Binance, WazirX ownership row has crypto users in knots
The ownership dispute between Binance and WazirX has crypto users in a tizzy. Around 15 million of the WazirX co-founder Nischal Shetty’s registered users (as of August) have been affected by the public disagreement between CZ, the CEO of the global cryptocurrency platform Binance, and Shetty, a co-founder of the Indian cryptocurrency exchange.
According to sources, an ownership issue with the largest exchange by volume in the world is currently being investigated by Zanmai Labs, which runs WazirX in India.
According to investors, Zhao’s tweet on Saturday urging WazirX customers to transfer their assets to Binance sparked panic among users. “WazirX might be disabled.” ” It damages users, thus we can’t,” CZ tweeted on Saturday.
After a day, WazirX users’ ability to move money between the two exchanges internally was cut off, according to a user screenshot that ET has seen. Off-chain transactions happen away from the blockchain. Young cryptocurrency investors have voiced worry about the security of their assets on WazirX and the effects of a strained relationship between the two firms after their portfolios were severely damaged by a decrease in cryptocurrency values and India’s onerous tax structure.
On Saturday, Aditi Khandelwal of Jaipur withdrew all of her money from WazirX. She claimed it was difficult for a retail investor to comprehend a complex topic like the ownership structure of a corporation on Twitter. Since Luna’s failure, I’ve been getting closer to making a choice. The events of this past week were a turning point, the 24-year-old claimed.
Khandelwal was referring to Terra’s demise in May, a blockchain that ran the “algorithmic” stable currencies UST and Luna. In a week, the value of UST fell by over 80%, while the value of Luna, its sister token, dropped from $118 in April to $0.0003 in mid-May.
If I lose money in the cryptocurrency market, there is currently no user protection. Khandelwal, who exited the crypto market at a loss of 78 percent on her total assets, continued, “I don’t think I would return to crypto even to explore with a tiny amount of money till and unless the crypto field is a bit controlled in India.”
WazirX and Binance are connected in several ways. According to reports, the former offers wallet services to WazirX subscribers and also provides liquidity. According to Rajagopal Menon, vice president of WazirX, consumers’ cryptocurrency is secure.
“We are the only cryptocurrency exchange in India that permits full cryptocurrency withdrawals, which demonstrates our financial stability and the soundness of our business plan.” Withdrawals in INR are effective, and there is no problem with the company’s fundamental sustainability, according to Menon.
On Friday, the Directorate of Enforcement (ED) searched one of the directors of Zanmai Lab Pvt Ltd, the company behind WazirX, and ordered the freezing of its bank accounts totaling Rs 64.67 crore.
“The newcomers have a rather negative attitude.” While this ED matter is being resolved, I have transferred my assets from WazirX to Binance. “As an experienced trader, I know the money will be secure at WazirX, but I can’t accept the chance of any delays,” said cryptocurrency trader Shounak Shetty.
Since April 1, when the new tax law controlling cryptocurrencies went into effect and digital wallet Mobikwik stopped providing its services to the platform for payments linked to cryptocurrencies, WazirX volumes have been trending at all-time lows.
Since Friday, CZ of Binance and Shetty, the creator of WazirX, have been exchanging barbs on Twitter about the ownership claim made by WazirX and Zanmai Labs, as well as the implications of that ownership. Following the ED’s move on Friday, CZ announced its first public distancing from the activities of the Indian exchange since announcing the purchase of WazirX in 2019.
The two businesses concur that Shetty and the other cofounders wholly control and run Zanmai Labs and that Binance bought WazirX Technology in 2019. (IP). The argument arose from Binance’s denial that it had any influence over WazirX’s trading activities.
The Reserve Bank of India imposed a banking ban in 2019, thereby decimating trade on local cryptocurrency exchanges at the time the Binance-WazirX agreement took place. Shetty claims that when the banking restriction was overturned, Binance granted Zanmai a license to use the technology he had supplied to the company for the Indian market. Shetty’s Twitter account reports that the deal’s last leg has been delayed because Binance hasn’t disclosed its parent company. The two are divided up into operations. According to Shetty, the India business manages INR-Crypto pairings, while Binance is in charge of crypto-to-crypto pairs and handles withdrawals of cryptocurrency.
Due to India’s regulatory ambiguity, a lawyer informed ET that the acquisition might have been arranged in an “amphibious” way, putting WazirX’s founders in more legal danger. “If you take away the IP and the platform from any IT business, there is nothing left of value; Binance has taken everything away.” Zanmai is not wanted by them due to the risk. The senior lawyer, who has expertise with similar deals, said the founders would have felt it was a decent bargain at the time but didn’t realize that Sebi (the Securities and Exchange Board of India) and RBI risk lay on them.
Users no longer have access to internal fund transfers between the two exchanges as a result of Binance’s Sunday disablement of off-chain transactions to WazirX. According to a business blog post from July, in response to declining volumes brought on by the implementation of 1 percent Tax Deducted at Source on cryptocurrency transactions, WazirX began charging a fee to move money from WazirX to Binance. ET contacted Binance for comment on why they decided to stop allowing off-chain transactions, but they did not answer. WazirX made no remarks about the introduction of transfer fees.
The “weak regulatory oversight of transactions between WazirX and Binance, and non-recording of transactions on blockchains to minimize costs,” was a concern voiced by ED on Friday.
edited and proofread by nikita sharma
