The Financial Intelligence Unit India (FIU IND) has issued compliance showcause notices to nine offshore Virtual Digital Assets Service Providers (VDA SPs) for alleged violation of the Prevention of Money Laundering Act 2002 (PMLA)VDA SPs 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 offshore VDA SPs named in the showcause notices include Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex. FIU IND has also escalated the matter to the Ministry of Electronics and Information Technology, urging the blocking of URLs associated with these entities for non-compliance with Indian regulations. The regulatory obligations extend beyond physical presence of VDA SPs  in India, encompassing reporting, record-keeping, and other compliance measures to counter money laundering and terrorism financing risks.

Despite 31 VDA SPs registering with FIU IND to date, a number of offshore entities have allegedly sidestepped these requirements, catering to a significant user base in India. This regulatory action underlines the government’s attempt to bring offshore VDA SPs under the AML-CFT framework, irrespective of their geographical location. The move signals a tightening of regulatory scrutiny on virtual asset platforms operating in India, especially when the crypto markets are witnessing high volume trades due to increased anticipation around the new year celebrations.