- India’s crackdown on foreign crypto exchanges leaves users and the industry in limbo.
- Unclear regulations and a high tax create an uncertain future for the industry.
The Financial Intelligence Unit (FIU) issued non-compliance notices to several major foreign crypto exchanges in December 2023, demanding adherence to KYC and AML regulations. This was followed by app store bans and URL blocking, effectively shutting down access for Indian users.
The foreign crypto exchanges are Binance, HTX, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, Bittrex and Bitfinex. These exchanges are given 12 days to comply with Indian regulations. It has left users with limited options and the industry calling for regulatory clarity.
The action stemmed from concerns about tax evasion and money laundering. According to Economic times estimates $4 billion of dollars in crypto assets being held on foreign platforms. Out of this $4 billion, 80% is held in Binance.
No Clear Regulations for Domestic Exchanges
Critics argue that the government should prioritize clear regulations for domestic exchanges before targeting foreign ones, citing instances of user funds being locked on Indian platforms.
Siddharth Sogani, CEO of blockchain analytics firm Crebaco Global said:
“The government is trying to regulate the crypto exchanges outside the country, but what about the Indian exchanges? There are numerous cases where Indian exchanges have not allowed users to withdraw their funds. I think it’s hypocritical for the government to worry about foreign exchanges before setting clear regulations for Indian exchanges.”
While some believe this is a temporary setback with potential for re-entry after regulatory frameworks are established, others fear it could be a long-term shutdown. Industry voices like WazirX welcome the move as necessary to level the playing field, but emphasize the need for clear and fair regulations.
Despite India’s vast crypto potential, unclear regulations and a hefty 30% tax create a challenging environment. This, coupled with the recent crackdown, leaves the future of foreign crypto exchanges in India hanging in the balance.
While some exchanges like OKX are reportedly working towards compliance, many remain silent on their plans. Industry experts suggest potential for re-entry after the 2024 elections, but emphasize the need for clear regulations and fairer taxation to create a sustainable ecosystem.
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