The Enforcement Directorate, in its recent notice to WazirX, has asked the agency to explain why ‘withdrawal from crypto wallets’ is not a violation of the Foreign Exchange Management Act(FEMA), according to The Economic Times report.
The notice raises questions on the very essence of crypto and its fundamental structure which allows crypto users to transfer coins from their wallets to any other Wallet. The agency had asked WazirX to explain transactions worth 2,790.74 crores. “These were carried out in violation of forex rules. WazirX’s platform allowed clients to transfer cryptocurrencies without proper documentation, making it a route for laundering,” said an official.
“Since money has crossed borders, the law of the land applies and one needs to be sure that this money isn’t cheap money (cheap money is a low-interest loan) or dirty money (used for illegal activities),” said an ED official.
“The exchange has claimed they have done KYC, but that isn’t enough to ensure that the digital currency isn’t misused. In the absence of any official digital currency and regulation, there have been instances of Bitcoins being used to buy drugs on the darknet as well as for money laundering,” the ED official added.
WazirX and a few exchanges have also received notices from the income tax department which is trying to figure out the source of earnings of the bourses and whether parts have escaped tax.
WazirX CEO and founder Nischal Shetty declined to comment on the matter. The exchange, it is believed, is yet to respond to the ED notice.
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The central agency had served the notice to WazirX in June after it stumbled upon information on crypto withdrawals and receipts in the course of an ongoing investigation into Chinese-owned online illegal betting applications. ED, in a June 11 press release had said the Rs 800-crore crypto inflow and Rs 1400-crore crypto outflow were not available on the blockchain.
