Crypto Exchange Penalised for Failing to Register Under Money Laundering Laws

Bybit, the world’s second-largest cryptocurrency exchange by trading volume, has been fined 9.27 crore rupees ($1.06 million) by India’s Financial Intelligence Unit (FIU) for failing to comply with the country’s anti-money laundering regulations.

The penalty was issued under the Prevention of Money Laundering Act (PMLA), as Bybit allegedly continued operations in India without securing the necessary registration. The Indian Ministry of Finance announced the fine in a press release, citing repeated violations by the exchange.

Regulatory Breach and Website Block

As a Virtual Digital Asset Service Provider (VDA SP), Bybit is classified as a ‘reporting entity’ under Section 2(1)(WA) of the PMLA. However, it failed to register with the FIU while expanding its services in India, leading to regulatory action.

Authorities took strict measures against the exchange, blocking its website under the Information Technology Act, 2000, through the Ministry of Electronics and Communication Technology (MEITY).

“The persistent and continuous non-compliance caused FIU-IND to block their websites to stop operations,” the statement read.

Bybit’s Service Suspension and Compliance Efforts

The fine follows Bybit’s decision to suspend services in India, citing regulatory developments and compliance concerns. In response, the exchange has sought to obtain a Virtual Digital Asset Service Provider (VDASP) licence in the country.

Bybit’s country manager for India, Vikas Gupta, stated that they expect to receive a full operational licence in the coming weeks. The company had submitted its registration application to the FIU on 26 June 2024.

Uncertainty Over Fine Payment

While previous reports suggested that Bybit had successfully registered with India’s FIU and settled the fine, a company spokesperson later retracted this information. The status of the penalty payment and the exchange’s compliance remains unclear.

Authorities have been approached for clarification on the matter, while Bybit has yet to issue an official statement regarding the fine and its registration progress.