India blocks access to overseas crypto exchanges Binance, Kucoin, and more after show cause notice

India has blocked access to the web platforms for overseas crypto exchanges and virtual digital asset services providers including Finance, Kucoin and OKX, according to a report from Economic Times. The latest development comes against the backdrop of non-compliance with show cause notices by the Financial Intelligence Unit (FIU) of these entities.

Earlier this week, Apple removed offshore crypto exchanges such as Binance, Kucoin and OKX from its App Store after a show-cause notice by the finance ministry's FIU for not complying with the country's money laundering laws. The Android versions of these apps are also likely to be taken down, reported the National Daily.

On December 28, the FIU issued notices to Binance and eight other cryptocurrency exchanges, seeking clarification from them over operations in India. The FIU highlighted concerns about their unauthorized operations and non-compliance with laws with respect to the prevention of money laundering.

FIU’s notice had given a time period of two weeks for responding to these platforms, which lapsed on Friday, January 12. Additionally, the FIU recommended to the IT ministry that access to the uniform resource locator (URL) of these platforms be blocked, prompting the government's subsequent action.

In response to the FIU’s show cause notices to non-compliant crypto exchanges, we took proactive steps, advising investors to transfer their funds to compliant platforms, said Edul Patel, CEO of Mudrex, an Indian Crypto Exchange.

"We are also providing dedicated support to ensure seamless fund transfers from other exchanges, upholding the highest safety and compliance standards. Indian investors should always aim to have their assets in the FIU-compliant entities as it gives them a way for legal recourse against any fraudulent activity on their account," he added.

According to research by Esya Centre, a think tank, the global crypto exchanges cause a tax leakage of nearly Rs 3,000 crore a year to the central exchequer as they do not have a registered entity in India.

Blocking access to foreign crypto platforms is set to help domestic exchanges, which have seen a surge in registration activity lately, thanks to the government's curbs and renewed interest in digital assets after ETF approval by the US SEC.

The recent FIU shows cause notice to offshore exchanges is attracting more investors to Indian exchanges, creating a level playing field. This not only fosters trust but also signifies a shift towards a compliant ecosystem that investors find reassuring, said Sumit Gupta, co-founder at CoinDCX.

"Amore crucial intervention is required in taxation. We, along with other crypto exchanges, have submitted requests to the government to reconsider the 1 per cent TDS, proposing a reduction to 0.01%. Once this reduction takes place, we anticipate further adoption in the market," he added.