Binance Set for Indian Comeback with $2 Million Penalty

Binance, once banned by the Indian government, is set to make a comeback after agreeing to pay a hefty penalty of approximately $2 million.

According to a report by ET, the world’s largest cryptocurrency exchange is preparing to re-enter the Indian market under the finance ministry’s oversight of the Financial Intelligence Unit (FIU).

Binance’s India Comeback

The latest development means that Binance will now have to comply with the existing regulatory frameworks, including the Prevention of Money Laundering Act (PMLA) and the taxation framework for virtual digital assets (VDA).

A source close to the matter was reported saying,

“Unfortunate that it took (Binance) more than two years to realize there is no room for negotiations, and (that) no global powerhouse can command special treatment, especially at the cost of exposing the country’s financial system to vulnerabilities.”

Previously criticized for its lax adherence to these laws, Binance now appears determined to operate within the legal boundaries of the Indian cryptocurrency ecosystem.

With the latest move, Binance has followed KuCoin’s footsteps, which recently announced the completion of compliance with the FIU. The Seychelles-headquartered exchange confirmed that it will start deducting 1% TDS on each cryptocurrency transaction that users initiate through its platform.

Binance’s Tryst With India

Binance previously held a significant market share – around 90% – of the estimated $4 billion in cryptocurrency holdings among Indian residents.

After the government authorities implemented the 1% TDS on cryptocurrency trading in July 2022, Indian exchanges recorded a nearly 90% decline in trading volume. Instead, traders flocked to offshore crypto exchanges, including Binance.

Later that year, Binance founder and former CEO, Changpeng Zhao (CZ) said that the exchange had no intentions of expanding into India due to the high taxation environment. However, he acknowledged that Binance’s services remained accessible to Indian residents.

This changed in the later part of 2023 when FIU issued a show cause notice to nine exchanges  – Binance, Huobi, Kraken, Bitstamp, MEXC Global, Bitfinex, Kucoin, Bittrex, Gate.io – for illegally operating in the country. Subsequently, the FIU recommended to the Ministry of Electronics and Information Technology to block access to exchanges’ websites prompting Google and Apple to remove these apps from the Play Store and App Store platforms in India.

The Ministry of Finance has clarified that registration and compliance obligations don’t require physical operations in India. All entities engaging in virtual asset transactions must comply with regulatory mandates, such as reporting and record-keeping under PMLA.