Indian Crypto Exchanges Facilitated Overseas Transactions Flouting KYC, Money-Laundering Rules: ED

CoinSwitch, CoinDCX, WazirX, and more exchanges are found to have facilitated requests of foreign investors to convert one crypto to another using third-party exchanges.

Indian crypto exchanges are said to be executing hundreds of KYC rule-flouting transactions daily. ( Image Source :Ewan Kennedy/Unsplash )

The Enforcement Directorate (ED) in its latest probe has found that top cryptocurrency exchanges in India have facilitated transactions from countries such as Brazil, Germany, and the US, without complying with know-your-customer (KYC) regulations as well as ant-money laundering (AML) rules, as per a report by Business Standard. The ED investigation also reportedly revealed that popular crypto trading platforms such as CoinSwitch, CoinDCX, and WazirX have facilitated requests of foreign investors to convert one crypto to another using third-party exchanges and earn commissions on them. 

The ED probe has also found that investments from global capital ventures such as Sequoia, Tiger Global, and others — amounting to around $ 1 billion — have not been disclosed in foreign currency-gross provisional return (FC-GPR) filing in multiple cases, which was mandated by the Reserve Bank of India. Not filing FC-GPR is a breach of forex rules, Business Standard reported.

The economic intelligence body also found that without a formal agreement, Indian crypto platforms have been using the wallet infrastructure of foreign crypto exchanges, giving them control over deposits of all users transacting on their platforms. The ED reportedly said that this is “prone to high risk.”

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“These crypto players are allowing anyone in the world without any identification to execute crypto transactions. When enquired, one of the crypto players said it had captured only Internet protocol addresses of users”, a senior ED official was quoted by Business Standard as saying.

The official added that these exchanges were executing “hundreds of such transactions” daily, flouting the RBI’s Foreign Exchange Management Act (FEMA) rules.

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