India’s Enforcement Directorate (ED) has summoned top crypto owners to investigate further whether the platforms are violating forex regulations, a report has confirmed.
an officer told economic times: “The information has been sought from the exchanges and in some cases their officials have also joined the investigation. Documents are being scrutinized and they may be called again if needed.”
Reports reveal exchange chief appears before ED
The report states that crypto exchanges operating in India will have to provide information under the Foreign Exchange Management Act (FEMA), a law that empowers the government and central bank to scrutinize financial transactions received or made from abroad.
As part of the ongoing investigation, sources said CoinDCX chief Sumit Gupta appeared before the government agency earlier this month, as well as officials from CoinSwitch Kuber were summoned.
Two crypto unicorns recently suspended withdrawals, citing large market volatility and KYC requirements.
The Binance-owned Indian exchange WazirX was reportedly investigated on the same grounds in June 2021 for allegedly interpreting transactions worth over $351 million (27.9 billion INR). The same exchange was later pulled over for alleged evasion of over $5 million (400 million INR) in goods and services tax (GST) and paying him $6 million (492 million INR) as taxes and fines. was asked to do.
The official also said: “Transaction history, relationship with foreign exchange, how much money is going out of India – ED is checking every detail on offshore transactions.”
Money laundering concerns haunt the industry
The investigation stemmed from concerns over money laundering and terrorist financing. “Recently, in one case, we have found instances 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 using crypto provides an opaque structure, making it almost difficult to find both the source and the beneficiary,” the official said.
CoinDCX has reported economic times That it will comply with the rules and cooperate with the regulators. CoinSwitch has also said that its approach is “transparency” to government questions.
Happen[In]crypto Spoke to Advocate Rajat Mittal, Tax Counselor of the Supreme Court of India, to understand what might lie ahead for these players. “At this point, the ED has called only top exchanges to participate in investigations related to money laundering and terror funding, if any,” he explained.
“ED is within its jurisdiction to investigate. Legal recourse will be available to these companies if the ED issues any notice of violation of FEMA norms or anti-money laundering laws. Like in the case of WazirX,” Mittal said.
The report comes soon after the new taxation guidelines impacted domestic trading volumes. Mittal also said that, till now no player has come forward to challenge the new guidelines in the court.