Binance distances from WazirX as Indian regulators keep chasing crypto.
When CZ claimed the sale never went through, the ownership of WazirX became a heated subject. But three years later, nothing has changed.
In the first week of August, the Twitter debate between WazirX co-founder Nischal Shetty and Binance CEO Changpeng “CZ” Zhao over the ownership of the Indian crypto exchange garnered a lot of attention.
WazirX was supposedly bought by Binance in 2019, and the Indian crypto exchange has been referred to as “Binance-owned” ever since. To everyone’s amazement, CZ rushed to Twitter to say that the deal never happened and that Binance has no stake in the Indian crypto exchange.
CZ said that Binance solely offers wallet services to WazirX as a technical solution, and that WazirX is in charge of all other parts of the exchange, such as user sign-up, Know Your Customer (KYC), trading, and initiating withdrawals.
Shetty responded to CZ’s assertion in another Twitter thread, alleging that Binance does indeed control the Indian crypto exchange WazirX and that the parent business, Zanmai Labs, solely runs crypto and Indian currency pairings on a Binance license. Binance, on the other hand, runs crypto-to-crypto pairings and handles cryptocurrency withdrawals, as shown by the terms of service.
For the following several days, the two co-founders argued back and forth, accusing each other of distorting important facts.
Based on the tweet exchange between the two co-founders, it is clear that there was an acquisition deal in the beginning, but Shetty claimed the deal was for the technology transfer rather than the entire company, which is why WazirX technology is owned by Binance, while Zanmai Labs only operates crypto/INR pairs under a Binance license.
“On the WazirX exchange, Binance does not conduct crypto-to-crypto exchanges.” Zanmai Labs is the only owner and operator of the WazirX exchange. Furthermore, although we agreed to buy some WazirX technological assets and intellectual property, this transaction was never executed.”
In another tweet, CZ stated that Binance attempted to acquire WazirX as late as February but was turned down. Shetty reacted to the tweet once again, alleging that the transaction entailed a purchase by Binance’s parent business, but that at the time of the transaction, Binance provided a “ambiguous explanation that parent entity is under reorganization.”
“The arrangement between Binance and Zanmai Labs was for the purchase of certain assets and intellectual property of WazirX, not shares in Zanmai Labs,” a Binance spokesman informed Cointelegraph. “We had sought the assets that were due to be transferred to us under the agreement, but this was not provided, and the arrangement was not (and could not be) fulfilled,” they went on to say.
WazirX, on the other side, feels that the answer to the present situation is for Binance to either purchase out India operations via its parent corporation rather than a random business, which may pose a danger to customers, or for Binance to sell back WazirX.
Taking three years to reveal the agreement never happened:
The purported money laundering inquiry by India’s Enforcement Directorate seems to be the root of the two corporations’ feud (ED). The aforementioned inquiry took place a year ago, and contrary to common opinion, it is focused on a Foreign Exchange Management Act (FEMA) violation rather than money laundering.
FEMA is one of several capital control rules implemented by the Indian government to prevent money from leaving the country. Individuals are only authorized to transmit a maximum of $250,000 for designated reasons outside of India every year, according to FEMA. FEMA rules, however, do not cover bitcoin transactions owing to the absence of controls around the crypto industry.
As a consequence, any users making crypto transactions worth more over $250,000 would continue to breach FEMA regulations. That seems to be the situation with the ED’s ongoing WazirX inquiry. The ED is conducting similar investigations into several additional cryptocurrency sites.
Cryptocurrency investing is not one of them. However, sending more than the stipulated amount, even in crypto, would legally be a violation of FEMA. As a result, moving money to an exchange that is not based in India is considered a breach of FEMA laws.
The year-old inquiry resurfaced in 2022, with the ED freezing $8.1 million in the exchange’s assets. The ED said that it was unable to locate on-chain records of transactions totaling millions of dollars. WazirX, on the other hand, refuted ED’s assertion, claiming that it had records for every single transaction.
The ED refers to off-chain transactions as direct transfers between WazirX and Binance, a function implemented by the two businesses as part of their cooperation. The function enables customers to move assets between two exchanges without paying any transfer fees.
According to WazirX’s official statement, there is a huge misunderstanding around off-chain transactions. According to the crypto exchange, an ED press release attempts to portray these transitions as mysterious and untraceable, while in fact, only KYC customers of the site may access the services. As a result, there is no doubt regarding untraced cash, and WazirX said that it was confident in proving ED incorrect in court.
Will the Binance-WazirX dispute have an influence on Indian cryptocurrency investors?
The Binance-WazirX issue caused concern among Indian investors who used WazirX. Many of these traders liquidated their investments as soon as the feud between the two co-founders began. The situation deteriorated further when CZ advised users to move their holdings to Binance.
WazirX informed Cointelegraph that there were some signals of liquidation and money movement in the wake of the tweets, but that after assuring customers that their assets would be secure, the trend has slowed.
Regardless of who is to blame, Indian crypto businesses think that the bombardment of insults on social media has impacted investor trust. Co-founder of the Indian cryptocurrency exchange Unocoin, Sathvik Vishwanath.
“This kind of behavior in the crypto market has a detrimental impact on the whole ecosystem, but the problem seems to be reversible.” They must either execute the transaction or reverse it, and the owners must be identified publicly. Transparency seems to be the missing piece here.”
The Indian crypto ecosystem had previously prospered and created numerous crypto unicorns; but, with the adoption of a 30% crypto tax and a 1% tax deduction at source this year, trade activity on key Indian crypto exchanges has plummeted considerably. The newly adopted tax laws not only discouraged Indian investors, but also caused some top crypto service providers to seek out more crypto-friendly locations.
The Indian central bank has long advocated for a ban on all forms of cryptocurrency usage, but the national government has altered its attitude over time without giving any legal framework. Many market pundits feel that the current Binance-WazirX controversy might be exploited by Indian law enforcement and the central bank to construct a case against crypto restrictions, as the Indian crypto ecosystem becomes more complicated.