Indian Enforcement Directorate Investigates Crypto Platforms for Alleged FEMA Violations

The Enforcement Directorate (ED) in India has conducted searches at two cryptocurrency platforms in Bengaluru, CoinDCX and Delta Exchange, as part of an investigation into alleged violations of the Foreign Exchange Management Act (FEMA). The platforms are accused of facilitating offshore trading of cryptocurrency derivatives and tokenized foreign stocks for Indian customers, potentially circumventing cross-border transaction regulations.

According to ED officials, the investigation was prompted by information suggesting large-scale FEMA violations. CoinDCX allegedly routed transactions through a shell entity based in Costa Rica on foreign cryptocurrency exchanges, enabling Indian users to trade in derivatives like futures and options, as well as products linked to foreign company shares. These offerings included trading in tokenized stocks of companies such as Apple, Google, and Tesla, executed through overseas platforms like Binance, KuCoin, Gate.io, and Bybit.

Evidence gathered suggests that funds deposited by Indian customers were converted into stablecoins, primarily USDT, and transferred to overseas exchanges to execute trading orders. The ED claims that these transactions were undertaken by bypassing the established framework for cross-border money transfers. Similar mechanisms were allegedly employed for derivatives trading, allowing CoinDCX to execute trades on foreign platforms while circumventing regulatory oversight.

The ED also found that Delta Exchange India's trades, including spot trading, cryptocurrency futures and options, and tokenized stock trading, were allegedly routed through CoinDCX. The agency estimates the volume of these cross-border transactions to be in the thousands of crores of rupees. Both platforms are accused of maintaining trading accounts on overseas exchanges and holding crypto assets in violation of FEMA, with significant amounts paid in transaction fees to foreign exchanges using stablecoins.