Just a while ago, a Redditor posted that Indian centralized exchanges are sharing investors’ private data illegally with the government. The Redditor mentioned that many investors have started receiving government notices because of their crypto activity.
Indian Exchanges Share Data to Government
Recent reports indicate that Indian exchanges illegally share customers’ private data with the government. Set1Less, a Reddit user, sent a warning that many India-based crypto exchanges violate their investors’ privacy.
Normally, centralized exchanges like Coinswitch, CoinDCX, WazirX and Bitbns have KYC protocols which include ID verifications when creating accounts. But, reports indicate that these exchanges share this private data with the government. According to the Redditor, many investors received government notices related to their crypto transactions.
These Indian exchanges collect data and send it to the government without investors’ approval. While the government can get warranties to search individuals, it’s illegal to go into every investor’s wallet or exchange details.
The Redditor said,
“The law protects people against unauthorized searches and seizures without any warrant. Users of CEX are not performing any illegal activity, and there is no probable cause to effect seizure of everyone’s data. Yet the CEX have happily turned over people’s data to the government, who is now coming after crypto traders.”
The Government Going After Crypto Investors
According to the Reddit post, the government asks crypto investors to show evidence of their crypto activities. The Redditor also posted screenshots showing the various things the government requires.
One of the major things the government is asking for is traders’ multiple-year bank records. The notice requires investors to list all the exchanges they held accounts and the dates when they started dealing with crypto assets. Moreover, the notice targets family members who use crypto, asking for detailed reports of the same and even details of individuals’ wallets.
Another requirement in the notice is for investors to show their taxation status for crypto transactions in the past years.
Over the past few years, the Indian government has been working on ways to regulate the crypto space. There were bills to ban crypto assets in the country completely. But, they settled for imposing harsh taxation rules.
Recently, the Indian parliament passed a new law for taxing the crypto space. The government imposed a 30% capital gain tax for every crypto transaction. Moreover, the bill set a 1% tax deduction on every buy or sell trade, regardless of whether investors make profits or losses. Reports indicate that most crypto stakeholders were not pleased with this law. Infact, other legislatures noted that the new bill would hamper the way crypto business is done.
Use Decentralized Exchanges
This move by centralized exchanges is illegal. After the Reddit post, one comment said that this is a “reason to ditch the CEXes and their KYC requirements.” There are other better options for investors, DEXes like Uniswap, Pancakeswap and dYdx. DEXes do not have KYC procedures, and authorities cannot call for data from such networks.