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Barring Offshore Crypto Entities
Several crypto exchange applications have been subject to restrictions within the Indian App Store due to directives issued by the government. The affected platforms are part of a dozen offshore crypto exchanges notified of noncompliance by the Indian government.
Accordingly, new users in the country cannot access these exchange platforms on Apple’s App Store. Last month, India’s Financial Intelligence Unit (FIU) reportedly issued letters to a host of offshore crypto exchanges, including Bitfinex, Binance, Huobi, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, and Bittrex.
According to the FIU notice, the affected exchanges engaged in illegal financial activities within Indian territory. With the FIU’s latest actions, the Indian government is making a deliberate effort to ensure regulatory compliance within the cryptocurrency landscape.
The FIU Compliance Directive
According to the notification issued by the regulator, any platform that offers services to Indian consumers and involves exchanges must comply with the requirement to register as a “reporting entity.” A part of this compliance involves submitting statements to the Department of Income Tax.
To ensure adherence to these restrictions, the Financial Intelligence Unit (FIU) has recommended to the Ministry of Electronics and Information Technology that they block the websites of exchanges that do not comply with the regulations.
Surprisingly, despite Apple’s App Store introducing measures to prohibit FIU-flagged cryptocurrency exchanges, these platforms remain accessible through Google’s Play Store and numerous web versions.
Sumit Gupta, founder of India-based CoinDCX, expresses his thoughts on this issue. He suggested a strategic roadmap for investors seeking to move from offshore exchanges that did not comply with regulations to India-based regulated platforms.
The founder unveiled a $1 million Treasury Fund with a 1% bonus dedicated to those looking to deposit digital assets on the CoinDCX platform till January 18, 2024. In addition, Gupta stated that CoinDCX is committed to ensuring a user-compliant platform with industry-standard safety protocols. Gupta cited CoinDCX as the first FIU-registered company, ISO 27001:2023 certified VDA exchange, and the first Indian platform that shares the Proof of Reserve & Liabilities.
India’s Declining Crypto Trading Volume
Meanwhile, domestic cryptocurrency exchanges experienced a sharp drop in trading volume following India’s imposition of a 30% tax on cryptocurrency transactions and an additional 1% tax deduction at source for each crypto trade.
Indian users flocked to foreign cryptocurrency exchanges to evade the burden caused by this demanding tax requirement. The recent regulatory measure aims to redirect transactions back to domestic platforms to restrict the use of foreign exchanges.
Furthermore, the recent move by the Indian government is consistent with the continuous international demand for regulatory structures in the digital asset domain. During the G20 summit last year, the Indian government actively advocated for global collaborative action to standardize crypto regulations.
Nevertheless, the finance ministry has failed to present a crypto bill for parliamentary debate, resulting in protracted uncertainty within the industry despite the Indian crypto community’s persistent demand for a comprehensive and equitable regulatory framework.
Meanwhile, the absence of a formal regulatory framework and abrupt tax impositions in India has caused a decline in crypto trade volumes. This lack of regulatory clarity also explains why some India-based crypto firms have started moving their headquarters to climes with adequate crypto regulation, such as Dubai.
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