The show cause notices have been issued to the platforms for not registering as reporting entities with the FIU
Apart from Binance and Kucoin, the platforms under the radar of the authorities include Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfenex
Under existing rules, all onshore and offshore VDA service providers are mandated by law to register with the FIU as ‘reporting entities’ and comply with provisions of PMLA.
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The Financial Intelligence Unit (FIU) of the Finance Ministry has issued notices to nine overseas crypto platforms, including Binance and Kucoin, for not complying with provisions of the anti-money laundering laws.
The show cause notices have been issued to the platforms for not registering as reporting entities with the FIU. The unit has also written to the Ministry of Electronics and Information Technology (MeitY) to block the websites of the nine entities.
Apart from Binance and Kucoin, the platforms under the radar of the authorities include Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfenex.
FIU India is tasked with processing, analysing and disseminating information about questionable financial transactions to enforcement agencies and foreign FIUs.
“Director FIU India has written to (the) Secretary, Ministry of Electronics and Information Technology to block the URLs of said entities that are operating illegally without complying with the provisions of the PML Act in India,” said an official press statement.
Under existing rules, all onshore and offshore virtual digital asset service providers are mandated by law to register with the FIU as ‘reporting entities’ and comply with provisions of the Prevention of Money Laundering Act (PMLA), 2002.
The rules entail reporting, record keeping, and other obligations on the platforms and sure they are in line with local laws. Curiously, reporting entities are mandated to file annual statements of financial transactions with the Income Tax Department, which include details of any reportable account maintained by a company during the year.
Crypto exchanges and VDA companies also have to maintain KYC details or records of identity documents of their users and clients as well as account files and business correspondence with its clients.
However, it is pertinent to note that these obligations are ‘activity-based’ and not contingent on physical presence in India, as per the Ministry.
This comes months after the union government brought VDA platforms under the ambit of the PMLA in March this year. Since then, 31 such platforms have registered with the central nodal agency including names such as CoinDCX, WazirX, Coinswitch, CoinswitchX, Zebpay, among others.
The move has largely been led by considerations around curbing the usage of cryptocurrencies for money laundering and financing of terrorism. Non-compliance with norms would invite appropriate action under the PMLA, Minister of State for Finance Pankaj Chaudhary said earlier this month.
Apart from regulatory compliances, the government has also opted for a heavy taxation regime towards cryptocurrencies which has hammered the sector. Centre’s decisions to levy 1% tax deducted at source (TDS) on crypto transactions above INR 10,000 and 30% tax on profits last year have hammered the ecosystem and pumelled crypto trade.
Coupled with calls for crypto ban by senior Reserve Bank of India (RBI) officials and the collapse of giants such as FTX, the crypto has dampened the sentiment. This has dried up funding and resulted in crypto platforms such as Pillow and WeTrade shutting operations this year.
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