India’s Financial Intelligence Unit (FIU) has taken a significant step by issuing Show Cause Notices to nine major offshore Virtual Digital Assets Service Providers (VDA SPs), including industry giants such as Binance and Huobi.
This move is part of India’s enforcement of its Anti-Money Laundering-Countering the Financing of Terrorism (AML-CFT) framework, which was extended to VDA SPs in March 2023.
The targeted entities, which have significant user bases in India, are facing scrutiny for operating without proper registration as mandated by the Prevention of Money Laundering (PML) Act.
The FIU’s notices require these exchanges to provide explanations for their non-compliance. Failure to do so may result in the blocking of their websites in India, effectively severing a substantial portion of their user base.
India’s stance on cryptocurrency has been marked by regulatory uncertainties and policy shifts. The country once contemplated an outright ban on cryptocurrencies, particularly evident when the Reserve Bank of India (RBI) prohibited banks from dealing with crypto businesses in 2018. However, the Supreme Court overturned this ban in 2020, leading to a period of regulatory ambiguity.
Recent developments, including India’s push for crypto rules at the G-20 summit, suggest a shift towards a more nuanced approach. The country is currently developing a five-point legislative framework for cryptocurrencies, influenced by recommendations from the International Monetary Fund (IMF) and the Financial Stability Board (FSB). This framework indicates a potential future where Indian crypto platforms could operate under guidelines similar to those for authorized dealers.
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