Ashish Singhal, Co-founder and CEO of India’s top crypto exchange CoinSwitch Kuber said that the company is cooperating with the country’s Enforcement Directorate (ED), whose agents searched its Bengaluru offices last week to understand its user-onboarding processes and business model.
Singhal also went to Twitter to assure investors that the searches were “not about money laundering or PMLA.” In a series of tweets posted on August 27, the CEO explained that what happened was a process geared toward helping the Indian government to develop regulations that would bring clarity around crypto as an asset class. He said cryptocurrencies are still in early stages and “are not yet clearly classified in most parts of the world.”
“Now, the law (in India and elsewhere) is still assessing if crypto is a “commodity,” “security,” “currency,” or something new. This is a work in progress.”
CoinSwitch is valued at $1.9 billion making it the largest crypto-based company in India, boasting more than 18 million registered users. The firm is funded by Coinbase Ventures, Andreesen Horowitz, and Tiger Global.
Singhal also affirmed CoinSwitch’s searches by the government when he spoke to Reuters, confirming his company’s engagement with the Indian ED unit in its Bengaluru tech hub on functionings of the crypto app.
“Our engagement with the Enforcement Directorate – Bengaluru was NOT related to any money laundering inquiry under PMLA, as reported in some news articles,” Singhal said, saying the “Enforcement Directorate – Bengaluru has been engaged with us concerning the functioning of our crypto platforms/exchanges. We are fully cooperating with them.”
The searches are reportedly related to suspected violations of India’s foreign exchange laws. The government agents are seeking to understand the company’s foreign investments, income inflows, and outflows to check whether there was a breach and seized some documents (Reuters).
Singhal declined to discuss the allegations made by the agency, citing legal sensitivities surrounding the matter.
The Enforcement Directorate has yet to respond to a request for comment (Reuters).
India’s Tightening Crypto Regulations
The investigations into the crypto trading platform came at a time when governments worldwide were looking to tighten regulations in the cryptocurrency sector. For example, the Monetary Authority of Singapore (MAS) is tightening rules on cryptocurrency trading by retail investors. The agency cited research that revealed that consumers were increasingly trading in digital assets despite warnings and measures issued by the regulator. They seem “irrationally oblivious” about investing and trading in crypto risks.
Due to this, MAS is considering restricting retail access to cryptocurrencies shortly. Among the new guidelines would be more robust user-onboarding and customer suitability tests and “restricting the use of leverage and credit facilities for crypto trading.”
Iran’s government has put in place new regulatory guidelines for cryptocurrency trading. The regulations specify “all issues related to cryptocurrencies, including how to provide fuel and energy for mining them, and how to grant licenses,” said Trade Minister Seyed Fatemi Amin in an announcement on August 29.
Apart from CoinSwitch Kuber, India’s ED is also investigating WazirX, another top crypto exchange in the country. WazirX assets amounting to $8 million were frozen by the agency in early August, citing possible co-conspiring with instant loan app companies to launder money for criminal groups by converting them into cryptocurrencies on the exchange.
WazirX has denied the allegations. However, the case has already had ripple effects, with Binance, the largest crypto exchange in the world, backing out of its plans to acquire WazirX. The Maharashtra-based crypto trading platform alleged that Binance had completed the acquisition process, while Binance denied the claims.
The Indian government has confirmed that it investigated several shadow banks and their fintech companies for money-laundering allegations. ED is looking into them for possible violations of central bank regulations and exploitative lending practices.