Kucoin becomes first FIU-India compliant global exchange in India
What could this mean for Kucoin?
On the operational front it means Kucoin which is currently a global exchange may be required to set up a local team to focus on business within India.
It would also mean setting up business alliances with banks and payment solution providers such as wallets that operate within the jurisdiction of India.
This news comes after the Indian government took the stance of shadow banning a number of leading International crypto exchanges.
Why did the Indian government ban the international crypto exchanges?
India has some of the highest crypto taxes. There is a 30% Tax on crypto and in addition there is 1% TDS on every crypto transaction.
This high rate of crypto tax and TDS (Tax deduction at source) brings a big squeeze on the gains of a crypto investor who is liable to be taxed within India.
This also creates a lot of additional burden of extensive record keeping and sharing the transaction details for every customer on the part of the exchange.
Every customer needs to be KYC compliant and his every crypto transaction gets reported to the tax department.
Is investing in crypto the same as winning a lottery in india?
Well if we look at the tax structure then winning a lottery incurs a tax of 30.3% irrespective of your tax bracket and crypto is being taxed at almost the same rate.
The pain point of the Indian crypto Industry
While the taxes are in place however there are no incentives for the blockchain industry in the country.
Besides this there is not even a clear crypto policy.
While the stand that the government takes is not clear there have been issues that customers face while dealing with the Indian exchanges.
These have mostly been related to the delays while making withdrawal of funds from crypto exchanges in India.
Dealing with international exchanges have been easier and lucrative
The international exchanges offer a lot more trading pairs, are more efficient and there are no taxes deducted at source.
Perhaps this has been a trigger for users to operate via these exchanges.
International exchanges as a pain point for the government
For the Indian government this could mean the outward flow of funds and crypto without it being able to levy a tax on the transactions.
As a move to counter these trades the government decided to shadow ban some of the leading international exchanges.
By shadow banning the URLs of these crypto exchanges the users from India would not be able to access the sites from within the country.
Even the apps of some of the sites were removed from the apple store and the android play store.
Following these actions the OKX exchange has taken the stand that it would be halting its operations to users from India.
Kucoin has decided to go the compliance route by way of registering itself with FIU india.
Is it wait and watch for other exchanges?
Exchanges like Binance and Huobi are still to take any step in response to the shadow ban.
While some may see this entry as a challenge for the Indian crypto exchanges that operate within India, how things proceed from here would be interesting to see.
Final thoughts
Kucoin has taken the bait and jumped onto the crypto scene in India. On one side there is a huge market and on the other side is a long list of compliances that it would need to meet in an industry that is not exactly on the high priority list of the government.
How things pan out remains to be seen.