Bybit Re-enters India’s Crypto Market: Navigating Regulatory Waters

Bybit, a prominent global crypto exchange, has made significant strides toward resuming operations in India by registering with the country’s Financial Intelligence Unit (FIU) on February 5, 2024. This crucial move follows a period of halted services due to compliance issues, which Bybit addressed by paying a $1.06 million fine under India’s Prevention of Money Laundering Act (PMLA) of 2005.

• Bybit registers with India’s FIU
• Anticipates full operational license soon
• Settles compliance issues with $1.06 million fine
• Pursues VDASP license

The exchange is now poised to secure its full operational license within weeks and is actively pursuing a Virtual Digital Asset Service Provider (VDASP) license, a key requirement for fully operating in India’s thriving crypto market. Vikas Gupta, Bybit’s country manager for India, expressed confidence in the process, stating:

“We expect to secure our full operational license in the coming weeks.” – Vikas Gupta, Bybit’s country manager for India

Bybit’s registration with the FIU aligns with India’s ongoing regulatory clampdown on crypto exchanges. Other major platforms like Binance, KuCoin, and OKX have encountered similar regulatory challenges. KuCoin managed to resume operations after settling a $41,000 fine, while Binance is expected to settle with a $2 million penalty, underscoring the stringent measures in place.

India’s regulatory environment for virtual digital assets (VDAs) has evolved rapidly. A notable shift occurred in 2023 when Virtual Asset Service Providers (VASPs) were included as Reporting Entities under the PMLA, aligning India’s crypto regulations with global standards set by the Financial Action Task Force (FATF). This mandates exchanges like Bybit to implement strict Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) measures, including Know Your Customer (KYC) checks and detailed transaction reporting.

The crypto market in India has experienced shifts in trading volumes, particularly following the introduction of a 30% tax on VDA income and a 1% Tax Deducted at Source (TDS) on transactions in 2022, coupled with a ban on offshore entities. Bybit’s determined move to re-enter the market reflects the company’s belief in the potential of India’s crypto space, despite these regulatory hurdles.

India’s active role in shaping global crypto policy during its G20 presidency in 2023 highlights the country’s broader regulatory ambitions. Bybit’s registration and pursuit of a VDASP license not only demonstrate its commitment to compliance but also set a precedent for other exchanges eager to operate within India’s regulatory framework.

While Bybit’s re-entry into India is promising, the journey is not without challenges. The regulatory landscape remains complex, with compliance requirements like maintaining detailed records and promptly reporting suspicious activities. Yet, the potential rewards of accessing India’s vast market make this a strategic move worth pursuing for Bybit and similar platforms.

Bybit’s efforts to navigate India’s regulatory waters are a testament to the resilience and adaptability of cryptocurrency exchanges in the face of stringent regulations. As the crypto landscape continues to evolve, Bybit’s re-entry serves as a case study in balancing compliance with innovation, reflecting the broader dynamics at play in the global crypto market.

Key Takeaways and Questions

• What steps has Bybit taken to resume operations in India?

  Bybit has registered with India’s FIU and paid a $1.06 million fine to resolve past compliance issues. It is also seeking a VDASP license to fully operate in the Indian crypto market.

• How has India’s regulatory stance affected other crypto exchanges?

  Other exchanges like Binance, KuCoin, and OKX have also faced regulatory challenges in India, but have resumed operations after agreeing to comply with the country’s PMLA rules and securing regulatory approval.

• What does the VDASP license signify for Bybit?

  The VDASP license would allow Bybit to fully operate in India’s crypto market, signifying a complete return to business in the region.

• What is the broader implication of Bybit’s registration with the FIU?

  Bybit’s registration with the FIU reflects India’s efforts to regulate the crypto industry more stringently and sets a precedent for other exchanges to follow to ensure compliance and continued operation in the country.

• What risks does Bybit face in re-entering the Indian market?

  Beyond regulatory compliance, Bybit faces challenges such as market competition and user adoption rates in India, which could impact its success.

• How might Bybit’s re-entry affect the global crypto market?

  Bybit’s success in India could set a precedent for other countries, potentially influencing global regulatory approaches and market dynamics.