WazirX and Binance Spat: Binance Stops Off-chain Transfers

Summary:
• WazirX, India’s leading cryptocurrency exchange, is embroiled in a feud with Binance. We tell you how it got here and why it could turn ugly.

Binance, the largest digital asset exchange in the world, stopped off-chain fund transfers with WazirX on Monday. In a growing dispute, Binance announced it will no longer enable off-chain financial transfers with WazirX using the ‘Login with Binance’ option, which alarmed WazirX users. Deactivating this function, which has been increasingly popular among WazirX users, could have a substantial impact on the exchange.

Despite the rift, WazirX users can still deposit and withdraw funds via the usual Binance and WazirX withdrawal and deposit processes. Nonetheless, the number of people affected is a major worry. About 15 million of the Indian crypto exchange’s registered users have been affected by the public spat. WazirX is India’s largest cryptocurrency exchange in terms of trade volume. In 2021, it had an annual trade volume over $43 billion.

How it all went wrong between WazirX and Binance

An ownership dispute between WazirX and Bitfinex has caused the two exchanges to engage in constant back-and-forth trading activity. WazirX and Binance are intricately connected with one another on a number of different fronts. WazirX users get access to wallet services through the latter, which also serves as a liquidity provider. The disagreement originates from Binance’s claim that it does not have any control over WazirX’s trading activities.

Ultimately, it boils down to whose job it is to oversee the legal aspects of WazirX operations. However, Binance CEO Changpeng Zhao claims that Binance does not conduct WazirX’s day-to-day running. On the contrary, Nischal Shetty, a co-founder of WazirX, is adamant that Binance is the true owner of WazirX and that Zanmai Labs has the rights to operate INR-Crypto pairs on WazirX. Zanmai Labs is will likely go the legal path and sue.

Late in 2019, Binance revealed in a blog post that it had completed the acquisition of WazirX. In a second blog post, WazirX confirmed the acquisition by Binance.” Zhao, CEO of Binance, tweeted on Friday that Binance does not own any equity in the company behind WazirX, Zanmai Labs. According to Zhao, the transaction to acquire the company was never finalized. He added that Binance only offers wallet services for WazirX as a technical solution and that the exchange also allows integrations that use off-chain transactions to save on network fees.

Furthermore, WazirX’s troubles are compounded by the intervention by Indian authorities. On Friday, India’s Directorate of Enforcement (ED) began investigating directors of Zanmai Lab Pvt. Ltd, WazirX’s parent company. They also froze the company’s its bank accounts with over $8 million. The feud is likely to dent the confidence of many users in crypto assets, in a market that is reeling from a prolonged downturn.