In a significant move, the Bharat Web3 Association (BWA), India's local advocacy body for cryptocurrency and Web3, has requested the Indian government to take decisive action against offshore cryptocurrency exchanges. This request led to the blocking of URLs of nine offshore exchanges and the issuance of show cause notices. Binance, KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex are among the affected exchanges.
The offshore entities have been given a two-week deadline to respond to these notices, which query why actions should not be taken against them. In contrast, the BWA had proposed a one-month grace period for these exchanges to register with India's Financial Intelligence Unit (FIU) under the Finance Ministry, conforming to India's anti-money laundering regulations under the Prevention of Money Laundering Act (PMLA). Since March, when registration with the FIU became mandatory, 31 domestic entities have complied.
This unprecedented move by Indian crypto-related entities against foreign exchanges comes in the wake of a challenging environment for the local crypto industry, exacerbated by heavy taxation, including a 30% tax on crypto profits and a 1% tax deducted at source (TDS) on all transactions. These measures have led to significant trading volume shifting from local to international platforms, with an estimated $420 million in revenue lost to the government and over $3.8 billion in trading volume moved offshore since July 2022.
The BWA's letter also recommended that the government mandate offshore exchanges to establish an Indian subsidiary or entity and enforce the TDS retrospectively from July 1, 2022. In case of non-compliance, the BWA suggests restricting access to these platforms on mobile app stores and blocking their IP addresses. Rajagopal Menon of WazirX and Sumit Gupta of CoinDCX, representing leading Indian exchanges, emphasize the need for a level playing field, focusing on the critical issue of 1% TDS affecting their businesses.
Disclaimer: Please note that the information provided in this article is based on the referenced research articles. It is essential to conduct further research and analysis before making any investment decisions. The cryptocurrency market is highly volatile, and investors should exercise caution and consult with financial professionals before engaging in cryptocurrency trading or investment activities.
