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Currently, the ED is reportedly investigating at least ten digital asset exchanges that are suspected of violating the Foreign Exchange Management Act 1999 (FEMA) and the Prevention of Money Laundering Act 2002 (PMLA).
While the Enforcement Directorate (ED), the Indian national financial-crime agency, is in the process of investigating the violations of the Prevention of Money Laundering Act (PMLA), CoinSwitch Kuber’s CEO Ashish Singhal claims that the investigation and the searches taking place in his office and residence are not related to money laundering investigation. On Saturday, Singhal shared more details on his Twitter page.
Enforcement Directorate – Bengaluru has been engaged with us with respect to functioning of our crypto platforms / exchanges. We are fully cooperating with them.
— Ashish Singhal (@ashish343) August 27, 2022
CoinSwitch is the largest crypto app in India, with millions of users and more than 500 employees. Launched in 2017, the company is backed by such big investors as a16z, Tiger Global, and Sequoia Capital. As of now, the company is valued at as much as $1.9 billion. Its CEO, Ashish Singhal, is a professional with rich background and experience companies including CRUXPay, Reap Benefit, Urban Tailor, Amazon, Microsoft, and more.
According to Ashish Singhal, India is lacking proper regulation of crypto industry, and the first issue that arises is to determine the status of cryptocurrencies, whether they are a commodity, security, currency, or something else. Once the classification, nature, and model of the business is defined, it will be clear which laws related to foreign exchange are applicable.
Notably, earlier this year, CoinSwitch CEO said the same. As we reported at that time, Singhal was calling for more ‘peace and certainty’ in crypto regulation. According to Singhal, it would bring more stability and protection to investors.
ED’s CoinSwitch Investigation
The ED, a law enforcement and economic intelligence agency responsible for fighting economic crime in India, is also mandated with investigation of offence of money laundering and violations of foreign exchange laws. Currently, the ED is reportedly investigating at least ten digital asset exchanges that are suspected of violating the Foreign Exchange Management Act 1999 (FEMA) and the Prevention of Money Laundering Act 2002 (PMLA). Recently, ED conducted searches at the offices of Indian cryptocurrency exchanges WazirX and Vaud. Besides, the agency even froze some of their bank accounts, suspending deposits and withdrawals for their user bases globally. CoinSwitch is reportedly another company under investigation.
According to those familiar with the matter, the accused app-based loan companies allegedly used fintech for receiving payments and for payouts. Then, the profit and the balance were moved out of the country using crypto, adding another layer to the funds.
Notably, the investigation by ED followed India’s decision to introduce a 30% capital gains tax as well 1% TDS on all crypto transactions from April and July, accordingly. As a result of the government’s initiative, crypto exchanges had to further strengthen their compliance norms.