FIU slaps Binance, other crypto exchanges with show cause notices; central agency asks IT Ministry to block sites

FIU sends notices to cryptocurrency exchanges operating illegally in India, asking them to comply with AML/CFT framework.

The Financial Intelligence Unit (FIU) sent a notice to cryptocurrency exchange Binance for “operating illegally” in India through an offshore entity. Notices have been sent to the firm in Seychelles, Cayman Islands and Switzerland. The other cryptocurrency firms to which notices have been sent are Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global and Bitfinex.

The FIU comes under the Finance Ministry’s Department of Revenue. “Virtual Digital Assets Service Providers [cryptocurrency services] were brought into the ambit of Anti Money Laundering/Counter Financing of Terrorism (AML-CFT) framework under the provisions of the Prevention of Money Laundering Act (PML) Act, 2002 in March 2023,” the FIU said in a press statement. The notices were sent under Section 13 of the Prevention of Money Laundering Act, 2002.

The FIU also wrote to the Ministry of Electronics and Information Technology (MEITY) asking them to block these services’ websites. While being compliant with Indian law in and of itself is “not contingent on physical presence in India”, the FIU said these companies had failed to follow “reporting obligations” to the government.

While 31 cryptocurrency firms have complied with these requirements, “several offshore entities though catering to a substantial part of Indian users were not getting registered and coming under the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework,” the FIU said. Under these reporting obligations, cryptocurrency firms are required to report suspicious activity like traditional banking institutions.