India, on January 12, 2023, blocked access to the web platforms of foreign cryptocurrency exchanges and 9 virtual digital asset service providers including Binance, Kucoin, and OKX.
Earlier in the week, the Ministry of Electronics and Information Technology (MeitY) had asked Apple to remove offshore crypto apps from its store. As of January 10, 2023, Apple did the same and its App Store no longer displayed various foreign exchanges operating in India, including Binance and Kraken. Searches on the app store for Mexc, Huobi, and Gate.io also did not produce any results.
A senior government official was quoted by the Economic Times stating that Android versions of these apps will also be taken down soon.
The ban followed inputs from the Finance Ministry’s Financial Intelligence Unit (FIU), suggesting alleged money laundering activities on these platforms, which recommended a ban until compliance with India’s crypto laws is evident.
Further, the ministry had clarified that these offshore platforms operated without necessary permits or approvals, often being used for illegitimate purposes and money laundering.
The FIU issued notices on December 28 to these nine exchanges, urging explanations for their operations in India without permission.
The FIU also advised the IT ministry to block the URL access to these platforms, leading to the recent government action.
What Happened After The Ban?
Blocking access to foreign platforms is showing a surge in registrations on domestic exchanges.
Indian traders had moved funds to offshore exchanges after the introduction of cryptocurrency revenue taxes of 30 per cent on crypto gains and 1 per cent TDS on transactions, causing a dramatic drop in trading volumes on Indian platforms in 2023.
However many crypto investors in India are facing confusion, as they were caught off guard with assets still on these website's wallets.
ET report said industry estimates indicate nearly USD 4 billion in crypto assets remain in offshore platforms to evade the 1 per cent tax deducted at source, out of which reportedly holds 80 per cent of this total.
Meanwhile, RBI Governor Shaktikanta Das reiterated opposition to cryptocurrencies, saying emerging markets and the world cannot afford “crypto mania”, also adding that the central bank won't start regulating them.
Das’s comments came a day after the US Securities and Exchange Commission (SEC) approved a spot bitcoin ETF. Also, South Korea’s top financial regulator stood firm on restricting financial institutions from launching cryptocurrency ETFs.
