Indian Government Blocks WEB Access to Offshore Crypto Platforms, Including Binance and KuCoin

India Blocks Access to Offshore Crypto Platforms Amid Money Laundering Concerns

In a significant move, the Indian government has blocked access to web platforms of foreign cryptocurrency exchanges, including major players like Binance, Kucoin, and OKX. This decisive action is part of a broader crackdown on offshore crypto apps, with potential removals of their Android versions looming. The Ministry of Electronics and Information Technology (MeitY) issued orders to Apple on Wednesday, urging the removal of offshore cryptocurrency apps from its store.

The impetus for these measures comes from the Finance Ministry’s Financial Intelligence Unit (FIU), which raised concerns about potential money laundering activities facilitated by these platforms. According to government officials, these foreign exchanges were operating without necessary permits and approvals, and there were instances of their wallets being used illegitimately.

This regulatory intervention is expected to benefit domestic cryptocurrency exchanges, some of which are already witnessing a surge in registrations. Industry executives argue that offshore platforms were operating in India without the required permissions, and finance ministry inputs suggested their involvement in money laundering activities.

The government’s action follows a series of reports and show-cause notices issued by the FIU to cryptocurrency exchanges, including Binance. On December 28, the FIU sent notices to Binance and eight other exchanges, asking them to explain their operations in India, citing a lack of permissions and non-compliance with anti-money laundering laws.

The FIU recommended blocking access to the uniform resource locator (URL) of these platforms, leading to the recent government decision. With the two-week deadline for responses lapsing on Friday, these exchanges are under scrutiny for operating without proper regulatory oversight in India.

The crackdown is not only aimed at addressing regulatory compliance issues but also at curbing tax leakage. Global cryptocurrency exchanges without a registered entity in India reportedly cause an annual tax leakage of nearly Rs 3,000 crore (approximately $400 million) to the central exchequer.

For Indian crypto investors, especially those with assets on offshore platforms, the sudden regulatory intervention has led to confusion and caught many off guard. It is estimated that nearly $4 billion worth of crypto assets are still parked in offshore platforms to evade the 1% tax deducted at source applicable on the exchange of virtual digital assets.

While the move restricts new transactions on these platforms, it is seen as a potential boon for domestic cryptocurrency exchanges. Players like CoinDCX have reported a significant increase in registrations, indicating a shift of investors from non-compliant exchanges to those adhering to FIU regulations.

As the regulatory landscape evolves, this crackdown signals the government’s commitment to bringing offshore crypto activities under scrutiny and enforcing compliance with existing financial regulations. The coming weeks are likely to witness further developments as the government assesses the responses from these offshore exchanges and charts the course for the future of crypto regulation in India.