Indian Government Rejects Binance’s Plea to Resume Operations, Demands PMLA Compliance
Cryptocurrency exchange Binance is in talks with the Indian government to regain access to its mobile app and website in the country after being delisted from Apple’s India app store. Binance is willing to pay taxes and penalties but is currently not willing to comply with the Prevention of Money Laundering Act (PMLA) guidelines.
The government has refused Binance’s request for a temporary resumption and insists on complete compliance with Indian legislation, including PMLA. Additionally, the government is working with banks to take action against traders using virtual private networks (VPNs) to access Binance’s website and curb illegal crypto trades.
Indian Government Steps Up Measures Against VPN Usage To Access Blocked URLs
India’s Financial Intelligence Unit (FIU) has issued compliance Show Cause Notices under the Prevention of Money Laundering Act (PMLA) to several cryptocurrency exchanges. The government is in the process of blocking the URLs of these entities that operate without compliance. However, the URLs are currently functional as the required paperwork is yet to be completed.
About 4,000 traders are allegedly using VPNs to trade on Binance instead of using compliant Indian exchanges. It is estimated that nearly $4 billion worth of cryptocurrency owned by Indian traders is stored in offshore wallets, primarily on Binance.
Binance has expressed its willingness to pay taxes and penalties incurred until January 12 when its operations were initially barred. However, it has requested time to set up processes to comply with PMLA and FIU rules before seeking permission to operate again.
The government has stressed the importance of PMLA compliance and stated that discussions on resuming Binance’s services will only happen after the government is satisfied with their responses to the FIU notices.
To prevent unauthorized operations by foreign cryptocurrency exchanges, the government is working with banks to take action against traders using VPNs to access platforms like Binance and bypass the ban.
Legal Challenges and Potential Workarounds for Binance in India
The government has blocked the websites and apps of nine offshore cryptocurrency platforms, including Binance, for failing to respond to show-cause notices from the FIU. The FIU imposes disclosure requirements on exchanges, which Binance is reportedly reluctant to comply with.
There are suggestions of potential workarounds involving establishing an Indian entity with Binance that signs a Memorandum of Understanding with Binance International. However, such arrangements may face rejection due to the government’s scrutiny.
Binance cannot expect exemptions from India’s FIU requirements and may also face concerns about retrospective taxes imposed by the income tax department. The government has introduced a 1% TDS on virtual digital asset transfers and a 30% capital gains tax on profits earned since specific dates.
Hot Take: Indian Government Holds Firm on Compliance Demands
The Indian government has rejected Binance’s plea to resume operations in the country until it complies with Indian legislation, including the Prevention of Money Laundering Act (PMLA). While Binance is willing to pay taxes and penalties, it currently refuses to comply with PMLA guidelines. The government is also taking action against traders using VPNs to access Binance’s website in an effort to curb illegal crypto trades. This comes after India’s Financial Intelligence Unit (FIU) issued compliance Show Cause Notices to several cryptocurrency exchanges and initiated the process of blocking their URLs. It remains to be seen how Binance will navigate these legal challenges and potential workarounds in order to resume operations in India.
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