ED Probe and Ownership Dispute Could Cause WazirX’s suspension

Following Binace CEO’s refusal to approve the acquisition of WazirX experts predict that the government is likely to intervene

The most recent developments could lead to the discontinuance of services offered by WazirX in India according to experts.

On Friday this week, the ED blocked the assets of banks of WazirX in a rumored fraud case involving money laundering through the cryptocurrency exchange

The conflict of verbal battles between Cayman Islands-based cryptocurrency exchange Binance and India-based WazirX is available for all to witness. There are currently questions remain about WazirX’s ownership structures cryptocurrency exchange, both in terms of operations and equity, in addition to the agreement announced for 2019 on both exchanges in an earlier blog post.

The dispute among Binance Chief Executive Changpeng Zhao and WazirX CEO Nischal Shetty has been interestingly broken out following the Indian Enforcement Directorate (ED) frozen the assets of banks owned by WazirX valued at INR 64.67 Cr for allegedly aiding the instant loan applications in money laundering. This was due to the fintech companies allegedly buying cryptocurrency using the public’s money

In a statement released on the 5th of August (August 5) The ED confirmed that the probe is ongoing, however the blame is on WazirX as well as its chief executive officer for failing to cooperate with authorities when information was sought regarding KYC in a variety of transactions involving money lending firms. The crypto assets purchased were later transferred to wallets in foreign countries, the statement said.

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Additionally, WazirX, in a statement, said to Newsexposer that it isn’t in agreement with the statement of the ED and is evaluating a new actions.

This isn’t WazirX’s first brush using the ED.

Indian Government Vs WazirX

The Minister of State for Finance Pankaj Chaudhary on Tuesday informed Rajya Sabha that the ED is investigating an alleged money laundering of 2,790 crore via WazirX. The ED is looking into two cases against WazirX in accordance with the laws in the Foreign Exchange Management Act, 1999 (FEMA) the minister told the Rajya Sabha.

On December 20, 2021 Tax officials searched WazirX headquarters and discovered alleged tax evasion amounting to an amount equal to 40.5 Cr.

This season, RBI governor Shaktikanta Das said earlier this year that the RBI Governor Shaktikanta Das saw the cryptocurrency market as a serious risk to the macroeconomy and added that those who invest in cryptocurrency are doing it at the risk of their own.

Private cryptocurrency poses a major threat to the stability of macroeconomics. Private cryptocurrency could affect the RBI’s ability to address concerns of financial stability Das said.

Is WazirX On The Way Out of India?

It has been widely stated that WazirX is India’s biggest cryptocurrency exchange, operates under an entity that is its parent Zanmai Labs Pvt Ltd, that is an entity registered in India However, the acquisition in 2019 by this Indian trading platform through Binance was thought to have altered the structure of control for the former.

It also raised concerns with authorities in Indian authorities regarding the flow of capital out of India (through legal methods) into crypto-currency exchanges that are registered in other countries.

The connection with Binance that has Chinese roots, as well as the transfer of cryptocurrency off-chain between WazirX onto Binance wallets, making it difficult to track the sources of buyers and sellers, added to the difficulties of WazirX According to experts.

Off-chain transactions refer to the transactions taking place on a cryptocurrency exchange which transfer the value out from the Blockchain. These transactions typically don’t incur any transaction fees, because there’s nothing happening in the Blockchain. Since no participant or miner is needed to verify the transaction, there’s no cost, which makes it an appealing option particularly if large amounts of money are involved.

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Kashif Raza, the founder of Bitnning in a series tweets, stated it was the case that conflict between the WazirX Bank and Bitnning was triggered by arbitrage in the regulatory system.

The growing problems of WazirX has also led to concerns about the company’s activities in India.

WazirX was created in the hands of Nischal Shetty Sameer Mhatre, Siddharth Menon and Nischal Shetty in the year 2017 to operate an exchange for peer-to-peer cryptocurrency. In November of 2019 it was revealed that Binance bought WazirX for an undisclosed sum. However, the details of the deal weren’t disclosed.

The Binance chief executive Zhao has offered his support to the ED to investigate WazirX after stating that Binance did not acquire the Indian crypto exchange.

We requested the transfer of WazirX source code operations, deployment, even as early as February this year. This request was rejected by WazirX. Binance does not have control over their systems. WazirX is not cooperating with us, and it appears like they are not cooperating with ED as well. Binance CEO said in a tweet. Binance CEO stated in an email.

In a statement on the news one of the crypto influencers commented, The entire crypto ecosystem is stunned and it’s going be difficult to convince regulators and authorities to adopt a more relaxed attitude towards the industry, especially considering the public battle that has been waged between WazirX as well as Binance CEOs. The first to be on the list of targets is WazirX.

If WazirX’s services were suspended, it could cause uncertainty regarding the assets it holds as well as Binance. According to an studyby WazirX regarding its 2021 results it reported that its trading volume was at $43 billion in the period, and it was home to 10 million.

Although only time will tell how things will turn out for WazirX the whole story has raised questions about the crypto industry that was already facing regulatory challenges in India.

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