India has reportedly suspended access to several foreign cryptocurrency exchanges, such as Binance, KuCoin, and OKX.
According to the Economic Times, this action comes after a period of continued non-compliance with official requests from the Financial Intelligence Unit (FIU) for clarification from cryptocurrency exchanges.
The ban also extends to Android versions of these exchanges, based on orders that have already been executed, as confirmed to the local press by a high-ranking government source.
Earlier in the week, Apple set a precedent by removing these third-party exchanges from its App Store following a show-cause notice issued by the Finance Ministry's Financial Intelligence Unit.
The move came after the Financial Intelligence Unit raised alerts over suspected money laundering activities on the affected platforms and advised a ban to be imposed until they comply with the country's cryptocurrency regulations.
To rectify the situation, the FIU reportedly sent notices on December 28 to nine exchanges, including Binance, requesting justification for their unlicensed operations in India.
The Ministry of Information Technology was also urged to block access to the URLs of these platforms, leading to the current government action.
This ban of foreign cryptocurrency platforms has inadvertently boosted registrations on local exchanges. After India imposed a 30% tax on cryptocurrency profits and a 1% TDS tax on transactions, Indian cryptocurrency traders started shifting their funds to offshore exchanges, leading to a significant decline in trading volumes on local platforms in 2023.
However, with recent restrictions on access to Binance and other foreign exchanges operating without local registrations since late December, traders have reportedly started migrating to local counterparts such as WazirX, CoinDCX, and CoinSwitch Kuber.
WazirX reported a 250% increase in deposit inflows within four days of the December 28 compliance notice sent to foreign exchanges, compared to the previous four days.
Speaking to the Economic Times, Idul Patel – CEO of Y Combinator-backed Mudrex – reported a similar trend, saying: “The numbers we normally do in 3 months, we have been able to achieve in the last two weeks.”
However, this sudden change has also left many Indian cryptocurrency investors in a lurch, with significant assets stuck in the wallets of banned foreign platforms.
Industry estimates suggest that nearly $4 billion in crypto assets remains offshore to avoid the 1% tax, with Binance said to hold 80% of that amount.
