What is a Show Cause Notice?
A show cause notice is given when disciplinary violations are found against a company. It asks the organization to explain why a certain action was taken in a manner not compliant with the rules and why they should not face criminal charges and penalties.
In this case, the Indian startup WazirX got a show cause notice because the regulatory agency Enforcement Directorate alleged that WazirX allowed the exchange of crypto currencies kept in pool account wallets to be available for other exchanges, which probably could be held by people in foreign places that can’t be traced to pinpoint the destination of such exchanges.
In a reply, WazirX has said that they haven’t received any show cause notice and all the transactions were made in compliance with the laws and regulations of crypto currency exchange. Additionally, WazirX is ready to cooperate with any investigation that may be launched by ED to validate its claim.
According to ED, a show cause notice has been served to Nischal Shetty and Sameer Hanuman Mhatre the directors of WazirX, under the Foreign Management Act, 1999 (FEMA concerning) cryptocurrency exchange and transactions totaling Rs 2,790.74 crore. The investigation, ED declared, was part of an ongoing probe into alleged money laundering activities being carried out on Indian soil. EdD also suspects that Chinese-owned illegal online betting applications are playing a crucial role in this criminal activity.
In a report released by ED, they state that the crypto exchange had not documented these transactions under the regulations of FEMA for remittances in foreign currency, or followed the required KYC procedures and guidelines for the allocation of non-WazirX wallets. Other documentation such as addresses, the purpose of transferring the currency, and the IP addresses of other wallets were not collected as well, it alleged.
“This clearly tells the world that WazirX is in clear violation of the mandatory Anti-Money Laundering and Combating of Financing of Terrorism precaution norms. Also, the FEMA guidelines which are applicable to Virtual Currency exchanges too. Crypto-currencies are like tangible assets and could be used as an instrument of payment to be used for terrorism and other harmful criminal activities.
In September 2019, Chinese global cryptocurrency, Binance acquired WazirX, one of India's largest exchanges. Since then, India's cryptocurrency ecosystem has been corrupted primarily from an unclear regulatory environment, in April 2021, daily trading volumes on WazirX crossed $200 million, catching the attention of everyone including ED.
No comments:
Post a Comment