India's Financial Intelligence Unit (FIU-IND) has imposed a fine of $2.25 million (₹18.8 crore) on Binance, the world's largest cryptocurrency exchange, for failing to comply with anti-money laundering (AML) regulations within the country. This penalty, announced on Wednesday, brings attention to a significant breach of regulations that occurred prior to December 2023. In accordance with India's regulatory framework, crypto asset service providers, including cryptocurrency exchanges, are required to register with the FIU as reporting entities and adhere to strict AML guidelines.
According to a notice obtained by Mint publication, Binance was represented by entities based in the Seychelles, Cayman Islands, and Switzerland during dealings with the FIU-IND. The notice also outlines specific directives for Binance to ensure diligent compliance with the obligations set forth in Chapter IV of the Prevention of Money Laundering Act, 2002.
Binance's return to the Indian crypto market is expected to face significant challenges. The Indian crypto industry has encountered considerable difficulties since 2022 when the government introduced a 30% tax on cryptocurrency earnings and a 1% tax deducted at the source for every trade. These stringent tax measures resulted in a staggering 90% decrease in daily average trades on major exchanges.
Binance has faced scrutiny on a global scale. In November 2023, the exchange's former CEO and founder, Changpeng Zhao (CZ), pleaded guilty to money laundering charges brought by U.S. authorities and subsequently resigned from his position. This legal development concluded with Binance agreeing to a substantial $4.3 billion settlement. Currently, Zhao is serving a four-month prison sentence in the U.S.
Indian Prime Minister Narendra Modi recently appointed Finance Minister Nirmala Sitharaman to serve another term in her position. Sitharaman has consistently stressed the importance of international cooperation in regulating crypto assets, given their cross-border nature and technological complexities. She maintains a cautious stance on cryptocurrencies, firmly asserting that they cannot be considered legal tender in India. This viewpoint aligns with concerns raised by the Reserve Bank of India (RBI), the country's central bank, which has repeatedly expressed apprehensions about the financial stability risks associated with cryptocurrencies.
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