New Delhi: WazirX, one of India’s biggest cryptocurrency trading platforms with millions of users, has revealed that it received 431 requests from law enforcement agencies (LEAs), pertaining to transactions totalling $390 million, during the 6-month period between October 2022 and March 2023.
The LEA requests were related to blocking user accounts, “suspected criminal proceedings, investigation”, and information on whether “such accused (users) had dealt in crypto through our (WazirX’s) platform”, the company said in its transparency report, released Tuesday.
Out of the total requests, 46 were from foreign LEAs and 385 from Indian, the report said.
According to WazirX, it had an estimated user base of 10 million users as of 2021.
WazirX said it had received requests from Indian LEAs such as the National Investigation Agency (NIA), Enforcement Directorate (ED), state cyber crime cells, Odisha Vigilance Department, and the Bhopal, West Bengal and Maharashtra police departments.
Foreign LEAs that requested information and action included the Toronto police department, Canada, the police department of Dortmund, Germany, the New York county district attorney, Burlington police, California police department, and the Florida police.
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LEA requests to WazirX on the decline
A November 2022 WazirX transparency report says it received 828 requests for information from LEAs during April to September 2022. In the 6 months before that, WazirX received 1,023 requests.
WazirX said it blocked more than 2,431 accounts based on both the company’s own monitoring process and based on directives from the LEAs.
The crypto platform says it “proactively” reported suspicious transactions to the country’s Financial Intelligence Unit (FIU-IND).
Suspicious transactions may include activity where a user’s trading volume doesn’t match the user’s data about individual ITR/financial status/income available with WazirX; or a transaction flagged as high-risk by third-party forensic tools, or users who do not furnish information or clarification about source of funds or income proof.
The Indian government is yet to take a firm stand on whether to regulate cryptocurrencies.
The Ministry of Finance’s latest Economic Survey, presented to Parliament on 30 January, says crypto assets do not “pass the test of being a financial asset because it has no intrinsic cash flows attached to them”. The topic of cryptocurrencies was absent from Finance Minister Nirmala Sitharaman’s 2023 Budget speech.
At the moment, the only real regulation on cryptocurrencies exists in the form of taxation, where crypto transactions are subject to a tax deducted at source (TDS), and profits from such transitions are subject to a 30 per cent tax.
Concerns that cryptocurrency can be used for illegal activities are further supported by WazirX’s report, which points out that most LEA inquiries about illegal transactions were about fraudulent activities linked to virtual digital assets (VDA). Cryptocurrency is an example of VDAs.
WazirX said, “With our regular coordination with LEAs and further analysis of the received requests, we can detect many nefarious activities in the VDA space. Most of the illegal transactions for which inquiries were sent, were fraudulent activities with VDAs.”
(Edited by Geethalakshmi Ramanathan)
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