Enforcement Directorate probing major Indian crypto exchanges. Is your money safe?


A multi-disciplinary organization, the ED is mandated to enforce laws such as FEMA, the Prevention of Money Laundering Act (PMLA), and the Fugitive Economic Offenders Act (FEOA), routinely investigating matters or businesses that fall within the purview of of these laws. .

Notices have been sent to major crypto exchanges, CoinDCX and CoinSwitch, and certain executives from both companies to understand transactional information and data on how these platforms work.

According to the statements issued by CoinDCX, all relevant information has been successfully shared with the authorities and they insist that they continue to comply with all applicable legal requirements in trading virtual assets.

As part of a broader investigation after crypto asset company ZebPay was reprimanded for violating foreign exchange laws last year, the activities of major cryptocurrency exchanges in the country are being scrutinized in an effort to remove any other violation.

Until now, the notices appeared to be procedural and crypto investors trading on other crypto exchanges had no reason to be alarmed.

However, just as Singapore-based crypto lending platform Vauld suspended all withdrawals, transactions, and deposits on its platform earlier this month, Indian crypto exchanges like CoinDCX have also restricted crypto deposits and withdrawals for multiple users citing compliance, risk, and tracking requirements.

Attributing the restriction to evolving regulatory requirements, the jury is still out on what exactly prompted the crypto exchange to take such sudden and drastic action.

A significant reduction in trading volumes could also have contributed to these actions, especially in light of the fact that many leading crypto firms like Celsius Network took similar action due to extreme market conditions.

While crypto investors in the country are understandably perturbed by these recent developments, it is important to note that many national cryptocurrency exchanges have a self-regulatory framework in place and have been dealing with matters transparently.

In terms of investor wealth protection, crypto exchanges act as transaction execution platforms and the safest ones store all customer tokens in a separate custody wallet.

This provides investors with exclusive title, rights, and ownership of all their cryptocurrency holdings, adding a degree of security in the event of any malicious attack on these virtual trading platforms.

Furthermore, many cryptocurrency exchanges have insured themselves against financial damage stemming from any cyber fraud, providing their clients with even more security than is currently required.

An inherently complex technology to the layman, blockchain technology and cryptocurrencies are undoubtedly revolutionizing the way token holders and businesses transact with each other.

Crypto is still in the early stages of its development cycle, with a regulatory framework under the Cryptocurrency and Digital Currency Official Bill Regulation for all cryptocurrency-related activities in India still being decided.

Despite the pioneering innovations brought about by the blockchain and cryptocurrency industry, cryptocurrency exchanges continue to be in the spotlight as governments around the world continue to interact and deliberate with them to understand the various nuances at work.

In India, most crypto platforms have already put in place self-regulatory frameworks aimed at checking for bad actors and taking immediate corrective action to ensure the safety of the platform and its investors.

Crypto investors in India would do well to understand the terms and conditions of the wallet in which their crypto holdings are held.

If the wallet is kept separate from the platform’s own wallet, there is no cause for concern as the owner of all tokens remains firmly with the owner of the wallet.

That said, it is advisable to transact on crypto exchanges that have an exemplary track record and follow high disclosure standards and strong KYC mechanisms, and adhere to their code of conduct in case of bad faith transactions.

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