The Enforcement Directorate has asked WazirX to explain why “withdrawal from crypto wallets” is not a FEMA violation.
In the notice Enforcement Directorate (ED) has asked WazirX the largest crypto exchange to explain why’ withdrawal from crypto wallets is not a violation of the Foreign Exchange Management Act (FEMA).
The ED notice questions on cryptocurrencies that unsettle crypto trading and all brouses in India. DE also questions very essence of the underlying digital ledger, blockchain that allow freely transfer of coins from on wallet to another.
ED need an explanation toward the transactions worth 2,790.74 crore which were carried out in violation to the Forex Rules.
WazirX is a platform for clients to transfer cryptocurrencies without proper documentation which makes it away for money laundering. When money crosses borders the law of the border applies and one needs to know that it is not a low-interest loan or dirty money
For example: If a person buy coins from WazirX, it gets stored in her wallet with the exchange. She can move the crypto purchased from WazirX to any other platform within India or abroad to their private wallet which is not linked with any exchange.
They can also transfer to any person who may be located anywhere.
WazirX and other exchanges may be doing the KYC of traders and investors who have accounts with them. If these traders carry out any transactions WazirX would also know the address of the wallet in which that the coins had been received.
This cannot identify the person or the entity owning to other wallet which receives the bitcoins. This is the nature of cryptos.
The exchange has claimed that they do KYC for their investors, but it is not enough to ensure that the digital currency isn’t misused. There have been instances where bitcoins have been instances where they have been used to buy drugs on the dark net as well as for money laundering.
WazirX and a few other exchanges have also received notices from the income tax. The department is trying to figure out the sources of income of the brouses and parts which have escaped tax.
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