Crypto in India is evolving rapidly as the country’s Financial Intelligence Unit (FIU) reviews registration requests from four foreign crypto exchanges.
According to sources familiar with the matter, two of these entities could receive approval to begin operations in India by the end of the Financial Year 2025.
Background of India’s FIU Approval And Regulatory Challenges Faced By Foreign Crypto Exchanges
According to the source, the two exchanges that may receive approval will undergo a detailed assessment of their operations, particularly concerning non-compliance issues, before India’s 2023 regulatory crackdown.
Penalties will be imposed based on the extent of their activities in India and the degree of their previous non-compliance.
“Only after complete due diligence will we allow any crypto exchange to operate in India,” the source emphasized. “We are very strict about compliance.”
The potential approval of these new exchanges comes in the wake of major regulatory changes.
In 2023, India’s Finance Ministry issued a mandate requiring all cryptocurrency exchanges to register as reporting entities with the FIU.
Following this mandate, the FIU notified nine prominent foreign exchanges, including Binance, KuCoin, Huobi, Kraken, Gate.io, and Bitfinex, for failing to comply with registration and AML requirements.
As part of a nationwide crackdown, Indian authorities blocked access to these platforms’ websites and mobile apps, effectively freezing their operations within the country.
The enforcement measure aligns with the Prevention of Money Laundering Act (PMLA), a law designed to combat financial crimes by ensuring transparency and accountability in financial transactions.
However, on May 10, Binance and KuCoin became the first foreign crypto exchanges to register with the FIU successfully.
Both exchanges were allowed to resume operations in India after paying penalties for their previous non-compliance. Binance was fined ₹188.2 million ($2.25 million), and KuCoin ₹34.5 lakh ($41,282).
Their successful re-entry opened the door for other foreign platforms to seek similar approvals, renewing interest from several exchanges that had been previously barred.
By June, four additional offshore exchanges had filed registration requests with the FIU, signaling a growing desire among global platforms to re-enter the Indian market.
The Booming Indian Crypto Market And Its Challenges
In 2023, Chainalysis ranked India as the country with the highest rate of cryptocurrency adoption, fueled by a combination of factors, including a tech-savvy young population and rapidly increasing smartphone penetration.
Over half of the Indian population is under the age of 25, and this digital nativity has helped drive the rapid uptake of cryptocurrencies and blockchain technology.
As of 2023, the number of registered crypto investors in India surged to over 20 million, up from 8.25 million in the previous year.
India also generated over $1 billion in crypto-related revenue during this period, making it an attractive market for foreign exchanges looking to expand their global footprint.
However, the regulatory environment remains stringent, particularly for foreign exchanges.
All crypto transactions in India are subject to a 1% tax deducted at source (TDS), and profits from crypto investments are taxed at a flat 30% rate.
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