The evolution of crypto in India is gaining momentum as the country's Financial Intelligence Unit (FIU) evaluates registration requests from four foreign crypto exchanges. Sources familiar with the matter suggest that two of these exchanges could receive approval to operate in India by the end of the Financial Year 2025.
crypto-exchanges">Background of India’s FIU Approval And Regulatory Challenges Faced By Foreign crypto Exchanges
The potential approval of these exchanges follows a detailed assessment of their operations, especially concerning non-compliance issues prior to India's 2023 regulatory crackdown. Penalties will be determined based on their activities in India and the extent of previous non-compliance. The source emphasized that only after thorough due diligence will any crypto exchange be allowed to operate in India, highlighting the rigorous compliance standards in place.
These developments come amid significant regulatory changes in India. In 2023, the Finance Ministry mandated that all crypto exchanges register as reporting entities with the FIU. Subsequently, the FIU identified nine prominent foreign exchanges, including binance and KuCoin, for not meeting registration and anti-money laundering (AML) requirements. Authorities blocked access to their platforms, enforcing the Prevention of Money Laundering Act (PMLA) to combat financial crimes.
On May 10, binance and KuCoin successfully registered with the FIU and resumed operations in India after paying fines for previous non-compliance. This paved the way for other foreign exchanges to seek similar approvals, sparking renewed interest from barred platforms. By June, four additional offshore exchanges had filed registration requests with FIU, indicating a growing desire to re-enter the Indian market.
crypto-market-and-its-challenges">The Booming Indian crypto Market And Its Challenges
Chainalysis ranked India as the country with the highest cryptocurrency adoption rate in 2023, driven by factors such as a youthful population and increasing smartphone penetration. With over 20 million registered crypto investors, India's digital native population has embraced cryptocurrencies and blockchain technology.
India's crypto market generated over $1 billion in revenue in 2023, attracting foreign exchanges seeking to expand globally. However, the regulatory landscape remains strict, with all crypto transactions in India subject to a 1% tax deducted at source (TDS) and profits from crypto investments taxed at a flat 30% rate.
