Nearly four weeks after the Indian Financial Intelligence Unit (FIU) flagged several crypto exchanges for operating illegally in the country, Google has removed all affected apps from its app store, the Google Play Store, with top names like Binance and Kraken affected.
In a statement dated December 28, 2023, the FIU indicted nine cryptocurrency exchange apps, including Binance, Bitfinex, MEXC Global, Bittrex, Bitstamp, Gate.io, Kraken, Huobi, and Kucoin, of violating AML laws. It also directed the Ministry of Electronics and Information Technology to block their URLs to prevent their usage in the country.
Recall that Apple also removed the same apps from its App Store for iPhones and iPads nearly two weeks ago, complying with the orders to block access to the apps. The websites associated with the affected platforms no longer work in India, marking one of the biggest crackdowns against crypto platforms in recent years.
Why Did Google Remove the Apps?
On December 28, 2023, the Financial Intelligence Unit (FIU), an Indian agency responsible for scrutinizing and regulating financial transactions, flagged nine cryptocurrency platforms for violating its anti-money laundering (AML) rules.
While the FIU statement did not explicitly order Google and Apple to remove the affected apps from their respective app stores, it is fair to assume something similar to that happened in the background, as both platforms removed only the affected apps, signifying that the removals are directly related to the FIU statement from last month.
It is essential to note that the restrictions only apply to Indian users. Android users accessing the Google Play Store from other countries or using a VPN can easily download and install the affected apps, signaling that the removals are not due to violating the Terms of Service.
What Did the Crypto Exchanges do?
According to a statement from the regulator, the cryptocurrency exchanges mostly have no physical presence in India and do not obey Indian laws. However, they allow Indian users to create accounts, buy, sell, and hold virtual assets.
According to the statement, Virtual Digital Asset Providers (VDA SPs) operating in India must register with FIU IND as a Reporting Entity. In addition, they must comply with all extant anti-money laundering laws as mandated by the Prevention of Money Laundering Act (PMLA) 2002.
While the FIU usually does not enforce this obligation against offshore crypto exchanges like Binance and Kraken, it indicated in its statement that crypto exchanges are subject to the obligation based on their activity and not their physical presence in India, so exchanges like Binance with no physical offices in India are also liable.
“However, several offshore entities though, catering to a substantial part of Indian users were not getting registered and coming under the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework,” the agency said partly in its statement, justifying its actions against the crypto exchanges.
Why Indians are Turning to Offshore Crypto Exchanges
Offshore cryptocurrency exchanges like Binance and Kraken only started appealing to Indians after the government introduced a 30% capital gains tax in 2022. Also, all crypto transactions are subject to a 1% levy, forcing many Indians to turn to offshore cryptocurrency exchanges not subject to the restrictions.
Until the FIU’s order and subsequent removals by Google and Apple, crypto exchanges not registered with the FIU in India could ignore the burdensome taxes with no repercussions, a hole the Indian government quickly discovered and patched. Major unregistered offshore crypto exchanges no longer (currently) work for Indian users, and the registered ones charge the government-imposed 1% mandatory fee on transactions.
What Next?
The Indian market is the second-largest internet market globally, and top cryptocurrency exchanges can’t afford to lose their entire user bases in the country. Most affected entities should move to rectify the issue as soon as possible; Binance recently released a statement indicating collaborations with authorities for rectification.
While we expect most of them to register with the FIU, get the necessary licenses, and offer crypto exchange services to users legally, some outliers may seek legal workarounds. Since the restriction is contingent on a technicality, getting a court judgment against the FIU is not out of the question.
