WazirX complied with all 377 information requests by law enforcement agencies from April to September 2021, the India-based crypto exchange revealed in its first transparency report released on October 14.
An estimated 339 information requests were from Indian agencies, and all the requests were related to criminal proceedings such as “fraud, kidnapping and narcotics,” the report stated. The company also blocked 14,469 accounts, 10% of which were due to payment disputes or ongoing criminal investigations.
As the Indian government mulls regulations for cryptocurrencies, platforms like WazirX are eager to comply with law enforcement and stay out of trouble. In the process, however, they might end up undermining the high privacy standards commonly associated with crypto transactions.
What the WazirX transparency report reveals
Aside from outlining the nature and quantity of law enforcement requests, the first transparency report also revealed several other initiatives by WazirX, as well as the company’s vision for cryptocurrencies going forward:
- Legal compliance: WazirX received a total of 377 government requests in the six-month period from April to September. 339 of those were from India, and 38 from foreign law enforcement agencies. All requests were related to criminal proceedings, and WazirX complied with all such requests.
- Blacklists: WazirX locked 14,469 accounts in the last six months. 90% of these were because customers requested that their accounts be closed. 10% of the blocks, which is roughly 1,500 accounts, were undertaken by WazirX for “payment disputes or ongoing investigation for LEA [law enforcement agency] cases.”
- Not a fiat replacement: In the report, WazirX also outlined its stance that “crypto is not meant to replace fiat/sovereign currency.” Instead, the company said, it is an asset class with utility on decentralised networks.
- Self-regulation efforts: WazirX is part of Blockchain and Crypto assets Council (BACC), a group focused on self-regulating the crypto industry which also includes Zebpay and CoinDCX among others, the report revealed.
Are cryptocurrencies being used for criminal activity in India?
WazirX has a total base of more than 7 million users, and has recorded a trading volume of US$21.8 billion in 2021 alone, the company recently revealed. Such a large user base also increases the threat of wrongful use. Here are past instances where law enforcement found cryptocurrency being used for crimes:
- Scams: The Hyderabad Police recently arrested a person for allegedly cheating several people to the tune of Rs 3 lakhs online on the pretext of selling cryptocurrencies.
- Money Laundering: India’s Enforcement Directorate claimed to have found in June this year that Chinese nationals had laundered proceeds of crime worth Rs 57 crore by converting the money into the crypto-currency Tether, and then transferring it to Binance, an exchange registered in Cayman Islands.
Cryptocurrency regulation in India: A timeline
With the crypto bill tabled before the Cabinet, India might be in the final stages of regulating cryptocurrencies. Here’s a timeline of everything that has happened so far:
- 2018: The Reserve Bank of India banned regulated entities including banks from providing services to crypto exchanges. It said that cryptocurrencies raise concerns of “consumer protection, market integrity, and money laundering, among others”.
- 2019: A report by the Finance Ministry (drafted in 2017) advocated for a ban on the use of cryptocurrency in India. The report was drafted by an inter-ministerial committee chaired by the secretary of the Department of Economic Affairs Subhash Chandra Garg.
- 2020: The RBI ban was then overturned by the Supreme Court of India which said that the move was “disproportionate”. It led to a surge in sign-ups across various crypto exchanges as they were able to access banking services.
- 2021: Finance Minister Nirmala Sitaraman announced that the crypto bill was tabled before the Cabinet awaiting approval, Mint reported in August. The RBI is also working towards a “phased implementation strategy” for the introduction of central bank-backed digital currency (CBDC), giving regulators necessary powers of oversight and monitoring which cryptocurrencies lack.
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