Apple (NASDAQ: AAPL) has delisted the apps of eight offshore digital asset exchanges from its App Store in India as regulatory pressure piles up on Binance, Kraken, and other non-compliant exchanges.
India’s Financial Intelligence Unit (FIU) began the crackdown in December by sending ‘compliance show cause’ letters to nine exchanges that it alleged were operating illegally. They included Russian exchange MEXC Global, Bitfinex, KuCoin, Bittrex, and Huobi, now operating as HTX. While local exchanges have obtained the FIU’s nod, these offshore exchanges continue to skirt regulators despite enjoying the lion’s share of the Indian trading volume.
Apple has now removed the apps, with Bloomberg reporting that the move was under the direct order of the Ministry of Electronics and Information Technology. The ministry issued a similar order to Google (NASDAQ: GOOGL), but it had yet to remove the apps from its Play Store. Google’s Android operating system accounts for over 95% of the Indian smartphone market, with Apple’s iOS only accounting for 3.9%.
The FIU had also recommended that the information ministry ban the exchanges’ websites, but this has yet to happen. According to sources, the process is tedious and requires a lot of paperwork, so the websites are still available.
Some, like Binance, have assured their existing users that the delisting will not affect them. The exchange’s South Asia-focused subsidiary claimed it was committed to resolving the stalemate.
“Please note that existing app users will not be impacted. We will continue to work with regulators to resolve the situation and will share updates,” the exchange said, adding that it was “exploring all avenues to establish a long-term sustainable business in India.”
India’s offshore exchange purge
India is a digital asset powerhouse and was only second to the U.S. last year for raw transaction volume. However, the market has experienced a seismic shift over the past two years, with the government’s tax drive pushing most of the trading volume from local to offshore exchanges.
It started in April 2022 when the finance ministry announced a 30% tax on all digital asset income. It followed up with a 1% tax deducted at source (TDS) on all trades above $120. Additionally, it prohibited traders from offsetting their losses with gains from elsewhere.
These taxes spelled doom for local exchanges as traders fled to offshore exchanges, which were not subject to these terms at the time. WazirX, which had a public fallout with its former ‘owner’ Binance last year, recorded a drastic 97% dip in trading volume since the taxes came in, it revealed last month.
As such, the FIU’s crackdown on the offshore exchanges has received overwhelming support from the local exchanges.
“[We] and other Indian VDA exchanges, are already compliant with India’s PMLA requirements for VASPs, and there is no reason why offshore exchanges shouldn’t do the same, should they wish to do business in India,” said CoinSwitch exchange CEO Ashish Singhal.
CoinDCX, India’s first digital asset unicorn, is going after the traders who will no longer have access to offshore platforms, luring them with deposit bonuses for new users who register by January 18. CEO Sumit Gupta also reiterated the exchange’s commitment to safeguarding users’ assets and adhering to all local laws.
[Community Update] Amidst the changing landscape of Indian VDA, where offshore exchange apps are now facing restrictions due to government directives, CoinDCX acknowledges the community's apprehensions. This is a defining moment for VDA in India, and we're dedicated to… pic.twitter.com/uTpxGqsHk0
— Sumit Gupta (CoinDCX) (@smtgpt) January 10, 2024
While the ban on foreign exchanges will aid the recovery of local platforms, regulatory reforms are the only permanent solution. Industry executives who spoke to CoinGeek say they want the TDS lowered to 0.01%, a 30% flat tax reduction, and to be allowed to offset their losses with gains made elsewhere, which are the norm in other financial markets.
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