ED says Chinese nationals laundered gambling amount of Rs 57 crore through WazirX.
Leading Indian cryptocurrency exchange WazirX has received a show-cause notice from the Enforcement Directorate (ED) for violating FEMA (1999) for cryptocurrency transactions worth Rs 2,790.74 crore. The enforcement agency shared this in a tweet on Friday. The enforcement agency said in a press release that Chinese citizens used the crypto exchange to launder gambling proceeds worth Rs 57 crore.
WazirX is an Indian cryptocurrency exchange in India that was launched in 2018. Users can visit WazirX to buy and sell bitcoin and other cryptocurrencies in rupees. Although the situation of cryptocurrencies in India has been volatile for some time, there has been a lot of interest in these tokens as an investment option.
Cryptocurrencies have also been used for illegal payments in the past. Including payments made on the infamous Dark Web because it is difficult to track the movement of funds via cryptocurrency. In a tweet posted by the ED, the agency said, “ED has issued a show-cause notice to WazirX Cryptocurrency Exchange for violation of FEMA, 1999 for transactions involving cryptocurrency worth Rs 2790.74 crore.”
Responding to a query from Gadgets 360, WazirX said that it has not yet received the show cause notice. It also denied any non-compliance from the company. “WazirX is in compliance with all applicable laws. We go beyond our legal obligations by following our KYC and Anti Money Laundering (AML) procedures and always provide information to Law Enforcement Officers whenever required.
Official Identity Information With this we are able to trace all the users. If we receive formal communication or notice from ED, we will fully cooperate in the investigation.” WazirX CEO and Founder Nischal Shetty said in an emailed statement. Which he also tweeted. “Funds are safe in WazirX, no need to worry about funds,” he said.
FEMA is the Foreign Exchange Management Act of 1999. which means “to consolidate and amend the law relating to foreign exchange with a view to facilitate external trade and payments and to promote the orderly development and maintenance of the foreign exchange market in India.”
According to the press release issued by ED, a show-cause notice has been sent to its directors M/s Zanmani Labs Pvt Ltd (WazirX). The ED has launched a probe into a money-laundering operation by the Chinese-owned illegal online betting app and alleged that these Chinese nationals purchased the cryptocurrency Tether worth 57 crores through WazirX. The statement further said, “It was found that WazirX users may transfer ‘valuable’ cryptocurrencies to any person, regardless of location and nationality, without proper documentation. This exemption makes it an exemption for money laundering or other illegal activities.” Creates a safe haven for search users.”
Are Bitcoin and Cryptocurrency legal in India?
Earlier this month, the Reserve Bank of India (RBI) asked Indian banks not to refer to the 2018 circular on cryptocurrencies. In 2018, RBI asked banks not to deal in virtual currency. However, in the last year 2020, the Supreme Court quashed this ban. So in June, the RBI issued a new order asking banks to stop using 2018 circular.
However, at that time RBI also asked banks to continue to follow other safeguards. The RBI said that banks, as well as other financial institutions, are yet to complete due diligence procedures in line with the norms governing KYC, Anti-Money Laundering (AML), Combatting Financing of Terrorism (CFT) norms. Including the obligations of entities regulated under the Prevention of Money Laundering Act (PMLA) to ensure compliance with relevant provisions under FEMA for foreign remittances.
In an earlier conversation with Gadgets 360, Faisal Kawoosa, Chief Analyst, TechArt, said, “Cryptocurrencies are a reality. We cannot deny it. It is good to see that India is making an early entry into this. The concern, however, is the ambiguity about its legality. I think we need to have a clear vision about it so that everyone can have the confidence to grow and benefit from it.”
With this latest development, the regulatory situation around cryptocurrencies seems to be a bit unclear as cryptocurrencies can be traded internationally without any difficulty. And this could create complications for companies trying to maintain records within India.