CoinSwitch Is Not Investigated for Money Laundering, Claims CEO  Company not Being Investigated for Money Laundering, CoinSwitch’s CEO Clarifies 

CoinSwitch Kuber’s CEO Ashish Singhal on Saturday provided more details about the searches at his office and residence by India’s financial crime investigating agency the directorate of enforcement (ED), two days ago.

He refuted the recent allegations that his firm has been investigated for certain illicit activities.

CoinSwitch CEO Explains

In a Twitter thread, Singhal explained that the ED’s searches were not linked to any investigation related to the Prevention of Money Laundering Act (PMLA). 

“Enforcement Directorate – Bengaluru has been engaged with us with respect to the functioning of our crypto platforms / exchanges. We are fully cooperating with them… Our engagement with the Enforcement Directorate – Bengaluru was NOT related to any money laundering enquiry under PMLA, as reported in some news articles,” he said on Twitter.  

According to Singhal, the problem is due to a lack of clarity about the status of cryptocurrencies – whether they are a commodity, security, currency, or something else. It’s a new class of asset and yet not clearly classified. The classification, nature, and model of the business determine which laws related to foreign exchange are applicable. 

“India is not alone. Australia is carrying out a “token mapping” to understand this; in the US, there is an ongoing debate whether some crypto is considered commodities, others securities,” Singhal added in his Twitter thread. 

ED Search and Allegations

On Friday, CryptoPotato reported that CoinSwitch, India’s second unicorn in the crypto space, was being investigated by the ED for suspected violation of the Foreign Exchange Maintenance Act (FEMA). In connection with the investigation, the ED conducted searches at five premises linked to CoinSwitch including the residences of its CEO and directors on Thursday. 

A news report by Reuters on Saturday claimed that the ED officials seized some financial documents during the search. They inquired about CoinSwitch’s foreign investments, income, and outflows to verify compliance with applicable rules and laws. The coverage also quoted Singhal saying he declined “to specify the ED’s allegations, citing legal sensitivities.”

Tightening Scrutiny

The ED is said to be investigating at least ten crypto exchanges for suspected violations of FEMA and PMLA. It conducted searches at WazirX and Vaud offices and froze some of their bank accounts in the past few weeks. CoinSwitch is another big brand in the crypto space that ED is investigating. 

Overall, the scrutiny of crypto exchanges by law enforcement agencies is tightening. In April, several such Indian firms had to halt deposits in INR as the instant payment facility through UPI was declined by RBI-controlled NPCI that runs the popular instant inter-bank mobile-based payments and settlements facility. 

This was followed by the government’s decision to levy a hefty 30% capital gains tax and 1% TDS on all crypto transactions from April and July, respectively. The move pushed crypto exchanges to further strengthen their compliance norms.