It is no secret that over the past few years, Indian cryptocurrency investors have flocked to offshore exchanges to avoid paying 30 per cent taxes on income and gains from virtual digital assets (VDAs) and 1 per cent transaction-related tax (TDS) on every buy and sell transaction totalling more than Rs 10,000. Over 90% of Indian traffic on cryptocurrency platforms over the last two years has gone to overseas exchanges, according to CoinDCX co-founder Sumit Gupta.
It was revealed that the offshore exchanges were not registered in India when a question was brought up in the Lok Sabha during the first week of December. The Finance Ministry responded by releasing a list of 28 cryptocurrencies and VDA services platforms that adhere to PMLA’s anti-money laundering and countering the funding of terrorism (CFT) rules and are registered with the Financial Intelligence Unit-India (FIU-IND).
Subsequently, offshore platforms such as Binance, Coinbase, and others were required to register to carry on with their operations within the nation. The Finance Ministry then sent out show-cause warnings on December 28. On X, Binance informed the users of the new modifications and that their money was safe for those who had already used the app.
Binance stated on X that the current scenario is not exclusive to #Binance and they are aware of recent modifications that have affected the Binance App and cryptocurrency exchanges in the Indian iOS App Store. They also guaranteed the continuous availability of their services and mentioned they are dedicated to adhering to local laws and keeping in contact with regulators across the globe. “Note that current app users won’t be impacted,” the message read. As we work with regulators to find a solution, we will continue to share information on this platform.”
To draw in users who were left behind by the offshore platforms, Gupta announced on X (formerly Twitter) that CoinDCX had launched a $1 million Treasury Fund. Through this fund, customers who deposit their VDA with the platform between January 9 and January 18, 2024, will receive a 1 per cent bonus.
Ashish Singhal, Co-founder and Group CEO, of PeepalCo & CoinSwitch, wrote on X, “By asking offshore exchanges to register with the FIU-IND, the idea is to increase compliance with Indian laws on taxation, the Prevention of Money Laundering Act (PMLA), and KYC norms.” Singhal believes, “This will help: a) create a level playing field between Indian & offshore exchanges, b) fortify compliance guardrails, and c) enhance consumer protection.”