India’s Financial Intelligence Unit (FIU) is reportedly evaluating applications from four additional offshore crypto exchanges to resume operations in the country, after previously banning them for non-compliance with Anti-Money Laundering (AML) regulations.
Following the recent approvals of Binance and KuCoin, at least two more exchanges are expected to receive clearance by the end of the fiscal year 2025, according to a local news report. This would follow a thorough review of transaction transparency, suspicious activity reporting, and related compliance measures.
Earlier this year, the FIU blocked access to nine foreign crypto exchanges, including Binance, due to AML non-compliance. Binance and KuCoin have since registered with the FIU, while OKX halted its operations entirely, citing regulatory challenges. Binance registered as a reporting entity with the FIU in August after reportedly paying a $2 million penalty.
Raj Kapoor, founder of the India Blockchain Alliance, believes that the entry of additional offshore exchanges will intensify market competition, offering Indian investors more trading options and potentially lower fees, but it may also pose regulatory challenges for domestic exchanges.
India’s cryptocurrency landscape is expected to evolve further as the Department of Economic Affairs (DEA) plans to release a key consultation paper on cryptocurrency legislation by October. The paper will seek input from various stakeholders to help shape future regulations for digital currencies.
India currently taxes cryptocurrency transactions at 30% on unrealized gains and imposes a 1% tax deducted at source on each transaction. However, the government has so far refrained from regulating crypto sales directly, focusing instead on tackling money laundering and terrorism financing.
On August 6, the Directorate General of Goods and Service Tax Intelligence (DGGI) issued a tax demand to Binance under the Goods and Services Tax (GST) laws. According to reports from The Times of India, Binance accrued at least Rs 4,000 crore from transaction fees charged to Indian users. These earnings were reportedly deposited into an account belonging to Nest Services Limited, a Binance affiliate based in Seychelles.
Binance initially proposed a $2 million fine to address its non-compliance and reinstate its operations in India. However, the $86 million tax demand involves recovering transaction fees generated from Indian users during its operational period.
Indian authorities are yet to impose similar tax demands on other foreign crypto exchanges, including Huobi, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, Bittrex, and Bitfinex.
