India Blocks Access to Foreign Cryptocurrency Exchanges In Favor of Domestic Platforms

Significantly, according to reports, India has blocked access to a number of international cryptocurrency exchanges, including OKX, KuCoin, and Binance. The government’s response to the Financial Intelligence Unit’s (FIU) frequent demands for clarity was non-compliance.

Previously, in response to a show-cause letter from the FIU within the finance ministry, Apple took these offshore exchanges out of the App Store. Concerned about possible money laundering operations on these platforms, the FIU has called for a suspension until these sites complied with India’s cryptocurrency laws.

Indian Government Urged to Block URL Access

To remedy the problem, the FIU sent letters on Dec. 28 to nine exchanges, including Binance, requesting reasons for their unlawful activities in India. The present government move resulted from a request to the IT ministry to prohibit URL access to these services.

Unintentionally, the decision to ban international cryptocurrency platforms has caused a spike in registrations on domestic exchanges. Local traders moved their money to offshore exchanges in 2023 as a result of India’s 30% tax on cryptocurrency earnings and 1% transaction-level tax (TDS). This led to a significant drop in trading volumes on local platforms.

Traders are apparently switching back to domestic competitors like WazirX, CoinDCX, and CoinSwitch Kuber due to recent access limitations to Binance and other overseas exchanges operating without local licenses.

Within four days of the Dec. 28 compliance notification to foreign exchanges, WazirX recorded a spectacular 250% increase in deposit inflows compared to the four days prior. Edul Patel, CEO of Mudrex, a Y Combinator-backed platform, highlighted a similar trend, stating, “The figures we usually do in 3 months, we’ve been able to realize those in the past two weeks.”

Despite the quick expansion of the switch to local platforms, many Indian cryptocurrency investors still encounter difficulties. Investors are apparently faced with a dilemma as significant assets are allegedly stranded in the wallets of the prohibited overseas sites. According to industry estimates, almost $4 billion in cryptocurrency assets are still held abroad, with Binance owning 80% of them.