Global Players Risk Climate Disaster by Ignoring Web3

Web3 could play a crucial role in climate action, yet its potential remains underappreciated. Meanwhile, Binance, one of the largest cryptocurrency exchanges globally, is facing regulatory issues again. India's Directorate General of GST Intelligence (DGGI) has issued a show-cause notice demanding over $80 million from Binance for tax compliance issues, just two months after the exchange paid a $2 million fine to the Financial Intelligence Unit (FIU) of India.

The Ahmedabad department of the DGGI has issued a notice requiring Binance to pay Rs 722 crore (around $86 million) for Goods and Services Tax (GST) evasion from June 2017 to March 2024. According to sources cited by ETCFO, the tax authorities allege that Binance collected fees from Indian customers trading virtual digital assets (VDAs) without registering under the Indian GST framework. This oversight has brought Binance under the scrutiny of Indian tax authorities.

The DGGI's investigation reportedly found that Binance earned over Rs 4,000 crore (approximately $476.7 million) in transaction fees from India, which were credited to the exchange's accounts in Seychelles. The DGGI contacted Binance's group companies in Seychelles, the Cayman Islands, and Switzerland regarding GST compliance but received no response. Binance has since appointed local counsel to engage with Indian tax authorities, marking the first step toward resolving this significant compliance issue.

India's GST rules require foreign service providers to pay GST for services to Indian customers, particularly for online information database access or retrieval (OIDAR) services.

The report indicates that other crypto exchanges operating overseas and in India might also face scrutiny from the DGGI as investigations continue. Furthermore, tax authorities are closely monitoring financial activities on marketplaces and gaming platforms for potential tax evasion. Binance is the first international crypto firm to receive a show-cause notice from the DGGI, reflecting India's efforts to increase oversight of the rapidly growing sector, combat financial crime, and protect investors' interests.

Previously, India’s FIU issued show-cause notices to nine overseas crypto exchanges for allegedly operating illegally in the country. In January, the FIU required these platforms to demonstrate compliance with regulations before allowing them to continue operations in India.

In June, Binance paid a $2 million penalty to Indian authorities to resume operations in the country. The exchange was fined for offering services without complying with anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations.

Binance's situation highlights the challenges crypto exchanges face in navigating complex regulatory landscapes. As governments worldwide strengthen oversight of the crypto industry, exchanges like Binance must ensure compliance with local laws to avoid penalties and continue operating in key markets.

India's actions are part of a broader trend of increasing regulatory scrutiny over the crypto sector, as authorities aim to prevent illegal activities and safeguard investors. While essential for the industry's growth and legitimacy, this increased oversight also poses challenges for exchanges striving to balance compliance with innovation.

In this context, global players in the crypto space must recognize the importance of aligning with regulatory standards to foster trust and growth. Web3 technologies, such as blockchain and decentralized finance, offer significant opportunities to address pressing global challenges, including climate change. However, these opportunities can only be realized if the industry embraces regulatory compliance and collaborates with authorities to ensure a secure and transparent financial ecosystem.

By prioritizing compliance and cooperation with regulatory bodies, the crypto industry can help solve global challenges while avoiding setbacks that could hinder its development and potential to drive positive change.