Binance, Kucoin Get Approval to Operate in India

“So Kucoin and Binance have got registered with FIU India…” India stamps the licenses for the two biggest cryptocurrency exchanges but remains stern on their regulatory framework. 

Previously disregarded by the Indian government, crypto exchanges Binance and Kucoin have been given the green light by the finance ministry's Financial Intelligence Unit (FIU) to operate as virtual asset service providers (VASPs).  

As per The Economic Times, both platforms are now in the green light for providing cryptocurrency services in India. The Director of FIU-IND, Vivek Aggarwal, has confirmed the new regulatory oversight, saying: 

“So Kucoin and Binance have got registered with FIU India… We now have full visibility of transactions that we need, and the STR (suspicious transaction report) submission process will start soon.”  

Aggarwal reaffirmed that FIU monitors trade in virtual digital assets (VDA) and requires offshore entities to nominate a “principal compliance officer who gets registered with FIU, India, and whose address and details are available to FIU for interacting.”

In response to the concerns about individual investors using illegal offshore cryptocurrency platforms and evading taxes, Aggarwal emphasised the need for an inquiry, saying that the investors involved in the illegal platforms would be representing illegality themselves. He explained:  

“If the platform is illegally operating, the investors are also illegally operating. It has to be seen if there is a legitimate transaction that has happened, from where the money has come, whether it is going through a banking channel, and whether it is declared in the tax return of the concerned taxpayer.” 

This comes after news that Binance sought to re-enter India by settling a fine of $2 million (INR 16.71 Crore) and getting registered with the FIU.  

Within the current regulatory framework, domestic and foreign cryptocurrency exchanges operating within India must register as “reporting entities” and follow the terms of the Prevention of Money Laundering Act (PMLA), 2002. Such regulation requires that crypto exchanges stringently apply the know-your-customer (KYC) procedures and keep detailed records of account operation and off-hours client communication.  

Exchanges now must have a principal compliance officer who provides their local contact details to meet the FIU regulations. The director of FIU, Vivek Aggarwal, elaborated that the compliance officer has to be available to FIU, but they are not required to be in India.  

The Road to Approval

The story of regulatory compliance goes back to December last year when the FIU's oversight became effective. The FIU served notices to nine international crypto companies, including Binance and Kucoin, for contravening the Prevention of Money Laundering Act (PMLA) and failing to register as reporting entities with the FIU. They also received a rebuke for not having the proper KYC measures.  

Although it initially exited the market, Binance encouraged discussions with the Indian government to lift the ban. Earlier, it had been reported that Binance was ready to clear all outstanding taxes and penalties but was still not fully compliant with the PMLA standards.  

In January this year, the FIU moved MeitY, demanding a full ban on the websites and apps of these nine crypto exchanges. As a result, most exchanges temporarily suspended services for Indian users and ceased local operations; however, a few, like Binance and Kucoin, chose to pursue compliance.  

Under instructions from the central authorities, several platforms, such as CoinDCX, WazirX, Coinswitch, and Zebpay, have also registered with the Financial Intelligence Unit (FIU).