India Warns Nine Crypto Exchanges to Block Access or Face Action

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India’s finance ministry has issued compliance notices to nine offshore cryptocurrency exchanges, including Binance and Kucoin, asking them to block their websites in India or face legal consequences.

The notices, sent on December 27, 2023, said the exchanges had failed to register with the authorities and comply with the anti-money laundering (AML) and counter-financing of terrorism (CFT) framework, according to sources familiar with the matter.

A New Bill Expected to Ban Private Cryptocurrencies

The exchanges, which also include Huobi, Kraken, Gate, Bittrex, Bitstamp, MEXC and Bitfinex, have been given 15 days to respond to the notices and explain why they should not be blocked or penalized.

The move is part of India’s ongoing crackdown on the cryptocurrency industry, which has faced regulatory uncertainty and legal challenges for years. India is expected to introduce a bill in its winter session of parliament that would ban most private cryptocurrencies and create a framework for a central bank digital currency.

A Mixed Signal

The notices come after the National Payments Corporation of India (NPCI), the operator of the state-backed United Payments Interface (UPI) network, said it was unaware of its use by any crypto exchange. UPI is a popular payment system that facilitates bank transfers and is widely used by crypto investors in India.

Some crypto exchanges, such as CoinSwitch Kuber and WazirX, have disabled rupee deposits through UPI, citing technical issues. Others, such as CoinDCX and ZebPay, have said they are in compliance with the NPCI guidelines and continue to offer UPI services.

Operating Without Regulatory Oversight

The crypto industry has urged the government to provide clear and consistent regulations and to engage in dialogue with the stakeholders. According to industry estimates, India has more than 10 million crypto investors, holding over $1 billion worth of assets.

“These exchanges operate in India without regulatory oversight,” a finance ministry official stated on condition of anonymity. “Our aim is transparency and accountability, protecting investors from financial crime.”

The ultimatum sent shockwaves through the industry. Kraken promptly responded, highlighting its commitment to working with Indian authorities while remaining operational. Other exchanges, like Binance, opted for internal reviews before issuing official statements.

Will Exchanges Lose Offshore Status in India?

This latest move is part of a larger policy puzzle. India’s parliament is on the brink of introducing a bill potentially outlawing most private cryptocurrencies while paving the way for a state-backed digital currency.

“The government’s stance is confusing,” lamented Raj Kapoor, founder of Indian exchange CoinDCX. “First, crypto isn’t illegal, then UPI access is banned, and now this. Clarity and dialogue are crucial.”

However, amidst the uncertainty, Coinswitch Kuber, another prominent exchange has maintained continued UPI support, claiming compliance with NPCI guidelines.

As the deadline approaches, the dance between Indian authorities and the crypto industry intensifies. Will exchanges bend and register, losing their offshore status? Or will they stand firm, facing potential blocks and a restricted market? The regulatory chess game continues, with the fate of Indian crypto hanging in the balance.

Author: Jinka

Jinka is a self-trained crypto journalist, passionate about happenings in the industry.