India implements ban on foreign cryptocurrency exchanges due to regulatory issues

India has taken steps to block access to foreign cryptocurrency exchanges, including major players such as Binance, KuCoin, and OKX. As reported by the Economic Times, the decision stemmed from a prolonged failure to respond to requests for formal clarification from the Financial Intelligence Unit (FIU).

FIU’s warning and Apple’s precedent

The FIU, under the Treasury, has raised concerns about potential money laundering activities on these offshore platforms and issued a show cause notice. Earlier this week, apologize Following guidance from FIU, we have taken decisive action to remove these exchanges from the App Store.

To address the situation, FIU sent notices to nine exchanges, including Binance, on December 28, seeking justification for their unlicensed operations in India. IT departments were then prompted to enforce URL access blocking for these platforms.

Read more: India implements strict measures against foreign cryptocurrency exchanges

Impact on domestic exchanges and trader behavior

The move to block foreign cryptocurrency platforms unintentionally triggered a surge in registrations for domestic exchanges. In accordance with the imposition of 30% tax on cryptocurrency To earn profits and 1% TDS from Indian trading, traders initially moved their funds to overseas exchanges, which led to a noticeable decline in trading volumes on local platforms in 2023.

However, with access to Binance and other foreign exchanges restricted since late December recently, there has been a shift back to domestic exchanges such as WazirX, CoinDCX, and CoinSwitch Kuber. WazirX reported a 250% surge in deposit inflows within four days of the December 28 compliance notice issued to foreign exchange exchanges.

Mixed results: growth of domestic platforms, concerns for investors

While this sudden change has boosted the growth of domestic platforms in India, it has also left many local cryptocurrency investors in a difficult position. A significant amount of assets are now locked in wallets on blocked foreign platforms. According to industry estimates, about $4 billion in cryptocurrency assets remain offshore to avoid the 1% tax, and Binance holds a stake equivalent to 80% of this amount.

Navigating Regulatory Uncertainty

The regulatory environment surrounding cryptocurrencies in India remains dynamic, forcing traders and platforms to adapt quickly to changing circumstances. The recent ban on offshore exchanges highlights the government’s commitment to strengthening compliance and ensuring a transparent cryptocurrency ecosystem in the country. As the cryptocurrency community navigates this regulatory uncertainty, the implications for both foreign and domestic platforms continue to unfold, shaping the future trajectory of cryptocurrency trading in India.