KuCoin announced successful registration with India's Financial Intelligence Unit (FIU), becoming the first global crypto exchange to get clearance from the anti-money laundering watchdog. This move will allow the exchange to restart operations in India. KuCoin promised to launch several initiatives designed for the Indian market, including localized payment solutions and alliances with regulatory and security departments.
“This milestone allows us to advance the conversation on crypto adoption in India, emphasizing user security and trading excellence. Additionally, it accelerates our investment and educational initiatives in India,” - stated Johnny Lyu, CEO of KuCoin.
At the time of writing, there was no official confirmation from Indian authorities, and users reported that the exchange website is still blocked and the app is not available. In response, the exchange promised to provide more details soon.
A year ago, the Indian Ministry of Finance stated that all Virtual Digital Assets Service Providers (VDASPs), including offshore crypto exchanges, should register with the FIU, conduct relevant KYC procedures, and comply with other provisions of the Prevention of Money Laundering Act. Some 31 local crypto exchanges including CoinX, Unocoin, Bitbns, Zebpay, WazirX, Mudrex, and Rario registered with the authority in the same year.
At the end of last year, on December 28, the FIU issued notices of operating illegally to nine offshore crypto exchanges, including Binance, KuCoin, Bitfinex, MEXC, and Kraken. The exchanges were given a short window to respond before the Ministry of Electronics and Information Technology would block the relevant websites. Apple removed the applications of crypto exchanges, including KuCoin's, from the Indian App Store two weeks later.
Nearly $4 billion worth of crypto assets belonging to Indian users were reportedly kept on offshore platforms as of January 2024. Nevertheless, the ban pushed some users to move funds back onto Indian platforms: CoinDCX and Mudrex exchanges have reported an inflow of funds. Several local crypto exchanges created lucrative deals for users with their funds stuck on banned foreign crypto exchanges. For example, one of the major local players, WazirX, offered a bonus of 1% to users who transferred their crypto to the exchange and saw a significant increase in P2P transactions, spot trading volume, and deposits.
As of right now, none of the global crypto exchanges has returned. Furthermore, OKX, which was not included in the original ban, announced its exit from India last week and asked users to withdraw funds by April 30. After the introduction of the new FIU requirements, the exchange did try to develop a KYC for Indian customers, but it looks like it could not reach the compliance objectives.
Now, with KuCoin's re-entry, the ice is broken, and we might see other major crypto exchanges returning to India.
Indian regulators have a tough stance on the crypto industry. In 2022 India introduced harsh taxes on crypto - a 30% tax on crypto income and a 1% tax deducted at source on each crypto transaction - which eventually led to the exodus of users, funds, and trades to offshore platforms. The Indian Finance Minister recently said that crypto is still unregulated in India and emphasized that the official government position is that crypto assets, “created for speculations and trading” cannot be treated the same way as fiat currencies, and the current crypto boom is not a reason for reassessing this position.
