WazirX, owned by Binance is under investigation for money laundering in India, with reports emerging that the Foreign Exchange Management Act of 1999 was broken by the India-based exchange, which runs as a separate division of Binance.

Pankaj Chaudhary, the country’s finance minister, told local media that the Indian Directorate of Enforcement is looking into WazirX, owned by Binance to see if it helped facilitate the laundering of 2,790 crore Indian rupees (more than $350 million) through its platform and so committing the crime of money laundering in India.

Investigations indicated that crypto assets worth over $350 million were transferred to unidentified wallets, leading to accusations that the exchange, which runs as a separate division of Binance, breached the terms of the Foreign Exchange Management Act, 1999 (FEMA).

In two incidents involving cryptocurrency, the regulator is looking into WazirX. WazirX allegedly exploited Binance’s walled infrastructure in one of the cases to conduct transactions that weren’t “registered on the blockchains and were thus shrouded in mystery.”

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Chaudhary continued by reiterating the need for international cooperation in cryptocurrency regulation. He stated:

“Any policy framework on cryptocurrency can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.”

In order to continue the investigation, the ED has sent a Show Cause Notice (SCN) to WazirX, requesting that company executives appear before it for additional questioning.

WazirX owned by Binance, money laundering

Regulators in India and WazirX

WazirX was bought by Binance in 2019, but Indian regulators have frequently called the company out for failing to follow rules around foreign exchange and money laundering.

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The ED was looking into WazirX in June 2021 for allegedly helping to facilitate unlawful cross-border transactions totaling $381.93 million or 27.90 billion rupees. The inquiry found that Chinese nationals converted illegal earnings into USDT before passing them through WazirX to launder.

The co-founders of WazirX, Nischal Shetty and Siddharth Menon have occasionally defended the exchange by saying it complied with all legal requirements.

Business Today previously reported that the co-founders had moved to Dubai due to tightening cryptocurrency regulations in India.

India is turning against cryptocurrency

In April 2018, India made its first move to outlaw cryptocurrencies. However, a March 2020 ruling by the Supreme Court overturned the verdict.

In July, the government unleashed a 30% tax on income gains and an additional 1% Tax Deducted at Source (TDS) rate on cryptocurrency which resulted in exchange trading volumes dramatically decreasing.

According to a follow-up poll conducted by WaxirX and Zebpay, 83% of cryptocurrency traders decreased their trading frequency as a result of the onerous tax regulations.

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