The cryptocurrency market is shambling due to legal notices sent to some leading crypto exchange platforms by FIU (Financial Intelligence Unit India). According to CoinDCX, within a week of the notice being issued, they have observed an increase of 2,000% in cryptocurrency deposits. On the other hand, Mudrex has recorded deposits worth over $1 million and welcomed 10,000 new users to its platform.
The cryptocurrency ecosystem is constantly evolving, and ensuring compliance with regulations is crucial for its growth and stability. As part of this effort, a new initiative is underway to bring Virtual Digital Asset Service Providers (VDASPs) under the Anti-Money Laundering/Counter Financing of Terrorism (AML-CFT) framework. This move highlights the industry’s commitment to maintaining ethical standards and combating financial crimes.
On December 28th, 2023, the Financial Intelligence Unit (FIU) took swift action by issuing a show cause notice to nine offshore cryptocurrency exchanges. The notice is intended to prompt these exchanges to provide explanations for any irregularities or suspected fraudulent activities.
This step is crucial in maintaining the integrity of the financial system and safeguarding the interests of investors. The FIU found that these exchanges were allegedly operating illegally and flouting India’s anti-money laundering laws.
The notice was sent out to Binance, Huobi, Kraken, Gate.io, Kucoin, Bitstamp, MEXC Global, Bittrex, and Bitfenex for their alleged illegal operations in India.
According to the Prevention of Money Laundering Act (PMLA) of 2002, offshore entities catering to Indian users are legally obligated to comply with the stipulated requirements. However, despite the regulatory framework in place, it has been reported that a significant number of offshore entities continue to operate without registering themselves.
As per reports, by avoiding registration these entities fall outside the purview of the anti-money laundering (AML) and counter-financing of terrorism (CFT) framework.
This is a cause for concern as unregistered entities may engage in illicit financial activities, including money laundering and financing of terrorism, which can have serious implications for the Indian economy and security. The government and regulatory bodies are working towards ensuring that offshore entities follow the guidelines and register themselves to prevent any possible misuse of the system.
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