WazirX, the biggest cryptocurrency exchange in India, saw a 54 per cent drop in trading volume in the last five days, showed data. Cryptocurrency trading volume on the popular exchange plunged to $2 million on August 9 from $4.3 million on August 5, revealed data by research firm CREBACO.
Last week, the Directorate of Enforcement (ED) conducted searches on one of the directors of Zanmai Labs Pvt Ltd, which owns the cryptocurrency platform and issued an order to freeze bank balance of around Rs 64.67 crore in a money. On August 9, Zanmai Lab released a statement, “WazirX is a platform co-operated by Zanmai Labs Pvt. Ltd. (Zanmai Labs) and Binance. Zanmai Labs has a no-tolerance policy towards any illegal activities using WazirX.”
Binance Distanced Itself from WazirX: Know Why
After this, Binance, a popular global cryptocurrency exchange platform distanced itself from the Indian exchange. Chief executive officer Changpeng Zhao said Binance did not own a stake in WazirX’s parent entity Zanmai Labs. “As a result of the recent regulatory action taken against Zanmai Labs Pvt Ltd, in relation to their operations of the WazirX Exchange, it has come to our attention that some users were given to believe that funds deposited in WazirX were managed by Binance. This is not the case,” said Patrick Hillmann, chief communications officer, Binance. It also disabled “off-chain fund transfers between the two platforms — Binance and Wazir X from August 8. Off-chain transfers are among the key issues cited by the probing agency in the money-laundering case, according to people aware of the development.
“Despite giving repeated opportunities, WazirX failed to give the crypto transactions of the suspect fintech APP companies and reveal the KYC of the wallets. Most of the transactions are not recorded on the blockchain also,” the ED said in a press release on August 5.
“Binance does NOT have control on operations including “user sign-up, KYC, trading and initiating withdrawals”, as stated earlier. WazirX’s founding team controls that. This was never transferred, despite our requests. The deal was never closed. No share xfers,” CEO Zhao said on Twitter.
WazirX-Binance Ownership Row Created Panic Among Crypto Users
The uncertainty over the ownership and probe by ED, have created panic among the cryptocurrency users. WazirX accounting for over 50 percent of trading volumes in the country. Cryptocurrency trading volume on WazirX platform skyrocketted by 1735 per cent year-on-year to $43 billion last year, taking its total user base to 10 million, the company mentioned. Many users have already withdrew their funds and closed their accounts on the platform, according to reports.
Zanmai Labs recently said it has no affiliation with any users who indulge in illicit activities. “Users are signed up on WazirX only after they complete the KYC process, including submitting proof of address and identity. Our KYC/AML terms and processes are available on the platform publicly. For every transaction, we are able to produce the KYC details of the relevant user,” it added.
“ED appears to be investigating the transactions of certain users and Zanmai Labs has no affiliation to such users and is unaware about the purpose of their transactions. Zanmai Labs is in the position of any other intermediary whose platform may have been misused,” it added.
Zanmai Labs, Which Operates WazirX Clears Doubts About Off-chain Transaction with Binance
Clearing the doubts over off-chain transactions, Zanmai Labs said,”Off-chain transactions between WazirX and Binance can only be done by a user between his/her/its own account on the two platforms. Hence, KYC details are available for all off-chain transfers as well [and have been submitted to the ED when requested]. Off-chain withdrawals also cannot happen if the accounts are not KYCed.”