Written By: Prajul Jain
In this article, we are going to look at the much heated-up controversy between Nischal Shetty (founder of WazirX) and Zhao co-founder of Binance Changpeng Zhao. But Before we begin, here’s a quick side note on our services at Enterprise Legion Management.
We at Enterprise Legion Management (ELM) provide businesses the opportunity to level up and step into the world of blockchain tech by creating and coding projects specific tokens for them. ELM makes the transition smooth and enriching, deriving total value. We are the go-to place for help relating to everything from funding to building brand loyalty.
at how this The story begins on the 5th of august as the Directorate of Enforcement ED conducted a series of searches on the directors of Zanmai Lab Pvt Ltd (Holding company of WazirX) and froze assets of 64. of 67 crores under the violation of the Foreign Exchange Management Act, 1999 (FEMA). Allegedly the crypto trading platform helped illegal Chinese lenders and fintech companies launder funds out of the country into untraceable overseas wallets. ED claims that WazirX is either unable or unwilling to provide the details of these transactions.
In response to this Changpeng Zhao (co-founder of Binance) made a series of tweets clarifying that Binance doesn’t own any ownership in WazirX and that the 2019 deal where Binance supposedly acquired WazirX hadn’t gone through. The post also highlighted how Indian investors could use Binance’s trading platform to buy cryptocurrencies using INR. In a subsequent tweet, he also advised WazirX users to move funds to Binance.
“If you have funds on WazirX, you should transfer them to Binance. Simple as that,” Zhao warned.
However, this caused a feud between the founders as Nishchal Shetty, CEO of WazirX, tweeted that WazirX is owned by Binance and the Indian entity, Zanmai Labs (owned by Shetty and other co-founders) only has a license from Binance to operate INR-crypto pairs. He asked users to not confuse Zanmai with WazirX and showed proof of the same as he added:
“You can check this fact by going to the TOS of WazirX More facts about WazirX: Binance owns the WazirX domain name, Binance has root access to AWS servers, Binance has all the crypto assets, and Binance has all the Crypto profits.” Technically, that would give Binance not only unfettered access to WazirX data but also allow it to shut down the exchange if it believed that would serve its interests.
This was indeed confirmed by Binance as it said that it has control of everything except user signup and KYC. Binance tried to clarify this by saying that it only provides wallet services to WazirX. But everything seems hazy from here. The ownership of WazirX is pretty complicated. According to ED, Zanmai Pvt Ltd (holding company of WazirX) has created a series of agreements with Crowdfire Inc, Binance, and Zettai Pte to completely obscure the ownership of the exchange.
“Earlier, their Managing Director Nischal Shetty had claimed that WazirX is an Indian Exchange which controls all the crypto-crypto & INR-crypto transactions and only has an IP & preferential agreement with Binance. But now, Zanmai claims that they are involved in only in-crypto transactions, and all the other transactions are done by Binance on WazirX. They are giving contradictory & ambiguous answers to evade oversight by Indian regulatory agencies,” said the ED.
Now that we are over with all the details of the matter doesn’t it feel somehow like a breakup story? Let’s now jump to the conclusion and look might affect investors and the crypto market.
The growing allegations and investigations around WazirX run the risk of further damaging the crypto ecosystem’s already precarious reputation. Investors in WazirX should be concerned about the ED’s assertion that the allegedly owned crypto assets are untraceable in addition to the accusations of financial diversion. Any conclusion that negatively affects investors and their investments moving forward will likely cause the firm to fail and will set back India’s cryptocurrency industry by months, if not years. Now comes the main question:
Should users move their funds out of WazirX?
The answer in my opinion is a no. The movement to international exchanges(like Binance) can make investors non-compliant with government norms, and investors will have to bear the burden of a 1%tax deductible at source (TDS). Rupee withdrawals are working completely fine on the exchange and there are no issues in terms of the structural viability of the company, there has also been no irregularity in terms of crypto assets owned by the company. WazirX is likely to recover from this crisis.