Cooperating with ED on CoinSwitch functioning: CEO Ashish Singhal

Singhal’s statement comes
just days after ED carried out searches at five locations linked to CoinSwitch Kuber in Bengaluru.

The financial crimes investigating agency’s action also comes amid a probe into at least 10 crypto exchanges in the instant micro-loan app case.

“… We have been engaged in constructive dialogues with various stakeholders to help them understand our business models, best compliance practices, thereby bringing more clarity on such matters,” Singhal, also CoinSwitch cofounder, wrote on microblogging platform Twitter.

Lens on Loan Apps

ET reported on July 6 that ED had sent out notices to cryptocurrency exchanges, including CoinSwitch Kuber, seeking further information under the Foreign Exchange Management Act (FEMA).

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ET reported on August 11
that the agency was investigating 10 crypto exchanges for allegedly laundering more than Rs 1,000 crore — identified by the agency as “proceeds of crime” — in the instant loan app case, with most having a link to China.

“Enforcement Directorate – Bengaluru has been engaged with us with respect to functioning of our crypto platforms/exchanges. We are fully cooperating with them,” Singhal wrote. He clarified that the events of the last few days were “not about money laundering or PMLA (Prevention of Money Laundering Act).”

Digital lending through
mobile applications has caused concern because of the unsupervised growth of loan platforms in India. Instant loan apps have faced the heat over growing reports of unethical collection practices, high interest rates and the fraud and data risks surrounding their use.

Nascent Norms

Cryptos do not have a dedicated regulatory framework in the country. This has caused confusion for the nascent industry.

Earlier this year, the government put in place its first set of tax norms on trading and gains from cryptos.

“Crypto is a new asset class,” said Singhal. “Being in the early stages, cryptos are not yet clearly classified in most parts of the world. Now, the law (in India and elsewhere) is still assessing if crypto is a ‘commodity,’ ‘security,’ ‘currency’ or something new. This is a work in progress.”

CoinSwitch Kuber, backed by Silicon Valley-based venture capital firm Andreessen Horowitz and Sequoia Capital India, has over 18 million registered users. According to its website, more than Rs 1 lakh crore of cryptos have been traded on its platform.