Confusion On WazirX’s Acquisition By Binance As CEOs Clash On Twitter

Update | August 6, 2022, 12:50 AM

The original story has been updated to include the WazirX and Nischal Shetty’s response to the tweets and ED raids.

---

In a bolt out of the blue, Binance CEO Changpeng Zhao said on Twitter that the crypto giant never acquired India’s largest crypto exchange WazirX.

“Binance does not own any equity in Zanmai Labs, the entity operating WazirX and established by the original founders,” Zhao wrote.

Zhao’s tweets came on the same day as ED froze WazirX’s assets worth INR 64.67 Cr in connection with a money laundering case.

Who Owns WazirX?

In a blog post on November 21, 2019, Binance said that it had acquired WazirX. However, Zhao said that the deal was never closed and Binance has never owned any shares of Zanmai Labs, the parent company of WazirX.

Responding to Zhao’s tweets, WazirX CEO Nischal Shetty tweeted that while Binance does not hold any equity in Zanmai Labs, WazirX was acquired by Binance. Shetty also insisted that the two entities are different.

Shetty added that Binance owns WazirX’s domain name, root access to AWS servers, crypto assets and crypto profits. Shetty also seemed to imply that Zanmai and WazirX are two different and unrelated entities, with the only link between the two being himself.

Binance and Zanmai have been running WazirX together, as per the Indian crypto exchange’s updated user agreement.

According to the user agreement, Binance handles the peer-to-peer (P2P) cryptocurrency transactions between two parties. Binance also handles P2P transactions between supported cryptos, such as BTC-ETH and BTC-LTC.

On the other hand, Zanmai Labs enables users to trade in trading pairs involving the Indian rupee, such as INR-BTC and INR-ETH, in a non-P2P manner.

Since 2019, media reports have been calling WazirX an Indian subsidiary of Binance. The conflicting comments of Zhao and Shetty raise questions about the ownership of India’s largest cryptocurrency exchange.

WazirX’s Brushes With Indian Agencies

WazirX has been under the scrutiny of Indian agencies for some time now. In June last year, the ED issued a show cause notice to the Indian crypto exchange. The ED alleged that WazirX flouted the Foreign Exchange Management Act, 1999 in transactions involving crypto worth INR 2,790.74 Cr.

Earlier this week, Union Finance Minister Nirmala Sitharaman informed Rajya Sabha that the ED was investigating two cases against WazirX under the provisions of the Foreign Exchange Management Act (FEMA), the same act that was used to investigate alleged money laundering by the Chinese smartphone maker Xiaomi.

Disagreeing with the allegations made by the ED, WazirX issued a statement saying that it is evaluating its further plan of action.

“We have been fully cooperating with the Enforcement Directorate (ED) for several days and have responded to all their queries fully and transparently. We do not agree with the allegations in the ED press release. We are evaluating our further plan of action,” the statement read.

In his tweet thread, Zhao also expressed Binance’s willingness to work with ED’s investigation. “Binance collaborates with law enforcement agencies all around the world. We would be happy to work with ED in any way possible,” Zhao wrote.

Earlier this week, Finance Minister Nirmala Sitharaman mentioned that WazirX used Binance for alleged money laundering and not one crypto transaction between the two exchanges was being recorded on their respective blockchains.

The crypto industry is facing uncertainty in India in the absence of regulatory clarity from the government. However, the Reserve Bank of India (RBI) has made its feelings for cryptocurrencies very clear.

Earlier this year, the government also introduced a 30% tax on crypto income and 1% TDS on crypto transactions.

Amid an ongoing crypto winter and the RBI’s call to ban cryptocurrency altogether, the actions of WazirX and Binance could well decide the fate of India’s crypto landscape and the 100 Mn crypto investors in the country.