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Cryptocurrency exchanges Binance and KuCoin register with India’s financial intelligence unit as cryptocurrency credibility improves
Binance, the world’s largest cryptocurrency exchange, and rival KuCoin have become the first offshore crypto-related entities to be approved by India’s anti-money laundering unit, months after they were banned for “operating illegally”.
The two were registered with the country’s Financial Intelligence Unit (FIU-IND), the unit’s most senior official, which falls under the nation’s Finance Ministry, told CoinDesk. They were between more than 9 offshore entities prohibited – others included Huobi, Kraken, Gate.ioBittrex, Bitstamp, MEXC Global and Bitfinex – at the end of last year.
The approval marks a shift in credibility for cryptocurrencies in the nation, FIU-IND head Vivek Aggarwal said in a meeting with several financial journalists. The unit will establish a working group with industry to review compliance guidelines on money laundering laws for virtual digital asset service providers, he said.
“It is parliament and the government as a whole” that must give legitimacy to the sector, he said. The registrations serve to “safeguard the Indian economy. If a company is protected from financial crime abuse, then it automatically has, if not legitimacy, then at least a little more credibility to the system,” Aggarwal said.
KuCoin paid a $41,000 fine, the first crypto entity to do so, and resumed operations. Binance has not resumed operations because it is expected to pay a penalty after a hearing with the FIU. The Economic Times, citing people familiar with the matter, said Binance will accept a $2 million fine.
“Binance is registered but the compliance procedures have not been completed because the fine amount is to be decided by me and the hearing is still ongoing,” said Vivek Aggarwal, head of FIU-IND.
Other sanctioned platforms include Kraken, Gemini and Gate.io have started negotiations with the regulator. Both OKX and Bitstamp have submitted plans to exit the country.
India now has as many as 48 crypto entities registered as reporting entities under the National Prevention of Money Laundering Act, Aggarwal said. Friday’s meeting marks the first time the FIU has officially spoken to the press about cryptocurrencies and comes after Aggarwal and other FIU officials met with representatives of all 48 entities, also a first.
Domestically, India’s stance on cryptocurrencies has remained slightly ambiguous.
The imposition of stiff taxes on cryptocurrencies in 2022, coupled with winter in cryptocurrency markets, has pushed Indian traders to shift to international exchanges, hurting the local cryptocurrency industry. Trading volumes have returned to Indian bourses after the ban on offshore entities.
India has also made it a G20 presidential priority in 2023 to reach a global consensus on crypto policymaking and get all members to accept global guidelines, although the country has come under scrutiny for pushing consensus global without having its own legislation in force.
The occasion also saw the presentation of a report titled “Virtual Digital Asset Service Providers: Road to Effective Compliance under PMLA” by cryptocurrency advocacy body, Bharat Web3 Association.
The foreword of the report is written by Aggarwal: “This document also reflects our commitment to promoting a regulatory environment that not only keeps pace with innovation but also protects the financial system from the risks associated with money laundering.”
Offshore entities wishing to register with the FIU do not need to have an office in India. but they require a lead compliance officer to be registered along with his address and other details, Aggarwal said. Those who did not get registered with the unit and received a show cause notice in December remain stranded even if they have started interviews.
“The main objective of the AML/CFT (anti-money laundering and counter-terrorism framework) is for me to have full visibility of such transactions whenever I want and to receive reports of suspicious transactions,” Aggarwal said. “To that extent, we have compliance in place.”
UPDATE (May 10, 10:57 UTC): Adds details and background everywhere.
UPDATE (May 10, 1:04 PM UTC): Adds a credibility shift, a citation in the second and third paragraphs, regulatory environment and Bharat Web3 Association report.