India Cracks Down on Offshore Crypto Platforms Over AML Violations
The Financial Intelligence Unit-India (FIU-IND) has initiated a major regulatory sweep against 15 offshore cryptocurrency service providers, issuing non-compliance notices for operating without adhering to the country’s stringent anti-money laundering (AML) laws. The watchdog has also requested the immediate takedown of the mobile applications and web URLs associated with these platforms, marking a significant escalation in the government’s efforts to bring virtual digital asset (VDA) activity under federal oversight.
Broad Enforcement Action Targets 15 Entities
The latest enforcement action names a diverse group of platforms, including Weex, Blofin, Rezorex, Bitunix, DigiFinex, Toobit, XT.com, Latoken, WOO X, Pionex, ChangeNow, SimpleSwap, Fixedfloat, WhiteBIT, and Guardarian. Under the Prevention of Money Laundering Act (PMLA), the FIU has determined that these entities failed to meet necessary reporting and compliance obligations required to serve Indian users.
The directive was executed using powers granted under the Information Technology Act. Officials reiterated that the regulatory framework applies to all entities providing crypto-to-fiat exchange, custody, or digital asset transfer services to residents of India, regardless of whether the service provider maintains a physical office or local legal entity within the country.
Expanding Oversight of Digital Assets
Since bringing VDA service providers under the AML and counter-financing of terrorism (CFT) framework in March 2023, India has significantly tightened its stance on the sector. Registered entities are now mandated to implement robust KYC procedures, maintain meticulous records, and report suspicious transaction activity to the FIU.
This crackdown is part of a broader trend of increased financial scrutiny. Earlier this year, the regulator intensified its data-gathering efforts, demanding that major exchanges furnish details on over-the-counter (OTC) transactions exceeding $10,000. These requests were designed to identify beneficial ownership and track intermediaries involved in private, high-value crypto deals.
Curbing Shadow Transactions
The government’s focus on offshore platforms is partly driven by concerns over “shadow” transactions that bypass domestic reporting. Recent reports indicate that some Indian investors have been utilizing overseas services to convert cryptocurrencies like Tether (USDT) into gift cards for everyday purchases, effectively circumventing the domestic tax and regulatory net.
These developments pose a challenge to authorities attempting to track assets for tax purposes, especially given that India imposes a 30% tax on crypto gains and a 1% tax deducted at source (TDS) on virtual asset transfers. By blocking access to non-compliant offshore portals, the government aims to channel users toward regulated, domestic-registered entities that comply with standard financial reporting rules.
Lessons from Past Enforcement
The FIU’s current strategy mirrors the successful enforcement campaigns seen late last year. In late 2023, the regulator issued show-cause notices to several global giants, including Binance and KuCoin. Many of these platforms were subsequently blocked until they registered with the FIU and paid hefty penalties. Binance, for instance, settled its regulatory standing in August 2024 after paying a 188.2 million rupee penalty, while Bybit also secured registration after a 92.7 million rupee settlement.
As the government continues to clamp down on unauthorized offshore access, the FIU has issued a stern warning to the public. It reminded investors that virtual digital assets and NFTs remain unregulated in India, cautioning that users participating in these markets face high risks with virtually no regulatory recourse in the event of financial loss or platform insolvency.
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