India’s Financial Intelligence Unit (FIU), operating under the Ministry of Finance, has taken significant measures against offshore cryptocurrency platforms, serving show-cause notices to nine major players, including Binance and KuCoin, accordingn to a PTI report. This action has been initiated under the stringent Prevention of Money Laundering Act (PMLA) due to non-compliance with anti-money laundering legislation.
The FIU, exercising its authority, has also communicated with the Ministry of Electronics and Information Technology, urging the blocking of the URLs associated with these entities as their operations within India are deemed illegal under PMLA provisions.
The nine cryptocurrency exchanges issued with show-cause notices are Binance, KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex. The FIU clarified that compliance with PMLA provisions is activity-based and doesn’t necessitate a physical presence in India.
In its official statement, the Ministry of Finance highlighted the compliance action against these offshore Virtual Digital Assets Service Providers (VDA SPs) under Section 13 of the Prevention of Money Laundering Act, 2002 (PMLA).
Digital asset service providers, whether operating within or outside India’s borders, engaging in activities such as converting between digital assets and traditional currencies, transferring digital assets, safeguarding or managing digital assets, or utilizing instruments that grant control over digital assets, are mandated to register with the Financial Intelligence Unit India (FIU IND) as a ‘Reporting Entity.’ Additionally, they must adhere to a specified set of responsibilities outlined in the PMLA of 2002.
Furthermore, the ‘Reporting Entity’ is obligated to file statements of financial transactions (SFT) with the Income Tax department, disclosing specific financial transactions or any reportable account maintained during the year.
The government’s decision to bring virtual digital assets service providers under the Anti-Money Laundering/Counter Financing of Terrorism (AML-CFT) framework in March reflects a broader effort to regulate this sector. As of now, 31 VDA SPs have registered with the FIU, signaling a commitment to enhancing regulatory oversight in the cryptocurrency space.
