After being banned by the Indian government, Binance has agreed to pay a penalty of $2 million in order to re-enter the Indian market. This move comes with the understanding that Binance will now have to comply with existing regulatory frameworks such as the Prevention of Money Laundering Act (PMLA) and the taxation framework for virtual digital assets (VDA). It is clear that Binance’s previous lax adherence to these laws has led to this point where they are now required to operate within legal boundaries.
In the past, Binance held a significant market share of around 90% of the estimated $4 billion in cryptocurrency holdings among Indian residents. However, after the government implemented the 1% TDS on cryptocurrency trading, Indian exchanges saw a drastic 90% decline in trading volume. This prompted traders to turn to offshore exchanges like Binance. This shift in market dynamics highlights the importance of regulatory compliance in maintaining trust and stability within the cryptocurrency ecosystem.
Binance’s founder and former CEO, Changpeng Zhao (CZ), had previously stated that Binance had no plans to expand into India due to the high taxation environment. However, the recent developments show a change in Binance’s approach as they are now willing to comply with regulatory requirements in order to re-enter the market. This shift in strategy indicates a recognition of the importance of operating within legal boundaries and aligning with government regulations.
The consequences of non-compliance with regulatory frameworks were made evident when the FIU issued a show cause notice to nine exchanges, including Binance, for illegally operating in the country. This led to Google and Apple removing these exchanges’ apps from their platforms in India. This move underscores the seriousness with which regulatory bodies are enforcing compliance and the potential repercussions for those who choose to operate outside the legal framework.
The Ministry of Finance has emphasized the importance of compliance with regulatory mandates for all entities engaging in virtual asset transactions. This includes requirements such as reporting and record-keeping under the PMLA. It is clear that regulatory compliance is a crucial aspect of operating within the cryptocurrency ecosystem, and companies like Binance must adhere to these regulations to maintain trust and integrity within the market.