Crypto Exchange Penalised for Operating Without Registration

Bybit, the world’s second-largest cryptocurrency exchange by trading volume, has been fined $1.06 million (₹9.27 crore) by India’s Financial Intelligence Unit (FIU) for failing to register under the Prevention of Money Laundering Act (PMLA). The penalty follows previous compliance issues that led to the suspension of Bybit’s services in India.

Regulatory Breach and Website Block

India’s Ministry of Finance confirmed the fine in an official press release on 31 January, stating that Bybit had expanded its operations in India without securing the necessary registration with the FIU-IND.

“As a Virtual Digital Asset Service Provider (VDA SP), Bybit is classified as a ‘reporting entity’ under Section 2(1)(WA) of the PMLA,” the statement read. “The persistent and continuous non-compliance caused FIU-IND to block their websites under the Information Technology Act, 2000, through the Ministry of Electronics and Communication Technology (MEITY).”

The regulatory crackdown on Bybit comes amid increasing scrutiny of cryptocurrency exchanges operating in India without proper authorisation.

Suspension of Services and Compliance Efforts

Weeks before the penalty was announced, Bybit suspended its services in India, citing “recent developments with Indian regulators” and compliance concerns. The exchange’s country manager for India, Vikas Gupta, expressed confidence that full operations would resume soon, stating that Bybit expected to obtain the required license “in the coming weeks.”

Bybit had submitted its registration application for a Virtual Digital Asset Service Provider (VDASP) license on 26 June 2024. However, the approval status remains unclear.

Conflicting Reports on Fine Payment

There have been conflicting reports regarding Bybit’s settlement of the fine. Earlier reports suggested that the exchange had successfully registered with the FIU and paid the penalty. However, a Bybit spokesperson later retracted this claim.

Efforts to seek clarification from both Bybit and the FIU regarding the fine payment and the exchange’s compliance status are ongoing.

Bybit’s case highlights the growing regulatory pressure on cryptocurrency exchanges in India as authorities tighten compliance measures in the digital asset sector.