India’s Financial Intelligence Unit Targets Offshore Cryptocurrency Providers 

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Key takeaways:

  • India’s Financial Intelligence Unit issues show cause notices to nine offshore cryptocurrency operators.
  • Besides Binance and Kucoin, other virtual digital assets service providers (VDA SP) have received notices for non-registration.

In a significant move to regulate the rapidly growing cryptocurrency sector, India’s Financial Intelligence Unit (FIU) has raised concerns about nine offshore Virtual Digital Assets (VDA) service providers for purportedly violating the Prevention of Money Laundering Act (PMLA) of 2002. 

The targeted firms, located in Seychelles, Cayman Islands, and Switzerland, have received compliance Show Cause Notices from the Indian government.

The cryptocurrency platforms under scrutiny include Kucoin, Huobi, Kraken,, Bittrex, Bitstamp, MEXC Global, and Bitfinex. According to a statement released by the finance ministry on December 28, both offshore and onshore Virtual Digital Asset service providers operating in India must register with the FIU-India and adhere to the provisions of the PMLA, 2002. 

These activities encompass exchanges between virtual digital assets and fiat currencies, as well as the transfer and administration of virtual digital assets or instruments enabling control over them.

The FIU-India, the national agency responsible for analyzing and disseminating information related to suspect financial transactions, emphasized that compliance with the law is tied to the nature of the activity, not physical presence in India. 

In March, India’s Finance Ministry mandated that cryptocurrency businesses register with the FIU, the country’s anti-money laundering unit, and adhere to other processes outlined in the PMLA. This legal obligation includes implementing verification processes such as Know Your Customer (KYC).

The recent development follows the denial of consideration for a Public Interest Litigation (PIL) in November, which aimed to establish rules and principles for cryptocurrency trading in India. The Supreme Court of India, led by the Chief Justice, deemed the petitioner’s claims as having a more legislative character.

While 31 cryptocurrency firms have complied with the registration requirements and associated obligations, the FIU noted that several offshore entities, serving a significant portion of Indian users, were failing to register and fall under the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework. 

Under these reporting obligations, cryptocurrency firms are obligated to report suspicious activities, similar to traditional banking institutions.

The move by the Indian government underscores its commitment to bringing cryptocurrency activities under regulatory frameworks, particularly in the context of preventing money laundering and ensuring the security of financial transactions in the country. 

The evolving landscape of cryptocurrency regulations in India will likely continue to be closely monitored as authorities seek to strike a balance between innovation and financial security.

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Aadrika Sharma
Aadrika Sharma

I enjoy writing and try to learn new things every passing day!

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