As India still awaits clarity on Crypto regulation, the Indian watchdog ED continues its stringent stance against the Crypto sector.
On August 5, the Enforcement Directorate conducted searches at the premises of Zanmai Labs Private Limited, which owns and operates the crypto exchange platform WazirX. The ED had reportedly frozen bank assets worth Rs 64.67 crores. This investigation is linked to the ongoing investigation against many Chinese loan apps.
The ED said that the accused used instant loan app companies to launder money via the sale and purchase of virtual crypto assets. The agency also found that these loan apps used digital assets to take money out of the country and transfer it to Hong Kong via WazirX.
The Ministry of Finance also announced that it was investigating two cases against WazirX under the Foreign Exchange Management Act (FEMA), with allegations that WazirX used the Binance crypto exchange to disguise transactions.
However, WazirX has claimed it was compliant with the KYC law and had a no-tolerance policy toward any illegal activities.
Earlier this year, the ED also issued a show-cause notice to cryptocurrency exchange WazirX and its directors Nischal Shetty and Sameer Mhatre on June 11 for allegedly violating guidelines in connection with transactions worth Rs 2,790.74 crore.
ED Lens on CoinSwitch
Continuing its money laundering probe, the ED lately searched five premises connected with crypto company CoinSwitch on alleged money laundering charges. The crypto exchange is suspected of acquiring shares worth more than $250 million in infringement of forex laws and non-compliant with certain Know Your Customer (KYC) requirements.
Launched in 2020, CoinSwitch Kuber is one of the largest crypto platform in India, with over 18 million registered users. The platform reached unicorn status last year after raising $260 million in a Series C funding round led by Coinbase Ventures and Andreessen Horowitz. The company is also backed by Sequoia, Paradigm, Ribbit, and Tiger Global.
The ED also scrutinizes multiple possible contraventions under FEMA and other entities connected to CoinSwitch. A company spokesperson told IANS that they received multiple queries from government agencies. “Our approach has always been that of transparency. Crypto is an early stage industry with a lot of potential and we continuously engage with all stakeholders,” the spokesperson mentioned
Over ten crypto exchanges are currently under the ED radar for their alleged involvement in money laundering of over Rs 10 billion.
In another case of the crackdown on crypto exchanges, the agency had seized assets worth Rs 370 crores, including the crypto balances in the Flipvolt crypto exchange. The ED scrutinized various premises of Yellow Tune Technologies Pvt Ltd in Bengaluru and froze assets belonging to Flipvolt crypto exchange, which runs the Darshan Bathija-led Vauld.
Like several other players offering crypto services in India, the company received summon from the ED office in July, “seeking certain information/documents.” Crypto lender Vauld offered services to Indian residents through its domestic entity Flipvolt Technologies.
India’s Crypto Stance
Additionally, Reserve Bank of India governor Shaktikanta Das believes crypto is useless for developing economies like India. This year the government also introduced two new laws imposing crippling taxes on crypto-related unrealized gains and transactions.
In a recent survey conducted with 2042 Indian cryptocurrency investors by crypto exchange KuCoin, 33% of respondents were concerned by ambiguous government regulations that could deter potential investors from crypto.