In a recent development, the Indian government has blocked access to major global crypto exchanges, including Binance, KuCoin, and OKX. This move, effective January 12th, is aimed at preventing Indians from accessing the URLs of foreign crypto platforms. Notably, the Ministry of Electronics and Information Technology has also requested Apple to restrict Indians from accessing foreign exchange applications. While the government’s intention is to curb money laundering activities, critics argue that this decision stifles innovation and limits access to financial opportunities for Indian citizens.
Despite the government’s attempts to block access, it has been found that some individuals are still able to access the websites of Binance, OKX, and KuCoin using Google Chrome without a virtual private network (VPN). However, other browsers like Safari and Mozilla Firefox have restricted access to these platforms. Additionally, the recently implemented restrictions prevent Indians from downloading foreign exchange applications. Nevertheless, those who already have these applications downloaded can still access them. However, the withdrawal of cryptocurrencies poses a challenge as UPI withdrawals are no longer available.
The Finance Ministry’s Financial Intelligence Unit (FIU) recently issued show-cause notices to nine international exchanges operating in India, including Binance, KuCoin, Huobi, OKX, Kraken, Gate.io, MEXC Global, Bitfinex, and Bittrex. The FIU warned that these exchanges may be involved in money laundering activities. A show-cause notice is a formal document that alleges wrongdoing and requests companies to provide an explanation for their actions. The exchanges were given a two-week window to respond to the notice, which expired on Friday.
The restrictions imposed by the Indian government aim to level the playing field for local crypto exchanges, as Indian investors had been moving their funds to overseas platforms to avoid the 1% tax deducted at source implemented by the government in 2022. However, these restrictions are expected to reverse this trend, with Indian investors now shifting their focus back to local platforms. This can already be observed, as WazirX, a local exchange that was previously owned by Binance, experienced a 250% increase in deposit inflows in the four days following the show-cause notice. Similarly, CoinDCX and Mudrex are attracting new users and deposits since December 28th. With limited access to foreign platforms, Indian investors will have no choice but to utilize local exchanges, leading to increased user engagement and deposit inflows.
Response from Binance
Binance, one of the major global crypto exchanges impacted by the restriction, has assured its users that their funds are safe and stated its commitment to adhering to local regulations and laws. The exchange maintains its dedication to engage in constructive policy-making that benefits all users and market participants. However, the future of Binance’s involvement in the Indian crypto market remains uncertain due to the ongoing regulatory challenges.
The Indian government’s decision to block access to global crypto exchanges and restrict the download of foreign exchange applications reflects its concern regarding money laundering activities. While this move may address some of these issues, it also restricts access to financial opportunities and limits innovation in the Indian crypto market. The restrictions have sparked a shift back to local exchanges, providing them with newfound growth opportunities. However, it is crucial for the government and regulators to strike a balance between regulatory measures and creating an enabling environment for the crypto industry to thrive, fostering financial inclusion and economic growth in the country.