Binance has registered as a “reporting entity” with India’s Financial Intelligence Unit (FIU), allowing the world’s largest cryptocurrency exchange to operate in India after being blocked since January.
The FIU imposed in June a fine of 188.2 million rupees ($2.25 million) on Binance for operating in violation of local anti-money laundering (AML) regulations.
The registration reflects Binance’s compliance with India’s anti-money laundering regulations, enabling the exchange to fully offer its services to Indian users via its website and app.
In a blog post, Binance said it’s committed to adhering to anti-money laundering standards in India and other jurisdictions. Richard Teng, CEO of Binance, highlighted the importance of aligning with Indian regulations to meet the needs of Indian users.
“Recognizing the vitality and potential of the Indian VDA market, this alignment with Indian regulations allows us to tailor our services to the needs of Indian users,” Richard added.
Earlier this year, Binance was among several offshore crypto exchanges banned from operating in India due to non-compliance with local regulations. However, Binance said in April that it plans to resume its services in the Indian market after settling its outstanding tax liabilities.
Interestingly, Indian regulatory bodies levied a tax demand of 722 crore rupees ($86 million) against Binance earlier this month.
Binance’s prior market dominance might have been helped by non-compliance with local tax laws that otherwise would require users to pay a 1% tax deducted at source on transactions.
On August 6, the Directorate General of Goods and Service Tax Intelligence (DGGI) issued a tax demand to Binance under the Goods and Services Tax (GST) laws. According to reports from The Times of India, Binance accrued at least Rs 4,000 crore from transaction fees charged to Indian users. These earnings were reportedly deposited into an account belonging to Nest Services Limited, a Binance affiliate based in Seychelles.
This is the first instance of the Indian government imposing a tax claim on a cryptocurrency exchange. Initial email notices sent to Binance offices in Seychelles, the Cayman Islands, and Switzerland were reportedly ignored, prompting the appointment of local counsel to resolve these tax obligations.
Indian legislation requires all crypto service providers and investors to deduct a 1% tax at the source (TDS) for every transaction, alongside a 30% tax on any profits made from crypto investments. While domestic exchanges like WazirX and CoinDCX have implemented systems to facilitate these tax requirements, many offshore exchanges failed to do so.
Binance initially proposed a $2 million fine to address its non-compliance and reinstate its operations in India. However, the $86 million tax demand involves recovering transaction fees generated from Indian users during its operational period.
Indian authorities are yet to impose similar tax demands on other foreign crypto exchanges, including Huobi, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, Bittrex, and Bitfinex.
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