Crypto exchanges in India are having a tough time right now due to multiple reasons including the recent tax rule on crypto assets. However, things are looking even more tough now after the Enforcement Directorate (ED) has issued notices to crypto exchanges for Forex violations.
According to the Economic Times with its interaction with an ED official, the latter said:
“Transaction history, relationship with foreign exchanges, how much money is going out of India – ED is examining every detail on offshore transactions.”
The Foreign Exchange Management Act 1999 (FEMA) outlines formalities and procedures for all foreign exchange transactions in India. Its objective is to facilitate external trade and payments and ensure orderly development and maintenance of the Indian forex market. Basically, ED has to ensure compliance with the law and probe violations under the FEMA act.
This renewed attention to FEMA violations came after the Indian Rupee’s continued slide against the U.S. Dollar. INR fell to a record low of 89.40 per dollar in this week, bringing the year-to-date decline to 6%.
Generally, cryptocurrencies offer a free movement of money across political boundaries. This is because cryptocurrencies can bypass traditional banking channels. A lot of such outflows internationally could put pressure on the national currency. Besides this, cryptocurrencies can become a new ground for money laundering and terror funding.
In fact, popular Indian crypto exchange CoinSwitch Kuber confirmed receiving an ED notice:
“We receive queries from various government agencies. Our approach has always been that of transparency. Crypto is an early-stage industry with a lot of potentials and we continuously engage with all stakeholders.”