‘Cloaked in Mystery’: ED Is Probing WazirX for Laundering of Rs 2,790 Crore

A show-cause notice has also been issued against WazirX for allowing outward remittance of crypto assets.

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Minister of State for Finance Pankaj Chaudhary on Tuesday, 2 August, said that the Enforcement Directorate is probing alleged money laundering of Rs 2,790 crore through crypto exchange WazirX.

The ED is investigating two cases related to cryptocurrency against WazirX under the provisions of the Foreign Exchange Management Act, 1999 (FEMA), he said in a written reply to the Rajya Sabha.

"In one of the cases, investigation done so far has revealed that one Indian Crypto-exchange platform, Wazirx, operated by Zanmai Labs Private Limited in India was using the walled infrastructure of Cayman Island based exchange Binance," Chaudhary said.

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

Crypto Is a 'Borderless Sector'

Accordingly, he said, a show-cause notice (SCN) has been issued under the provisions of the Foreign Exchange Management Act (FEMA) against WazirX for allowing outward remittance of crypto assets worth Rs 2,790 crore to unknown wallets.

Further, in another case, it is noticed that WazirX has allowed foreign users' request to convert one crypto into another on its own platform as well by using transfers from third-party exchanges namely FTX, Binance, etc, he said.

In response to another question, Chaudhary said cryptocurrencies and non-fungible tokens (NFTs) are, by definition, borderless and require international collaboration to prevent regulatory arbitrage.

Therefore, any legislation for regulation or banning the possession of and trade in such a borderless sector can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards, he said.