Binance Seeks India Return After Compliance Pledge, Penalty Payment

Binance, a cryptocurrency exchange banned by the Indian government in January 2024, is seeking to resume operations in the country. According to a report in The Economic Times (ET), Binance is willing to pay a penalty of around $2 million to demonstrate its commitment to compliance.

Re-entry Strategy: Registration and Regulatory Adherence

The cryptocurrency exchange plans to re-establish its presence as an entity registered with the Financial Intelligence Unit (FIU) of the Indian Ministry of Finance. The FIU plays a crucial role in overseeing trade in virtual digital assets (VDAs). This move signals Binance’s willingness to comply with all relevant regulations, including the Prevention of Money Laundering Act (PMLA) and the VDA taxation framework.

India’s Firm Stance on Regulatory Compliance

Indian officials have consistently emphasized the importance of regulatory compliance for all cryptocurrency exchanges operating within the country.”There is no space for dealings, and no worldwide force to be reckoned with can order exceptional treatment, particularly at the expense of uncovering the country’s monetary framework to weaknesses,” an authority was cited as saying in the ET report.

Previous Non-Compliance and Enforcement Actions

In December 2023, the FIU had issued notices to nine overseas crypto platforms, including Binance, for failing to comply with anti-money laundering (AML) laws. These platforms, including Binance, were not registered as reporting entities with the FIU, leading to show cause notices and website blocking requests sent to the Ministry of Electronics and Information Technology (MeitY).

Shifting Strategy and Ongoing Talks

Following its app store delisting and website blockage, Binance had initiated talks with the Indian government to regain access. While prior reports recommended an eagerness to suffer duties and consequences, Binance had been reluctant to follow PMLA rules completely. The Indian government rejected Binance’s initial proposal for a temporary resumption of operations, insisting on complete adherence to all regulations, including PMLA.

Industry Landscape and Regulatory Alignment

The Indian government extended the PMLA’s scope to include VDA platforms in 2023. This move prompted prominent cryptocurrency exchanges like CoinDCX, WazirX, Coinswitch, and Zebpay to register with the FIU. Similarly, onshore and offshore cryptocurrency platforms must now comply with PMLA regulations by registering with the FIU as reporting entities. This involves implementing know-your-customer (KYC) practices for users, maintaining detailed account records, and establishing clear business communication protocols.

Binance’s renewed efforts to comply with Indian regulations suggest a strategic shift towards re-entering the lucrative Indian market. Whether their penalty payment and commitment to compliance will be enough to appease the Indian government remains to be seen.