India’s FIU may approve additional offshore crypto exchanges

India's Financial Intelligence Unit (FIU-India) is reportedly considering granting permission for more offshore cryptocurrency exchanges to operate within the country. 

Following the recent lifting of bans on major exchanges Binance and Kucoin, FIU-India is currently reviewing requests from four additional offshore crypto exchanges that seek approval to resume operations by March 2025. 

A source familiar with the review process mentioned that “We have received requests from four more offshore crypto exchanges to operate in India, and we assume that at least two of them will be permitted to resume operations by end FY25.” 

However, approval will only be granted after these exchanges undergo thorough checks to ensure compliance with anti-money laundering (AML) regulations. 

This includes providing transparency in transactions, reporting suspicious transactions, and other related compliance measures. 

The FIU-India official stressed, “Only after complete due diligence, will we allow any crypto exchange to operate in India. 

We are very strict about compliance.” 

The FIU-India recently authorised Binance and Kucoin to operate as Virtual Asset Service Providers (VASPs) in India, marking a significant shift in the regulatory landscape for cryptocurrencies in the country. 

Both exchanges had to meet stringent compliance requirements before being permitted to operate. 

Kucoin resolved its non-compliance issues by paying a fine of Rs 35.5 lakh (approximately $43,000), which resulted in the lifting of its website ban. 

Meanwhile, Binance was fined a more substantial amount of $2.25 million (?18.8 crore) for failing to comply with AML regulations. 

Despite these fines, both exchanges have now been cleared to operate with full transaction visibility and have initiated the suspicious transaction reporting process required by FIU-India. 

These recent developments reflect India’s cautious yet evolving approach to the rapidly growing crypto sector. 

While the government remains vigilant about enforcing strict AML measures, the decision to potentially allow more offshore exchanges indicates a willingness to integrate digital assets into the financial ecosystem. 

Vivek Aggarwal, FIU-IND Director, confirmed that while offshore exchanges do not need to form separate entities in India, they must have a compliance officer registered with FIU-IND to ensure adherence to regulations. 

The move to possibly approve more exchanges is seen as part of India’s broader strategy to regulate cryptocurrencies and maintain financial stability. 

By ensuring that exchanges comply with AML regulations, the FIU-India aims to mitigate risks associated with money laundering and other illicit activities while fostering a more regulated and transparent crypto market. 

As India continues to navigate the complexities of cryptocurrency regulation, the upcoming decisions by FIU-India will be crucial in shaping the future of digital assets in the country.