India’s Financial Intelligence Unit has imposed a fine of $2.25 million (₹18.8 crore) on Binance, a leading cryptocurrency exchange, for failing to comply with anti-money laundering (AML) regulations. The return of Binance to the Indian market is expected to be challenging, especially following the government’s tax measures, which have resulted in a significant decrease in daily trades on local crypto exchanges. This fine comes amidst global scrutiny of Binance and legal issues involving the former CEO, Changpeng Zhao (CZ).
The fine, which was issued on Wednesday, underscores a serious breach of regulations that occurred prior to December 2023. According to India’s regulatory framework, crypto asset service providers, including cryptocurrency exchanges, are required to register with the Financial Intelligence Unit as reporting entities and adhere to strict AML rules.
The notice, as reported by Mint publication, revealed that Binance’s representatives before the Financial Intelligence Unit included its establishments in the Seychelles, Cayman Islands, and Switzerland. The notice also stated that specific directives have been given to Binance to ensure thorough compliance with the obligations outlined in Chapter IV of the Prevention of Money Laundering Act, 2002.
Binance’s reentry into the Indian crypto market is likely to pose significant challenges for local exchanges. The Indian crypto industry has been grappling with considerable difficulties since 2022, when the government introduced a 30% tax on crypto earnings and a 1% tax deduction at source (TDS) on every trade, resulting in a sharp 90% decline in daily average trades on major exchanges.
Binance has been under global scrutiny, with its former CEO and founder, Changpeng Zhao (CZ), pleading guilty to money laundering charges brought by U.S. authorities in November 2023 and subsequently resigning from his position. This legal development led to Binance agreeing to a substantial $4.3 billion settlement. Zhao is currently serving a four-month prison sentence in the U.S.
Indian Prime Minister Narendra Modi has reappointed Finance Minister Nirmala Sitharaman to serve another term as the country’s finance minister. Sitharaman has consistently stressed the importance of international cooperation in regulating crypto assets, given their inherently cross-border nature and the technological complexities involved. She has maintained a cautious stance on crypto, firmly asserting that they cannot be considered legal tender in India, aligning with the concerns raised by the Reserve Bank of India (RBI), the country’s central bank, about the financial stability risks posed by cryptocurrencies.
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