Indian regulator is investigating crypto exchanges for alleged violations of foreign law

The Mumbai-based crypto exchange WazirX has been the target of most Indian regulations as the company continues to attract local investors.

In its most recent engagement with the government, the Directorate-General of Enforcement (ED) WazirX made a clear statement of alleged violation of the Foreign Exchange Management Act on transactions valued at Rs 2,790.74 billion (~ $ 372 million) .

According to The Economic Times, Binance’s cryptocurrency exchange has come to the fore after the ED questioned its ability to allow users to make cross-border payments without direct oversight. An ED official highlighted:

“This happened in violation of the forex rules. WazirX’s platform allows customers to transfer crypto without proper documentation, making it a money laundering avenue. “

Since WazirX recognized a violation of state law, the communication was based on the statement that “one must ensure that this money is not cheap money (cheap money is low-interest credit money or money is an illegal business use). “

While WazirX’s decentralized capabilities allow users to transfer cryptocurrencies across international borders, WazirX users from India must share Know Your Customer (KYC) documents such as PAN and Aadhaar tokens that conform to the US social security system. However, the cryptocurrency exchange will not be able to track the identity of the recipient’s wallet.

As is known to crypto enthusiasts around the world, without proper KYC processes it is almost impossible to connect a person to the recipient’s wallet address. The ED official also stated that “the exchange has stated that it has implemented KYC, but that is not enough to ensure that the digital currency is not abused. In the absence of any regulation and official digital currency, there have been cases where Bitcoin has been used to buy drugs on the Darknet and launder money. “

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

“We are able to track all users of our platform with officially identifiable information. We have worked with ED on the investigation and are preparing a response to the detailed notification we received regarding FEMA violations. “

According to a stock exchange spokesman, WazirX intends to pursue the announcement of the ED and says: “Here, regulatory clarity will help us a lot”.

Related: High Court of India Calls for Advertising Disclaimer From Crypto Exchanges

To fuel the ongoing witch hunt against the Indian crypto establishment, the Delhi High Court recently notified leading crypto exchanges like CoinDCX and WazirX about a review of their advertising policies.

The court is trying to enact new guidelines for crypto advertising with a disclaimer that covers 80% of the screen. The petition also calls for crypto companies to include a statement highlighting the risks associated with investing in crypto.

Indian authorities continue to scrutinize domestic crypto innovations without clarifying their official stance on the technology. Previously, India’s traditional banking giant, ICICI Bank, had also warned its remittance users not to use the platform to transfer cryptocurrencies or invest in fiat currencies, which may have been relevant for crypto investing in the past.