Just when things were starting to look positive for crypto trading, the government has come down on WazirX. The Enforcement Directorate (ED) has said that it has issued a Show Cause Notice to WazirX cryptocurrency exchange for contravention of FEMA, 1999, for transactions involving cryptocurrencies worth Rs. 2,790.74 crores.
The ED disclosed the information through a Tweet and also issued a press release.
ED has initiated an investigation on the basis of an ongoing money laundering probe into Chinese-owned online betting applications, the agency said in a statement.
It has said that Chinese nationals have laundered proceeds of crimes worth approximately Rs. 57 crore by converting Indian Rupee deposits into cryptocurrency Tether (a stablecoin), and based on instructions received from abroad they transferred them to Binance Wallet, an exchange registered in the Cayman Islands.
ED also said that “WazirX does not collect the requisite documents in clear violation of the basic mandatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines.
The agency further adds, “In the period under investigation, users of WazirX via its pool account, received incoming cryptocurrency worth Rs 880 crores from Binance accounts and transferred out cryptocurrencies worth Rs. 1400 crore to Binance accounts. None of these transactions are available on the blockchain for any audit/ investigation. It was found that the WazirX Clients could transfer ‘valuable’ cryptocurrencies to any person irrespective of its location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering/ other illegitimate activities.”
WazirX is India’s leading cryptocurrency exchanges. The Binance owned subsidiary provides a platform to crypto traders to buy cryptocurrencies on its website and application. The platform also runs a Non-Fungible Token (NFT) marketplace.
India’s stance on Cryptocurrency
As of yet, there are no laws regulating cryptocurrencies in India. The RBI had recently issued a compliance note to banks, asking them not to stop crypto traders and exchanges. However, it had asked banks to comply with the provisions of money laundering and FEMA.
Before that, the government had amended law to ask companies and crypto exchanges to disclose crypto related transactions. There were also reports that the government may establish a new crypto-regulation panel. Yesterday, it was reported that a Cryptocurrency Regulation Bill will soon be tabled in the Parliament.
Even the crypto industry has initiated processes to set up a formal board to create and implement a self-regulatory code of conduct for exchanges. Global crypto exchanges are lining up to enter the Indian market.
Note: This story will be further updated once more details are available.
Update (11th June, 2021, 03:10 p.m.)
WazirX has issued a statement on Twitter. It says that it is yet to receive any show cause notice from the Enforcement Directorate as mentioned in today’s media reports.
It further says that, “WazirX is in compliance with all applicable laws. We go beyond its legal obligations by following KYC and Anti Money Laundering (AML) processes and have always provided information to the law enforcement authorities whenever required. We are able to trace all users on our platform with official identity information. Should we receive a formal communication or notice from the ED, we’ll fully cooperate in the investigation. Please note: your funds are absolutely safe on WazirX.“