Indian crypto platforms have seen a significant surge in daily transactions and user registrations with some seeing a 2,000 per cent increase in deposits after the finance ministry issued show cause notices to nine offshore virtual digital assets (VDA) service providers dealing with crypto assets.
The Financial Intelligence Unit (FIU) under the finance ministry issued the show cause notices to VDA platforms like Binance, the largest cryptocurrency exchange, and Kucoin last month for non-compliance with anti-money laundering law and requested the Ministry of Electronics and Information Technology (MeitY) to block their websites.
“Since the FIU notification, we have seen a significant surge, with a 2000 per cent increase in crypto deposits, showcasing a strong response from investors to our compliance-focused approach,” said Sumit Gupta, co-founder, CoinDCX; a crypto exchange platform.
Other platforms have also benefited after the FIU action.
“We saw about 35,000 investors come in since the FIU notice came out and deposit roughly $2.5 million in the past couple of weeks. A vast majority of this number has been just in crypto deposits, likely people moving their funds to ensure they remain on a compliant platform,” said Edul Patel, chief executive officer (CEO), Mudrex; a platform for crypto investments.
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Patel said his company has recorded a 20 per cent jump in active users after the FIU announcement. Currently, the platform has a monthly active user base of over one lakh.
Companies like CoinSwitch have reported a 30-35 per cent increase in daily transaction volumes after the finance ministry’s notice. Homegrown crypto players are using strategies to attract investors who have invested in offshore crypto platforms.
“We began a slow rollout of crypto deposits for over 100 crypto assets on CoinSwitch PRO to enable users to secure their funds in a platform that is fully compliant with the Indian rules and regulations by just following a few simple steps. To further incentivise responsible trading, we have announced a 2 per cent guaranteed cashback for crypto deposits to CoinSwitch PRO,” said Balaji Srihari, Business Head, CoinSwitch; a Bengaluru-based crypto exchange platform.
CoinDCX announced the allocation of a fund worth $1 million to help investors transfer their holdings to the platform.
“To reinforce trust within the crypto community, CoinDCX has earmarked a $1 million fund to aid investors in asset transfers from non-compliant offshore exchanges to CoinDCX exchange. We are actively supporting users, providing seamless crypto deposits with a 1 per cent bonus, and opening deposit routes for a secure transition,” Gupta said.
“When it comes to compliance, the primary challenge arises from the fact that crypto is a young asset class. This means that regulations are constantly being updated and improved. As a crypto platform, this can become a game of catch-up. As for the cost of compliance, we are spending 5x of what we used to,” Patel from Mudrex said.
He, however, said that despite rising costs, compliant platforms will encourage investors to invest in crypto.
“We are always in first line to get things done because no matter the cost, the benefits are there for all to see, and ultimately, it will encourage more people to join us in the world of crypto investing,” he said.
Last month, notices were sent to VDA platforms like Binance, the largest cryptocurrency exchange, and Kucoin, among others for non-compliance with anti-money laundering laws. MeitY also asked Apple to remove offshore cryptocurrency apps from its store. The Android versions of these apps are also likely to be removed. In October last year, the finance ministers and central bank governors (FMCBG) of G20 countries adopted a road map on crypto assets and called for its swift implementation. The roadmap was proposed in a synthesis paper by the International Monetary Fund and Financial Stability Board.