In a proactive endeavor to fortify regulatory oversight within India's burgeoning digital asset market, the Financial Intelligence Unit (FIU) has intensified efforts to enforce robust Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) guidelines. This initiative aims to enhance compliance standards across all cryptocurrency exchanges operating within the country.

Under the ambit of the Prevention of Money Laundering Act (PMLA), the FIU has officially recognized major offshore exchanges, Binance and KuCoin, as Virtual Asset Service Providers (VASPs) in India. This development underscores a broader commitment by Indian authorities to ensure adherence to regulatory frameworks within the virtual asset sector.

KuCoin, in a bid to rectify previous non-compliances, has settled a penalty of INR 41 lakhs (approximately $41,000), resulting in the lifting of the ban on its operations in India. Conversely, Binance is in the process of resolving its liabilities and is expected to pay a fine of $2 million, as per sources cited by The Economic Times. Both exchanges have now aligned with FIU-IND registration, administered by the Indian Ministry of Finance, bringing the total number of registered entities to 47.

In line with efforts to nurture a compliant virtual asset ecosystem, the Bharat Web3 Association (BWA) conducted a capacity-building workshop for VASPs. Notable industry players such as CoinDCX, WazirX, and KuCoin participated in sessions aimed at elucidating compliance responsibilities and devising risk-based assessment strategies.

Shri Vivek Aggarwal, Director of FIU-IND, stressed the paramount importance of AML/CFT compliance for VDAs serving Indian users. He underscored that compliance obligations extend irrespective of the physical presence of VDAs in India, aligning with international standards set by various regulatory bodies.

Dilip Chenoy, chairman of the Bharat Web3 Association, highlighted the necessity of adherence to AML and CFT protocols to mitigate risks associated with non-compliance. He addressed challenges posed by tax regulations and ease of doing business, advocating for dialogue and cooperative efforts among reporting entities.

Chenoy emphasized the significance of partnerships with reporting entities through initiatives such as the FIU-led Working Group on Terror Funding (FWG-STF), aimed at bolstering detection and reporting mechanisms for suspicious activities within the sector.

The workshop featured insights from key figures in the Indian crypto compliance sector, including discussions led by Rohan Bhandari of CoinDCX on PMLA Compliance for VASPs, and Mr. Muthuswamy Iyer from WazirX.

India has emerged as one of the fastest-growing cryptocurrency economies globally, as highlighted in a Chainalysis report. Binance's reinstatement marks a significant development, following KuCoin's compliance with FIU regulations, as both exchanges now adhere to local compliance standards, including the implementation of a 1% tax deduction at source (TDS).

The FIU's proactive stance towards bolstering AML and CFT measures underscores India's commitment to fostering a compliant and transparent digital asset ecosystem. The inclusion of major exchanges like Binance and KuCoin signifies a pivotal step towards aligning with international regulatory standards, ensuring the integrity and security of India's cryptocurrency market.