After the Terra collapse, which devastated many Indian cryptocurrency investors and the failure of hedge funds such as Celsius and Three Arrows Capital, the
FTX fiasco is the most recent shocking development to impact the cryptocurrency market.
What worries the Indian crypto investors is the fact that Indian exchanges are also private, don’t share financial information with users, and their revenues have collapsed since the government adopted an aggressive taxation policy for crypto.
“At a time when the top global exchanges are under the spotlight, the Indian exchanges should also show transparency and provide evidence that they are sustainable businesses,” said Vishal Gupta, a Noida-based crypto investor.
Ashish Singhal, co-founder and CEO of CoinSwitch, India’s largest crypto investing platform, said his firm did not have any exposure to FTX and its token, FTT.
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“We hold users’ crypto assets in a 1:1 ratio. It means that funds are available for our users to trade 24 hours a day. We have zero leverage on users’ crypto. We have a straightforward business model based on trading fees and commissions. We earn commissions from transactions. We do not reinvest users’ crypto in any form or manner,” he said.
Singhal added that the exchange uses the world’s best custody services in terms of security, has fully audited financials, and has a “riskometer” on Solana (SOL), a feature that warns on highly volatile coins or when the company feels that users need to proceed with caution while investing.
Solana is one of the tokens exposed to FTX founder Sam Bankman-Fried and his firms, Alameda Research and FTX.
Sumit Gupta, CEO and co-founder of CoinDCX, said his firm never exposed user funds to price or credit risk.
“We never lend or take any actions with our users’ assets without prior consent. This means that all customers can access their funds at any time. Secondly, at CoinDCX, we have taken a conscious decision not to have a native token. This helps safeguard our users from the risks of making the native exchange token a larger part of their portfolio. Thirdly, risk management and continuous audit are integral parts of our system,” he said.
Gupta added that CoinDCX wallets were state-of-the art and had multi-party computation (MPC), which means transfers could only happen if authenticated by the users themselves.
Smaller crypto startups also say they have made adequate provisions for consumer protection.
Khaleelulla Baig, co-founder and CEO of thematic investment platform Koinbasket, said it has been their policy from day zero to not take custody of client funds and assets, nor do they seek any rights to trade on behalf of users.
“We believe in empowering users with complete control over their accounts, funds and assets. Also, all crypto basket algorithms avoid picking crypto projects that primarily depend on leverage and collateral as core business activities. Till date, we have integrated with only regulated global exchanges like Coinbase,” he said.
After FTX’s collapse, leading crypto exchanges like Binance, Crypto.com, and Kucoin etc have conducted reviews of their total value of reserves. Crypto.com’s initial audit has revealed that 20% of its assets are in the meme coin Shiba Inu. And in another emerging sign of distress in the ecosystem, crypto lender BlockFi has once again halted withdrawals.