Centre May Bring The Curtain Down On Offshore Crypto Trading Apps Over Flouting PMLA

The government is reportedly mulling further action, including a potential ban on Indian operations of overseas cryptocurrency apps, such as Binance, if they are found guilty under the Prevention of Money Laundering Act (PMLA).

“The action so far has been on reports and show cause notices issued to these (digital) wallets by the finance ministry,” ET reported, citing an IT ministry official.

Now, if offshore cryptocurrency app are found guilty of violating more provisions of the money laundering law, a complete ban will be imposed on their Indian operations, the official said.

A few days ago, tech giant Apple delisted at least three offshore crypto exchanges, including Binance, Kucoin and OKX, from its India app store following the finance ministry’s show cause notices to nine virtual digital asset (VDA) service providers for not complying with provisions of anti-money laundering laws.

The show cause notices were issued to the overseas platforms for not registering as reporting entities with the Financial Intelligence Unit (FIU). Thereafter, the unit also wrote to the Ministry of Electronics and Information Technology (MeitY) to block the websites of these nine entities.

Both onshore and offshore cryptocurrency platforms are required to register with the Financial Intelligence Unit (FIU) as ‘reporting entities’ and adhere to the provisions of the Prevention of Money Laundering Act (PMLA), 2002.

These regulations mandate crypto exchanges and Virtual Digital Asset (VDA) platforms to uphold Know Your Customer (KYC) details for their users, alongside maintaining comprehensive account records and business correspondence with clients.

In a significant move last year, the government extended the scope of the Prevention of Money Laundering Act (PMLA) to include Virtual Digital Asset (VDA) platforms. Since then, 31 platforms, including prominent names like CoinDCX, WazirX, Coinswitch, and Zebpay, have registered with the Financial Intelligence Unit (FIU).

Last October, Reserve Bank of India (RBI) Governor Shaktikanta Das reiterated the central bank’s unwavering stance on a cryptocurrency ban, emphasising that there has been no change in their position. Das has consistently expressed concerns about the ‘dangers’ of cryptocurrencies, reflecting the RBI’s conservative approach toward these digital assets.

India, under its erstwhile G20 presidency, has taken a proactive stance in advocating for a global framework to regulate crypto assets. Finance Minister Nirmala Sitharaman actively advocated for collaborative regulation with the International Monetary Fund (IMF) and the Financial Stability Board (FSB).

Despite substantial regulatory challenges, India surprisingly claimed the top position in Chainalysis’ 2023 Global Crypto Adoption Index. This represents a rebound from the previous year when India had slipped to the fourth spot in Chainalysis’ 2022 adoption index.