Key Takeaways
- Binance has been slapped with $2.2 million (INR 18.82 crore) by India’s Financial Intelligence Unit (FIU) for violating AML regulations.
- This punitive measure comes after a series of compliance notices were issued to Binance and eight other offshore cryptocurrency exchanges last year.
Binance, the world’s largest cryptocurrency exchange, has been slapped with a substantial fine of approximately $2.2 million (INR18.82 crore) by India’s Financial Intelligence Unit (FIU) for violating the nation’s anti-money laundering regulations.
The Ongoing Regulatory Crackdown
This punitive measure comes after a series of compliance notices were issued to Binance and eight other offshore cryptocurrency exchanges last year. In January 2024, these entities were removed from India for “operating illegally.”
The FIU’s decision to impose the fine follows a comprehensive hearing where both written and oral submissions were considered, leading to the conclusion that Binance had indeed flouted the country’s stringent anti-money laundering norms.
According to the FIU announcement, “After considering the written and oral submissions of the Binance, Director, FIU-IND, based on the material available on record, found that the charges against Binance were substantiated. Consequently, the Director FIU-IND vide order dated 19th June, 2024 in exercise of powers under Section 13 PMLA, imposed a total penalty of Rs. 18,82,00,000 (Rupees Eighteen Crore Eighty Two Lakh Only) on the Binance.”
Market Re-entry and Failure to Compliance
Binance, along with KuCoin, was granted conditional approval by the FIU to resume operations in India in May, provided they adhere to a set of compliance requirements. The FIU’s announcement emphasized the need for “diligent compliance with the obligations” by Binance, highlighting the importance of regulatory adherence in fostering a safe and transparent digital asset ecosystem.
“Furthermore, specific directions have also been issued to Binance to ensure diligent compliance with the obligations outlined in Chapter IV of the Prevention of Money Laundering Act (PMLA) of 2002, in conjunction with the PMLA Maintenance of Record Rules (PMLA Rules) of 2005 for prevention of money laundering activities and combating the financing of terrorism (AML/CFT),” the statement said.
Industry Reactions and Future Implications
Commenting on the development, Shivam Thakral, CEO of BuyUcoin, remarked, “This significant penalty is a clear indication of the increasing scrutiny and regulation in the digital asset space. It’s essential to stay informed and aware of such developments to navigate this evolving landscape successfully.”
Thakral’s comments reflect a broader sentiment within the industry, where there is a growing recognition of the need for robust regulatory frameworks. He further noted, “The need for compliance is critical for user protection and to conduct business in a fearless environment. Sustained efforts by FIU-IND will lead to a fertile ground for Web3 businesses to grow and enable India to become a $1 trillion digital economy.”
The enforcement action against Binance is seen as a pivotal moment for virtual digital asset service providers (VASPs) in India. Thakral emphasized the necessity for collaboration within the industry to foster a growth-oriented ecosystem.
“VASPs in India must collaborate to create a growth-oriented ecosystem for the digital asset industry. I strongly believe that constructive dialogue between the regulators and industry players will lead to a more mature and pro-consumer digital asset market in India,” he added.
Manhar Garegrat, Country Head India & Global Partnerships, Liminal Custody, said: “The developments we are observing with FIU-IND related to Binance are very organic and are a significant pointer towards India’s progress on regulating the digital assets markets in India. A common regulation for all stakeholders and businesses – local and global – would ensure a level playing field for industry players and would provide equal growth opportunities to all the relevant stakeholders of the industry.”
“Since India is a lucrative market for global brands with a large representation of the young and ambitious demographic along with an increasing set of seasoned investors, it becomes highly critical for regulators to protect the interests of users and consumers in every sector. Alongside the massive growth ETFs are seeing in the global investments space, the digital asset sector continues to grow significantly as well. According to a research report, India is one of the top countries in terms of digital assets ownership. In such a large digital asset market, it is imperative to implement a regulatory framework for the protection of user funds and for providing a friendly environment for businesses,” he added.
Manhar also noted that Liminal have been at the forefront of adapting regulatory policies and acquiring necessary licenses for our operations in APAC & MENA, with a deeper focus on India and the UAE. “Liminal recently became the first digital asset custodian to achieve FIU-IND compliance. Liminal also received final approval from Financial Services Permission (FSP) from the Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority (FSRA). The license grants Liminal the ability to operate as a regulated custodian within the Middle East, a rapidly growing financial hub,” he said.
This fine underscores the Indian government’s commitment to tightening regulatory oversight in the rapidly evolving digital asset space.
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