Friday, June 21, 2024

Binance Stops ‘Off-Chain’ Fund Transfers on WazirX, Learn Why Two Big Crypto Exchanges Are Fighting

Global crypto exchange Binance said on Monday that it is discontinuing fund transfer outside India’s crypto exchange WazirX ‘off-chain’ system. WazirX is under investigation for sending out crypto assets worth Rs 2,790 crore to some unknown wallet. The Enforcement Directorate (ED) on Friday said it has frozen WazirX’s bank deposits worth Rs 64.67 crore. The ED has imposed this ban in connection with a money laundering probe against some fraudulent smartphone-based lending apps backed by Chinese funds.

“For clarity and user safety, we are removing the ‘off-chain’ fund transfer channel between WazirX and Binance,” said Patrick Hillman, Chief Communications Officer at Binance.

Binance will stop supporting off-chain fund transfers between WazirX and Binance with the option to “Login with Binance” from around 8.30am on August 11, 2022. However, users will still be able to deposit and withdraw their balances as per the standard withdrawal and deposit procedures between Binance and WazirX platforms.

What is the fight between Binance and WazirX?

The real fight between these two big crypto exchanges is over ownership. In fact, both the companies are fighting over the fact that WazirX is ‘not ours, it is yours’. Let us understand this matter in few points-

In November 2019, Binance announced in a blogpost that it had ‘acquired’ WazirX. Binance CEO Changpeng Zhao and WazirX founder Nischal Shetty were seen together at the time. The blogpost explained that platform users will have access to a large number of cryptocurrencies directly from Binance’s trading platform, they will be able to buy cryptocurrencies with the Indian Rupee, and invest in stable coins such as Tether. It also said that the acquisition of WazirX is a part of the company’s strategy to expand its global presence.

On August 3, the Enforcement Directorate raided WazirX’s parent company Zanmai Lab Pvt Ltd director Sameer Mhatre in a money laundering case. The financial assets of the company have also been frozen. The agency said that Mhatre was not sharing any information from the front on demand and was “not cooperating in the investigation”. The agency also said that the exchange and its officials were giving contradictory and vague answers to avoid Indian regulatory agencies.

The agency said that it has been found that many fintech companies engaged in arbitrary lending through mobile apps have diverted most of the funds to WazirX, then from there the funds were diverted to unknown foreign wallets.

Must Read: Why You Should Own Verasity Coins

What Binance did after this, the fight started from there. Binance CEO Changpeng Zhao made a series of tweets on August 5, 2022, after WazirX was caught in a legal battle.

He clarified that Binance does not hold any stake in Zanmai Labs and simply provides wallet services to WazirX. He added that the Indian crypto exchange alone is responsible for all operations on WazirX – sign ups, KYC, trading and withdrawals.

Binance said that it has come to the notice that some users have been led to believe that Binance manages the funds deposited in WazirX, but this is not the case. Binance will further cooperate with Indian regulatory bodies in matters related to WazirX. Binance seeks to create a regular framework for the industry and believes in open dialogue with regulators, policy-makers and legal agencies, the statement said. ”

Now after these tweets, there has been a constant tussle between Zhao and Shetty on Twitter. Shetty has said that Binance is the owner of WazirX. He also added that Zanmai Labs is a completely separate entity, while Binance owns the domain name of WazirX, has access to AWS servers and retains all profits and crypto assets stored on the platform.

Shetty said Zanmai Labs is licensed to operate only INR-crypto pairs from Binance, while Binance itself manages crypto-to-crypto pairs and withdrawals.

Now this dispute does not seem to end at the moment, but the ED’s investigation is going on. However, Indian investors are definitely caught in the middle of this controversy.

If WazirX’s funds remain frozen, it will become difficult for it to bear the cost. At the same time, the transaction will also not get support. From above, there is also a dilemma whether the deposits of investors on the platform are safe or not, as many companies in the crypto industry have declared themselves bankrupt in the recent past. The company has assured that investors’ money is safe, but there is fear among investors.

Monesh Kumar
Monesh Kumar
Monesh Kumar is a cryptocurrency and blockchain enthusiast. He trades cryptocurrencies and holds some but he prefers holding Bitcoin, Ethereum & Cardano.

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