The problem gets bigger for crypto players as top executives are called
India’s Enforcement Directorate (ED) has convened top crypto chiefs to further investigate whether the platforms are violating currency rules, a report has confirmed.
It told an official Economic Times: «Information has been sought from the stock exchanges, and in certain cases their leaders have also joined the investigation. The documents are being examined and, if necessary, can be redialed. “
Report reveals exchange chiefs appeared before ED
The report states that the crypto exchanges operating in India will have to provide information in accordance with the Foreign Exchange Management Act (FEMA), a legislation that authorizes the government and the central bank to investigate financial transactions received from or made abroad.
As part of an ongoing investigation, sources said that CoinDCX chief Sumit Gupta appeared before the public agency earlier this month, with leaders from CoinSwitch Kuber also summoned.
The two crypto unicorns recently suspended withdrawals, citing greater market volatility and KYC requirements.
The Binance-owned Indian stock exchange WazirX was reportedly investigated on the same basis in June 2021, to explain transactions of over $ 351 million (INR 27.9 billion). The same stock exchange was also later uprooted for alleged evasion of over $ 5 million (INR 400 million) in goods and services tax (GST) and was asked to pay around $ 6 million (INR 492 million) in taxes and penalties.
The official also added: “Transaction history, relationship with foreign exchanges, how much money goes out of India – ED examines all details of offshore transactions.”
Money laundering concerns the problem industry
The investigation came about due to concerns about money laundering and terrorist financing. “Recently, in one of the cases, we found cases of use of hawala [an informal method of transferring money without any physical money actually moving] and crypto in TBML [trade-based money laundering]. This e-hawala route that uses crypto offers an opaque structure, making it almost difficult to find both the source and the recipient, the official said.
CoinDCX has told Economic Times that it would comply with the rules and cooperate with regulators. CoinSwitch has also stated that its approach is “transparency” for government inquiries.
Be[In]Crypto spoke with lawyer Rajat Mittal, tax adviser at India’s Supreme Court, to understand what could be next for these players. He explained, “At this time, the ED has convened only the best exchanges to participate in the money laundering and terrorist financing investigation, if any,” he explained.
“ED is well within its right to investigate. Legal appeals will be available to these companies if the ED issues notice of a breach of FEMA standards or anti-money laundering laws. As in the case of WazirX, “Mittal added.
The report comes shortly after the new tax guidelines had a blow to domestic trade volumes. Mittal also said that so far no players have signed up to challenge the new guidelines in court.
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