Binance, the world’s largest cryptocurrency exchange, has been fined $2.25 million (₹18.8 crore) by India’s Financial Intelligence Unit (FIU-IND) for non-compliance with domestic anti-money-laundering regulations. This move paves the way for Binance to resume operations in India, contingent upon payment of the fine and adherence to local regulations.
The FIU-IND notice, issued on Wednesday, outlined the reasons for the penalty: “Binance’s ongoing provision of services to Indian clients and operations within India without adhering to its statutory obligations under the Prevention of Money Laundering Act (PMLA), 2002.” The notice, dated December 28, 2023, mandates that Binance comply with specific directives outlined in Chapter IV of the PMLA. Representations for Binance were made through its facilities in the Seychelles, Cayman Islands, and Switzerland.
This development follows reports from May 10 indicating that both Binance and Kucoin, another cryptocurrency exchange, were on the verge of receiving clearance to operate in India after their suspension by FIU-IND in December. Vivek Aggarwal, director of FIU-IND, confirmed last month that Binance was under scrutiny and had presented its case to the unit, which operates under the finance ministry.
Despite reaching out, Binance has not yet responded to requests for comment.
Binance has faced global scrutiny and controversy. In November 2023, founder and former CEO Changpeng Zhao pleaded guilty to money laundering charges brought by the US Securities and Exchange Commission, leading to his resignation and a $4.3 billion settlement.
In November 2019, Binance announced the acquisition of Indian crypto exchange WazirX. Zhao declared, “The acquisition of WazirX shows our commitment and dedication to the Indian people and strengthens the blockchain ecosystem in India.” However, in August 2022, Zhao retracted, stating that Binance had never finalized the deal, following accusations of oversight evasion by WazirX.
Binance’s potential re-entry into the Indian market could challenge local exchanges. Since the Indian government introduced a 30% tax on crypto earnings and a 1% tax deducted at source (TDS) on every crypto trade in 2022, daily average trades on major Indian exchanges like WazirX and CoinDCX have plummeted by up to 90%.
A senior executive at a leading Indian crypto firm, requesting anonymity, remarked, “Given that Binance holds the world’s largest liquid reserves of crypto tokens and the largest variety of token listings, many traders are likely to resume trading on the platform or move to it. This is likely to hurt homegrown exchanges’ growth this year.”
However, other stakeholders see Binance’s compliance as beneficial for the Indian crypto market. Vivek Aggarwal emphasized that taxes and fines should not be misconstrued as legitimizing the cryptocurrency industry. “Whether cryptocurrencies are legitimate or not should depend on dedicated regulations, which are yet to be taken up by Parliament and policymakers,” he stated. “Adherence to laws is a base requirement of all companies that are registered in India and offer services to Indian consumers. This has nothing to do with legitimising the crypto industry.”
As the cryptocurrency landscape in India continues to evolve, Binance’s compliance with regulatory standards could set a precedent for other international players, potentially shaping the future of digital assets in the country.