This move comes from a noncompliance notice issued by the Indian government, which has been cracking down on crypto-related activities within the country. Apple’s App Store in India also removed these apps in December 2023, adding to these exchanges’ regulatory challenges.
Indian government’s noncompliance notice
On December 28, 2023, the Financial Intelligence Unit (FIU) of the Indian Ministry of Finance issued a notice to several cryptocurrency exchanges, including Binance, Huobi, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, Bittrex, and Bitfinex.
The notice pointed out that these exchanges operated illegally in India and required them to register as “reporting entities.” Additionally, the FIU mandated that these exchanges submit financial statements to the income tax department.
One of the key recommendations put forth by the FIU was to block the websites of the aforementioned exchanges due to their failure to comply with the regulatory requirements.
This notice marked a significant step in the Indian government’s efforts to monitor and regulate cryptocurrency transactions within its borders.
Binance’s response and user assurance
Despite removing the Binance app from Google’s Play Store in India, the cryptocurrency exchange has taken steps to reassure its existing users. Binance South Asia addressed the app blockage through a post on X (formerly Twitter), acknowledging the situation and emphasizing the safety of users’ accounts and funds. This move aims to instill confidence in Binance’s user base in the face of regulatory challenges.
Impact of taxation on crypto trading
The Indian government’s tightening grip on cryptocurrency exchanges coincides with the introducing of new tax regulations. In particular, the Indian Finance Bill 2022, approved by parliament in March 2022, introduced a 30% tax on cryptocurrency holdings and transfers. This significant tax burden has had a profound impact on the cryptocurrency trading landscape in India.
Under these new regulations, traders cannot offset losses against profits, and each trading pair is treated as a separate entity for tax calculations. This tax regime has led to a substantial decrease in trading volume on Indian cryptocurrency exchanges, prompting many users to seek alternatives on foreign crypto exchanges to avoid hefty tax liabilities.