India’s financial regulator has slapped a $1.06 million fine (9.27 crore rupees) on cryptocurrency exchange Bybit for failing to comply with the country’s strict anti-money laundering (AML) regulations. The fine is a significant blow to one of the largest global crypto exchanges, highlighting India’s ongoing commitment to regulating the growing digital asset sector.

Bybit’s Non-Compliance with the Prevention of Money Laundering Act (PMLA)

Bybit’s legal troubles stem from its failure to register under the Prevention of Money Laundering Act (PMLA), a key piece of legislation aimed at combating money laundering and terrorist financing. The Financial Intelligence Unit (FIU) of India classified Bybit as a “reporting entity,” meaning the platform is legally obligated to adhere to India’s anti-money laundering laws. Despite this, the exchange continued its operations in India without securing the necessary registration.

While December 2023 saw multiple exchanges flagged by the FIU for PMLA non-compliance, Bybit initially escaped immediate action. However, the FIU eventually cracked down on Bybit for continuing to operate without proper registration, leading to the $1.06 million fine and subsequent blocking of Bybit’s websites under the Information Technology Act.

Bybit’s Response and Efforts to Comply

Amidst the regulatory crackdown, Bybit has been actively working to address its compliance issues in India. The exchange has filed for a Virtual Digital Asset Service Provider (VDASP) license, which is necessary for operating legally within the country’s rapidly evolving crypto space. Bybit submitted its application for the VDASP license in June 2024, signaling its intention to meet regulatory standards.

Vikas Gupta, Bybit’s Country Manager for India, expressed confidence that the exchange would receive full approval in the coming weeks, although the uncertainty surrounding its status remains. Initial reports suggested that Bybit had successfully settled the fine and resolved its registration issues, but these claims were later retracted, leaving stakeholders uncertain about the exchange’s full compliance in India.

Regulatory Landscape in India and Global Implications

Bybit’s challenges are part of a broader trend in India, where authorities have been cracking down on crypto exchanges failing to meet the country’s regulatory requirements. Exchanges such as Binance, KuCoin, and OKX have also faced similar scrutiny for non-compliance with India’s PMLA and other financial regulations.

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