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Apple Cracks Down on Crypto Exchanges in India: Fallout from a Regulatory Tightening

The Indian app store landscape has undergone a major shift, with some of the biggest names in global crypto exchanges – Binance, KuCoin, and OKX – finding themselves unexpectedly delisted. This abrupt exit stems from India’s intensifying regulatory scrutiny of the crypto industry, fueled by concerns over tax evasion and money laundering.

Apple Cracks Down on Crypto Exchanges in India: Fallout from a Regulatory Tightening
Source: Freepik

Show-Cause Notices: Government’s Firm Stance on Non-Compliance

In a prelude to the new year on December 28th, 2022, the Indian Ministry of Finance sent a stern message to nine virtual digital asset (VDA) service providers: comply or face consequences. Binance, KuCoin, Houbi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex received show-cause notices alleging illegal operations and disregard for local tax regulations.

The Ministry also directed the Ministry of Information Technology to block the websites of these nine crypto firms, sending shockwaves through the Indian crypto community.

Apple Plays It Safe: Mitigating Legal Risks with App Store Removals

Under increasing legal pressure, Apple, known for its cautious approach, chose a prudent path. The decision to remove these delisted apps from the Indian app store appears to be a strategic move to avoid entanglement in regulatory actions. This isn’t Apple’s first encounter with antitrust scrutiny concerning financial services within its app store ecosystem.

A recent lawsuit filed in the California District Court in November 2022 accused Apple of fostering an anti-competitive environment by allegedly favoring PayPal’s Venmo and Block’s Cash App, resulting in inflated prices for consumers.

India Tightens the Reins: Addressing Tax Evasion and Boosting Domestic Exchanges

The Indian government’s crackdown on offshore crypto exchanges is not only driven by legal compliance concerns but also aims to tackle a two-pronged challenge: rampant tax evasion and a preference for international platforms over domestic ones. After the implementation of taxes on crypto income in 2022, a significant portion of Indian crypto traders shifted their deposits overseas to circumvent the 30% tax on crypto earnings and 1% TDS on all crypto transactions.

Consequently, Indian crypto exchanges experienced a sharp decline in trading volumes. The government’s current actions target narrowing the scope for illicit crypto activity and incentivizing the use of native exchanges.

Balancing Regulation and Consumer Protection: Insights from Experts

Ashish Singhal, Co-founder and Group CEO of PeepalCo, offers a nuanced perspective on the situation. He emphasizes that requesting offshore exchanges to register with the Financial Intelligence Unit (FIU-IND) aims to strengthen compliance with Indian laws regarding taxation, money laundering prevention, and KYC norms.

According to Singhal, this approach will foster a level playing field for both Indian and offshore exchanges, bolster compliance frameworks, and ultimately enhance consumer protection within the Indian crypto environment.

Uncertain Future for Indian Crypto Users: Safety of Funds in Question

The immediate impact on Indian crypto users remains unclear. The question of whether they will be forced to withdraw their funds from the delisted exchanges hangs heavy in the air. Fortunately, India still boasts robust domestic exchanges like CoinDCX and WazirX, providing alternative platforms for trading.

Moreover, a potential return of the delisted apps to the Indian app store is not out of the question, provided they comply with the necessary regulations and register with relevant authorities. However, any official pronouncements from Binance or the other affected exchanges regarding their plans in India are yet to be made.

Conclusion: Turning Point for the Indian Crypto Landscape

Apple’s removal of major crypto exchanges from its Indian app store is a stark illustration of India’s firm stance towards the crypto industry. The government’s focus on curbing tax evasion and promoting domestic exchanges reflects a growing desire to exert control over this volatile yet potentially transformative financial sector.

While the immediate future for Indian crypto users may be uncertain, one thing is clear: the landscape of Indian crypto is at a turning point, and only time will tell how this regulatory push will ultimately reshape the industry in the world’s second-most populous nation.

January 11, 2024 at 1:00 pm

Updated January 11, 2024 at 1:00 pm

Disclaimer

Remember, investing in cryptocurrencies involves risks, and it’s important to conduct thorough research and seek professional advice before making any financial decisions. (Please keep in mind that this post is solely for informative purposes and should not be construed as financial or investment advice.)

FAQ

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