Finance ministry issues notice to 9 offshore crypto platforms

The Financial Intelligence Unit (FIU) under the Finance Ministry has issued show cause notices to nine offshore cryptocurrency and virtual digital assets platforms. The show cause notice has been issued for non-compliance with anti-money laundering law. The FIU has also written to the Ministry of Electronics and Information Technology to block the URLs of nine entities that are operating illegally without complying with the provisions of the Prevention of Money Laundering Act (PMLA) in India.

Companies like Binance and Kucoin are amongst those who have received the show-cause notice. The rest of the companies are Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global and Bitfinex. It has been cleared by FIU that the compliance mandate in the PMLA provisions is activity-based and does not require a physical presence in India.

"As part of compliance action against the offshore entities, Financial Intelligence Unit India (FIU IND) has issued compliance Show Cause Notices to the following nine offshore Virtual Digital Assets Service Providers (VDA SPs) under Section 13 of the Prevention of Money Laundering Act, 2002 (PMLA)," the ministry said in a statement.

It is mandatory that digital asset service providers, operating within or outside India, and involved in activities such as converting between digital assets and traditional currencies, transferring digital assets, safeguarding or managing digital assets etc. must register with the Financial Intelligence Unit India (FIU IND) as a 'Reporting Entity.' Also, the service providers are bound to adhere to a specified set of responsibilities outlined in the Prevention of Money Laundering Act (PMLA) of 2002.

Moreover, the ‘Reporting Entity’ must file statements of financial transactions (SFT) with the Income Tax department disclosing certain financial transactions or any reportable account maintained by them during the year.

The government decided to bring in virtual digital assets service providers under the ambit of Anti Money Laundering/Counter Financing of Terrorism (AML-CFT) framework in March this year and so far 31 VDA SPs have registered with FIU.