Binance, the world’s leading cryptocurrency exchange, has partially re-entered the Indian market following the payment of a substantial $2.25 million fine. This marks a significant move towards reestablishing its presence in a market where it once held a dominant position. However, despite this progress, not all of Binance’s services are fully operational in India.
Binance Resumes Operations in India
Binance’s return to India comes after facing significant regulatory hurdles, which culminated in a ban in late 2023. The exchange was fined 188.2 million rupees (approximately $2.25 million) by the Indian Financial Intelligence Unit (FIU) for failing to comply with strict anti-money laundering (AML) regulations. This penalty, the largest ever imposed on a cryptocurrency entity in India, underscores the Indian government’s commitment to enforcing compliance within the crypto sector.
Following the issuance of show-cause notices by the FIU, Binance took steps to align with Indian regulations by registering with the agency in May 2024. This registration was essential for the unblocking of Binance’s website, as Indian law mandates that all Virtual Digital Asset Service Providers (VASPs) must be registered with the FIU and adhere to AML guidelines.
Despite the website’s unblocking and the resumption of key services such as spot and futures trading, some functionalities remain restricted. Notably, the peer-to-peer (P2P) cash transactions, a popular feature among Indian users, are still unavailable.
Binance’s Regulatory Challenges and Market Dominance
Before encountering regulatory challenges, Binance had a significant foothold in the Indian cryptocurrency market, controlling nearly 90% of the estimated $4 billion in crypto holdings among Indian citizens. This dominance was partly due to Binance’s previous avoidance of Indian tax regulations, including the 1% tax deducted at source (TDS) that other registered exchanges were required to impose on transactions. This tax led many Indian users to turn to offshore platforms like Binance, which initially operated outside the scope of Indian financial laws.
The decision to re-enter the Indian market indicates Binance’s intent to comply with local laws, including the Prevention of Money Laundering Act (PMLA) and crypto tax regulations, which it had previously neglected. The unblocking of Binance’s website allows Indian traders to once again access one of the largest and most diverse cryptocurrency platforms in the world. However, the continued restriction of services such as P2P transactions shows that Binance is still in the process of meeting its full regulatory obligations.
Ongoing Regulatory Obstacles for Binance in India
Binance’s operations in India have been fraught with challenges, both from local and global regulatory bodies. The exchange’s activities were halted due to non-compliance with AML regulations, prompting a crackdown by the FIU. This scrutiny was not unique to Binance; other exchanges, such as KuCoin, also faced penalties for similar violations.
In response to these regulatory challenges, Binance had previously suspended cash payments for P2P trades in India as part of its efforts to comply with the country’s regulations. Before the ban, Binance’s failure to adhere to local tax requirements, particularly the TDS, had allowed it to dominate the Indian market. However, this dominance led to significant regulatory backlash, ultimately resulting in Binance’s temporary exit from the country.
The recent fine payment and FIU registration represent a new chapter in Binance’s relationship with Indian regulators. Although the exchange’s website is now accessible, its complete return to the Indian market will depend on its ability to fully comply with all local regulations, including those governing P2P transactions.
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