The government has also requested the Ministry of Electronics and Information Technology (MIETY) to block the URLs of these entities operating illegally in India.
The move comes as part of the broader effort to bring Virtual Digital Assets Service Providers under the Anti Money Laundering/Counter Financing of Terrorism (AML-CFT) framework, a regulatory framework introduced in March 2023. Virtual Digital Asset Service Providers are entities involved in activities such as exchanging virtual digital assets and fiat currencies, transferring virtual digital assets, and safekeeping or administering virtual digital assets.
The compliance Show Cause Notices have been issued under Section 13 of the PMLA, directing cryptocurrency exchanges to explain their non-compliance with the regulatory framework. The nine exchanges served with these notices include prominent names like Binance, KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex. It's important to note that compliance with PMLA provisions is activity-based and does not necessarily require a physical presence in India.
To escalate the enforcement, the Director of FIU IND has written to the Secretary of the Ministry of Electronics and Information Technology, urging the blocking of URLs associated with these offshore entities. This move aims to prevent their continued operation in India without adhering to the regulatory obligations outlined in the PMLA.
Virtual Digital Asset Service Providers operating in India, both offshore and onshore, are required to register with FIU IND as Reporting Entities. These entities must comply with various obligations, including reporting, record-keeping, and other requirements mandated by the PMLA. The registration requirement is activity-based and not contingent on physical presence in India.
While 31 VDA SPs have registered with FIU IND to date, several offshore entities catering to a substantial number of Indian users have not complied with the AML-CFT framework. The recent regulatory actions underscore the government's commitment to ensuring a secure and transparent cryptocurrency ecosystem in India.
As the cryptocurrency landscape continues to evolve globally, regulatory interventions become imperative to protect investors and prevent illicit financial activities. The actions taken by the Indian government signal a proactive stance in addressing potential risks associated with the use of virtual digital assets. The cryptocurrency community will keenly observe the developments to gauge the impact on the industry's regulatory landscape in India.
– Ranu Jain
