In November 2019, the global cryptocurrency ecosystem Binance announced that it had acquired WazirX, one of India's largest crypto exchanges. The deal was a significant moment for the Indian crypto industry and a great sign of things to come.
As per an official announcement blog on the Binance website, the partnership would provide plenty of benefits to WazirX users. To begin with, it would allow users to purchase Tether (USDT) against the Indian Rupee (INR). In turn, this would enable users to trade any digital asset available on the Binance platform. Therefore, the partnership essentially gave users access to a wide range of tokens that were previously out of reach for Indian audiences.
"The acquisition of WazirX shows our commitment and dedication to the Indian people and strengthens the blockchain ecosystem in India as well as another step forward in achieving the freedom of money," said Changpeng Zhao (CZ), the CEO of Binance. WazirX CEO Nischal Shetty was also optimistic about the partnership and believed it would help boost crypto adoption in India.
Enforcement Directorate (ED) freezes WazirX bank accounts
Not much was said about the partnership until the Enforcement Directorate (ED) froze the WazirX bank accounts on August 5. The move was part of the ED's probe against smartphone-based instant loan apps that are allegedly laundering money through cryptocurrencies.
The ED also issued a statement saying that WazirX executives were "non-cooperative" and "giving contradictory and ambiguous answers to evade oversight by Indian regulatory agencies".
"Their Managing Director Nischal Shetty had claimed that WazirX is an Indian exchange which controls all the crypto-crypto and INR-crypto transactions and only has an IP and preferential agreement with Binance. But now, Zanmai claims that they are involved in only INR-crypto transactions, and all the other transactions are done by Binance on WazirX," the ED said.
War of words
In what's being seen as a bid to steer Binance away from investigations, CZ took to Twitter on August 5 to clarify the company's relation with WazirX.
"Binance does not own any equity in Zanmai Labs, the entity operating WazirX," he said in a tweet. He explained that the previously announced acquisition of WazirX in 2019 "was never completed" and that Binance had never "owned any shares of Zanmai Labs."
Shetty was quick to respond. He explained that Zanmai Labs is a separate entity that is owned by the founders of WazirX and has been licensed by Binance to "operate INR-Crypto pairs in WazirX". On the other hand, Binance operates and charges fees for crypto-to-crypto trading and crypto withdrawals on WazirX. He also stated that WazirX had handed over control to its domain name and AWS servers and that the only thing remaining was Zanmai Labs.
However, the real shock came when CZ encouraged WazirX users to transfer their funds to Binance, saying that the company "could disable WazirX wallets” but wouldn't do that because it would "hurt users". Shetty quickly pointed out that having the power to shut down wallets proved that Binance had control over and owned WazirX.
Conclusion
WazirX has reassured users that "deposits and withdrawals are working as usual". Shetty has also downplayed all recent events, stating that user assets, including crypto and fiat currencies on WazirX are safe. However, the war of words between the CEOs adds doubt to the mind of customers, who are already skeptical following the account freeze from a few days ago. How things pan out, only time will tell.
First Published: Aug 8, 2022 4:27 PM IST
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