Crypto exchange Binance is considering re-entering India’s market after having been banned there in late 2023. The potential re-entry would involve a penalty of about $2m, the Economic Times reported Thursday.
The platform’s return would be contingent upon registration with the finance ministry’s Financial Intelligence Unit (FIU). The FIU is responsible for supervising virtual asset commerce.
A source informed the outlet that Binance intends to adhere to all relevant legislation, including the Prevention of Money Laundering Act (PMLA) and the crypto taxation framework. Prior to this, Binance had been neglecting these regulations.
Binance didn’t return Cryptonews’ request for comment by press time. Confirmation regarding the $2m penalty amount remains unclear.
No Physical Presence Needed in India, But Rules Apply to All VASPs
In December, the FIU advised the Ministry of Electronics and Information Technology to restrict access to the web addresses of nine crypto exchanges, including Binance.
The Ministry of Finance meanwhile clarified that registration and compliance requirements do not necessitate a physical presence within India. The regulatory framework applies to all entities involved in virtual asset transactions. This includes reporting, record-keeping, and other obligations mandated under the Prevention of Money Laundering Act (PMLA).
India has been actively integrating the crypto sector within its established financial system. In March last year, regulations were introduced mandating Know Your Customer (KYC) data collection from crypto companies. Concurrently, FIU registration became a requirement for these firms.
The regulations extend to all Virtual Asset Service Providers (VASPs) with Indian operations, irrespective of their onshore or offshore location. These entities must register as reporting entities with the FIU and comply with the PMLA.
Additionally, in August, Prime Minister Narendra Modi advocated for the need for global regulations governing cryptocurrencies.
Binance Dominated India’s Crypto Market
Prior to its ban, Binance reportedly held a dominant market share, accounting for nearly 90% of the estimated $4b in cryptocurrency holdings amongst Indian citizens.
This dominance was primarily attributed to its non-adherence to Indian tax regulations. Unlike registered exchanges which levied a 1% tax deducted at source (TDS) on transactions, Binance facilitated trading without this tax implication.
The introduction of the 1% TDS on cryptocurrency trading in India demonstrably triggered a significant migration of users, with millions shifting their activity to offshore crypto exchanges, including Binance.