FIU-India Reviews Offshore Exchanges: Binance and Kucoin Lead the Way for Crypto Operations by March 2025

• India is on the verge of a significant shift in its cryptocurrency landscape, with potential resumptions of operations for various offshore exchanges.
• Recent developments indicate that the Financial Intelligence Unit (FIU-India) is engaged in a meticulous evaluation of requests from four offshore cryptocurrency exchanges.
• “We assume that at least two of them will be permitted to resume operations by end FY25,” stated a source involved in the review process.

The article explores India’s evolving regulatory stance towards offshore cryptocurrency exchanges and its implications for the market.

Regulatory Changes: A New Phase for Offshore Exchanges

The FIU-India has recently taken steps that may reshape how offshore cryptocurrency exchanges operate within the country. The lifting of bans on notable platforms such as Binance and Kucoin marks a pivotal point. These exchanges have now gained approval to function as Virtual Asset Service Providers (VASPs), enabling them to conduct operations under enhanced scrutiny and compliance measures.

Compliance as a Cornerstone of Operations

FIU-India’s focus on stringent compliance with anti-money laundering (AML) regulations has become evident in the recent approval processes. A source within the agency emphasized that thorough due diligence is paramount. “Only after complete due diligence will we allow any crypto exchange to operate in India. We are very strict about compliance,” the official noted. This highlights the regulator’s commitment to financial integrity in an increasingly digital economy.

Penalties and Corrective Measures: A Wake-Up Call for Exchanges

The enforcement actions taken against non-compliant exchanges serve as a stark reminder of the regulatory environment in India. Kucoin, which faced issues with compliance, paid a substantial fine of Rs 35.5 lakh (approximately $43,000) that facilitated the lifting of its operational ban. Binance, on the other hand, was fined $2.25 million (₹18.8 crore) for lapses in its AML practices, underscoring the high stakes involved for these platforms in maintaining operational integrity.

Implications for the Future of Crypto in India

The possibility of resuming operations for additional offshore exchanges is contingent upon their ability to demonstrate compliance with FIU-India regulations. As the regulatory body shifts its approach, it may pave the way for a more structured and transparent cryptocurrency market in India. However, exchanges must take proactive steps to align with the established guidelines, ensuring they do not find themselves on the wrong side of compliance measures.

A Path Forward: The Role of Compliance Officers

Interestingly, the FIU-India has indicated that while offshore exchanges do not need to establish separate Indian entities, they must appoint a compliance officer registered with FIU-IND. This move aims to enhance oversight and ensure that these platforms adhere to necessary regulations while operating in India. The compliance officer will play a crucial role in maintaining transaction visibility and reporting any suspicious activities, which is essential for fostering confidence among users and regulators alike.

Conclusion

As India re-evaluates its stance on offshore cryptocurrency exchanges, the emphasis on regulatory compliance signifies a commitment to ensuring a secure and transparent market. The ongoing review processes and the establishment of a structured compliance framework will likely dictate how the landscape evolves in the coming years. Stakeholders in the crypto industry must stay informed and prepared to navigate this changing regulatory environment.