India’s Financial Intelligence Unit (FIU-India) is set to lift the ban on Binance, the world’s largest cryptocurrency exchange, after completing due diligence, according to a top government official. The ban on another offshore exchange, KuCoin, was lifted in March after the company paid a penalty of Rs 34.5 lakh. Vivek Aggarwal, director of FIU-India and additional secretary in the Department of Revenue, stated that proceedings regarding Binance were ongoing, and the quantum of penalty was yet to be decided.
Aggarwal made these remarks during a workshop conducted by the Bharat Web3 Association (BWA) in New Delhi on May 10. He mentioned that Binance had completed the initial registration process with FIU-India, but discussions regarding the penalty and compliance were still ongoing. The registration of Binance comes shortly after its rival KuCoin signed up in March. Meanwhile, another exchange, OKX, decided to discontinue its services in India from April 30.
In December 2023, FIU-India found that nine offshore exchanges, including Binance and KuCoin, were not registered under its jurisdiction and were not in compliance with the Prevention of Money Laundering Act (PMLA) of 2002. As a result, the government ordered to block the URLs of these exchanges in India in January, and their apps were removed from Apple and Google’s app stores.
Virtual digital asset service providers, whether operating within or outside India, are required to register with FIU-India as a ‘Reporting Entity’ and comply with the stipulated requirements under the PMLA. However, the penalty for non-compliance with these regulations is yet to be determined for Binance.
Last month, Changpeng Zhao, the former CEO of Binance, was sentenced to four months in prison after pleading guilty to violating US laws against money laundering. This development highlighted the regulatory challenges faced by cryptocurrency exchanges worldwide. Zhao’s sentence was much lighter than that of Sam Bankman-Fried, the CEO of FTX exchange, who received a 25-year prison term for stealing $8 billion from customers.
Union Finance Minister Nirmala Sitharaman recently emphasized the risks associated with unregulated crypto, including terror funding and drug financing. During its G20 presidency, India advocated for a global regulatory framework for crypto-assets. G20 countries endorsed the Financial Stability Board’s high-level recommendations and called for the swift implementation of the Crypto-Asset Reporting Framework (CARF) and amendments to the ‘Common Reporting Standard’ (CRS).
CARF facilitates the reporting of tax information on crypto asset transactions in a standardized manner, ensuring transparency and accountability in the crypto market. As a result, crypto transactions by Indians on foreign-domiciled exchanges will be subject to automatic exchange of information protocols under CARF.
On May 10, the price of bitcoin fell sharply amid disappointing US economic data and hawkish remarks from Federal Reserve officials. This decline in bitcoin’s price reflects the ongoing volatility in the cryptocurrency market, influenced by various economic factors and regulatory developments.
