Coinbase Secures Approval to Re-enter Indian Crypto Market Following Regulatory Challenges
In a significant development for the Indian cryptocurrency landscape, US-based cryptocurrency exchange Coinbase has announced that it has received essential approvals from the Financial Intelligence Unit of India (FIU-IND) to recommence operations in the country. This announcement was made in a press release on Tuesday, March 11, signaling Coinbase’s planned return to Indian crypto trading markets after a prolonged hiatus.
Plans for Expansion and Compliance
Coinbase’s decision to re-establish its presence in India follows its previous operations, which were suspended over a year ago due to challenges related to regulations governing the Unified Payments Interface (UPI). The exchange revealed that it intends to roll out its initial retail services later this year, with ambitions to introduce further investment opportunities and additional products in the Indian market.
The return of Coinbase is notable against the backdrop of a broader regulatory framework introduced by the Union government, which placed virtual digital assets (VDAs) such as cryptocurrencies under the Prevention of Money Laundering Act (PMLA) of 2002. This legislation mandates compliance from both offshore and onshore VDA service providers, including crypto trading platforms, which are now required to register with the FIU as reporting entities.
FIU-IND: Role and Responsibilities
The FIU-IND operates under the Union Ministry of Finance and plays a crucial role in monitoring financial transactions for suspicious activities. It is tasked with receiving, processing, analyzing, and disseminating information related to suspect financial transactions to various enforcement agencies as well as foreign financial intelligence units.
Coinbase’s comeback aligns with the return of other foreign crypto exchanges to India. Notably, Binance successfully registered with FIU-IND in August of last year, allowing it to resume operations after a regulatory pause of several months.
Addressing Market Gaps
With the resurgence of Coinbase, the exchange is likely poised to capitalize on the market gap left by the Indian crypto platform WazirX, which faced difficulties after reportedly losing approximately half of its reserves due to a security breach in the previous year. Other prominent Indian exchanges, including CoinSwitch and CoinDCX, have the backing of Coinbase, enhancing the competitive landscape for cryptocurrency trading in India.
John O’Loghlen, the Regional Managing Director for Asia-Pacific at Coinbase, expressed optimism about the future of cryptocurrency in India, stating, "India represents one of the most exciting market opportunities in the world today, and we’re proud to deepen our investment here in full compliance with local regulations. We’re committed to building in markets that believe in the potential of crypto and onchain innovation."
In addition to retail services, Coinbase is also looking to expand its crypto developer platform in India, aiming to provide essential tools and resources for aspiring developers. "By expanding access to our trusted platform and tools such as Base, we aim to empower a new generation of builders to stay home, innovate locally, and scale globally,” O’Loghlen noted.
Background on Coinbase’s Previous Challenges
Coinbase initially launched its crypto trading services in India in 2022, which included support for payments through the UPI system. However, the exchange had to suspend its operations shortly after the launch when the National Payments Corporation of India (NPCI) indicated it was unaware of any crypto exchange utilizing the widely used digital payments system. Reports later indicated that Coinbase faced “informal pressure” from the Reserve Bank of India, prompting the halt in trading services.
The regulatory environment surrounding cryptocurrency in India has been fraught with complexity. Although the Union government has not implemented formal regulations to legalize cryptocurrencies, it has enforced a 30 percent tax on crypto income and a one percent deduction on each transaction since 2022. Despite this uncertainty for mainstream tokens such as Bitcoin, the Indian government’s focus appears to favor blockchain development and the introduction of central bank digital currencies (CBDCs), such as the Reserve Bank of India’s e-rupee.
As Coinbase prepares for its market re-entry, the dynamics of India’s cryptocurrency market are sure to evolve, drawing attention from investors and industry leaders alike.
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