FINANCE MINISTRY’S DECISION TO IMPOSE A FINE ON BINANCE IS A STEP IN RIGHT DIRECTION

In a decision that could set a precedent in the Indian financial sector, the Financial Intelligence Unit (FIU) under the Ministry of Finance has fined global crypto exchange Binance a hefty Rs 18.82 core (approximately $2.2 million) for not adhering to anti-money laundering laws while catering to Indian customers. In January, the websites of nine offshore crypto exchanges including Binance were blocked for not being registered in India and complying with Indian laws. The penalty announced on Thursday paves the way for Binance to resume its operations in India.

Binance had a similar incident in Canada in May when The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) imposed a penalty of $4.4 million for not adhering to Canada’s anti-money laundering (AML) and anti-terrorist financing (ATF) regulations. The penalty was imposed for two violations:
failing to register with FINTRAC as a foreign money services business (MSB) and failing to report large virtual currency transactions of CAD 10,000 or more. Binance already shut its Canada operations in June 2023.

In Nigeria, two Binance executives Tigran Gambaryan and Nadeem Anjarwalla have been charged with money laundering and tax evasion. Both were invited to Nigeria for discussions after the government blocked the website amid an economic crisis. After failed negotiations, they were detained and charged with a slew of financial crimes. Tigran Gambaryan who is compliance chief at Binance is a US citizen and a former US federal agent. Nadeem Anjarwalla is a low professional reportedly with dual citizenships of the UK and Kenya. During a Ramadan prayer, Nadeem Anjarwalla escaped from the Nigerian authorities and has
remained elusive to date despite a red alert issued by Interpol. TigranGambaryan is still in Nigerian custody and has reportedly fallen ill.

The former Binance CEO and cofounder Changpeng Zhao “CZ” is currently serving a 4-month prison sentence in the US for Binance.US violating anti-money laundering laws. With $43 billion of personal fortune, CZ is the richest person in prison in history. In a keenlywatched court proceeding, Binance agreed to pay a staggering $4.3 billion in settlement. Before the US authorities made CZ accept accountability for his platform’s failure to adhere to anti-money laundering and terror financing laws, he was the most powerful
crypto tycoon.

The failure of Binance to follow anti-money laundering laws in different jurisdictions is not deliberate as recurring instances of the failures and penalties would suggest. Crypto exchanges work in an automated manner through software programs. The antimoney laundering and other compliance measures need to be
incorporated into the software system. The success of Binance lies in its ability to help faceless millions send and receive payments in real-time without any fuss. Binance was able to process withdrawals up to $10 billion in 24 hours without anyone human being involved.

Why CZ and other Binance executives remain committed to their product offerings was this success. It was able to make millions of unbanked people work and get paid as a global workforce. It promised the biggest
reform in the banking industry which is still moving at a snail’s pace and falling way short of meeting the challenge of providing a quick and efficient international banking experience in the globalized world.

However, the cryptocurrency story today has more reasons to cheer about. The approval of bitcoin spot ETF in the US has been extremely successful. Several traditional finance companies like BlackRock are offering investment opportunities in bitcoin spot ETF. It is one of the key supports for the rebound of Bitcoin and the overall cryptocurrency market. Bitcoin spot ETFs are available in the US, Canada, Australia, Germany,
Brazil, Bermuda, Jersey, Switzerland, Liechtenstein, and Guernsey.

Thailand is the latest country to join the Bitcoin ETF trend, with Thai regulators approving One Bitcoin ETF Fund of Funds Unhedged early this month. However, currently it’s available only to wealthy and institutional
investors, and not to retail investors. Hong Kong and the UK have also issued similar products as spot bitcoin ETFs. The decision of India’s FIU to impose a penalty on Binance for not adhering to AML laws is the
right decision. It allows Binance to pay the penalty and resume its operations. This time, they should be more careful to avoid being on the wrong side of the law.

The FIU’s decision to impose a hefty fine on Binance sounds similar to US the Department of Justice’s $4.3 billion settlement with Binance. The FIU and the Indian regulators should be more forthcoming when it comes to punishing wrongdoing in the corporate and business world. In this light, the FIU’s decision should be a precedent to follow.