In response to the Ministry of Finance Financial Intelligence Unit’s ban on offshore crypto exchanges like Binance and OKX, Indian crypto exchanges are stepping up to assist users in transferring their crypto assets from these banned platforms. With an estimated $4 billion invested by Indian investors in offshore exchanges, recent regulatory developments have raised concerns among users about the safety of their assets.
Indian exchanges woo users of banned platforms
CoinDCX, one of India’s largest crypto exchanges, has taken proactive measures by allocating $1 million to facilitate the transfer of assets from non-compliant offshore exchanges to its platform. CEO Sumit Gupta noted a significant 2000% surge in new inflows within the first week after show-cause notices were issued to non-compliant entities. To reinforce trust in the crypto community, CoinDCX is actively supporting users with seamless crypto deposits, offering a 1% bonus, and providing secure deposit routes for a smooth transition.
Following this trend, BuyUcoin has announced zero fee transfers for users from offshore exchanges in response to the Financial Intelligence Unit (FIU) ban. Shivam Thakral, BuyUcoin’s CEO, expressed support for the FIU’s move, considering it a positive step toward investor protection and the enforcement of capital flight rules. Another major exchange, WazirX, is incentivizing users with a 1% bonus for transferring their crypto assets. As a result, WazirX observed a 42.3% increase in peer-to-peer transactions, a 253% increase in spot trading volume, and a 114% increase in deposits (crypto + INR) from November to January compared to the previous three months.
Challenges and opportunities in the crypto landscape
Rajagopal Menon, vice president of WazirX, emphasized that the FIU’s actions were long overdue. He highlighted that foreign exchanges were taking advantage of regulatory and tax arbitrage at the expense of Indian exchanges, creating a detrimental situation for everyone involved. Indian users had no recourse, the government lost tax revenue, and Indian exchanges lost market share. The FIU, a branch of the Indian Finance Ministry, issued a notice of non-compliance to several foreign crypto exchanges, including Binance, Huobi, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, Bittrex, and Bitfinex, on December 28, 2023.
The FIU provided a one-week window for crypto exchanges to respond to the notice and recommended the IT department to block the URLs of mentioned foreign crypto exchanges if they failed to comply. Around January 10, approximately two weeks after the FIU notice, Apple’s Indian app store blocked all foreign crypto exchanges, while they remained accessible on the Android app store. Subsequently, these exchanges were also blocked from Google’s app store, creating panic among Indian users who had turned to foreign platforms like Binance to avoid a hefty 30% crypto tax.
Amidst discussions among Indian crypto influencers about alternative ways for users to access the banned platforms, including through virtual private networks (VPNs), BuyUcoin cautioned against such actions. They highlighted potential negative consequences, such as users falling victim to phishing sites and other online scams. Reports suggested that OKX started requesting Indian users to update their personal information to comply with local regulations, indicating a move toward FIU compliance. As Indian crypto exchanges actively work to assist users in transferring their assets and comply with local regulations, the landscape of crypto trading in the country undergoes significant changes.