There is also a good, ethical reason to stop using .io domains completely, as the territory's population had no say in the governance of the TLD and are deprived of any revenue from it.
I guess the money probably goes into the treasury, but it can't be more than a drop in the bucket.
I still think TLDs in general were a mistake. It always felt life a leftover from the old Usenet dominated Internet. The Internet quickly outgrew the categorization system and we ended up where we are today with most everything being shoved in .com because it was the least strict.
gigaom.com/2014/06/30/the-dark-side-of-io-how-the-u-k-is-making-web-domain-profits-from-a-shady-cold-war-land-deal/
Edit to add: just to be clear, the UK had bought these people's homeland something like five years previously. Bought.
This hits me from a deep emotional place. We shouldn't do things like this. The deeper and more connected this giant web becomes for me, and the more parts I know about, the more everything I've ever known comes into question. It feels as if the final episode will be the big reveal that Bruce Wayne is on the therapist's lounge discovering his second alter-ego, the Joker.
Also, in 2009 an attempt was made to prevent resettlement by declaring the area a marine reserve. [2]
[1] https://en.wikipedia.org/wiki/Chagossians#Court_battle
[2] https://en.wikipedia.org/wiki/Depopulation_of_Chagossians_fr...
On the scales of US budget, it's not likely that income of any government enterprise would noticeably affect your personal income. It may be different for smaller nations.
There is a difference, though, between "the legal representative of the country controls the domain and gets money from it, which they distribute as they see fit" and "somebody having no connection with the country controls the domain and gets money from it". The first may not be ideal, especially for countries with oppressive governments, but makes sense. The second makes much less sense, if we talk about geographic domains at least.
On the scale of a territory like BIOT, it is a reasonable expectation; Tuvalu is a high-profile example. However, the point is that there are no Chagossian representatives who have had a say in the organisation or governance of the territory's Internet infrastructure. There are a multitude of possibilities for how the .io ccTLD could be operated, but Chagossians have not had the opportunity to influence or decide them. In the absence of that, it seems right that the relatively lucrative .io registration business is used in some way to the benefit of displaced Chagossians.
If it were part of Mauritius, it would fall under the existing MU.