Binance recently announced its return to India on the occasion of the country’s 78th independence day — marking a fresh start to crypto adoption in one of the world’s fastest-growing digital economies.
However, the exchange still faces an $86 million tax demand from Indian authorities under the Goods and Services Tax.
Binance’s return to India is the culmination of a complex regulatory process. In December 2023, the Indian Ministry of Finance’s Financial Intelligence Unit (FIU) issued notices to several offshore crypto exchanges, including Binance, KuCoin, Bittrex, Gate.io and OKX, among others, for operating illegally in India.
This also led to the removal of Binance’s app from the Google Play Store and Apple’s App Store in India.
The crux of the issue was the requirement for the exchange to be registered as a “reporting entity” because reports suggest that the firm was not submitting routine statements to the Indian Income Tax Department.
As a result, many users were able to circumvent the nation’s tax laws — such as the 1% tax deduction at source (TDS) levy and the flat 30% tax on all crypto transactions and digital asset transfers — and declare much lower earnings.
Binance showcases a clear willingness to comply.
Binance has reportedly taken several decisive steps to reestablish its presence in India.
For starters, the exchange paid a fine of approximately $2.25 million to the FIU for violating the country’s Anti-Money Laundering (AML) regulations. Furthermore, the exchange has assured authorities it will continue to comply with all of the required tax reporting processes while maintaining rigorous AML and Countering the Financing of Terrorism controls.
Not only that, Binance has also assured lawmakers that it will facilitate the creation of an industry-leading Financial Crimes Compliance unit designed to assist enforcement in investigating agencies in crypto-related crimes and capacity-building so as to fortify the collaborative security aspect of the ecosystem.
Richard Teng, CEO of Binance, recently said, “Our registration with the FIU-IND marks an important milestone in Binance’s journey. Recognizing the vitality and potential of the Indian VDA market, this alignment with Indian regulations allows us to tailor our services for Indian users.”
The return of a major player like Binance is expected to inject new vigor into the market, potentially leading to increased competition, innovation and improved services for Indian crypto enthusiasts.
Experts seem divided on Binance’s return
Saravanan Pandian, CEO of local cryptocurrency exchange KoinBX, sees Binance’s return as “a significant and bullish development that signals growing confidence in the potential of India’s digital asset ecosystem.”
“This move will likely bring increased competition, which can drive innovation, improve user experiences, and potentially lead to more regulatory clarity as global standards and best practices are adopted.”
On a similar note, Shahzad Nathani, head of operations and partnerships for the Indian blockchain platform Shardeum, believes the moment can usher in a new era of collaboration and competition.
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“For Indian crypto firms, the move could present both opportunities and challenges. Collaboration and competition will drive innovation, ultimately benefiting the end-user,” Nathani told Cointelegraph.
Others are not so sure.
Aravind Chandrasekaran, ex-product lead for OnMeta, who is currently building a local lending platform, bitcoinpe.in, sees Binance’s return as both a good and bad thing for the market.
“The good part is that Binance’s return will force Indian players to up their game, especially against such a company with a deep pocket,” Chandrasekaran told Cointelegraph.
“The bad part is that Binance is a hotbed for gray area activities because of their lax rules, especially regarding the prevention of money laundering in India.”
Further complicating matters is the aforementioned $86 million tax demand, which some have suggested makes Binance’s return far from settled.
Moreover, many Binance users still seem to be under the impression that they are now cleared of all their previous tax liabilities, which might not be the case if and when the exchange starts sharing TDS and other transaction data with the government.
Charting a rapidly evolving terrain
Binance’s reentry comes at a time when the Indian government still seems to be in the process of formulating a sustainable, long-term outlook toward the crypto sector.
As highlighted earlier, the implementation of a 30% tax on crypto holdings and transfers, along with a 1% TDS for every crypto trade, has already impacted trading volumes on local exchanges, with platforms like CoinDCX and WazirX witnessing an exodus of 90+% of their users since late 2023.
Looking ahead, Binance’s compliance with Indian regulations could set a precedent for other international exchanges to operate in the country, leading to a more balanced approach to crypto regulation in India.
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Edul Patel, CEO of Indian investing and trading platform Mudrex, said, “Indian investors should always aim to have their assets in the FIU compliant entities as it gives them a way for legal recourse against any fraudulent activity on their account.”
As the situation continues to evolve, all eyes will be on how Binance navigates the regulatory landscape and how its presence shapes the future of crypto in India.