A Show Cause Notice has been issued under the provisions of FEMA against WaxirX by the ED for allowing outward remittance of crypto assets worth Rs 2790 crore to unknown wallets.
Finance Minister Nirmala Sitharaman confirmed in the Rajya Sabha on Tuesday that the Enforcement Directorate (ED) is investigating two cases against cryptocurrency platform WazirX under the foreign exchange management act (FEMA) provisions.
Sitharaman told the upper house that in the first case, the investigation done so far has revealed that the crypto-exchange platform, Wazirx, operated by Zanmai Labs Private Limited in India, was using the walled infrastructure of Cayman Island-based exchange BINANCE.
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"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," read the FM's statement.
A Show Cause Notice (SCN) has been issued under the provisions of FEMA against WaxirX for allowing outward remittance of crypto assets worth Rs 2790 crore to unknown wallets.
In another case, WazirX has allowed the foreign users’ request to convert one crypto into another on its own platform as well as by using transfers from third-party exchanges namely FTX, BINANCE, etc.
In a statement, WazirX denied the allegations.
"Zanmai Labs Pvt Ltd has taken legal recourse against the proceedings in question, denies any allegations of wrongdoing, and does not agree with the presentation of facts in the said Answer," it said.
CNBC-TV18 on July 6 reported that crypto exchanges were served notices by ED in cases related to foreign exchange violations.
This comes at a time when the crypto industry is grappling with declining volumes, tax and newly implemented TDS. The purpose of levying TDS on crypto transfers is to capture the details of all transactions related to virtual digital assets.
Cryptos are now taxed on par with gains from speculative activity such as gambling, and lotteries, putting digital assets in the highest tax band.
(Edited by : Abhishek Jha)
First Published: IST