Terrorism (AML-CFT) framework.
Violation of anti money laundering laws
The FIU, responsible for identifying and combating suspect financial transactions, revealed that the targeted cryptocurrency exchanges had not registered under the provisions of the Prevention of Money Laundering Act (PMLA) Act, 2002. In March 2023, virtual digital asset service providers were explicitly included in the AML-CFT framework. Despite this, the FIU alleges that these exchanges failed to comply with reporting obligations to the Indian government, a requirement similar to traditional banking institutions.
Show cause notices and urgent website blockades
Show cause notices, issued under Section 13 of the Prevention of Money Laundering Act, 2002, were sent to Binance and other exchanges operating from offshore locations such as Seychelles, Cayman Islands, and Switzerland. The FIU, not stopping at the notices, has also written to the Ministry of Electronics and Information Technology (MEITY), urging them to block the websites of the implicated cryptocurrency exchanges.
The FIU emphasises that compliance with Indian law is not contingent on physical presence, and it is the reporting obligations that these companies have allegedly failed to fulfill.
While 31 cryptocurrency firms have reportedly complied with the AML-CFT framework, the FIU points out that "several offshore entities," despite serving a significant portion of Indian users, have neglected to register and adhere to reporting obligations. The regulatory crackdown reflects the Indian government's determination to bring the cryptocurrency space under a comprehensive regulatory framework, addressing concerns related to money laundering and terrorism financing.
