Binance, the world’s largest cryptocurrency exchange, has attracted Indian crypto traders who are using the platform to buy and sell cryptos while settling transactions in Indian Rupees (INR). The exchange offers an ‘escrow service’ that facilitates peer-to-peer trades between local buyers and sellers, with payment options including online fund transfers, services like G-pay, and even physical delivery of cash.
These transactions have garnered the attention of regulators in India, who are concerned about potential violations of exchange control and anti-money laundering rules. However, Binance is technically not breaking any laws as it does not possess a rupee bank account. Instead, it acts as a neutral third-party, providing an escrow facility for the transfer of cryptocurrencies that are not recognized as legal tender.
Binance’s peer-to-peer service allows traders to set timers for closing trades and rate each other based on their experiences. The exchange holds custody of users’ crypto assets during the trading process, releasing them only after the buyer confirms the completion of payment.
It is worth noting that many Indian traders using the Binance site are crypto brokers seeking potential customers. Once a broker establishes contact with a counterparty and obtains their contact information, they can carry out direct transactions.
Binance offers its peer-to-peer service free of charge, aiming to onboard customers with basic KYC formalities. The exchange hopes that some customers will eventually transition to more exotic products where service charges may apply.
In an effort to draw attention to the challenges faced by the local cryptocurrency industry, a video demonstrating a token crypto trade on Binance, accompanied by a payment made in Indian Rupees, was shared with the Reserve Bank of India (RBI). The industry hopes that this demonstration, along with their representation, will prompt the regulator and the government to address the issues posed by trades that circumvent existing rules and regulations.
Overall, the Indian crypto industry has been stifled by high taxes and the absence of banking services due to concerns from the RBI. This has led to a significant decline in user activity at large India-based exchanges. In contrast, global crypto exchanges, including Binance, have experienced increases in user base and transaction volumes within India, despite operating from outside the country.
The sector’s challenges are exacerbated by limited access to modern financial services such as banking and payment rails. The industry has urged the RBI to permit the resumption of UPI/payment services for the virtual digital asset (VDA) sector, emphasizing the importance of accommodating the needs of this rapidly evolving industry.
As the cryptocurrency landscape in India continues to evolve, it remains to be seen how regulators will respond to the growing demand for crypto trading and the innovative solutions offered by international exchanges like Binance. For now, Indian traders are taking advantage of Binance’s platform to conduct peer-to-peer trades in INR, while regulators closely monitor the situation to ensure compliance with existing laws and regulations.
