Binance Curtails Ties to WazirX Following Regulatory Probe

key takeaways

On-chain fund transfers will still work between Binance and WazirX
Binance CEO Changpeng Zhao said the WazirX acquisition was never finalized

Binance is further disengaging from Indian cryptocurrency exchange WazirX, with off-chain fund transfers between the two platforms set to be scratched.

The move to remove the transfer channel via the “Login with Binance” option will be effective from August 11, according to a blog posted on Monday. Off-chain transfers occur outside of a blockchain network and facilitate instant payouts, as opposed to slower on-chain transactions.

Binance said its decision to disable such transactions is a result of recent regulatory action against WazirX operator Zanmai Labs over allegations of facilitating money laundering on the exchange.

“It has come to our attention that some users were given to believe that funds deposited in WazirX were managed by Binance,” the company said in the blog. “This is not the case.”

On-chain fund transfers will remain available between the two platforms.

Binance has been publicly disassociating itself from WazirX in recent days after Indian regulators froze $8.1 million in funds belonging to the local exchange. It is one of the most prominent firms in the Indian crypto industry, counting 15 million users as of August.

As part of a wider probe into Indian fintechs, the Enforcement Directorate claimed a significant amount of funds were diverted from WazirX to unknown foreign wallets and that the exchange didn’t cooperate with the agency.

Following the regulatory woes, a public spat broke out between Binance CEO Changpeng Zhao and WazirX co-founder Nischal Shetty.

Who’s responsible for WazirX?

In 2019, Binance announced a deal to acquire WazirX — a widely-celebrated move for the Indian crypto ecosystem at the time. But Zhao said his company never finalized the deal to acquire the exchange and Binance only provides wallet solutions for it.

Shetty rebuffed that claim, saying Binance did acquire WazirX and it licensed Zanmai Labs to operate rupee-based crypto pairs on the exchange.

Patrick Hillmann, chief communications officer at Binance, compared the situation to a car owner having sold their vehicle but refusing to hand over their keys.

“Shetty told us, ‘We have given you access to our AWS pass keys,’ but that’s not what we meant by ownership. The operations, marketing, how users are KYCed, actual database of the users were all kept, owned and run by WazirX,” Hillmann reportedly told CNBC-TV18.

“Now, the ED has asked them [WazirX] for information on what they used the car for and now they are throwing up their hands, saying Binance owns the title,” he said.

Binance has said it will support Indian regulators in their investigations relating to WazirX.

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