Home / Markets / Cryptocurrency /  WazirX episode exposes darker side of crypto transactions: Govt source
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Caution is necessary when dealing with cryptocurrencies as the WazirX episode has exposed its darker side, a top government source said on Thursday.

The source added that people should exercise caution in absence of a regulation to govern cryptocurrencies and so-called exchanges trading in them.

"Caution is the word that should be in the minds of the people dealing with crypto. In the episode of WazirX, people got to know many darker sides, caution is necessary in crypto transaction," PTI quoted a source as saying.

The Enforcement Directorate (ED) had frozen the assets of WazirX, which is linked to the world's largest digital currency exchange Binance, as part of its probe into suspected violation of foreign exchange regulations.

The ED said that it froze assets worth 646.70 million rupees of WazirX, one of the largest virtual currency exchanges in India.

A spokesperson for WazirX said, "We have been fully cooperating with the Enforcement Directorate for several days and have responded to all their queries fully and transparently."

"We do not agree with the allegations in the ED press release. We are evaluating our further plan of action."

The investigative agency said that its action was related to the probe into the crypto exchange's suspected role in assisting instant loan app companies in laundering the proceeds of crime by converting them into cryptocurrencies on its platform.

The searches were conducted on one of the directors of Zanmai Lab, which owns WazirX.

ED on money-laundering investigations

The ED said that it was conducting money-laundering investigations against several shadow banks and their fintech companies for violation of central bank norms and indulging in predatory lending practices.

"While doing fund trail investigation, ED found that large amounts of funds were diverted by the fintech companies to purchase crypto assets and then launder them abroad ... maximum amount of funds were diverted to WazirX exchange and the crypto assets so purchases have been diverted to unknown foreign wallets," it said in a release.

A lot of these fintech companies dealing in illegal lending practices were backed by Chinese funds, the investigating agency added. (

The ED launched its investigation last year into WazirX for suspected violations of foreign exchange regulations.

Trading on WazirX drops by over 55%

WazirX, which has around 15 million users and is India's biggest crypto exchange, has recorded a sharp 50% drop in trading on its platform, while its WRX crypto token has nosedived from 23 per coin earlier this month to 17 on Wednesday.

In a week, WazirX's trading volumes have sunk by more than 55% – from $4.3 million on 5 August to $2 million on 9 August.

Binance CEO tweets about WazirX

Meanwhile, Binance CEO Changpeng Zhao had tweeted that the company does not own shares in Zanmai Labs.

“Binance does not own any equity in Zanmai Labs, the entity operating WazirX and established by the original founders," he said.

Zhao wrote, “On 21 Nov 2019, Binance published a blog post that it had “acquired" WazirX. This transaction was never completed. Binance has never - at any point - owned any shares of Zanmai Labs, the entity operating WazirX."

“Binance only provides wallet services for WazirX as a tech solution. There is also integration using off-chain tx, to save on network fees. WazirX is responsible all other aspects of the WazirX exchange, including user sign-up, KYC, trading and initiating withdrawals," Zhao added.

Last year, the ED was looking into a money laundering case which involved Chinese-owned illegal online betting applications. During the course of the investigation it was found that the laundered proceeds of crime worth about 570 million rupees had been converted into cryptocurrencies using the Binance platform, the ED had said.

With agency inputs

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