Unauthorised cross-border crypto transfers: Why ED searched Mudrex and Instadapp; what is the case?
The Enforcement Directorate (ED) on Thursday said it had conducted searches in Karnataka and Madhya Pradesh as part of an investigation into alleged foreign exchange violations involving cross-border cryptocurrency transfers worth more than ₹4,900 crore.
The searches were carried out on October 26 under the Foreign Exchange Management Act (FEMA). The operation covered three premises in Bengaluru and one in Madhya Pradesh, the federal agency said in a statement.
"Preliminary findings during the investigation revealed contravention of FEMA through unauthorised cross-border money transfer, unauthorised crypto balances in foreign platforms amounting to more than ₹4600 crore," the statement said.
According to the ED, the searches revealed the alleged misuse of crypto tokens for unauthorised cross-border money transfers and financial transactions, including transactions involving certain tax-haven jurisdictions.
The investigation has brought cryptocurrency platform Mudrex and decentralised finance platform Instadapp under scrutiny over their alleged roles in transactions that may have violated foreign exchange regulations.
The ED alleged that the first entity searched, which operated the Mudrex platform, advertised instant cross-border money transfers using cryptocurrencies despite not having authorisation from the Reserve Bank of India (RBI) for such services.
The agency is examining the alleged use of crypto tokens to facilitate international transfers outside the authorised financial system.
The investigation centres on whether such activities contravened FEMA provisions governing cross-border transactions and foreign exchange movements.
The allegations remain part of an ongoing investigation.
The second entity identified by the ED was Instadapp, a decentralised finance (DeFi) platform that uses software to facilitate financial transactions without relying on a conventional banking network of branches and employees.
According to the agency, users can lend their cryptocurrency holdings to earn interest, borrow against crypto assets they already own and exchange one cryptocurrency token for another.
These activities are executed through automated computer programs known as smart contracts, which carry out transactions when specified conditions are met.
The ED is examining whether transactions associated with the platform breached India's foreign exchange regulations.
The agency said its preliminary investigation had detected alleged FEMA contraventions involving $40 million, equivalent to approximately ₹380 crore, in connection with the second entity.
The alleged violations form part of the broader investigation into cryptocurrency-enabled cross-border transactions exceeding ₹4,900 crore.
The ED has flagged the alleged use of digital tokens to move money across borders without the necessary authorisation. The probe also covers transactions involving jurisdictions described by the agency as tax havens.
The searches are part of the agency's efforts to establish the nature, scale and regulatory implications of the transactions under investigation.
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