India Restricts Access to Leading Offshore Crypto Exchanges

India Restricts Access to Leading Offshore Crypto Exchanges

India has taken decisive action by suspending access to several international cryptocurrency exchanges, including Binance, KuCoin, and OKX.

Regulatory Non-Compliance Leads to Access Suspension

Reports from the Economic Times indicate that the suspension follows a prolonged period of non-compliance with official requests for clarification from the Financial Intelligence Unit (FIU) by these crypto exchanges.

Android Versions Also Affected

The restrictions extend to the Android versions of these exchanges, as confirmed by a high-level government source, emphasizing the severity of the measures.

Apple Sets Precedent with App Store Removal

Earlier in the week, Apple took a notable step by removing these offshore exchanges from its App Store after receiving a show-cause notice from the FIU under the finance ministry.

FIU’s Concerns Over Money Laundering

The FIU had expressed concerns about suspected money laundering activities on these platforms, prompting a ban recommendation until compliance with India’s crypto regulations is achieved.

FIU’s Decisive Actions and Notices

To address the situation, the FIU issued notices on Dec. 28 to nine exchanges, including Binance, demanding justification for their unlicensed operations in India.

Impact on Domestic Exchanges

The crackdown on foreign crypto platforms has inadvertently driven a surge in registrations on domestic exchanges. Following the introduction of a 30% tax on crypto profits and a 1% TDS on transactions in India, crypto traders had initially shifted funds to offshore exchanges, causing a significant decline in local trading volumes throughout 2023.

Migration to Domestic Platforms

However, with recent access restrictions to Binance and other unregistered foreign exchanges, traders are now migrating back to domestic platforms like WazirX, CoinDCX, and CoinSwitch Kuber.

Domestic Exchanges Experience Significant Growth

WazirX reported an impressive 250% surge in deposit inflows within four days of the Dec. 28 compliance notice, compared to the preceding four days.

Positive Trend Across Platforms

Edul Patel, CEO of Mudrex, a Y Combinator-backed platform, confirmed a similar trend, stating, “The figures we usually achieve in 3 months, we’ve realized in the past two weeks.”

Dilemma for Indian Crypto Investors

While the shift has been positive for domestic exchanges, many Indian crypto investors now face a dilemma, with substantial assets locked in the wallets of blocked foreign platforms.

Significant Offshore Assets and Challenges

Industry estimates suggest around $4 billion in crypto assets remain offshore to avoid the 1% tax, with Binance holding a reported 80% of this amount.

In conclusion, India’s stringent measures against non-compliant offshore exchanges have reshaped the crypto landscape, driving a notable return to domestic platforms, albeit leaving some investors with complex asset management challenges.

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