Govt Wants Binance To Follow PMLA Guidelines As It Seeks To Resume India Operations

Days after Apple delisted Binance from its India app store after the finance ministry issued show cause notices to nine virtual digital asset (VDA) service providers for not complying with provisions of anti-money laundering laws, the cryptocurrency exchange platform has been in talks with the government to regain access to its mobile app and website in the country.

While the platform is willing to pay taxes and penalties, it is not yet ready to comply with the Prevention of Money Laundering Act (PMLA) guidelines, ET reported, citing sources close to the matter.

The government has turned down Binance’s request to resume operations in India temporarily, insisting that the platform first implements processes to adhere to the country’s legislation, including PMLA, the report said.

The government is also considering further actions, including a potential ban on the Indian operations of overseas cryptocurrency apps if they are found guilty under PMLA.

Meanwhile, the government is also working with banks to formulate action against traders who are using VPN (virtual private network) to access Binance’s website to circumvent the ban and continue crypto trades illegally.

As per ET data, around 4,000 traders, believed to be top investors, use VPNs for trading on Binance instead of moving assets to compliant Indian exchanges. An estimated $4 Bn of Indian traders’ cryptocurrency is parked in offshore wallets, mainly on Binance. 

Binance is reportedly prepared to pay taxes and penalties incurred as of January 12 when its operations were barred in India. However, the company mentioned the need for time to set up processes to comply with PMLA and financial intelligence unit (FIU) rules, requesting permission to operate in the interim.

However, the government has told the cryptocurrency exchange platform that it could not “make exceptions” of these kinds for any firm. Thus, Binance must show complete compliance with the regulations before any further discussions on these issues.

“We remain committed to the adherence of local regulations and laws and are dedicated to maintaining active communication with regulators to ensure user protection and the development of a healthy Web3 industry. Updates with relevant information will be promptly shared through our official channels,” a Binance spokesperson told ET.

In a significant move last year, the government extended the scope of PMLA to include VDA platforms. Since then, 31 platforms, including prominent names like CoinDCX, WazirX, Coinswitch, and Zebpay, have registered with the Financial Intelligence Unit (FIU).

Both onshore and offshore cryptocurrency platforms must register with the Financial Intelligence Unit (FIU) as ‘reporting entities’ and comply with PMLA, 2002. These regulations require crypto exchanges and VDA platforms to enforce know your customer (KYC) details for users, in addition to maintaining thorough account records and business correspondence with clients.

Last October, Reserve Bank of India (RBI) Governor Shaktikanta Das reiterated the central bank’s unwavering stance on a cryptocurrency ban, emphasising that there has been no change in their position. 

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.