Global watchdog highlights enforcement gaps as foreign crypto exchanges operate without registration, urging stronger international coordination.
New Delhi: FATF highlights enforcement challenges as foreign crypto operators bypass registration, creating financial and security risks globally.
Mixed Progress on Travel Rule Enforcement
The Crypto Travel Rule, introduced by FATF in 2019, requires virtual asset service providers—including exchanges, custodial solutions, and financial services firms—to trace and report the origins and destinations of crypto transactions above a certain threshold. While 73% of jurisdictions have enacted legislation to enforce the rule, only 35 out of 85 have taken substantial enforcement actions. This highlights a gap between policy creation and actual implementation. FATF emphasizes that consistent global enforcement is essential, providing its guide Best Practices in Travel Rule Supervision to assist jurisdictions in operationalizing these frameworks.
India’s Response to Offshore Crypto Players
In March 2023, India designated crypto operators as reporting entities under the Prevention of Money Laundering Act (PMLA) and issued detailed guidelines. Domestic exchanges registered promptly, but offshore operators largely ignored the requirements. In December 2023, the Ministry of Finance issued notices to non-compliant exchanges, eventually blocking 19 entities. Recently, FIU-India issued non-compliance notices to 25 foreign platforms, including Singapore-based CoinW, UK-registered BTCC, Hong Kong’s Changelly, US-based Paxful, Cambodia’s Huione Group, Curaçao-based BC.Game, and Seychelles-registered BitMex. The actions underscore that enforcement, rather than voluntary compliance, drives offshore operators to adhere to regulations.
Risks of Offshore Crypto Platforms
Unregistered foreign crypto operators pose significant risks to both financial security and national stability. Governments must adopt comprehensive strategies to ensure compliance or shut down non-compliant operations. Globally, countries are taking varied approaches, including blocking non-compliant exchanges, pursuing criminal action, mandating local registration, reducing taxes for domestic players, and increasing levies on foreign exchanges.
Way Forward
FATF’s targeted reviews highlight both progress and remaining gaps in global crypto regulation. India’s enforcement measures have been recognized internationally, but with rapidly evolving technology, faster and real-time solutions are necessary. Studying global approaches and adapting them in India will be crucial to safeguard citizens’ wealth and strengthen the national financial ecosystem.
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