- Top crypto exchange in India, Wazirx is reportedly under investigation for money laundering.
- Elsewhere, Kraken has decided to go public through IPO Instead of the previously announced direct listing.
Wazirx, the biggest crypto exchange in India acquired by Binance in 2019 is reportedly under investigation by the Indian financial watchdog, Enforcement Directorate (ED). According to a report, a show-cause notice has been sent to the exchange founder Nischal Shetty, and the director Sameer Mhatre.
Reuters disclosed that the investigation is about a suspicious transaction worth around $382 million. The exchange operators allegedly failed to enforce the laid down rules of obtaining the required documents to conduct the Know-Your-Customer verification (KYC). This, therefore, breaches the foreign exchange regulations. This is part of an investigation into illegal betting apps owned by Chinese nationals. They took advantage of the poorly enforced KYC verification of the site to illegally move money around.
The agency said:
WazirX does not collect requisite documents in clear violation of the basic mandatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines.
According to reports, Chinese nationals usually deposit money into their Wazirx wallet, then convert them to Tether (USDT). The USDT holdings are then transferred to Binance, the biggest exchange in the world. It is worth noting that Binance is also under investigation by the FBI for a case suspected to be money laundering.
No formal notice received yet by WazirX
Shetty has responded to the ongoing reports, claiming he has not received any formal notice from the ED. In addition, he assured the over 2 million registered users of the site that Wazirx is in full compliance with all the AML guidelines and the applicable rules.
We go beyond our legal obligations by following Know Your Customer (KYC) and Anti Money Laundering (AML) processes and have always provided information to law enforcement authorities whenever required.
The ED has also responded that a show-cause notice has been served to the exchange.
ED has issued Show Cause Notice to WazirX Crypto-currency Exchange for contravention of FEMA, 1999 for transactions involving crypto-currencies worth Rs. 2790.74 Crore.
— ED (@dir_ed) June 11, 2021
The outcome of this investigation may have an impact on the crypto regulations yet to be finalized in the country. In 2018, the Indian Central Bank banned banks from processing crypto-related transactions. However, this was squashed by the Supreme court in 2020.
Kraken takes a u-turn, to go for IPO
In other news, Kraken has reverted its decision of going for a direct listing after observing the mixed results of Coinbase shares. The CEO of the exchange Jesse Powell has opted for the traditional Initial Public Offering (IPO). Powell believes that direct listing leads to no institutional backing which leaves the stock price more volatile in the market.
With the traditional IPO, existing shareholders are barred from selling their shares at debut. This means a smaller supply of the shares is sold to ease the pressure. He mentioned that the company may make a market debut in the second half of 2022.
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