Indian crypto platforms have seen a significant increase in daily transactions and user registrations, with some seeing a 2,000 percent increase in deposits after the Finance Ministry issued cause notices to nine digital asset service providers. offshore virtual assets (VDAs) that deal in cryptoassets.
The Financial Intelligence Unit (FIU) of the Ministry of Finance last month issued cause notices to VDA platforms such as Binance, the largest cryptocurrency exchange, and Kucoin for non-compliance with the anti-money laundering law and requested the Ministry of Electronics and Information Technology. (MeitY) to block their websites.
โSince the FIU notification, we have seen a significant increase, with a 2,000 percent increase in crypto deposits, showing strong investor response to our compliance-focused approach,โ said Sumit Gupta, co-founder of CoinDCX; a crypto exchange platform.
Other platforms have also benefited from the UIF's action.
โWe saw about 35,000 investors come in since the UIF notice came out and deposit approximately $2.5 million in the last few weeks. A large majority of this number has been in crypto deposits alone, probably people moving their funds around to ensure they stay on a supported platform,โ said Edul Patel, Chief Executive Officer (CEO) of Mudrex; a platform for crypto investments.
Patel said his company saw a 20 percent increase in active users after the UIF announcement. Currently, the platform has a monthly active user base of over one lakh.
Companies such as CoinSwitch have reported a 30 to 35 percent increase in daily transaction volumes following the Ministry of Finance's advisory. Local crypto players are using strategies to attract investors who have invested in offshore crypto platforms.
โWe have started a slow rollout of crypto deposits for over 100 crypto assets on CoinSwitch PRO to allow users to secure their funds on a platform that is fully compliant with Indian rules and regulations by just following a few simple steps. To further incentivize responsible trading, we have announced a guaranteed 2 percent cashback for crypto deposits on CoinSwitch PRO,โ said Balaji Srihari, Chief Commercial Officer, 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.
โTo bolster trust within the crypto community, CoinDCX has earmarked a $1 million fund to assist investors in asset transfers from non-compliant offshore exchanges to the CoinDCX exchange. โWe are actively supporting users, providing seamless crypto deposits with a 1 percent bonus and opening deposit routes for a safe transition,โ said Gupta.
โWhen it comes to compliance, the main challenge arises from the fact that cryptocurrencies are a young asset class. This means that regulations are constantly updated and improved. As a crypto platform, this can become a game of catch up. In terms of compliance cost, we are spending five times more than what we used to spend,โ said Mudrex's Patel.
However, he said that despite the rising costs, supported platforms will encourage investors to invest in cryptocurrencies.
โWe are always on the front lines of getting things done because no matter the cost, the benefits are there for all to see and will ultimately encourage more people to join us in the world of cryptocurrency investing,โ said.
Last month, notices were sent to VDA platforms such as Binance, the largest cryptocurrency exchange, and Kucoin, among others, for failure to comply with anti-money laundering laws. MeitY also called on Apple to remove offshore cryptocurrency apps from its store. Android versions of these apps are also likely to be removed. In October last year, finance ministers and central bank governors (FMCBG) of G20 countries adopted a roadmap on cryptoassets and called for its rapid implementation. The roadmap was proposed in a synthesis document from the International Monetary Fund and the Financial Stability Board.
First published: January 14, 2024 | 6:15 PM IS
