Binance-WazirX spat heats up as investors yank funds from Indian exchange

From the Editor’s Desk

Dear Reader,

“He said, she said” doesn’t get much more bitter, nor high-stakes, than the blame game being played out between cryptocurrency exchanges WazirX and Binance in recent days.

WazirX, reckoned to be India’s largest exchange, and Binance, the world’s largest crypto exchange, have been embroiled in a war of words over the ownership of the Mumbai-headquartered business that has seen the latter vociferously deny owning the former.

Since such tussles typically involve positive ownership claims rather than “it’s not mine and I’m not responsible,” this case is an outlier, but Binance is keen to put clear blue water between itself and WazirX as the Indian business faces allegations of violating foreign exchange rules — read: money laundering.

Whether the allegations hold up is, of course, a matter for the courts to decide, but Binance has a long history of scrapes with authorities around the world, so its determination not to blot its copybook is understandable. All the more so given its efforts to get on agencies’ good side in the past year, which have included beefing up compliance and making high-profile hires of former regulatory folks from Britain and the U.S.

It shows ultimately what a firm like Binance may value more — publicly cutting ties to a once-beloved partner and insisting on a corporate annulment that’s way past its celebrated union many moons before. But it also reveals something inherently true in any challenged market environment: every man for himself. There’s no loyalty when the stakes involve survival. 

Until the next time,

Angie Lau,
Founder and Editor-in-Chief
Forkast

Forkast.Insights | What does it mean?

Binance’s elusive corporate structure strikes again. The world’s largest exchange by trading volume has a history of being coy about exactly where it is based and what it owns. Its labyrinthine corporate structure also has allowed it to sidestep regulators on multiple occasions.  

Binance currently has no official headquarters. Founded in China before pulling out in 2017, it has since set up shop at various times in Japan, Malta, the Cayman Islands, Seychelles and more recently, the United Arab Emirates. Its internal structure is fragmented, allowing legal entities to close down and move on if regulators start paying too much attention to them. 

In India, a similar situation has arisen. An obfuscated business deal involving the apparent acquisition of WazirX has allowed Binance to step back from any legal issues by claiming it never fully acquired the exchange and that it offers merely technical support to it. Yet a year ago, Binance Chief Executive Changpeng Zhao retweeted a post saying Binance owned WazirX.

But now that WazirX is caught between its legal troubles and being in a country with an increasingly hardening stance toward cryptocurrency, Binance is distancing itself from the company. 

For any chief executive whose company is currently in Binance’s portfolio, this should be a cause for worry. The giant has shown little appetite to fight legal battles for itself, and now, it seems, for companies with which it is affiliated. 

Forkast.Insights | What does it mean?

BlackRock has not had a good 2022. The world’s largest asset manager, with its record-breaking US$10 trillion-plus of assets under management, set a different record this year: In the first half, it lost US$1.7 trillion of its clients’ cash. The company’s move into crypto during the second crypto winter is part of a broader change in its strategy for managing people’s money. 

When BlackRock launched, it prided itself on its actively managed portfolios. But during this year’s market rout, BlackRock’s clients have moved huge sums of money into passive funds that track markets without intervention as trust in actively run funds has dwindled. The partnership with Coinbase is another passive facility for investors. 

During what is expected to be a rough period for asset markets in the near future, crypto has been faring surprisingly well. Its correlation with broader financial markets has been loosening and institutional money has been pouring in.

Although the news is being viewed as a big win for Coinbase, it’s also positive PR for BlackRock. 

Forkast.Insights | What does it mean?

Another day, another crackdown on crypto in China. The latest move by Chinese authorities is further indication of their determination to dissuade its people from getting involved with crypto. A key target of the latest battle in China’s war on crypto is people teaching others how to trade crypto beyond the reach of authorities. 

Many crypto exchanges claim that they ban customers from China, but that doesn’t mean Chinese people are dissuaded by such restrictions. They can easily find online tutorials via virtual private networks to help them set up overseas internet protocol addresses that allow them to circumvent China’s internet firewalls and gain access to trading platforms that serve other countries.

Another approach Chinese investors have taken to flout the country’s ban on crypto has been to register a company overseas in jurisdictions such as the British Virgin Islands or the Marshall Islands. 

Crypto trading has long been frowned upon by Beijing, with money laundering being a primary concern. The way in which crypto exists independent of the banking system and therefore state control, alongside its international nature, also adds to authorities’ worries over capital outflows as well as competition with the e–CNY, China’s new central bank digital currency that is currently being market-tested across the nation.

As Chinese authorities step up efforts to shut down social media accounts and video channels helping people trade crypto abroad, Chinese crypto investors — no matter how much they have successfully evaded crackdowns in the past — might wish to follow suit and lie low for a while.