The Financial Intelligence Unit (FIU) under the Indian Finance Ministry has issued a show cause notice to nine offshore cryptocurrency exchanges, urging the Ministry of Electronics and Information Technology (MeitY) to block their URLs in India. The move comes in response to alleged non-compliance with India’s anti-money laundering laws. Notable exchanges affected include Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfenex.
In a statement, the FIU disclosed that the action was part of a compliance drive against offshore Virtual Digital Assets Service Providers (VDA SPs) under Section 13 of the Prevention of Money Laundering Act, 2002 (PMLA). The notice accused the nine exchanges of operating illegally within India.
Virtual digital asset service providers, regardless of their location, are required to register with FIU India as ‘Reporting Entities’ if engaged in activities such as virtual digital asset exchanges, transfers, safekeeping, or administration. These entities must adhere to the specified requirements outlined in the PMLA of 2002.
Despite serving a substantial user base in India, several offshore entities have reportedly avoided registration, thus evading the Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework. The notice highlighted that, currently, 31 VDA SPs have completed registration with FIU India.
The FIU India, as the primary national agency for handling information related to suspicious financial transactions, plays a crucial role in processing, analyzing, and sharing such information with enforcement agencies and foreign Financial Intelligence Units.
This regulatory move signals the Indian government’s commitment to tightening control over cryptocurrency activities within its jurisdiction, particularly in the context of financial security and compliance with anti-money laundering laws. The affected exchanges now face the possibility of URL blocking within India, pending their response to the show cause notice.