Sebastian Sinclair

<div id="highlights-block_62f0633984372" class="highlights">
 <ul>
 <li>Binance chief Changpeng Zhao said his firm never completed a transaction to acquire major Indian exchange WazirX in 2019</li>
 <li>WazirX&#8217;s co-founder Nischal Shetty has disputed those claims and said Binance operates crypto-to-crypto pairs and processes digital asset withdrawals</li>
 </ul>
 
</div>



Binance CEO Changpang Zhao said Friday his firm never finalized a deal to acquire Indian crypto exchange WazirX, days after the platform was accused of evading oversight by local agencies.



In a tweet <a href="https://twitter.com/cz_binance/status/1555578417973792769?s=20&amp;t=RMyL5Z3l4L0o0NKRIuZWgA" target="_blank" rel="noreferrer noopener">thread</a>, Zhao said the November 2019 deal &#8220;was never completed&#8221; and Binance only provides &#8220;wallet services for WazirX as a tech solution.&#8221;



&#8220;Binance has never — at any point — owned any shares of Zanmai Labs, the entity operating WazirX,&#8221; Zhao wrote. &#8220;WazirX is responsible [for] all other aspects of the WazirX exchange, including user sign-up, [know-your-customer solutions], trading and initiating withdrawals.&#8221;



That&#8217;s despite the deal, at the time, having been made <a href="https://support.wazirx.com/hc/en-us/articles/360039273693-WazirX-Gets-Successfully-Acquired-By-Binance" target="_blank" rel="noreferrer noopener">public</a> by both <a href="https://www.binance.com/en/blog/all/binance-acquires-indias-leading-digital-asset-platform-wazirx-to-launch-multiple-fiattocrypto-gateways-404105749895733248" target="_blank" rel="noreferrer noopener">Binance</a> and WazirX, which purported to allow users to buy and sell crypto with Indian rupees (INR) via the Binance Fiat Gateway.



WazirX&#8217;s co-founder Nischal Shetty has disputed Zhao&#8217;s claims, in what&#8217;s now a tit-for-tat online feud between the exchange execs.



&#8220;WazirX was acquired by Binance,&#8221; <a href="https://twitter.com/NischalShetty/status/1555602963430785024?s=20&amp;t=Cyfvv8NkIW4dQORfEPEgAA" target="_blank" rel="noreferrer noopener">Shetty tweeted</a>, less than two hours after Zhao had publicly distanced Binance from the exchange. &#8220;Binance operates crypto to crypto pairs, processes crypto withdrawal[s].&#8221;



<h3 class="wp-block-heading">Binance and WazirX ties examined by Indian regulators</h3>



WazirX has drawn the ire of the Directorate of Enforcement (ED), the country&#8217;s financial watchdog, over allegations Zanmai Labs facilitated money laundering on the exchange. 



The exchange touts itself as the country&#8217;s &#8220;largest&#8221; crypto exchange with 31.7 million users, about eight million behind another major Indian exchange, CoinDCX&#8217;s, which recorded 40 million overall in March. 



Binance, the country&#8217;s fourth-largest exchange, garners roughly 27.6 million users, according to <a href="https://www.businessinsider.in/cryptocurrency/news/around-90-million-users-flocked-to-crypto-bandwagon-in-march-2022-report/articleshow/92081565.cms#:~:text=As%20per%20Comscrore's%20report%2C%20CoinDCX,and%2030.1%20million%20users%20respectively." target="_blank" rel="noreferrer noopener">Business Insider India</a>.



A recent ED <a href="https://enforcementdirectorate.gov.in/sites/default/files/latestnews/PR%20HYZO_Freezing%20of%20assets%20of%20WazirX%20Crypto%20Exchange.pdf" target="_blank" rel="noreferrer noopener">investigation</a> has claimed large amounts of funds were diverted from questionable, non-bank financial institutions and their fintech partners to WazirX, which were then laundered abroad.



Domestic Indian publication <a href="https://www.business-standard.com/article/markets/ed-serves-fema-notice-to-cryptocurrency-exchange-wazirx-minister-122080301365_1.html" target="_blank" rel="noreferrer noopener">Business Standard</a> first reported on the investigation.



Regulators have accused Zanmai Labs of creating a &#8220;web of agreements&#8221; with social media management tool Crowdfire, also founded by Shetty, alongside Singapore holding company Zettai and Binance&#8217;s Cayman Islands entity. This was meant to obscure ownership of WarzirX, according to a <a href="https://enforcementdirectorate.gov.in/sites/default/files/latestnews/PR%20HYZO_Freezing%20of%20assets%20of%20WazirX%20Crypto%20Exchange.pdf" target="_blank" rel="noreferrer noopener">statement</a> Friday.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">2/ You can check this fact by going to the TOS of WazirX More facts about WazirX: • Binance owns WazirX domain name • Binance has root access of AWS servers • Binance has all the Crypto assets • Binance has all the Crypto profits Don’t confuse Zanmai and WazirX&mdash; Nischal (Shardeum) ⚡️ (@NischalShetty) <a href="https://twitter.com/NischalShetty/status/1555602967813816320?ref_src=twsrc%5Etfw">August 5, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The ED has issued a freeze on Zanmai director Sameer Mhatre&#8217;s bank balances worth INR 646,700,000 ($8.1 million) over an alleged failure to cooperate with the agency.



Shetty previously claimed WazirX controls all crypto-crypto and INR-based crypto transactions with only intellectual property and preferential agreement with Binance. 



