India blocked access to global crypto exchanges including Binance, KuCoin and OKX on January 12. India has imposed an IP block that prevents Indians from accessing the URLs of foreign crypto platforms.
However, according to CryptoSlate’s research, at the time of publication, it was still possible to access the websites of Binance, OKX, and KuCoin via Google Chrome without using a virtual private network (VPN). The Binance website was also accessible via Safari and Mozilla Firefox browsers without any VPN, although OKX and Kucoin websites were inaccessible.
The Ministry of Electronics and Information Technology on January 10 asked Apple to restrict Indians’ access to currency applications. At the time of writing, both the iOS and Android app stores have restricted access to foreign crypto exchange applications to Indians.
The move comes after the Finance Ministry’s Financial Intelligence Unit (FIU) warned that some international exchanges may have been for money laundering, a government official told the Economic Times.
Restricting foreign exchange
The FIU’s warning came about two weeks after it issued warnings to nine foreign exchanges operating in India. This included Binance, KuCoin, Huobi, OKX, Kraken, Gate.io, MEXC Global, Bitfinex and Bittrex.
The show-cause notice alleged that the exchanges were operating illegally in India and did not comply with anti-money laundering laws. A show-cause notice is a formal document alleging misconduct and asking companies to explain why disciplinary action should not be taken against them.
The show-cause notice gave the exchanges two weeks to explain, expiring on Friday.
The recently imposed restrictions will deter Indians from downloading the foreign exchange application. However, those who have already downloaded the applications can still access them. However, withdrawing the cryptocurrencies may prove to be a problem as withdrawals from UPI will no longer be available.
In an email to users, Binance said:
“We work hard to engage in constructive policymaking that aims to benefit every user and all market participants. All user funds are safe.”
Binance added that it “remains committed to complying with local regulations and laws.”
Indian exchanges are flourishing
Indian exchanges had been driving users to foreign platforms after India introduced a 1% tax deducted at source in 2022. Several investors switched to foreign platforms to avoid taxes.
However, the recent crackdown will level the playing field as Indian investors have already flocked to the local platforms. WazirX, for example, saw deposit inflows jump 250% in the four days after the show-cause notice was issued compared to the four days before, Bloomberg reported. WazirX was owned by Binance until an unconscionable and acrimonious split in 2022.
WazirX rival CoinDCX has also gained users since December 28. Mudrex, a Y-combinator-backed local exchange, has gained 30,000 new users since December 28, according to the Bloomberg report.
With foreign platforms becoming almost impossible to access, Indians looking to trade cryptocurrencies will have no choice but to use local platforms, which are expected to see more user and deposit inflows.