India’s recent move to block access to global crypto exchanges, including Binance, KuCoin, and OKX, has sent shockwaves throughout the cryptocurrency community. This article will delve into the implications of India’s decision, the potential reasons behind it, and its impact on both Indian and foreign cryptocurrency exchanges.
On January 12th, India implemented an IP block that prevented Indians from accessing the URLs of foreign crypto platforms. However, despite this blockade, it was still possible to access the websites of Binance, OKX, and KuCoin via Google Chrome without the need for a virtual private network (VPN). The Binance website could also be accessed through Safari and Mozilla Firefox browsers without a VPN. Unfortunately, the websites of OKX and KuCoin remained inaccessible.
India’s Ministry of Electronics and Information Technology took action by requesting Apple to restrict Indians’ access to foreign exchange applications on January 10th. Both the iOS and Android app stores complied and restricted access to foreign crypto exchange applications for Indians. The primary reason behind these measures is the Financial Intelligence Unit’s (FIU) concern regarding potential money laundering activities associated with some international exchanges.
The FIU had issued show-cause notices to nine foreign exchanges operating in India, including Binance, KuCoin, Huobi, OKX, Kraken, Gate.io, MEXC Global, Bitfinex, and Bittrex. These notices alleged that the exchanges were operating illegally in India and were not in compliance with anti-money laundering laws. The exchanges were given a two-week deadline to explain their actions, which expired on Friday.
The newfound restrictions prevent Indian users from downloading applications from foreign exchanges. However, those who already have the applications downloaded can still access them. The real challenge arises when it comes to withdrawing the cryptocurrencies, as UPI withdrawals will no longer be available.
In response to the situation, Binance stated in an email to its users that they are committed to engaging in constructive policy-making that benefits all users and market participants. Furthermore, Binance emphasized its adherence to local regulations and laws while assuring users of the safety of their funds.
Indian exchanges had been witnessing a steady decline in users as investors sought to bypass the 1% tax deduction at source implemented in 2022. Many opted to move to overseas platforms to avoid the tax burden. However, with the recent clampdown on foreign platforms, Indian investors have started flocking back to local platforms.
For example, WazirX, formerly owned by Binance, saw a significant jump in deposit inflows by 250% within four days after the show-cause notice was issued. CoinDCX, a rival exchange to WazirX, also experienced an increase in users since December 28th. Mudrex, a local exchange backed by Y Combinator, gained 30,000 new users within a similar time frame.
India’s decision to block access to global crypto exchanges has certainly disrupted the cryptocurrency landscape within the country. The move aims to regulate and curb potential money laundering activities associated with foreign exchanges. As Indian investors are left with no choice but to use local platforms, we can expect increased user and deposit inflows to these exchanges. The situation highlights the significance of regulatory compliance and the ever-evolving nature of the crypto industry.
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