Notices and Penalties on Offshore Platforms
India’s Financial Intelligence Unit (FIU-IND) has issued enforcement notices to 25 offshore cryptocurrency exchanges, accusing them of violating the Prevention of Money Laundering Act (PMLA). The crackdown highlights New Delhi’s effort to bring unregistered crypto platforms under its anti-money laundering (AML) rules.
Under Section 13 of the PMLA, the FIU has demanded explanations from these platforms, warning of audits, inspections, and fines of up to ₹1 lakh per violation. The agency has also invoked the Information Technology Act to push for the removal of unregistered crypto apps and websites available in India.
According to the ministry, all Virtual Digital Asset (VDA) providers must register with the FIU and comply with KYC, record-keeping, and suspicious transaction reporting—regardless of their physical location.
Exchanges named in the action include:
- Huione
- CEX.IO
- BingX
- LBank
- CoinW
- BTCC
- Changelly
- Paxful
- PrimeXBT
- BitMex
These platforms operate across jurisdictions from the British Virgin Islands to Seychelles.
India’s Regulatory Strategy
This is not India’s first move against offshore VDA operators. In late 2023, the FIU sent show-cause notices to nine exchanges, including Binance and KuCoin. By mid-2024, Binance was hit with a ₹188.2 million (about USD 2.25 million) fine for operating without registration. Many exchanges either complied or exited the Indian market following that action.
Currently, more than 50 VDA operators have registered under the PMLA framework. However, several large offshore exchanges continue to service Indian users without registering, leaving them outside India’s AML and counter-terrorism financing (CFT) net.
The government’s goal is clear: plug regulatory gaps, limit illicit capital flows, and align domestic rules with international standards.
The 25 exchanges now face strict deadlines, typically within 45 days, to respond to FIU’s notices. Failure to comply could result in:
- Bans on apps and URLs
- Formal investigations
- Blacklisting from India’s financial ecosystem
Some platforms may opt to register retroactively, while others could choose to exit the market or challenge the move legally.
Analysts believe the crackdown will likely benefit compliant domestic exchanges and reduce systemic risks. It may also push India toward introducing more comprehensive cryptocurrency laws. Critics, however, warn that heavy-handed enforcement could stifle innovation and drive users toward unregulated channels.
