Binance, the world’s largest cryptocurrency exchange, is gearing up to re-enter the Indian market following a ban imposed by the Indian government. The exchange has agreed to pay a penalty of around $2 million to make a comeback. This move comes after Binance faced criticism for its lack of adherence to regulatory frameworks such as the Prevention of Money Laundering Act (PMLA) and the taxation framework for virtual digital assets (VDA). The Finance Ministry will now oversee Binance through the Financial Intelligence Unit (FIU), ensuring that the exchange operates within the legal boundaries of the Indian cryptocurrency ecosystem.
Binance, which previously held a significant market share of around 90% of the $4 billion in cryptocurrency holdings among Indian residents, saw a decline in trading volume after the government implemented a 1% TDS on cryptocurrency trading. This led to traders flocking to offshore exchanges, including Binance. However, with the recent announcement of compliance with the FIU, Binance aims to regain its position in the Indian market. The exchange will now start deducting 1% TDS on each cryptocurrency transaction initiated by users through its platform, following in the footsteps of other exchanges like KuCoin.
Binance’s founder and former CEO, Changpeng Zhao (CZ), previously expressed reluctance to expand into India due to the high taxation environment. However, the landscape changed when the FIU issued a show cause notice to Binance and other exchanges for illegal operations in the country. This led to Google and Apple removing these exchanges’ apps from their platforms in India. Despite this setback, the Ministry of Finance clarified that registration and compliance obligations do not require physical operations in India. All entities engaging in virtual asset transactions must adhere to regulatory mandates under the PMLA.
The resurgence of Binance in the Indian cryptocurrency market serves as a cautionary tale for global exchanges operating in different regulatory environments. Compliance with local laws and regulations is crucial for sustaining operations and building trust with regulators and users. Binance’s willingness to pay the penalty and comply with the FIU demonstrates a shift towards a more transparent and compliant approach. As the cryptocurrency market continues to evolve, exchanges must adapt to changing regulatory landscapes to ensure long-term success and stability.
Leave a Reply