Binance and KuCoin, two major players in the global cryptocurrency market, have successfully registered with India’s Financial Intelligence Unit (FIU-IND), a major development in the crypto industry of India. This move comes after a period of legal uncertainties and operational bans that affected several offshore exchanges.
Back in Action
KuCoin has set the stage by paying a fine of $41,000, thereby resuming its operations in India. This action makes KuCoin the first cryptocurrency entity to clear its penalties and get back to business under the new regulatory guidelines. On the other hand, Binance is currently in the process of concluding its financial penalties, which are yet to be finalized. Expectations are set around a $2 million fine, as discussions continue to unfold.
Vivek Aggarwal, head of FIU-IND, emphasized the importance of these registrations, stating that they enhance the credibility of the cryptocurrency market within the nation. He mentioned, “The registrations act to safeguard the Indian economy. If any business is ring-fenced from being abused for financial crime, then automatically it has, if not legitimacy, at least a little more credibility to the system.”
Regulatory Milestones and Compliance
The journey to these registrations has been challenging. Binance and KuCoin were among more than nine offshore entities that were initially banned due to allegations of operating illegally. These bans included well-known platforms like Huobi, Kraken, and Gate.io. The lifting of these bans and subsequent approvals signify a change towards a more regulated and recognized operation for cryptocurrency entities in India.
The FIU-IND has been proactive in establishing a framework for compliance. Aggarwal announced the formation of a working group with the crypto industry to review and enhance the guidelines on money laundering laws for virtual digital asset service providers. This move aims to integrate the crypto businesses more seamlessly into the country’s financial system.
The Broader Impact on the Crypto Market
The re-entry of Binance and KuCoin into the Indian market is expected to influence the trading dynamics big time. Previously, the imposition of stiff crypto taxes and a general market downturn had pushed Indian traders towards international exchanges. With regulatory clarifications in place, there is a potential for trading volumes to pivot back to domestic platforms.
Moreover, the Indian government’s active involvement in setting a global standard for crypto policy during its G20 presidency in 2023 highlights its commitment to playing a major role in international crypto regulations. Despite the absence of a finalized national crypto legislation, the efforts to reach a global consensus have been clear.
The path to regulatory clarity has been fraught with challenges. India has maintained a cautious but evolving stance on cryptocurrency. The country’s crypto bill has been on hold since 2021, with no real movement expected until at least mid-2025, according to a senior lawmaker.
In addition to regulatory problems, crypto exchanges face operational challenges. The Reserve Bank of India (RBI) has historically been skeptical of cryptocurrencies, leading to a banking ban in 2018, which was later overturned by the Supreme Court in 2020. This has allowed exchanges to re-establish banking channels and continue their operations.
The registration process for crypto exchanges now demands rigorous compliance with the nation’s anti-money laundering standards. Exchanges are required to appoint a principal compliance officer and maintain detailed records of transactions.
Reflecting on the economic footprint, the cryptocurrency market in India has seen substantial growth, with its valuation expected to skyrocket in the coming years. According to a report by the National Association of Software and Service Companies, the market was valued at $73.8 million in 2021 and is projected to rise to $123.2 million by 2025, eventually reaching $241.1 million by 2030.
Notably, global exchanges like Binance and Kraken have been key players for Indian crypto users, despite the absence of others like Coinbase. The anticipation for future growth is even more optimistic, with projections estimating the market could swell to $343.5 million by 2024 and soar to $467.2 million by 2028, fueled by an impressive compound annual growth rate of 54.11% from 2024 to 2032.
