The recent crackdown on offshore crypto exchanges in India has significantly impacted the digital financial landscape. The Economic Times reports that the government’s action follows a prolonged period of offshore crypto platforms failing to comply with requests from the Financial Intelligence Unit (FIU) for clarification. Apple’s decision to remove these exchanges from its App Store marked a significant development, prompted by the FIU’s concerns over suspected money laundering activities. This action led to a ban on these platforms until they comply with India’s crypto regulations.
The Block and its Ripple Effect
The government’s measures have extended beyond Apple’s App Store, affecting Android versions as well. High-level government sources have confirmed these orders are in effect. Earlier in the week, the FIU issued a show-cause notice, initiating this action and citing the need for compliance with crypto regulations, affecting the exchanges. To address this, the FIU sent notices to nine exchanges, including the industry giant Binance, demanding justification for their unlicensed operations in India. Additionally, the IT ministry has received a request to block URL access to certain platforms, leading to the government’s current action.
Boost in Domestic Crypto Exchange Registrations
An unintended consequence of blocking foreign crypto platforms has been a significant increase in registrations on domestic exchanges. Following the implementation of a 30% tax on crypto profits and a 1% TDS on transactions in India, traders moved their funds to offshore exchanges, resulting in a drastic decrease in trading volumes on local platforms in 2023. However, with the restrictions on Binance and other foreign exchanges, traders are now shifting back to local platforms like WazirX and CoinSwitch Kuber. WazirX reported a 250% increase in deposit inflows within four days of the notice, indicating a movement back to local platforms.
In conclusion, the crackdown on offshore exchanges has led to a ripple effect in the Indian crypto market, boosting domestic registrations and revitalizing local platforms. This surge in activity benefits local exchanges but presents a dilemma for Indian crypto investors, who have significant assets stuck abroad. The industry’s future in India hinges on how it addresses and navigates these challenges. As the situation evolves, the resilience of the Indian crypto market will be crucial for its continued growth.
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