29 December 2023

2023 has been a good year. A handsome 150% gain on Bitcoin and even more so on some altcoins like Solana. 2024 promises to be even bigger – approval of Bitcoin spot ETF, Bitcoin halving, Ethereum upgrade and so on.

Crypto investors are dreaming of riding the rocket further.

Just as we were doing the piece on our expectations for 2024, a big news dropped 😱

“India's Financial Intelligence Unit (FIU), under the purview of the Ministry of Finance, has issued show-cause notices to 9 offshore cryptocurrency platforms under the stringent Prevention of Money Laundering Act (PMLA). Those served with the show-cause notice include big-ticket virtual digital assets platforms like Binance and Kucoin. The notices are issued for non-compliance with the anti-money laundering legislation,” news agency PTI reported on Thursday.

Naturally, in our Hot Take today, we have to look at this development and what it means for all of us. 2024 outlook will have to wait for the new year 😊

Top-3 stories of the week:

1

2

3

The newsletter is put together by Giottus Crypto Platform. You can read all the previous issues of Cryptogram here.

Was this newsletter forwarded to you?

WEEKLY MACROS

• Total crypto market cap - $1.67 trillion - UP 0.6%

• Bitcoin price - $42,655 - DOWN 3%

• The dollar index (DXY) - 101.21 - DOWN 0.6%

• Bitcoin Dominance - 51.35% -  DOWN 3.4%

• Crypto Fear and Greed Index - 65 - the market is in greed

THE HOT TAKE

FIU action is timely and overall good for the ecosystem

We feel that FIU’s show-cause notices (read official release here) to Binance, Kucoin, Huobi, Kraken, Gate.io, Bitrex, Bitstamp, MEXC Global, and Bitfinex is a new year gift to the Indian crypto ecosystem. Before you judge us, please hear us out.

It means that India is serious about compliance in crypto investing and that it sees crypto as a regulated industry in the near future. These international exchanges have not registered with FIU yet while 31 Indian players including Giottus have

There is a natural imbalance in terms of how India wants to regulate but is unable to given that foreign players have had a free hand in giving access to Indians. That changes, today. Yes, KYC is a must for investing in India and platforms need to ensure that enough due diligence goes behind all transactions they serve.

However, things aren’t going to be smooth for all of you – questions like ‘what will happen to my assets?’ and ‘will India get good global crypto liquidity henceforth?’ are likely on your minds. We address that and beyond today.

•  Don’t panic and sell your assets

While the websites are likely to be banned, often Indians have found ways to access the services via the app or using other methods (VPN). If you are holding assets in these international exchanges, there is still time for you to move them over to Indian ones. For example, Giottus accepts crypto deposits for 100+ coins today without a limit.

Action this immediately – we are not sure if any international exchange will take an effort to register with FIU at this point. They have delisted customers from a specific geography from their platform before – that’s a risk you should not undertake.

Once the assets are on an Indian exchange or your personal wallet, you have all the ability to swap or sell them when you want. And you will be compliant when you do this!

• But, 1% TDS is still high

Yes, 1% TDS on sale of crypto hurts but we must abide by the law of the land. We, Indian crypto platforms, are in conversations with the government to rationalize this in 2024 and even reduce the tax burden if possible. However, things take time to play out in terms of regulations. We have progressed well step by step and we will get there soon.

• My international exchange is not on the list, yet

Well, we do understand that the bigger ones are targeted first – we are sure the FIU will likely do the same to OKX, Bybit, Bitget and others who are not currently part of the list. There are inherent risks in parking assets and trading in international exchanges today. Do not try and circumvent the system – it may not be worth the pain later. The same applies with trading in DEXs.

• What happens to crypto liquidity in India?

Unlike in 2017-18, where access to Bitcoin or other assets in India was limited by supply (and hence a premium in price), many Indian platforms today have agreements with international exchanges for liquidity. These are likely to be not affected by the show-cause notices. Indian customers will continue to access global liquidity in crypto.

• How do I know which Indian exchanges are FIU compliant?

The list of compliant crypto platforms was recently released in the Parliament – you can see the document here. You can also ask the platform (via customer support or other means) if they are.

• So, what happens now to these international exchanges?

International exchanges which consider India as a serious base to tap into will take steps to set up offices in India and register with FIU. This process will take time though. 

• I still have queries

Please write to us at [email protected].

Was this newsletter forwarded to you?

If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Disclaimer: Crypto-asset or VDA investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.