Cryptocurrency exchange Binance has implemented new compliance procedures requiring users in India to submit detailed sender and beneficiary information for all crypto deposits and withdrawals, according to a recent update on the exchange’s website. The new rules came into effect this week.
The changes are part of Binance’s actions to align with the Financial Action Task Force (FATF) Travel Rule, a key global standard for anti-money laundering (AML) and counter-terrorist financing procedures, especially the Foreign Exchange Management Act (FEMA) in India.
Under the revised rules, Binance users must now provide KYC-like details such as full name, geographic region like country, town or city, and PAN details when receiving or sending any amount of cryptocurrency.
These details will have to be provided for beneficiaries when sending crypto assets to users within or outside the exchange. Users will also need to provide details of senders when receiving assets from wallets held within or outside the exchange.
The changes affect all crypto deposits and withdrawals on Binance. Users will encounter pop-up prompts in the Binance interface to enter the necessary information for pending inbound and outbound crypto transactions.
Peer-to-peer virtual digital asset (VDA) transactions, while not being explicitly illegal in India, operate under a gray area akin to much of the cryptocurrency industry. Most mainstream exchanges in India, including CoinSwitch and CoinDCX, don’t offer P2P transactions due to this regulatory ambiguity. Instead, they offer fiat on and off ramps, allowing users to make cryptocurrency trades on the exchange.
Even Coinbase, while relaunching in India this month, said users will be allowed to convert their INR to crypto on the exchange, conduct trading activities, and then withdraw in INR, disallowing sending crypto assets to other exchanges or wallets.
Users typically utilise decentralised exchanges for P2P transactions, as FEMA guidelines require strict reporting and limits for money moving out of the country to avoid money laundering.
Commenting on the development, Aishwary Gupta, global head of business at blockchain network Polygon, said, “This is a good move as it signals that cryptocurrency exchanges are complying with local regulations to ensure continued operations and retention of high-value clients. It also signals that the government might be willing to allow cryptocurrency investments and transactions if they are traceable and follow existing guidelines.”
He added that the reporting requirements are unlikely to have a material impact on Binance’s transactions volumes, as most users have completed their KYC and could have already been traced for any questionable transactions.
Binance had halted operations in India in late 2023 after the finance ministry began to crackdown on foreign cryptocurrency exchanges that had failed to register as a reporting entity with the Financial Intelligence Unit (FIU) and complying with provisions of anti-money laundering laws. It later restarted operating in August 2024 after registering with the FIU.
The development comes at a time of heightened scrutiny of the cryptocurrency industry in India even as the asset class remains unregulated and subject to high taxation.
Last week, the Enforcement Directorate conducted searches at multiple premises linked to five Bengaluru-based platforms in connection with alleged unauthorised cross-border transfer of money via cryptocurrencies.
The ED said that its probe revealed that none of the five entities were designated as authorised entities by the RBI for offering cross-border transfer of payments via VDAs.
Authorities also continue to flag risks in the ecosystem, with the central government officials telling a parliamentary standing committee on finance last month that VDAs are “high risk”, citing rampant money laundering, trafficking, radicalisation and suspicious crypto transactions.
Source: Inc42 - Startups
