Binance, the world's largest crypto-currency trading platform, is preparing its return to India after being banned in January. The platform will register with the Financial Intelligence Unit (FIU) of the Ministry of Finance. The FIU is responsible for overseeing trade in virtual digital assets (VDAs). Binance will comply with all applicable laws, including the Prevention of Money Laundering Act (PMLA) as well as the tax framework for VDAs, "which it had so far neglected", said a person quoted.
Officials familiar with the matter said India's position has always been clear for all global crypto-currency exchange platforms: comply with all laws to continue operating in India. "It is unfortunate that it has taken Binance more than two years to realise that there is no room for negotiation and that no global power can demand special treatment, especially at the expense of exposing the country's financial system to vulnerabilities," one person added.
However, the official did not confirm the amount of the $2 million fine or the calculations behind it. ET's requests to Binance went unanswered until press time on Wednesday. In January, Binance was among nine offshore crypto-currency platforms banned from operating in India via web addresses and mobile apps. The government's action was in response to the platforms' failure to comply with the FIU and PMLA directives.
Prior to its ban, Binance accounted for nearly 90% of the estimated $4 billion in crypto-currency holdings by Indian nationals. The platform's market dominance is mainly attributed to its non-compliance with tax laws, allowing investors to trade without paying the 1% withholding tax (WHT) applicable on registered exchanges. Manhar Garegrat, head of India at Liminal, a cryptocurrency custody solutions provider, said Binance's return should be seen as a victory, which will bring maturity to the cryptocurrency industry, with global companies investing in India. "However, it must be borne in mind that all exchanges are now on a level playing field, where there is no tax evasion. User acquisition and retention will be a completely different game," he added.
Binance's major acquiescence to now operate as a fully compliant entity marks a significant turning point. "I think the biggest win here is getting an entity like Binance to agree to comply with Indian laws and participate in the country's financial oversight system by reporting to law enforcement agencies," said a senior executive of an Indian crypto-currency exchange.
Binance will be the second offshore exchange to register in India after Seychelles-based Kucoin announced its compliance with the FIU last month, following which the ban on its website was lifted. Kucoin said that by registering, it is "setting a precedent for a more inclusive, secure and regulated cryptocurrency landscape in India".
Market leaders believe Binance's return could shake up market dynamics, as it brings superior technology and greater liquidity than Indian exchanges. It is returning to India at a time when popular currencies such as bitcoin and ethereum are hitting all-time highs.