Zanmai Labs now claims it is only involved in INR-based crypto transactions where all other trades are handled by Binance on WarzirX, the agency said in its statement.



WazirX is accused of giving &#8220;contradictory and ambiguous&#8221; answers to &#8220;evade&#8221; regulatory oversight from Indian authorities.



&#8220;Recent allegations about the operation of WazirX and how the platform is managed by Zanmai Labs are of deep concern to Binance,&#8221; Zhao said. &#8220;Binance collaborates with law enforcement agencies all around the world. We would be happy to work with ED in any way possible.&#8221;



WazirX and a spokesperson for Zhao did not immediately return a request for comment.



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Binance Distances Itself From India’s Crypto Exchange WazirX

Shalini Nagarajan

<div id="highlights-block_62c41f60368f0" class="highlights">
 <ul>
 <li>Local investors shouldn’t move to foreign crypto exchanges to skirt local taxes, WazirX’s CEO said</li>
 <li>Companies dependent on transaction fees could revise revenue forecasts, a crypto exec told Blockworks</li>
 </ul>
 
</div>



Trading volumes on Indian crypto exchanges plummeted after a <a href="https://cms.blockworks.co/india-clarifies-crypto-taxes-as-trading-volumes-crater/" target="_blank" rel="noreferrer noopener">contentious tax policy</a> came into effect on Friday.



Top exchanges including <a href="https://www.coingecko.com/en/exchanges/wazirx#statistics" target="_blank" rel="noreferrer noopener">WazirX</a>, <a href="https://www.coingecko.com/en/exchanges/zebpay#statistics" target="_blank" rel="noreferrer noopener">ZebPay</a>, <a href="https://www.coingecko.com/en/exchanges/coindcx#statistics" target="_blank" rel="noreferrer noopener">CoinDCX</a> and <a href="https://www.coingecko.com/en/exchanges/bitbns#statistics" target="_blank" rel="noreferrer noopener">BitBNS</a> saw volumes drop between 10% to as much as 70% in the last week, according to data from CoinGecko. 



CoinDCX saw the biggest nosedive, with volumes down from roughly $6 million on June 28 to just about $2 million on Tuesday — a 70% drop. WazirX’s trading volumes fell by a similar level, while BitBNS and ZebPay had relatively smaller decreases.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Indian Crypto exchange&#39;s trading volume have plunged by 90-95% , 3 months after new crypto laws became applicable. Based on current volumes &#8211; Exchanges are only able to generate trading fee revenue of $1000 to $3000 Max. Bitbns seems to be still doing well. Tough times ahead. <a href="https://t.co/KNDbea9BCn">pic.twitter.com/KNDbea9BCn</a>&mdash; Crypto India 🔑 (@CryptooIndia) <a href="https://twitter.com/CryptooIndia/status/1543884371395891206?ref_src=twsrc%5Etfw">July 4, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The fall in volumes cannot entirely be attributed to India’s crypto tax laws taking effect. A combination of falling cryptoasset prices, liquidations and financial struggles of key crypto players, soaring inflation and the anticipation of a recession have all resulted in the current “crypto winter.”



Even so, crypto executives in India had warned the central authority’s decision to impose a 1% tax deducted at source (TDS), above a flat 30% tax on crypto profits, would discourage investors from trading in digital assets.



Nischal Shetty, CEO of WazirX, said on <a href="https://twitter.com/NischalShetty/status/1543939846879707136" target="_blank" rel="noreferrer noopener">Twitter</a> that investors in India shouldn’t be flocking to foreign crypto exchanges as a way to sidestep local tax laws. “There has been misinformation spread by some that trading on foreign exchange does not attract TDS. That is incorrect,” he said.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1/Something important for Indian crypto traders to understand • Trading on foreign exchanges that don’t deduct TDS would mean YOU have to pay TDS directly to Income Tax Department • You need to know PAN of the seller on international exchanges • May be asked to pay 20%…&mdash; Nischal (Shardeum) ⚡️ (@NischalShetty) <a href="https://twitter.com/NischalShetty/status/1543939846879707136?ref_src=twsrc%5Etfw">July 4, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Further, investors shouldn’t expect the 1% TDS to be altered this year, according to Khaleelulla Baig, co-founder of Singapore-based KoinBasket.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“It’s important that the government should soon look at revising the guidelines to encourage entrepreneurship in the Web3 sphere,” he said in an email.</blockquote>



Before the 1% TDS kicked, CoinSwitch CEO Ashish Singhal told Blockworks cryptocurrencies should be taxed at par with equity markets.



“The crypto market is driven by high-frequency traders, like intraday traders in equity markets. These traders operate on extremely thin margins, and locking up their capital with high TDS will restrict their ability to operate,” he said.



Sinking trading volumes could have a direct impact on the revenue streams of these companies, possibly prompting them to lay off workers in an industry already grappling with <a href="https://cms.blockworks.co/crypto-industry-layoffs-may-have-unintended-consequences/" target="_blank" rel="noreferrer noopener">high employee turnover</a>. 



“Transaction volume in the crypto space has collapsed,” Manuel Ortiz-Olave, co-founder of equity tokens business Brickken, told Blockworks via Telegram. “This implies that companies dependent on transaction fees (i.e. exchanges and similar) will see a major revision of revenue forecasts, which will drive cost restructuring decisions.”



Companies building on top of blockchain technology-providing services, that aren’t intrinsically linked to the performance of cryptocurrencies, will do better in comparison, he added.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



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