ED issues ‘crypto withdrawals’ Notice Against WazirX; Why it is critical for Indian ecosystem?

ED issues ‘crypto withdrawals’ Notice Against WazirX; Why it is critical for Indian ecosystem?

Indian regulatory watchdog Enforcement Directorate (ED) issued a notice against India’s largest crypto exchange WazirX asking them why withdrawals from the crypto wallet are not a violation of India’s Foreign Exchange Management Act (FEMA), as per a report in ET. The notice from the financial watchdog comes at a crucial juncture in terms of crypto regulatory compliance in India.

The notice asking the validity of crypto withdrawals from one crypto wallet to another could pose a big hurdle for Indian crypto exchanges. Earlier, the crypto exchanges in India were already suffering due to the non-cooperation of banks to offer their services, and the current notice could only elevate the problems of the crypto service providers in the country.

The current ED notice to WazirX comes just a month after the regulatory watchdog had issued another notice to the crypto exchange regarding a money-laundering scandal involving a Chinese betting racket.

Will the Indian crypto ecosystem Face Another regulatory challenge?

The ED notice to WazirX poses a great challenge to the crypto ecosystem as it questions the legality of crypto transfers from one crypto wallet to another. Earlier, during the banking ban, the regulatory watchdog only had issues with the banking withdrawals but the current notice could potentially pose risk to the entire crypto trading ecosystem.

The regulatory dilemma in India has taken several turns this bull season. First, there were rumors of a possible crypto bill listing during the upcoming parliament session, however, that didn’t happen as the crypto bill didn’t find a place in the 17 bills listed for the monsoon session. Later there were reports of imposing an additional 18% tax on the foreign exchanges offering their services to Indian customers

Several countries around the globe are currently working actively to regulate the crypto market comprehensively. Some countries have put crypto under existing finance laws while others are developing new rules. Indians also had great expectations from the government post-Supreme court ruling in March 2020 quashing the banking ban imposed by Indian Central Bank RBI. The ED notice to WazirX could halt the progress of the Indian crypto ecosystem which has thrived despite the uncertainties on regulations.