Indian Regulator Demands $86 Million from Binance
According to reports, India’s Directorate General of Goods and Services Tax Intelligence (DGGI) has issued a show-cause notice to Binance, demanding Rs 722 million in goods and services tax (GST), which amounts to around $86.047 million. This move marks the first time the Indian Revenue Service has targeted a major cryptocurrency company, establishing a significant regulatory precedent.
Reasons for the $86 Million Demand
The notice issued by the DGGI pertains to fees charged to Indian customers who engage in trading virtual digital assets (VDA) on the Binance platform. These transactions fall under the category of Online Information Database Access or Retrieval (OIDAR) services. Despite having a significant global presence across 150 countries and a market share exceeding 40%, Binance has yet to register under the Indian GST framework. This oversight places the cryptocurrency giant under increased scrutiny from India’s tax authorities.
Additionally, it was reported that Binance earned a minimum of 4,000 rupees (approximately $476 million) from trading fees charged to Indian customers. Following a thorough investigation, it was revealed that the fee income was funneled into the account of Nest Services Limited, a Binance Group company based in Seychelles.
Regulatory Compliance and Financial Penalties
In response to the situation, Binance has engaged local legal counsel in India to address the tax compliance issue. Earlier this year, the company obtained approval from India’s Financial Intelligence Unit (FIU) to register as a Virtual Asset Service Provider (VASP), but faced a fine of 180,000 rupees (about $2.2 million) for failing to adhere to anti-money laundering (AML) regulations. The FIU emphasized the need for Binance to enhance its compliance measures under the Prevention of Money Laundering Act (PMLA).
Furthermore, the ongoing investigation into Binance aligns with a broader global trend of cryptocurrency exchanges facing heightened regulatory standards. Notably, in Nigeria, Binance was formally accused of tax evasion by the federal government in March 2024, with allegations of evading value-added tax (VAT) and corporate income tax by the Nigerian Federal Inland Revenue Service (FIRS).
Conclusion
Transitioning towards stringent regulatory standards and compliance requirements, cryptocurrency exchanges like Binance are under increasing scrutiny from tax authorities worldwide. The demand for $86 million from Binance by the Indian regulator underscores the importance of regulatory compliance and financial transparency in the evolving landscape of digital asset transactions. As the industry continues to evolve, regulatory oversight and enforcement are crucial elements shaping the future of cryptocurrency exchanges globally.
