Binance’s Return to India: Paying $2 Million Penalty for Compliance
Binance, the world’s largest cryptocurrency exchange, is set to make a comeback in the Indian market after agreeing to pay a hefty penalty of approximately $2 million. The exchange was previously banned by the Indian government for its lax adherence to regulatory frameworks, including the Prevention of Money Laundering Act (PMLA) and the taxation framework for virtual digital assets (VDA).
According to a report by ET, Binance will now operate under the oversight of the Financial Intelligence Unit (FIU) of the finance ministry. This move signifies a shift in Binance’s approach towards compliance with Indian laws and regulations.
A source close to the matter expressed disappointment that it took Binance more than two years to realize the importance of complying with regulatory frameworks. The source emphasized that no global powerhouse should command special treatment at the cost of exposing the country’s financial system to vulnerabilities.
Binance’s decision to re-enter the Indian market follows in the footsteps of KuCoin, another cryptocurrency exchange that recently completed compliance with the FIU. KuCoin announced that it will start deducting 1% TDS on each cryptocurrency transaction initiated by users on its platform.
Previously, Binance held a significant market share in India, accounting for around 90% of the estimated $4 billion in cryptocurrency holdings among Indian residents. However, after the government implemented a 1% TDS on cryptocurrency trading in July 2022, Indian exchanges saw a significant decline in trading volume as traders turned to offshore exchanges like Binance.
The situation escalated in 2023 when the FIU issued a show cause notice to nine exchanges, including Binance, for illegally operating in the country. This led to Google and Apple removing these exchanges’ apps from their platforms in India.
Despite these challenges, Binance has now committed to operating within the legal boundaries of the Indian cryptocurrency ecosystem. The Ministry of Finance has clarified that registration and compliance obligations do not require physical operations in India, emphasizing the importance of all entities engaging in virtual asset transactions to comply with regulatory mandates.
Binance’s comeback in India marks a significant development in the cryptocurrency industry and highlights the importance of regulatory compliance for global exchanges operating in different markets.
