The FIU imposes a fine of ₹18.82 crore on Binance

The Finance Ministry’s Financial Intelligence Unit has fined Binance, the world’s largest cryptocurrency exchange by volume, ₹18.82 crore for allegedly violating the Prevention of Money Laundering Act (PMLA), 2002. India has service providers in the field of virtual digital assets such as crypto exchanges, to be registered with the FIU as a reporting entity and to comply with anti-money laundering regulations.

Binance was among nine offshore crypto exchanges called virtual digital asset service providers that received a notice from the FIU-IND on December 28, 2023 for non-compliance with the PMLA law. Subsequently, in January this year, these entities were banned from operating “illegally” in India without registration with the Intelligence Unit.

Binance and KuCoin were the two of these nine exchanges that eventually registered with the intelligence unit to resume operations.

The Financial Intelligence Unit is part of the Indian Ministry of Finance and serves as the national agency for receiving, processing, analyzing and sharing information on suspicious financial transactions with its foreign counterparts and enforcement agencies. The unit had subsequently asked the ministry of electronics and information technology (MeitY) to block the URLs of virtual digital asset service providers in India. Apple and Google had also removed the applications from their app stores. The ban helped domestic crypto exchanges that complied with FIU guidelines.

Dilip Chenoy, Chairman, Bharat Web3 Association, said: “The obligations are activity based and not dependent on physical presence in India, highlighting the objective to effectively track and trace fraudulent activities.”

The FIU lifted the ban on Seychelles-based crypto exchange KuCoin in March. The exchange resumed operations after paying a smaller fine of Rs 34.5 lakhs in May. It is speculated that four more exchanges will register with the FIU IND.

The fine is imposed for violating a slew of rules under Section 12 of the PMLA Act on due diligence, keeping fair reports and sharing access to information with the Director of FIU.

“Specific directions have been issued to Binance to ensure diligent compliance… for combating the financing of terrorism and preventing money laundering activities,” the financial watchdog’s press release said on June 19.

“This significant penalty is a clear indication of the increasing scrutiny and regulation in the digital asset space,” said Shivam Thakral, CEO of BuyUcoin, India’s second-longest running digital asset exchange. “The need for compliance is critical to protecting users and conducting business in a fearless environment. Continued efforts by FIU-IND will lead to fertile ground for Web3 companies to grow,” said Thakral

Binance was founded in 2017 by Changpeng Zhao. In recent years, Binance has faced regulatory backlash and harsh penalties from countries like Canada and the US due to its ignorance of local licensing.

Till December 2023, India had a total of 31 cryptocurrency exchange entities registered with the FIU.