Bybit makes peace in India, pays $1m Finance Ministry fine, agrees to full adherence to law

Crypto exchange Bybit has registered with the Financial Intelligence Unit-India (FIU-IND). That agency, part of the Indian Finance Ministry, had ordered Bybit’s website to be blocked in the country and imposed a fine after finding in January that the exchange violated anti-money laundering rules. 

The FIU-IND fined Bybit 92.7 rupees (around $1.1 million) on January 31, saying the exchange engaged in “persistent and continuous” violations of the 2005 Prevention of Money Laundering (Maintenance of Records) Rules. As a Virtual Digital Asset Service Provider (VDASP), the exchange had reporting obligations, but it had expanded its services in India without registering the new offerings with the FIU-IND.

Bybit’s suspension is part of a larger crackdown

Bybit suspended all services to Indian users except withdrawals on Jan. 12, citing new and continuing regulatory issues. The suspension even applied to Bybit payment cards in India. The exchange said the suspension would be temporary.

The exchange announced its payment of the fine and FIU-IND registration on Feb. 6. It noted that it had applied to the agency to become a registered VDASP in India in June 2024.

The FIU-IND cracked down on foreign crypto exchanges in December 2023, alleging they did not observe the agency’s regulations. The exchanges affected included Binance, which was shut out of the country until June, when it paid a $2.2 million fine to the FIU-IND. 

India’s approach to crypto is evolving

The Indian government has shown little enthusiasm for cryptocurrency, imposing strict regulations on the industry and high taxes on profits from digital assets. Part of exchange’s reporting obligations involve taxation. 

Crypto exchanges themselves are liable to taxation as well. In December, the Finance Ministry declared that domestic and foreign crypto exchanges owe an aggregate 8.24 billion rupees in back taxes. Binance owed the lion’s share of back taxes.

A rift within the government came to light in May, when the Securities and Exchange Board of India recommended that government agencies regulate crypto. That position contrasts with the central bank view that retail crypto is a macroeconomic risk. 

In a February interview with Reuters, Economic Affairs Secretary Ajay Seth said India was reconsidering its stance on cryptocurrency in light of world trends. In any case, India led the world in cryptocurrency adoptionin 2023 and 2024, according to the annual Chainalysis survey.

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