FIU IND Sends Notice to 9 Foreign-Based Crypto Exchanges

FIU IND Urges Blocking URLs of 9 Crypto Exchanges Breaching PML Act

The Ministry of Finance has taken action against nine offshore virtual digital assets (VDA) service providers engaged in crypto asset dealings. Show cause notices have been issued to these entities for operating illegally and failing to comply with the provisions outlined in the Prevention of Money Laundering (PML) Act.

Additionally, the Finance Ministry has urged the Ministry of Electronics and Information Technology (Meity) to block access to their websites. Notably, these platforms encompass major players in the crypto exchange realm, such as Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex.

It's worth noting that VDA service providers were incorporated into the Anti-Money Laundering/Counter Financing of Terrorism (AML-CFT) framework under the PML Act in March 2023.

As of now, 31 VDA service providers have completed registration with FIU IND. Yet, numerous offshore entities serving a significant portion of Indian users have chosen not to register, consequently operating outside the AML/CFT framework, as highlighted by the finance ministry.

Government's Strong Signal for Adherence to PML Act Regulations

This action can be seen as a strong signal to these exchanges and other offshore entities that strict adherence to the AML/CFT framework under the PML Act is imperative.

By targeting these major players in the crypto exchange realm, the government aims to emphasize the importance of complying with regulatory requirements, especially concerning financial security measures and combating money laundering and terrorism financing.

The move might serve as a warning to non-compliant entities, signaling the government's intent to ensure strict adherence to regulations within the crypto asset space and possibly indicating more stringent oversight and enforcement in the future.

The primary goal of the G20 Summit is to improve regulatory clarity, a crucial step towards bolstering confidence in the crypto market. Compliance with government-set rules is imperative for exchanges to provide certainty to businesses and investors.

Potential Actions for Exchanges in Response to the Government's Measures

Exchanges could prioritize immediate compliance by swiftly addressing the issues raised by the government. This might involve implementing stringent AML/CFT measures, ensuring registration with relevant authorities, and actively following the regulatory framework.

Exchanges may initiate dialogue with regulatory bodies to understand and address concerns. They could collaborate with authorities to demonstrate their commitment to compliance and work toward meeting regulatory standards.

To align with regulatory requirements, exchanges might make operational adjustments, such as modifying their procedures, enhancing KYC (Know Your Customer) protocols, and implementing robust security measures to prevent money laundering and terrorism financing activities.

The recent case involving Binance in the US resulted in fines for Changpeng Zhao and the platform due to Bank Secrecy Act violations, and now Binance is settling with the U.S. court. This marks the end of unregulated operations, prompting exchanges to overhaul their policies for continued compliance and operations.

Exchanges could focus on improving transparency by providing regular reports, disclosures, and audit trails to demonstrate their commitment to lawful operations and financial integrity.

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