ED has sent out notices to cryptocurrency exchanges seeking further information under the Foreign Exchange Management Act (FEMA), they added.
Crypto trading platform CoinDCX’s founder Sumit Gupta joined the federal agency’s probe at its Bengaluru office earlier this month, the sources said.
Executives at other crypto exchanges including crypto trading platform CoinSwitch Kuber were also summoned, and the probe agency sought information about certain transactions, at least two people in know of developments told ET.
Under FEMA, payments made to any person outside India or receipts from them, along with forex deals and foreign security are restricted.
The objective of the Act is to facilitate external trade and payments and for promoting the orderly development and maintenance of the forex market in India
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“Transaction history, relationship with foreign exchanges, how much money is going out of India – ED is examining every detail on offshore transactions,” an official said.
“Information has been sought from the exchanges and in certain cases their executives have also joined the probe. The documents are being examined and if need be, they could be called again,” the official added.
Multiple agencies, including the Income Tax department, are probing crypto firms.
In June last year, ED had asked India’s largest cryptocurrency exchange by volume,
WazirX, to explain transactions worth Rs 2,790.74 crore involving cryptocurrencies that are allegedly in violation of FEMA rules.
ED is among the central agencies, including the Narcotics Control Bureau (NCB) and the I-T department, that have written to the government over the alleged misuse of cryptos, especially in trade-based money laundering (TBML).
“Recently, in one of the cases, we found instances of use of hawala and crypto in TBML. This e-hawala route using crypto offers an opaque structure making it almost difficult to find both the source and the beneficiary,” an official privy to the development said.
“The hawala (route) is operated by the Dawood Ibrahim gang. So, we see the e-hawala network being used by the D-Gang a lot,” the official added.
CoinDCX said it would comply with existing laws and cooperate with regulators.
“As per our understanding, the ED has sent notices to major exchanges in India seeking information and data on how platforms work. As required, we have shared all necessary information to the satisfaction of the department and no subsequent action is pending at our end,” a spokesperson for CoinDCX said.
ET reported on June 23 that CoinDCX, which is backed by Coinbase Ventures, had paused its crypto withdrawal facility – without prior communication to its customers – since May. Around the same time, the exchange also enforced stricter know your customer (KYC) norms.
“We receive queries from various government agencies. Our approach has always been that of transparency. Crypto is an early-stage industry with a lot of potential and we continuously engage with all stakeholders,” said a spokesperson for CoinSwitch Kuber.
A spokesperson for WazirX told ET that the company has moved the Karnataka High Court seeking interim relief.
The High Court had in an order passed last month allowed a stay on the summons, subject to the condition that the company shall provide documents or information as sought within a fortnight.
“…The matter is pending before the Karnataka High Court where the company and its director filed a writ petition, and the court has passed an interim order. We have complied with the order. WazirX is not the only exchange to have received such summons,” the spokesperson said.