India to Block 9 Crypto Exchanges’ Websites Including Binance

The Indian government has initiated stern measures against offshore virtual digital asset service providers, issuing show cause notices to nine prominent platforms under local anti-money laundering laws.

According to the Financial Intelligence Unit (FIU), these exchanges are operating unauthorized and illegally within the country, so their domain names have been blacklisted.

The show cause notices target major global players in the crypto space, including Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex. Despite their substantial global trading volumes, these exchanges lack the required authorization to operate in India.

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Government’s Directive to Block Domains

The Director of FIU IND has formally written to the Secretary of the Ministry of Electronics and Information Technology, urging the blocking of URLs associated with these entities. The move comes in response to their non-compliance with the provisions of the Prevention of Money Laundering Act in India.

While the government has not outlined specific consequences or provided a timeframe for compliance, the lack of crypto-specific precedents in the country adds an element of uncertainty.

The action follows the government's recent declaration that 28 domestic crypto service providers have registered with the FIU, a number that has now risen to 31.

India's Regulatory Landscape

India permits the operation of cryptocurrency exchanges, but stringent restrictions are imposed under local anti-money laundering laws. These regulations include the deduction of taxes at the source for every transaction, with a substantial 30 percent tax on crypto gains, lacking any offset provisions against losses in other asset classes.

According to the FIU, numerous offshore exchanges operate within India without proper registration, catering to a significant portion of Indian users. The government's efforts to align the crypto sector with traditional finance include mandates for KYC information collection and registration with the FIU for crypto companies.

Prime Minister Narendra Modi expressed the need for global crypto regulation in August, emphasizing the importance of a comprehensive framework that transcends national boundaries. 

India's regulatory stance on crypto has been characterized by high capital gains taxes, with a hefty 30 percent tax on crypto profits surpassing rates applied to equities and other investments.

However, Chainalysis reported earlier this year that India is leading the world in "grassroots crypto adoption." By raw volume, India is the second-largest crypto market in the world.