Crypto exchange Binance is considering re-entering the Indian market after being banned in late 2023. In order to do so, they would need to pay a penalty of approximately $2 million and register with India’s Financial Intelligence Unit (FIU). Binance has expressed its intention to comply with all relevant legislation, including the Prevention of Money Laundering Act (PMLA) and India’s crypto taxation framework. The confirmation of the penalty amount and Binance’s return remains unclear as they have not responded to requests for comment.
The FIU advised the Ministry of Electronics and Information Technology in December to restrict access to the web addresses of nine crypto exchanges, including Binance. The Ministry of Finance clarified that compliance with registration and regulations does not require a physical presence in India and applies to all entities involved in virtual asset transactions. This includes reporting, record-keeping, and other obligations under the PMLA. India has been actively integrating the crypto sector into its established financial system, with regulations introduced last year mandating KYC data collection and FIU registration for crypto companies.
Regulations extend to all Virtual Asset Service Providers (VASPs) with Indian operations, regardless of their location. These entities must register with the FIU as reporting entities and comply with the PMLA. Prime Minister Narendra Modi has also called for global regulations governing cryptocurrencies, highlighting the need for a regulatory framework in the industry. Binance, prior to its ban, held a dominant market share in India, controlling nearly 90% of the $4 billion in cryptocurrency holdings among Indian citizens. Its dominance was attributed to its non-compliance with Indian tax regulations, as it did not impose a 1% tax deducted at source on transactions like registered exchanges did.
The introduction of the 1% TDS on cryptocurrency trading in India resulted in a significant migration of users to offshore exchanges, including Binance. The lack of tax implications on Binance’s platform attracted users seeking to avoid the tax, leading to a shift in user activity. Binance’s potential return to the Indian market comes at a time when the country is actively regulating the crypto sector and integrating it into the financial system. Compliance with FIU registration and the PMLA are key requirements for all VASPs operating in India, demonstrating the government’s commitment to overseeing virtual asset transactions.
