India Restricts Access to Leading International Cryptocurrency Exchanges

The Government of India has taken a strong step to tighten regulations around cryptocurrency trading in the country. In a move that has sent shockwaves through the crypto community, India has blocked access to several major offshore cryptocurrency exchanges that were operating in the nation without proper registrations and compliance with domestic rules. This unprecedented action by authorities aims to crack down on illegal activities and protect Indian investors.

Blocking access to unregistered exchanges

The Ministry of Finance issued orders last week directing internet service providers to restrict access to major offshore exchanges, including Binance, KuCoin, and OKEx. According to sources, the orders were implemented by the end of December following months of non-compliance by these platforms with official requests for information from the Financial Intelligence Unit. While the measure has drawn criticism from some traders, the government argues it is necessary to ensure all entities dealing with the financial assets of Indians adhere to strict anti-money laundering and Know Your Customer norms.

The block extends beyond the desktop websites of these exchanges to their mobile applications on Android as well. Apple had already removed many of their apps from the App Store in line with an earlier directive. Officials said the goal is to prevent any illegal usage of the platforms within India’s borders until the relevant exchanges register with local regulators and subject themselves to the scrutiny required.

Industry players say the government crackdown could be due to raised concerns over possible money laundering activities detected on the platforms. To address the situation, notices were issued last month requesting justification for their unregistered functions within the country. Authorities also sought cooperation from the technology ministry to cut off online access to the exchanges altogether if needed, leading to the current restrictions.

Surge in volumes for local exchanges

While traders with holdings stuck on the now-blocked exchanges worry over the accessibility of their assets, the action has had an intriguing upside effect locally. After India levied a 30% tax on cryptocurrency profits and introduced a 1% TDS deduction this year, trading volumes on Indian exchanges declined sharply as users shifted to platforms abroad. However, with major foreign venues now restricted, activity and new user signups have bounced strongly for domestic players like WazirX, CoinDCX and CoinSwitch Kuber over the past few weeks.

WazirX reported deposit inflows growing by 250% in just four days after the notices to foreign exchanges compared to the prior period. The CEO of emerging exchange Mudrex also pointed to a parallel boom, stating transaction figures achieved in months were exceeded within a fortnight. While the sudden policy move has left some investors in a fix, it seems to have inadvertently boosted the local crypto economy in India that aims to establish regulated operations.