Binance cleared to operate in India, subject to a $2.25-million fine and compliance

New Delhi: Binance, the world’s largest cryptocurrency exchange, received a notice on Wednesday from India’s Financial Intelligence Unit (FIU-IND), which fined it $2.25 million ( ₹18.8 crore) for operating without complying with domestic anti-money-laundering regulations before December 2023. This means the exchange has now been cleared to operate in India, provided it pays the fine and complies with regulations.

In its notice, FIU-IND said it imposed the fine “due to Binance’s ongoing provision of services to Indian clients and operations within India, without adhering to its statutory obligations under the Prevention of Money Laundering Act (PMLA), 2002.” The company was issued a notice under Section 13 of the PMLA on 28 December 2023.

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The notice, a copy of which Mint has seen, added, “Specific directions have been issued to Binance to ensure diligent compliance with the obligations outlined in Chapter IV of PMLA.” Entities that represented Binance before FIU-IND included its facilities in the Seychelles, Cayman Islands and Switzerland.

On 10 May, Mint reported that Binance and fellow cryptocurrency exchange Kucoin were set to be cleared to operate in India after being suspended by FIU-IND in December. Vivek Aggarwal, director of FIU-IND, told Mint last month that the exchange was under scrutiny and had made representations to the unit, which is affiliated with the finance ministry.

An email sent to Binance did not elicit an immediate response.

No stranger to controversy

Binance, which has no designated global headquarters, has courted controversy worldwide. In November 2023, its founder and erstwhile chief executive Changpeng Zhao pled guilty to money laundering charges by the US Securities and Exchange Commission. He subsequently stepped down as chief executive and agreed to a $4.3-billion settlement.

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In November 2019, Binance had announced the acquisition of Indian crypto exchange WazirX. Zhao said at the time, "The acquisition of WazirX shows our commitment and dedication to the Indian people and strengthen the blockchain ecosystem in India.” But in August 2022, Zhao claimed his firm had never finalised a deal to acquire WazirX, days after the homegrown platform was accused of evading oversight by local agencies.

More trouble for Indian crypto?

Binance’s potential return to the Indian market could mean more trouble for homegrown exchanges. India’s cryptocurrency industry has been in the doldrums since 2022, when the union government introduced a 30% tax on crypto earnings and a 1% tax deducted at source (TDS) on every crypto trade. Since then daily average trades on India’s largest exchanges, WazirX and CoinDCX, have cratered by up to 90%.

A senior executive at one of India’s top crypto firms, who did not wish to be named, said, “Given that Binance holds the world’s largest liquid reserves of crypto tokens and the largest variety of token listings, many traders are likely to resume trading on the platform or move to it. This is likely to hurt homegrown exchanges’ growth this year.”

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Other stakeholders said that if Binance complies with the rules, India’s crypto market will benefit from a major player's return.

Aggarwal, however, had said in May that taxes and fines “should not be considered proof of the legitimacy of the cryptocurrency industry”. He said, “Whether cryptocurrencies are legitimate or not should depend on dedicated regulations, which are yet to be taken up by Parliament and policymakers. Adherence to laws is a base requirement of all companies that are registered in India and offer services to Indian consumers. This has nothing to do with legitimising the crypto industry.”