Why has Binance been fined by the U.S.?

Subject : Economy

Section: Msc

Context:

The U.S. government last week slammed Binance, the world’s largest cryptocurrency exchange, with a $4.3 billion fine after confirming serious protocol failures as it frequently violated U.S. sanctions.
Thereafter, on November 22, Binance’s CEO and one of the crypto industry’s most powerful players, billionaire Changpeng Zhao, announced his resignation. The latest update has shocked thousands of traders worldwide who rely on Binance (legally or illegally) to conduct their crypto trades.

What are FTX and Binance?

FTX and Binance are cryptocurrency exchanges, meaning they enable customers to trade digital currencies for other digital currencies or traditional money, and vice versa. The two exchanges process the majority of all crypto trades in the world.
FTX, one of the world’s largest exchanges, was run by Sam Bankman-Fried and is headquartered in the Bahamas. Binance, the largest exchange, is run by billionaire Changpeng Zhao.
Both companies built their businesses on risky trading options that are not legal in the United States.

Cryptocurrencies Exchange

A cryptocurrency exchange, or a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies.
Exchanges may accept credit card payments, wire transfers or other forms of payment in exchange for digital currencies or cryptocurrencies.
A cryptocurrency exchange can be a market maker that typically takes the bid–ask spreads as a transaction commission for its service or, as a matching platform, simply charges fees.

What is Cryptocurrency?

A cryptocurrency is a medium of exchange, such as the rupee or the US dollar, but is digital in format that uses encryption techniques to both control the creation of monetary units and to verify the exchange of money.
Bitcoin is considered to be the world’s best known cryptocurrency and is the largest in the world according to market capitalisation.
Most cryptocurrencies are not regulated by national governments, they are considered alternative currency or means of financial exchange that are outside the scope of state monetary policy.
However, In September 2021, El Salvador became the first country in the world to introduce Bitcoin as legal tender.

Where does India Stand in terms of Regulating Cryptocurrency?

In 2017, the Reserve Bank of India (RBI) issued a warning that virtual currencies/cryptocurrencies are not a legal tender in India. However, no ban on virtual currencies took place.
In 2019, RBI issued that trading, mining, holding or transferring/use of cryptocurrencies is subject to punishment in India with a financial penalty or/and imprisonment up to 10 years.
RBI also declared that it may launch digital rupee as a legal tender in India in future.
In 2020, the Supreme Court of India removed the ban on cryptocurrencies imposed by RBI.
In 2022, the Government of India clearly mentioned in the Union budget 2022-23 that-the transfer of any virtual currency/cryptocurrency asset will be subject to 30% tax deduction.
Gifts in the form of virtual assets/cryptocurrencies will be taxed in the hands of the receiver.
In July 2022, The Reserve Bank of India (RBI) recommended a ban on cryptocurrencies citing ‘destabilising effects’ for the country’s monetary and fiscal health.