FEMA violations: WazirX denies allegations of wrongdoings

BL New Delhi Bureau | | Updated on: Aug 03, 2022

Have taken legal recourse against the proceedings, says crypto exchange

Crypto exchange, WazirX, has denied the allegations of wrongdoings that have been highlighted in a government reply to a Rajya Sabha question on Tuesday.

In a statement, WazirX said that Zanmai Labs Pvt Ltd ( which operates WazirX in India) has taken legal recourse against the proceedings in question. It denies any allegations of wrongdoing, and does not agree with the presentation of facts in the said answer.

On Tuesday, the Minister of State for Finance, Pankaj Chaudhary said in a written reply, to a unstarred question posed by Sushil Modi in Rajya Sabha, that the Directorate of Enforcement is investigating two cases related to cryptocurrency against WazirX under the provisions of Foreign Exchange Management Act, 1999 (FEMA).

The government reply highlighted that in one of the cases, investigation done so far has revealed that Wazirxwas using the walled infrastructure of Cayman Island-based exchange Binance. 

Transactions not recorded

Further, it has been found that all crypto transactions between these 2 exchanges were not even being recorded on the blockchains and were thus cloaked in mystery, the reply added.

Accordingly, a Show Cause Notice (SCN) has been issued under the provisions of FEMA against WaxirX for allowing outward remittance of crypto assets worth ₹2,790 crore to unknown wallets.

Further, in another case, it is noticed that WazirX has allowed the foreign users’ request to convert one crypto into another on its own platform as well as by using transfer from third party exchanges namely FTX, Bianance, etc, the government reply said. 

WazirX has now denied both these allegations made by the government in the reply. The government had also highlighted that currently cryptocurrencies are unregulated in India and the government does not collect any data on such information. 

In all, Modi had asked four questions. He wanted to know whether some crypto exchanges allowed citizens from countries like the US, Germany, Brazil to transact without KYC, AML compliance. Modi also wanted to know from the government the amount received by these crypto exchanges from global capital ventures for which disclosure has not been made.. He also sought to know as to whether any Indian crypto platform used wallet infrastructure of foreign crypto exchange without any agreement.

Published on August 03, 2022
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