India: Coinbase Ventures backed CoinSwitch accused of forex law breaches

Lavina Daryanani
Source: NewsBytes

Five premises of prominent crypto exchange CoinSwitch Kuber were raided by the Enforcement Directorate in India on Thursday. The exchange has allegedly been accused of violating forex laws.

Per Bloomberg,

The Enforcement Directorate searched office facilities and residences of directors and the CEO. The exchange is under suspicion of acquiring shares of over 20 billion rupees ($250 million) in contravention of forex laws, the person said, asking not to be named as the matter isn’t public.

Furthermore, the source revealed that the exchange had also been found non-compliant with certain know-your-customer norms.

Commenting on the same, a spokesperson for the Bengaluru-based exchange said,

“We receive queries from various government agencies… Our approach has always been that of transparency. Crypto is an early stage industry with a lot of potential and we continuously engage with all stakeholders.”

As such, CoinSwitch Kuber is backed by Tiger Global, Sequoia, Paradigm, Ribbit Capital and Coinbase Ventures, and Andreessen Horowitz (A16Z). Notably, the company became India’s second crypto unicorn last year when it raised $260 million in its Series C funding round. The investments had flown into the company back then despite the government being hostile towards cryptocurrencies.

Leaving aside CoinSwitch Kuber, crypto exchange WazirX was in the news at the beginning of August when the anti-money laundering agency raided its director and froze assets.

The crypto landscape in India

Indian regulators continue to be skeptical about digital assets. Earlier this week, the Governor of the Reserve Bank of India emphasized that crypto can create financial instability in the nation and can be misused as a tool for money laundering. When markets were in poor shape, Das had also stated that cryptos were “dangerous.”

Quite recently, the government imposed a 30% tax on income earned from the transfer of virtual digital assets or cryptocurrencies. The same had come into effect in April this year and was seen as an extension of the government’s anti-crypto stance by people from the community.

A recent blog post from crypto exchange CoinDCX, however, stated that crypto received as salary does not essentially fall under the 30% tax module. Just as people started relishing the same, CoinCrunch’s Naimish Sanghvi took Twitter to state that it’s best to just comply with the law. He added that promoting a different narrative could get everyone into trouble. Sanghvi further said,

“I know the experts at Coindcx want what is best for everyone. I get that. But by and large everyone in the financial domains knows that when it comes to taxes, assuming the worst scenario or highest taxes is the best option for anyone.”