I recently read in the news that Binance, the world's biggest cryptocurrency exchange, received a tax show-cause notice of nearly $86 million from some Indian tax authority. What really drew my attention was that Binance has decided to challenge the notice. Now, to me, that sounded like a pretty bold move, in fact, I am really waiting to see how this case is going to turn out.
Upon further investigation, I learned that the taxman, DGGI (Directorate General of Goods and Services Tax Intelligence), alleges that Binance has been siphoning off a fee from its Indian customers for trading on its platform but has evaded its share of taxes. This happened from July 2017 to March 2024, which is a very long period. I personally believe that Binance should really come out and make their position known with some supporting evidence.
I appreciate that Binance is open to cooperation regarding the concerns raised with Indian authorities. It is not only the duty of companies, more so from the domain of cryptocurrency, to be transparent, but also to adhere to the concerned domestic legislation. However, on the other hand, I am also very conscious of the fact that the probe ordered by DGGI is independent of the Financial Intelligence Unit, which had already registered Binance as an entity; therefore, somewhere it hints at a lack of coordination between regulatory bodies in India.
Another level of complexity in the issue includes the classification of Binance's services as OIDAR or Online Information and Database Access or Retrieval Services. The OIDAR services are delivered via the internet and received by the recipient online with no physical interface with the supplier. This would largely be so that this overseas service provider or any other comparable overseas service provider does not take undue advantage from the cryptocurrency space. I believe there is a need to consider the subtlety of the cryptocurrency space and the global nature of Binance operations.
This is beside the supposition that Binance would have had more than $476 million in transaction fees, transferred to a Binance Group Company called Nest Services Limited, located in Seychelles. This raises questions about their streams of revenue and tax obligations. Being someone with huge interests in the cryptocurrency space, I believe companies like Binance should be very open with their financial dealings and tax compliance.