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WazirX seems to be in trouble since ED had issued the Show Cause Notice to its M/s Zanmai Labs Pvt Ltd. WazirX is indeed India’s leading crypto exchange platform allowing the customers to trade in cryptocurrencies.
Although Nischal Shetty, the director, denied any notice issued, it was surely issued by Foreign Exchange Management for the ongoing money laundering of 2,790.74 crore INR. The news was revealed by the official Twitter handle of the Directorate of Enforcement on June 11, 2021.
Image Source: Twitter
WazirX denied all the accusations of receiving any show-cause notice from ED. Additionally, their Twitter handle said that WazirX is always being providing all the information to the authorities.
Image Source: Twitter
So, does it mean that WazirX P2P is regulated? Was it not involved in money laundering? Let’s explore. Firstly, if you aren’t aware of what exactly is WazirX P2P, then let me tell you that it allows the users to directly sell and buy USDT with other sellers and buyers. Here, P2P means ‘People to People’.
Earlier, on May 20, 2021, WazirX made its Paytm account un-operational. Since then, WazirX P2P has become the common mode to sell and buy USDT using Indian National Rupee (INR). Well, it was primarily because the Paytm Payments Bank stopped the cryptocurrency transactions.
WazirX P2P works by matching one person looking to sell the USDT for Fiat with another person looking to buy the USDT in exchange for fiat. In this way, the buyer transfers the money in the seller’s account using UPI, and WazirX provides the USDT to the buyer once the seller confirms the payment. Looks easy, right?
But, recently, it is accused of money laundering worth Rs 2790.74 Crore through illegal online betting applications owned by China. Online gambling or betting is a kind of gambling being conducting on the internet on various applications, including gaming.
It has been found that the Chinese nationals had converted the laundered INR into USDT, and then it was transferred to the Binance wallets.
Notably, Section 3 under Foreign Exchange Management Act provides that a person shall not deal in the foreign exchange. Central Government establishes the Directorate of Enforcement (ED) to hold an investigation against those entities that commit contravention of the FEMA rules.
You can know more about FEMA here https://m.rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=164
WazirX can correctly be labeled as unregulated because it doesn’t even collect the required mandatory documents, which is a violation of FEM guidelines. The platform has transferred cryptos worth Rs 1,400 crore and received cryptos worth Rs 880 crore into and from Binance accounts. The critical point is that these transactions were not available on the blockchain for investigation.