India's Enforcement Directorate (ED) 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 probe focuses on allegations that these platforms facilitated offshore trading of cryptocurrency derivatives and tokenized foreign stocks for Indian customers, potentially circumventing cross-border transaction regulations.

Investigation Details

The ED's investigation was reportedly triggered by information suggesting large-scale FEMA violations by Neblio Technologies Private Limited (operating CoinDCX) and Excelium Technologies Private Limited (operating Delta Exchange). According to an ED officer, these platforms allegedly allowed Indian users to engage in cryptocurrency derivatives trading, including futures and options, as well as products linked to foreign company shares through overseas crypto exchanges. Evidence gathered during searches indicated that funds deposited by Indian customers were converted into stablecoins like USDT and transferred to foreign exchanges such as Binance, KuCoin, Gate.io, and Bybit to execute trading orders.

Alleged Transaction Mechanisms

The ED claims that CoinDCX allegedly routed transactions through accounts held in the name of a shell entity based in Costa Rica, which existed only on paper to facilitate cross-border trading. However, the agency asserts that these transactions were actually executed directly from CoinDCX via application programming interfaces (APIs). The platforms are accused of offering derivatives trading in crypto tokens, futures, options, and real-world asset (RWA) tokens, as well as tokenized stocks of foreign companies like Apple, Google, and Tesla, despite not being authorized for such activities. Delta Exchange's trades, particularly in derivatives and tokenized stocks, were allegedly routed through CoinDCX to overseas exchanges, with the total volume of these cross-border transactions reportedly amounting to several thousand crore rupees.

Regulatory Concerns

The ED further alleged that CoinDCX maintained trading accounts on overseas exchanges and held crypto assets in violation of FEMA. The agency claims the platform paid hundreds of crores of rupees in transaction fees to foreign exchanges using stablecoins, thereby circumventing the prescribed framework for cross-border payments. Delta Exchange is also accused of transferring hundreds of crores of rupees to associated overseas entities. Both CoinDCX and Delta Exchange India have been approached for comment on the ED's allegations.