By
Anisha Pandey
June 24th, 2024
The world’s largest cryptocurrency exchange, Binance, has been hit with a fine of approximately $2.2 million (18.82 crore INR) by India’s Financial Intelligence Unit (FIU) for failing to adhere to the country’s anti-money laundering (AML) regulations.
The FIU announced on Thursday that Binance did not meet the statutory obligations under the Prevention of Money Laundering Act (PMLA), leading to this significant penalty.
Regulatory Crackdown and Compliance Efforts
In January 2024, Indian authorities issued showcause notices to Binance and other offshore cryptocurrency exchanges, accusing them of operating illegally within the country. This led to the expulsion of these exchanges from the Indian market.
However, in a notable development, Binance, along with KuCoin, received conditional approval from the FIU in May 2024 to resume operations, provided they complied with AML regulations and paid the required fines.
This recent development raises questions about whether Binance has fully adapted to meet India’s stringent regulatory requirements. After reviewing Binance’s submissions, the FIU ordered the exchange to improve its compliance measures, showing the Indian government’s commitment to strict AML enforcement.
Global Regulatory Challenges
This fine in India is part of a wider trend of international cryptocurrency exchanges needing to follow local laws. In Canada, Binance is fighting a $4.4 million fine for not registering as a foreign money services business and failing to report large transactions.
Binance says its Canadian operations were small compared to its global activities. Last year, Binance left the Canadian market, showing its regulatory challenges in different countries. In the U.S., Binance settled for $4.3 billion over anti-money laundering and sanctions violations.
Binance, along with CEO CZ, reached a settlement with the US Department of Justice for a substantial $4.3 billion penalty. This agreement included a $3.4 billion fine from the US Treasury’s Financial Crimes Enforcement Network (FinCEN) and an additional $968 million from the Office of Foreign Assets Control (OFAC).
Impact on the Broader Cryptocurrency Market
Centralized exchanges (CEXs) play a crucial role as fiat on-ramps and off-ramps in the cryptocurrency ecosystem. However, stringent regulatory conditions or non-compliance issues could lead to the exclusion of huge portions of the population from accessing crypto markets.
If regulatory pressures or compliance failures force CEXs to shut down or restrict operations, many individuals who rely on these exchanges to buy or sell cryptocurrencies may face difficulties accessing digital assets. This could hinder financial inclusion efforts, particularly for those without access to decentralized finance (DeFi) alternatives or peer-to-peer (P2P) trading platforms.
As Binance and other exchanges deal with these rules, their capability to adjust and improve how they follow the law will be vital for their worldwide operations.