• Binance-owned WazirX exchange in India is once again embroiled in a controversy related to Bitcoin transactions that amounted to 2,790.74 crore rupees.
  • The Directorate of Enforcement initiated a probe on India’s largest crypto exchange over cross-border payments that they say is against the “law of the land.”
  • Comments from Nischal Shetty, owner of WazirX are awaited on this matter.

In an altercation with the Indian government, the largest cryptocurrency exchange in India received a show-cause notice yet again from the ED over forex law violation.

The notice seeks an explanation from the crypto exchange on why did they allow transactions across the border, which is a clear breach of the Foreign Exchange Management Act.
According to a statement issued by an ED official to the Economic Times, he says that the transactions made are against the FEMA or forex rules. He added that the WazirX allowed its users to make payments across the border without proper documentation, thus, validating it as money laundering.

The statement further pointed out that the cross-border payments made were violated the law of the land and in such cases, one should be aware that “money isn’t cheap money (cheap money is a low-interest loan) or dirty money (used for illegal activities)”.

Why is WazirX in Trouble?

According to the popular norms, WazirX allows its wallet users to purchase cryptocurrencies on its platform and then transfer them to any other wallet within India or to a wallet held outside the country.

Raising a question on this practice, the ED official says that although WazirX may have done a KYC of its wallet and account holders (involved in trading and investing), it does not guarantee that the cryptocurrencies are not being used any illegal activity.

They allege that as digital currencies are not yet regulated, cryptocurrencies like Bitcoin are being used to trade drugs and for money laundering on the dark web.

The Previous Notice

In June, WazirX received its first show-cause notice by the ED with regards to the FEMA probe on the illegal online betting apps owned by China and the associated money laundering issue.

Source: dnaindia.com

In a press release in June, ED had said that the blockchain did not record crypto transactions of Rs 800-crore (receipt) and Rs, 1400 crore (transfer) respectively, WazirX was one of more than 20 exchanges that have been warned over violations of foreign exchange rules, Reuters reports.

In response, WazirX has said they are working closely with relevant authorities to clarify their position and will cooperate fully once the investigation is complete.

Interestingly, the cryptocurrency market in India has seen exponential growth since November 2017, as Indians have invested almost $40 billion in cryptocurrencies last year.