Indian regulator investigates crypto exchange for alleged forex law violations

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Mumbai-based crypto exchange WazirX has been the target of much of India’s regulatory heat as the company continues to attract local investors.

In the last confrontation with the government, the Directorate of Enforcement (ED) sent a notice of justification to WazirX for allegedly violating the Foreign Exchange Management Act regarding transactions valued at 2,790.74 crore. rupees (~ $ 372 million).

According to The Economic Times, the Binance-owned cryptocurrency exchange came to light after the ED questioned its ability to allow users to make cross-border payments without direct government oversight. An ED official pointed out:

These were carried out in violation of forex rules. The WazirXs platform has allowed clients to transfer cryptocurrencies without proper documentation, making it a laundering route.

Seeing a violation of the law of the country, the advice given to WazirX is based on claims that one has to be sure that this money is not cheap money (cheap money is a low loan. interest rate) or dirty money (used for illegal activities).

While WazirX’s decentralized capabilities allow users to transfer cryptocurrencies across international borders, WazirX users from India are required to share Know Your Customer (KYC) documentation like PAN and Aadhaar cards, an equivalent. of the United States social security system. However, the crypto exchange will not be able to track the identity of the recipient’s wallet.

As crypto enthusiasts across the world know, connecting an individual to a recipient’s wallet address is nearly impossible without proper KYC processes. The ED official also said that the exchange claimed to have done KYC, but that is not enough to ensure that digital currency is not misused. In the absence of an official digital currency and regulation, there have been instances where Bitcoins have been used to buy drugs on the dark net as well as for money laundering.

Citing the existing KYC and anti-money laundering processes in place, WazirX told Cointelegraph:

We are able to track all users on our platform with official credentials. We have cooperated with ED in the investigation so far and are preparing a response to the detailed advice we have received on FEMA violations.

According to the exchange spokesperson, WazirX intends to follow up on the ED advice, stating that this is where regulatory clarity will help us a lot.

Related: Indian High Court Asks Crypto Exchanges Disclaimer

Fueling the ongoing witch hunt against the establishment of crypto in India, the Delhi High Court recently sent a notice to major crypto exchanges, including CoinDCX and WazirX, on revising their advertising policies.

The court is seeking to impose new guidelines for crypto ads with a warning that covers 80% of the screen. The petition further wants crypto companies to include a voiceover highlighting the risks associated with crypto investing.

Indian authorities continue to scrutinize local crypto innovations, while not clarifying their official position on the technology. Previously, India’s traditional banking giant ICICI Bank also warned its remittance users not to use the platform for crypto transfers or invest any fiat currencies that may have affiliations with crypto investments. in the past.

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