Binance, a popular cryptocurrency exchange, is considering re-entering the Indian market after being banned in late 2023. The platform may have to pay a penalty of around $2 million to re-enter the market, subject to registration with the Financial Intelligence Unit (FIU) of the finance ministry. Binance intends to comply with all relevant legislation, including the Prevention of Money Laundering Act (PMLA) and the crypto taxation framework, which it had previously neglected.
The FIU recently advised the Ministry of Electronics and Information Technology to restrict access to the web addresses of nine crypto exchanges, including Binance. The Ministry of Finance clarified that registration and compliance requirements do not require a physical presence in India and apply to all entities involved in virtual asset transactions. This includes reporting, record-keeping, and other obligations mandated under the PMLA. India has been actively integrating the crypto sector into its established financial system, requiring Know Your Customer (KYC) data collection and FIU registration for crypto companies.
All Virtual Asset Service Providers (VASPs) with Indian operations, regardless of their location, must register as reporting entities with the FIU and comply with the PMLA. Prime Minister Narendra Modi has advocated for global regulations governing cryptocurrencies to ensure compliance and oversight. Binance, prior to its ban, held a dominant market share in India, accounting for nearly 90% of the estimated $4 billion in cryptocurrency holdings among Indian citizens, due to its non-adherence to tax regulations. Unlike registered exchanges that levied a 1% tax on transactions, Binance facilitated trading without this tax implication.
The introduction of the 1% TDS on cryptocurrency trading in India led to a significant migration of users to offshore exchanges, including Binance. This shift in user activity highlighted the impact of tax regulations on the crypto market and the importance of compliance for both exchanges and users. Binance’s potential re-entry into the Indian market could provide opportunities for users to trade on a familiar platform while ensuring compliance with Indian regulations. The platform’s willingness to adhere to legislation and pay the penalty demonstrates a commitment to operating within the legal framework and contributing to the growth and regulation of the crypto sector in India.
