Does India’s FIU Ban Affect Your Crypto Investment? (2024)

With the high adoption of cryptocurrencies globally, there’s also a subsequent increase in the number of cryptocurrency exchanges—platforms that allow users, traders or investors to buy, sell and store virtual currencies.

A crypto exchange works exactly like a stock exchange that helps users to trade in digital currencies such as Bitcoin, Tether or Ethereum. These exchanges work on digital marketplaces like desktop functions similar to e-brokerages or mobile applications. Cryptocurrency exchanges also provide users with an array of trading and investing tools.

In the latest development on cryptocurrency exchanges domestically, the Indian government has actioned blocking URLs of nine cryptocurrency exchanges in India. Here’s all you need to know.

India to Ban URLs of Certain Crypto Exchanges

On Dec. 28, 2023, a show cause notice was sent to nine offshore crypto exchanges by the Financial Intelligence Unit (FIU) after they were found to be “illegally operating” and not in compliance with India’s anti-money laundering law. The FIU comes under the Indian Finance Ministry and has asked the Ministry of Electronics and Information Technology (MeitY) to block URLs of the nine cryptocurrency exchanges in India.

The notice was sent out to them by FIU for illegally operating in India. The nine crypto exchanges to get the notice include Binance, Huobi, Kraken, Gate.io, Kucoin, Bitstamp, MEXC Global, Bittrex and Bitfenex.

The notice states, “As a segment of compliance action against the nine offshore entities, FIU India (FIU IND) has issued compliance notices to the virtual digital assets service providers (VDA SPs) of the PMLA (Prevention of Money Laundering Act), 2002 under Section 13.”

The notice further reads, “The regulation casts record reporting and other obligations on the VDA SPs under the 2002 act, which includes registration with the FIU IND too.” As of now, in total 31 VDA SPs have completed their registration with FIU IND.

The rule states that virtual digital asset service providers, whether operating outside or within the country, are involved in activities such as virtual digital asset transfers, virtual digital asset-to-fiat currency, facilitating control over virtual digital assets or safekeeping or administration of virtual digital assets need to register with FIU IND as a “Reporting Entity”.

They are also obligated to adhere to the stipulated requirements mandated under the PMLA of 2002. Nevertheless, a significant number of offshore entities serve a notable portion of Indian users, avoid registration and therefore fall outside the purview of the anti-money laundering (AML) and counter-financing of tourism (CFT) framework.

FIU India serves as the main national agency tasked with receiving, processing, analyzing and sharing information that concerns suspicious financial transactions with foreign financial intelligence units and enforcement agencies.

KuCoin Registers With FIU-IND

As you can read above, KuCoin, an offshore cryptocurrency exchange, was banned along with eight other international exchanges for illegally operating in India. These exchanges are not registered with FIU-IND.

KuCoin finally announced on March 23 that it had achieved compliance with the FIU-IND regulations. This declaration follows months after the exchange received a show-cause notice for failing to adhere to local anti-money laundering regulations.

Recently, another global exchange, OKX, declared that it would cease its services to Indian users starting April 30 due to regulatory challenges in the country.

KuCoin became among the first global cryptocurrency exchanges to register with FIU-IND. Approximately nine offshore exchanges, including KuCoin, Binance, Kraken and Houbi, were discovered to be non-compliant with FIU-IND regulations and were not aligned with the provisions of the Prevention of Money Laundering Act (PMLA), 2002, in December 2023.

In response, the government ordered the URLs of these exchanges blocked in India in January, and their apps were removed from Apple and Google’s app stores.

What Should Indian Consumers Do To Mitigate The URLs’ Ban

If you are still trading on an international platform that is not registered with FIU, but not yet banned, it is advisable you move your assets to an Indian cryptocurrency exchange that is FIU-registered.

With inherent risks attached with trading on international platforms, the right way forward is to not panic and sell your assets rather just move them to an Indian exchange or your personal wallet.

Once it is on your personal wallet, you can easily swap or sell them according to your wish.

Among the companies that are FIU-compliant is Mudrex, which witnessed a surge of $1 million in their crypto deposits from prominent exchanges including Binance.

Edul Patel, chief executive officer and co-founder of Mudrex, said “The Government of India has always supported fostering innovation and promoting responsible growth within the crypto industry. Indian investors should always aim to have their assets in FIU-compliant entities as it gives them a localized experience and more importantly a way for legal recourse against fraudulent activity on their account”.

It is always a best practice when using funds on foreign exchanges, one should aim to move funds back to India, says Patel.

Also Read: Spot Bitcoin ETF Approved By SEC: What It Means For Indian Investors

Global Cryptos Face the Axe

Cryptocurrency exchanges like Binance, Kraken, Kucoin and others were banned in India by the FIU. The Director FIU IND wrote to the Secretary of Meity to block these exchanges as they were illegally operating without following the provisions of the PML Act in India.

The nine offshore exchanges that stand banned include Binance, Bitstamp, Kucoin, Huobi, MEXC Global, Kraken, Gate.io, Bitfinex and Bittrex. This action was taken in response to suspected disobedience of Indian anti-money laundering regulations.

In effect, Apple removed their applications from the Apple Store and Google removed them from its PlayStore in India. As foreign cryptocurrency exchange platforms are blocked, domestic exchanges are set to benefit from a surge in domestic registrations.

On March 22, cryptocurrency exchange OKX announced ceasing operations in India by the end of April following the restrictions imposed by the FIU. The exchange has informed its Indian users that it will discontinue its services in the country. Investors are required to liquidate their positions by the end of the following month; thereafter, they will only have the option to withdraw their funds.

Crypto Exchanges That Are Not Banned In India

Currently, there are 31 crypto businesses in India that are registered with FIU. Find the list of the top cryptocurrency exchanges that you can consider moving your crypto assets to.

UnoCoin

Unocoin is one of the oldest and leading exchanges in India for buying, selling and storing cryptocurrencies. Users can trade in eighty different digital currencies on this platform along with free Bitcoins on signing up. Users can also refer and earn 15% of their transaction fees.

WazirX

WazirX is one of the fastest-growing exchanges in India with sixty lakh plus registered users. It is also known for its beginner-friendly interface and advanced trading charts which are available across Android, web, iOS and Windows applications. It offers a wide range of tradable pairs and coins at competitive prices.

ZebPay

ZebPay is a well-known exchange among crypto investors for interest earnings on idle crypto holdings. It provides up to 8.5% returns for investors’ cryptocurrency fixed deposits. At present, the exchange is supporting 100-plus crypto coins with around 50 lakh registered users.

CoinDCX

CoinDCX is one of the transparent and safest crypto exchange platforms in India. The onboarding process is carried out safely with a host of security checks done through automated software applications such as biometrics. They also offer self-custody wallets for their users.

Mudrex

Mudrex was launched in the year 2018 with a vision of making cryptocurrency investing long-term and less risky. This exchange platform is one of the earliest to register with FIU in India and is 100% compliant with Indian users. The platform has one million plus invested users. Mudrex provides its users with the unique advantage of zero fees on crypto deposits.

CoinSwitch

CoinSwitch is one of the best crypto exchanges for beginners. They let the users trade more than 100 cryptocurrencies for as low as INR 100 through an easy user interface. They also provide trading pairs of INR to the crypto rupee index, the benchmark index for measuring Indian rupee-based crypto market performance.

Know more about the best crypto exchanges in India.