March 25, 2023

Ashish Singhal, the CEO of CoinSwitch Kuber, on Saturday provided more details about a search of his office and residence by India’s financial crime agency, the Enforcement Directorate (ED), two days ago.

He dismissed recent allegations that his company was under investigation for certain illegal activities.

CoinSwitch CEO explained

In a Twitter post, Singhal explained that the ED’s search was not related to any investigations related to the Prevention of Money Laundering Act (PMLA).

“The Bureau of Enforcement – Bangalore has been in contact with us regarding the operation of our crypto platform/exchange. We are fully cooperating with them… As reported in some news articles, our cooperation with the Law Enforcement Agency – Bangalore has nothing to do with any money laundering investigation under PMLA,” he said. Say on Twitter.

According to Singhal, the problem is due to a lack of clarity about the status of cryptocurrencies — whether they are commodities, securities, currencies, or something else. This is a new asset class that has not yet been clearly classified. The classification, nature and mode of business determine which foreign exchange-related laws apply.

“India is not alone. Australia is working on ‘token-mapping’ to find out; in the US it has been debated whether some cryptocurrencies are considered commodities while others are securities,” Singhal said in his Twitter post added in.

ED Search and Charges

on Friday, encrypted potato CoinSwitch, the second unicorn in the Indian cryptocurrency space, is reportedly under investigation by the ED for allegedly violating the Foreign Exchange Maintenance Act (FEMA). In connection with the investigation, the ED conducted searches at five CoinSwitch-related premises on Thursday, including the residences of its CEO and directors.

One piece of news Report Reuters claimed on Saturday that Education Department officials seized some financial documents during the search. They inquired about CoinSwitch’s foreign investments, income and outflows to verify compliance with applicable rules and laws. The report also quoted Singhal as saying he refused to “specify the ED’s allegations, citing legal sensitivity.”

increased scrutiny

The ED is said to be investigating at least 10 cryptocurrency exchanges for alleged violations of FEMA and PMLA. Over the past few weeks, it has conducted searches at the offices of WazirX and Vaud and froze some of their bank accounts. CoinSwitch is another big name in the crypto space that the ED is investigating.

Overall, scrutiny of cryptocurrency exchanges by law enforcement agencies is tightening. In April, several such Indian companies had to stop depositing in Indian rupees after the RBI-controlled NPCI, which operates the popular instant interbank mobile payment and settlement facility, rejected instant payments via UPI.

Subsequently, the government decided to impose a capital gains tax of 30% and a TDS of 1% on all crypto transactions in April and July, respectively. The move pushes the cryptocurrency exchange to further strengthen its compliance norms.

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