Indian Enforcement Directorate has summoned the executives of top Indian Crypto Exchanges. They have been asked for information, and in certain cases, their CEOs have joined the investigation, an official told the Economic Times. The documents are being analyzed and might be called again if necessary.
Exchange Chiefs Have Already Had a Date With the ED
According to the report, the Foreign Exchange Management Act (FEMA), a piece of legislation that gives the government and the central bank the authority to look into financial transactions made or received from abroad, will require the cryptocurrency exchanges operating in India to provide information.
As per the sources, executives from CoinSwitch Kuber were also summoned, while CoinDCX CEO Sumit Gupta testified before the government agency earlier this month as part of an ongoing investigation.
The two crypto startups have lately halted withdrawals because of increased market volatility and KYC requirements.
In June 2021, WazirX, an Indian exchange controlled by Binance, was investigated for similar reasons and asked to explain transactions totaling more than $351 million. WazirX was investigated for allegedly evading more than $5 million in GST and had to pay about $6 million in tax and penalties.
The official further stated: “Transaction history, relationship with foreign exchanges, how much money is going out of India – ED is examining every detail on offshore transactions.”
Concerns About Money Laundering Affect the Business
Money laundering & terrorist financing concerns led to the investigation. “Recently, we discovered instances of hawala and Crypto in TBML [trade-based money laundering] in one of the cases. Hawala is an informal transfer technique without actual money moving.” The official said that it is nearly impossible to identify both the source and the beneficiary via this e-hawala channel because it has an opaque structure.
The official also added that “The hawala (route) is operated by the Dawood Ibrahim gang. So, we see the e-hawala network being used by the D-Gang a lot.”
According to a statement made to the Economic Times, CoinDCX would abide by the law and work with authorities. CoinSwitch has indicated that it responds to government inquiries in a “transparent” manner.
Advocate Rajat Mittal, a tax advisor for the Supreme Court of India said, “ED has merely summoned the leading exchanges for engaging in probe relevant to Money Laundering and Terror Funding if any.”
“ED has every right to look into something. These businesses would have legal options if ED told them they had broken FEMA regulations or anti-money-laundering laws. As in the instance of WazirX,” Mittal continued.