Indians are turning to local exchanges amid clampdown on foreign platforms

India blocked access to global crypto exchanges, including Binance, KuCoin, and OKX, on Jan. 12. India has instituted an IP block that prevents Indians from accessing the URLs of foreign crypto platforms.

As per CryptoSlate’s investigation, however, it was still possible to access the websites of Binance, OKX, and KuCoin via Google Chrome without using a virtual private network (VPN), as of the time of publication. The Binance website could also be accessed via Safari and Mozilla Firefox browsers without any VPN, although OKX and Kucoin websites were inaccessible.

The Ministry of Electronics and Information Technology asked Apple to restrict Indians from accessing foreign exchange applications on Jan. 10. As of 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.

Clamping down on foreign exchanges

The FIU’s warning came about two weeks after it issued show-cause notices 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 not complying with the anti-money laundering laws. A show-cause notice is a formal document that alleges wrongdoing and asks companies to explain why disciplinary action should not be taken against them.

The show cause notice gave the exchanges two weeks to explain, which expired on Friday.

The recently levied restrictions will prevent Indians from downloading the application of the foreign exchanges. However, those who already have the applications downloaded can still access them. Withdrawing the cryptocurrencies may, however, prove a problem as UPI withdrawals will no longer be available.

In an email to users, Binance said:

“We are working hard to engage in constructive policy-making that seeks to benefit every user and all market participants. All user funds are safe.” 

Binance added that it remains “committed to the adherence of local regulations and laws.”

Indian exchanges are thriving

Indian exchanges had been hemorrhaging users to foreign platforms after India implemented a 1% tax deducted at source in 2022. Several investors moved to overseas platforms to avoid the taxes.

The recent clampdown, however, is set to level the playing field as Indian investors have already started flocking to the local platforms. WazirX, for instance, saw deposit inflows jump by 250% in the four days after the issue of the show-cause notice compared to the four days before it, Bloomberg reported. WazirX used to be owned by Binance until an unceremonious and bitter split in 2022.

WazirX rival CoinDCX has also gained users since Dec. 28. Mudrex, a Y combinator-backed local exchange gained 30,000 new users since Dec. 28, according to the Bloomberg report.

With foreign platforms becoming nearly impossible to access, Indians wishing to trade cryptocurrencies will have no choice but to use local platforms, which are set to see more user and deposit inflows.