A multi-disciplinary organization, the ED is mandated with enforcing acts such as FEMA, the Prevention of Money Laundering Act (PMLA), and the Fugitive Economic Offenders Act (FEOA), routinely investigating matters or businesses that fall within the ambit of these acts.
Notices have been served to leading crypto exchanges, CoinDCX and CoinSwitch, and certain executives at both firms to understand transactional information and data on how these platforms work.
Based on the statements issued by CoinDCX, all relevant information has been satisfactorily shared with the authorities, and insist that they continue to comply with all statutory requirements applicable in the trading of virtual assets.
As part of a larger investigation after crypto-asset company, ZebPay was reprimanded for violating foreign exchange laws last year, the activities of major crypto exchanges in the country are being scrutinized in an effort to weed out any further violations.
So far, the notices served to seem to be procedural and crypto investors trading on other crypto exchanges do not have any reason to be alarmed.
However, like how Singapore-based crypto lending platform Vauld suspended all withdrawals, trading, and deposits on its platform at the start of this month, Indian crypto exchanges like CoinDCX had also restricted crypto deposits and withdrawals for multiple users citing compliance, risk, and monitoring requirements.
Attributing the restriction to evolving regulatory requirements, the jury is still out on what exactly has prompted the crypto exchange to take such sudden and drastic steps.
A significant reduction in trading volumes could also have contributed to these actions, especially in light of the fact that many leading crypto firms like Celsius Network took similar measures due to extreme market conditions.
While crypto investors in the country are understandably perturbed by these recent developments, it is important to note that many domestic crypto exchanges have a self-regulatory framework in place and have been dealing with matters transparently.
In terms of investor wealth protection, crypto exchanges act as transaction execution platforms and the most secure ones store all customer tokens in a separate custodial wallet.
This provides investors with exclusive title, rights, and ownership to all of their cryptocurrency holdings, adding a degree of safety in case of any malicious attack on these virtual trading platforms.
Additionally, many crypto exchanges have secured themselves against financial damages arising from any cyber fraud, providing their customers with even more security than mandated currently.
An inherently complex technology for the layman, blockchain technology and cryptocurrencies are undoubtedly revolutionizing how token holders and businesses transact with each other.
Crypto is still in the early stages of its development cycle, with a regulatory framework still being decided upon under the Cryptocurrency and Regulation of Official Digital Currency Bill for all crypto-related activities in India.
Despite the pathbreaking innovations brought about by the blockchain and crypto industry, crypto exchanges continue to be in the spotlight as governments worldwide continue to engage and deliberate with them to understand the various nuances at work.
In India, most crypto platforms have already put in place self-regulation frameworks that are meant to check for bad actors and take immediate remedial action to ensure the platform and its investors’ safety.
Crypto investors in India would do well to understand the terms and conditions of the wallet in which their cryptocurrency holdings are maintained.
If the wallet is maintained separate from the platform’s own wallet, there is no cause for concern as the owner of all tokens remains firmly with the wallet owner.
That being said, it is advisable to conduct transactions on crypto exchanges that have an exemplary track record, and which follow high standards of disclosures, and robust KYC mechanisms, and adhere to their code of conduct in case of any mala fide transactions.
