India’s Crypto Market Set for Expansion: FIU Reviews Two Foreign Exchange Registrations - Read Here
In a significant move for the Indian cryptocurrency landscape, India’s Financial Intelligence Unit (FIU) is reportedly reviewing applications from four offshore crypto exchanges for registration. According to sources familiar with the matter, two of these exchanges are likely to be approved to begin operations in India by the end of the Financial Year 2025. This development comes as the nation tightens its grip on cryptocurrency regulations, signaling a potential revival of foreign exchanges in the rapidly growing Indian crypto market.
The Revival of Foreign Exchanges in India
India's crypto scene has been marked by regulatory challenges, particularly in relation to foreign cryptocurrency exchanges. Last year, the FIU sent show cause notices to nine major offshore platforms, including industry giants like Binance, KuCoin, Huobi, and Kraken, for failing to comply with India’s anti-money laundering (AML) laws. The move led to a temporary block on access to these platforms for Indian users, as per the Prevention of Money Laundering Act (PMLA). However, with the FIU now considering approval for two foreign exchanges, the market could witness a revival of international players, bringing fresh opportunities for Indian crypto enthusiasts.
The potential re-entry of these exchanges into the Indian market would follow an exhaustive review of their compliance with transaction transparency, reporting of suspicious activities, and adherence to other regulatory requirements. This meticulous process underscores India’s tough stance on crypto regulations, ensuring that only compliant platforms can operate within the country.
A Market Rebound for Foreign Crypto Players?
The Indian crypto market, already recognized as one of the fastest-growing in the world, presents a lucrative opportunity for foreign exchanges looking to tap into its immense potential. According to a report by Chainalysis, India boasted the highest crypto adoption rate globally in 2023, generating over $1 billion in revenue that year alone. This growth has attracted global attention, with several foreign exchanges eyeing a return to the Indian market despite the regulatory hurdles.
However, compliance remains a critical factor. An official source stated that the exchanges under review would face a "thorough evaluation of transaction visibility and AML compliance," and those that fail to meet these standards will face penalties proportional to their non-compliance prior to the ban. Additionally, foreign exchanges will need to address any pending issues with India’s Goods and Services Tax (GST) system, which could add to operational costs. Binance, for example, was asked to pay a staggering $86 million in unpaid GST dues before the platform was banned in India in December 2023.
KuCoin: Leading the Way in Compliance
One of the few success stories among foreign exchanges in India is KuCoin, which became the first exchange to be fully compliant with the FIU’s guidelines. KuCoin paid a modest penalty of INR 34.5 lakh (approximately $41,000) for past non-compliance, a significantly smaller amount than Binance’s hefty $2.25 million fine. Following this, KuCoin resumed operations in India, setting a precedent for other exchanges that are keen to re-enter the market.
Singapore-based Bitget is another exchange currently in active discussions with the FIU, and sources suggest that the platform could be one of the two exchanges approved for operation by 2025. However, with the stringent review process, the path to re-entry is far from guaranteed.
Tough Road Ahead for Crypto Exchanges
While foreign exchanges may be eager to resume operations in India, the regulatory landscape presents several challenges. Alongside AML compliance and reporting requirements, foreign platforms must also register under India’s GST regime. This adds a layer of complexity to their operations, as failure to pay taxes on transaction fees collected from Indian customers could lead to further penalties. The FIU’s tough stance reflects the Indian government’s broader efforts to regulate cryptocurrency, ensuring that all platforms adhere to the nation’s financial and legal standards.
The approval of these two exchanges, if granted, would signal a shift in India’s crypto regulatory environment. It would showcase the country’s willingness to integrate foreign platforms into its market, provided they meet the necessary compliance benchmarks. For Indian crypto investors, this could mean greater access to international platforms and services, helping further drive the country’s crypto economy.
The upcoming Financial Year 2025 could mark a turning point for foreign crypto exchanges in India. With two potential approvals on the horizon, the Indian market is likely to see increased competition among crypto platforms, both domestic and international. However, the stringent compliance measures set by the FIU will ensure that only the most transparent and accountable exchanges can thrive in this space.
India’s growing influence in the global crypto market, combined with its regulatory framework, positions the country as a key player in shaping the future of cryptocurrency adoption and innovation. As exchanges navigate the complexities of compliance, one thing is clear: India’s crypto journey is only just beginning.
