FIU in India Questions Approval of International Crypto Exchanges

By March 2025, it is anticipated that India’s Financial Intelligence Unit will have approved two more foreign cryptocurrency exchanges, following the recent registration of Binance and KuCoin.

As India’s Financial Intelligence Unit (FIU) examines registration requests from four international cryptocurrency exchanges, the country’s cryptocurrency market is growing quickly.

According to sources familiar with the matter, two of these entities could receive approval to begin operations in India by the end of the Financial Year 2025.

Background of India’s FIU Approval And Regulatory Challenges Faced By Foreign Crypto Exchanges

The source claims that prior to India’s regulatory crackdown in 2023, the two exchanges that might be approved will go through a thorough evaluation of their operations, with a focus on non-compliance issues.

The severity of their prior non-compliance and the scope of their operations in India will determine the penalties that are applied.

“Only after complete due diligence will we allow any crypto exchange to operate in India,” the source emphasized. “We are very strict about compliance.”

Significant regulatory changes have preceded the possible approval of these new exchanges.

A mandate requiring all cryptocurrency exchanges to register as reporting entities with the FIU was issued by India’s Finance Ministry in 2023.

In response to this directive, the FIU notified nine well-known foreign exchanges—Binance, KuCoin, Huobi, Kraken, Gate.io, and Bitfinex—that they had not complied with AML and registration requirements.

Indian authorities effectively stopped these platforms’ operations within the nation by blocking access to their websites and mobile apps as part of a nationwide crackdown.

The enforcement action is in line with the Prevention of Money Laundering Act (PMLA), a law that ensures accountability and transparency in financial transactions in order to combat financial crimes.

On May 10, however, Binance and KuCoin were the first foreign cryptocurrency exchanges to effectively register with the FIU.

Both exchanges had to pay fines for their prior non-compliance before being permitted to start up again in India. KuCoin was fined ₹34.5 lakh ($41,282) and Binance ₹188.2 million ($2.25 million).

After their successful re-entry, other international platforms were able to apply for similar approvals, which rekindled interest from a number of exchanges that had been turned down before.

As of June, the FIU had received registration requests from four more offshore exchanges, indicating an increasing inclination among international platforms to return to the Indian market.

The Booming Indian Crypto Market And Its Challenges

In 2023, Chainalysis ranked India as the country with the highest rate of cryptocurrency adoption, fueled by a combination of factors, including a tech-savvy young population and rapidly increasing smartphone penetration.

Since more than half of Indians are under 25, the country’s digital natives have contributed to the quick adoption of blockchain technology and cryptocurrencies.

India had over 20 million registered cryptocurrency investors as of 2023, up from 8.25 million the year before.

Over $1 billion was made in revenue related to cryptocurrencies in India during this time, which attracted foreign exchanges seeking to broaden their global reach.

The regulatory landscape is still strict, though, especially with regard to foreign exchanges.

In India, profits from cryptocurrency investments are subject to a flat 30% tax rate, and all cryptocurrency transactions are subject to 1% tax deducted at source (TDS).