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Binance to cease off-chain fund transfers with WazirX from August 11; does not manage WazirX users’ funds

Binance chief communications officer Patrick Hillman has said, “In order to provide clarity and protection for users, we are removing the off-chain fund transfer channel between WazirX and Binance. From August 11, Binance will cease to support off-chain fund transfers between WazirX and Binance via the ‘login with Binance' option.”

ET Now Digital

Updated Aug 8, 2022, 21:10 IST

New Delhi: Days after the Enforcement Directorate (ED) conducted searches at premises linked to cryptocurrency exchange WazirX director and froze bank assets worth Rs 64.67 crores, global crypto exchange Binance has announced the removal off-chain fund transfers with WazirX.

Binance chief communications officer Patrick Hillman said, “In order to provide clarity and protection for users, we are removing the off-chain fund transfer channel between WazirX and Binance. From August 11, Binance will cease to support off-chain fund transfers between WazirX and Binance via the ‘login with Binance' option.”

Hillman clarified that users will still be able to deposit and withdraw balances via the standard withdrawal and deposit process between Binance and WazirX.

As the name implies, off-chain transfers are those that take place off the blockchain to save time and money.

ED probe on WazirX

The latest development comes after the probe agency on Friday said lax know-your-customer (KYC) norms, loose regulatory control of transactions between WazirX and Binance, not recording transactions on blockchains to save costs, and not recording KYC of the opposite wallets ensured that WazirX was “not able to give any account for the missing crypto assets”.

The agency further noted that it had recently conducted searches on one of the directors of Zanmai Labs, which operates WazirX in India, and issued a freezing order on its bank accounts containing Rs 64.67 crore.

WazirX “actively” helped 16 fintech companies that are under investigation on charges of money-laundering to divert the alleged proceeds of crime using crypto, according to the ED, whose investigation also discovered that WazirX has an “obscure” ownership structure.

“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,” Hillman added.

In its note on Friday, the ED stated that Binance was without any known office, “any known employee and rarely responds to queries on legal@binance.com.” Hillman, however, said that the company would co-operate with Indian regulators in the ongoing matters concerning WazirX.

WazirX-Binance ownership row

Meanwhile, the top leadership of the two exchanges has been engaged in a war of words on Twitter since Friday. Binance founder Changpeng Zhao and WazirX cofounder Nischal Shetty were caught in a public spat over which entity controls trading operations on WazirX.

The row has caused chaos among the 15 million registered users of the Indian exchange.

WazirX was acquired by Binance in 2019 after which Zhao distanced himself from the operations of the former for the first time on Friday following ED action. Both the firms agree that Zanmai Labs is fully operated and owned by Shetty and cofounders.

The deal between the two crypto exchanges succeeded due to a banking ban by the Reserve Bank of India in 2019.

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