Financial Intelligence Unit India (FIU IND) Initiates Action Against Offshore Virtual Digital Assets Service Providers

In a decisive move aimed at preserving the integrity of India's financial landscape, the Financial Intelligence Unit India (FIU IND) has officially issued compliance Show Cause Notices to nine offshore Virtual Digital Assets Service Providers (VDA SPs). Notably among them are Binance, Kucoin, Phoenixfin Pte. Ltd, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex.

The entities have been identified for operating within India without adhering to the provisions of the Prevention of Money Laundering Act (PMLA) 2002.

This action follows growing concerns and pressures from local Virtual Asset Service Providers (VASPs) operating legally in India, which have been advocating for fair competition within the market. While compliance is a central issue, it is noteworthy that local exchanges have been actively pushing for regulatory measures to level the playing field.

Sumit Gupta, Co-founder of CoinDCX, shared with Unlock Blockchain, "Consumer Protection is paramount. Most Indian VDA exchanges are FIU registered entities and adhere to the Prevention of Money Laundering Act (PMLA). We have consistently advocated for robust regulatory frameworks that ensure transparency, protect consumers, and combat financial crime. The recent step from FIU IND to offshore Virtual Digital Assets Service Providers (VDA SPs) will aid users and investors in risk mitigation, protecting them from potential scams and fostering the development of a secure VDA ecosystem. This move by the FIU reinforces our belief in 'Building in India' and fosters a healthier environment for both domestic exchanges and Indian VDA users."

In recent times, legally compliant VASPs in India have raised concerns about the substantial cost of compliance and the significant tax burden (approximately 30%) imposed on users. This has created a competitive disadvantage for them, as offshore exchanges, such as the ones identified in the FIU IND action, operate without these financial encumbrances. Users are drawn to offshore platforms due to the absence of taxes on operations and profits, making them an attractive alternative.

FIU IND, in its commitment to ensuring a secure and compliant digital assets landscape in India, has urgently written to the Ministry of Electronics and Information Technology, urging the immediate blocking of URLs associated with these entities. This move seeks to address the non-compliance of offshore VDA SPs with the Anti Money Laundering/Counter Financing of Terrorism (AML-CFT) framework under the PMLA.

The industry awaits the Ministry's response and anticipates a swift and effective resolution to ensure a fair and regulated environment for all Virtual Asset Service Providers in India. Stay tuned for further updates as this story unfolds.