Offshore crypto exchanges must register with India’s FIU: Finance Ministry

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The Ministry of Finance has clarified that offshore cryptocurrency exchanges servicing the Indian market, too, have to be registered with the Financial Intelligence Unit-India (FIU) as reporting entities.

In response to questions raised by Andhra Pradesh MP Lavu Sri Krishna Devarayalu, MoS in Finance Ministry Pankaj Chaudhary said, “The guidelines and reporting requirements are applicable to offshore crypto exchanges servicing the Indian Market. The process of registration for the said Virtual Digital Assets Service Providers (VDA SPs) has been initiated. Appropriate action under PMLA shall be initiated in cases of non-compliance by offshore platforms.” 

Previously the government had noted entities dealing in VDAs, crypto exchanges and intermediaries would be considered “reporting entity” under the Prevention of money laundering Act (PMLA). It had also mandated that VDA service providers must comply with several regulatory requirements including KYC norms, record-keeping, reporting of suspicious transactions, among others. 

In the recent past, many Indian crypto users have shifted to global exchanges, more so after India has introduced taxation on crypto trades in India. Even though prominent exchanges such as Binance, Kraken and others service Indian customers, they aren’t yet a “reporting entity” in India. 

Mohnish Wadhwa, CEO of a business consulting firm CapDeck Advisors explains, “It was always understood that offshore VDA operators were also required to get registered with FIU, however with such clarification, it becomes an obligation for such exchanges and operators to report to FIU for any red flags they observe which pertain to a user who is Indian.” 

With the TDS provisions and such PMLA provisions, the stance of the government is becoming stricter on offshore operators serving Indian markets More such moves by the authorities to make such offshore entities reportable to Indian bodies will be seen, he added. 

So far in India, 28 VDA SP’s have registered themselves with the Financial Intelligence Unit-India (FIU-IND), according to the ministry. Neblio Technologies Private Limited(Coin DCX), Unocoin Technologies Pvt Ltd (Unocoin), Awlencan Innovations India Ltd (Zebpay), Zanmai Labs Pvt Ltd (WazirX), Bitcipher Labs LLP (Coinswitch), are some of the popular exchanges who have registered so far. 

“Compliance to PMLA is of utmost importance as the safety and financial integrity of Indians is at risk. Our citizens, unfortunately, when they deal with such non-registered platforms run the risk of dealing with nefarious and malicious actors; thereby jeopardizing their current and future finances,” said Sumit Gupta, Co-founder, CoinDCX commenting on the development.