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Crypto: WazirX Episode Reveals Crypto’s Dark Side: Government Sources

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Crypto: WazirX Episode Reveals Crypto’s Dark Side: Government Sources
The ED investigation into alleged money laundering by crypto Exchange WazirX and the ensuing feuds between its promoters have exposed the “dark side” of cryptocurrencies, a top government source said Thursday. The source added that people should exercise caution in the absence of regulation governing cryptocurrencies and the so-called exchanges that trade them.

“Caution is the word that should be on the minds of people dealing with crypto. In WazirX episode, people discovered many darker sides, caution is needed in crypto transactions,” said The source.

The Law Enforcement (ED) Directorate investigated money laundering allegations against WazirX.

The agency froze bank deposits worth Rs 64.67 crore as part of an ongoing money laundering investigation against some fraudulent smartphone-based lending apps “backed” by Chinese funds.

A few days after the ED action, a public spat broke out between the CEO of global cryptocurrency platform Changpeng Zhao and the co-founder of WazirX. Nischal Shetty.

Binance’s CEO has distanced himself from the operations of the WazirX exchange, while the Indian entity has said it is considering legal action against Binance.

minister of state for Finance Pankaj Chaudhary had told Parliament that a show cause notice had been issued under the provisions of the Foreign Exchange Management Act (FEMA) against WazirX for allowing the outward transfer of crypto assets worth Rs 2,790 crore to unknown wallets.

Additionally, in another instance, WazirX was noticed to allow foreign users’ request to convert one crypto to another on its own platform as well as using transfers from third-party exchanges, namely FTXBinance, etc., he said.

Government sources said the WazirX episode highlighted many issues and that ED is investigating the matter.

India does not recognize cryptocurrencies, but levies a 30% tax on income derived from these virtual digital assets.

Finance Minister Nirmala Sitharaman has argued for global regulation of cryptocurrencies to combat money laundering and terrorist financing risks.

At the G20 Ministerial Symposium on Tax and Development in Bali, she suggested that the G20 consider the feasibility of integrating non-financial assets like cryptography into the automatic exchange of information between nations to control tax evasion.

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