ED freezes Binance-backed WazirX's assets

Highlights

• The Enforcement Directorate on Friday froze WazirX’s bank deposits worth Rs 64.67 crore.
• The ED in a statement said that its actions were related to an ongoing investigation in WazirX assisting Chinese-baked loan app companies in laundering money. 

Binance-backed WazirX crypto exchange, one of the leading exchanges in India, is in hot waters after Enforcement Directorate, Hyderabad froze assets worth over Rs 64.67 crores in connection with a money laundering scheme.  

WazirX, which Binance acquired in 2019, was one of the several exchanges which had been under the scanner for flouting various non-compliance claims with foreign exchange rules. The ED, while freezing the assets, said that its actions were related to an ongoing investigation into the domestic exchange's alleged role in assisting Chinese-baked loan app companies in laundering money.

The agency revealed that it had conducted a raid on one of the directors Zanmai Lab, operator of WazirX.com, under the alleged violation of the Foreign Exchange Management Act. The ED, in a statement, said it had been keeping an eye on such loan apps for some time now, and when the police and ED started crackdown, it observed that money was transferred out of the country to Hong Kong through crypto assets via WazirX.  

WazirX's brush with controversy 

WazirX has been under the scanner for q while now. Just a couple of months ago, its top officials were hauled into the offices of ED for questioning in connection with the matter. Furthermore, ED had previously issued a show cause notice to WazirX in 2021 as well for similar violations involving about US$382 million. The agency had also conducted a probe against other exchanges operating in the country, such as CoinSwitch and CoinDCX.  

In a statement, the agency also pointed out how loose regulatory control of transactions between WazirX and the global exchange are making it challenging for the domestic exchange to provide any information about the missing assets. 

Wakeup call for crypto exchanges

This is not the first brush with controversy for the Binance protocol. In fact, last year, UK's financial watchdog Financial Conduct Authority (FCA) banned the global exchange from operating in the country. It has been trying to make its mark in the UK but have failed to do so due to its stringent policies.  

The UK was not the only place where Binance had its troubles. In the US, the Commodity Futures Trading Commission and the IRS have accused Binance of insider trading and other money laundering and tax evasions.  

It also got a warning from Japan's financial agency for operating without permission in the country. Even in South Korea, the regulators asked it to register to operate or risk getting banned. Eventually, Binance had to shut down its operations in the country.  

The recent WazirX incident has once raised questions over the safety and security associated with cryptocurrencies. Also, this will definitely prove to be a wake-up call for several domestic as well as global exchanges operating in the country. It’s high time that all the exchanges follow various anti-money laundering rules and place stringent security protocols to ensure that neither they nor its customers are harmed by a wrong decision.

With the regulation talks gaining momentum, it's critical to ensure all the checks and balances are in place before the market participants decide to invest in cryptocurrencies.

Risk Disclosure: Trading in cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory, or political events. The laws that apply to crypto products (and how a particular crypto product is regulated) may change. Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading in the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed. Kalkine Media cannot and does not represent or guarantee that any of the information/data available here is accurate, reliable, current, complete, or appropriate for your needs. Kalkine Media will not accept liability for any loss or damage as a result of your trading or your reliance on the information shared on this website.