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Binance Plots Comeback to India with $2M Penalty: Report

The Economic Times reported on Thursday that Binance, a cryptocurrency exchange, is contemplating re-entering the Indian market despite being banned there in late 2023. This potential comeback would involve a penalty of approximately $2 million.

For Binance to resume operations, it would need to register with the Financial Intelligence Unit (FIU) under the finance ministry’s supervision, which oversees virtual asset transactions.

According to a source, Binance aims to comply with all relevant laws, including the Prevention of Money Laundering Act (PMLA) and the crypto taxation framework, which it previously disregarded.

As of the time of press, Binance had not responded request for comment, and the exact amount of the $2 million penalty remained uncertain.

No Physical Presence Needed in India, But Rules Apply to All VASPs

In December, the Financial Intelligence Unit (FIU) advised the Ministry of Electronics and Information Technology to block access to the websites of nine cryptocurrency exchanges, including Binance.

Meanwhile, the Ministry of Finance clarified that registration and compliance obligations do not necessitate a physical presence in India. The regulatory framework applies to all entities engaged in virtual asset transactions, encompassing reporting, record-keeping, and other duties outlined in the Prevention of Money Laundering Act (PMLA).

India has been actively integrating the cryptocurrency sector into its established financial system. Last March, regulations were introduced mandating the collection of Know Your Customer (KYC) data from crypto firms. Concurrently, FIU registration became obligatory for these businesses.

These regulations extend to all Virtual Asset Service Providers (VASPs) operating in India, regardless of their location onshore or offshore. Such entities must register as reporting entities with the FIU and adhere to the PMLA.

Furthermore, in August, Prime Minister Narendra Modi emphasized the necessity for global regulations governing cryptocurrencies.

Binance Dominated India’s Crypto Market

Before its ban, Binance purportedly commanded a significant market share, encompassing nearly 90% of the estimated $4 billion in cryptocurrency holdings among Indian citizens.

This dominance was largely ascribed to its non-compliance with Indian tax regulations. While registered exchanges imposed a 1% tax deducted at source (TDS) on transactions, Binance enabled trading without this tax implication.

The implementation of the 1% TDS on cryptocurrency trading in India evidently prompted a substantial migration of users, with millions redirecting their activities to offshore crypto exchanges, including Binance.

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I want to save money. Will cryptocurrency work?

Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

Every cryptocurrency has two main components: the units of digital exchange called “coins” and the network within which the exchange takes place. These units can be transferred between wallets and exchanged on exchanges. The networks in which these coins exist are called blockchains, which translates to “chains of blocks.”

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