CoinDCX publishes Proof of Reserves, CEO Sumit Gupta says exchange will take more steps towards transparency

The company is also working to go live with CoinMarketCap's recently added proof-of-reserve tracker for crypto exchanges.

Other exchanges including Binance, OKX, KuCoin, and Bitfinex are also integrated with Nansen.

“With this, you can technically prove that you have 1:1 assets and a reserves-to-liability ratio of over 100%. It is important to take learnings from the recent (FTX) incident. Once you have all that out in the open, it gives confidence to customers as well as to regulators,” Sumit Gupta, co-founder and CEO of CoinDCX told Moneycontrol.

However, while proof of reserves can be an indicator of the financials of the company, the cascading effect on tokens has shaken the industry after the Terra-Luna crash, and FTT token among others.

“We need to understand that this industry is at a very nascent stage and there are no guidelines in place. We have seven parameters on the basis of which we filter tokens. I am not saying this is the ultimate solution, but it is a better bet,” Gupta said.

Gupta added that the next step for the company is to get a framework in place to assess which tokens should be listed. In the coming days, the company is expected to take more steps towards increased transparency and better reporting of various parameters including their Proof of Liability, which Gupta said should be ready to publish soon.

Last week, Gupta had tweeted that CoinDCX will publish its proof of reserves this week. He added, “We also plan to publish a report from a reputable 3rd party audit firm to certify our financial health. Unfortunately, Big 4 audit firms don't work with crypto companies in India.”

A number of founders, besides Gupta, have pointed out it was difficult for crypto exchanges to get audits done by the Big 4 firms namely Deloitte, EY, KPMG and PwC. Gupta said that the industry is working to change that, but it is a slow-moving process.

Last week, rival cryptocurrency exchange Coinswitch published a third-party report which verified its reserves.

The state of crypto in India

With crypto transactions taxed but the space yet to be regulated, the industry came together to form a new industry body on November 3, named Bharat Web3 Association (BWA). Going forward, BWA will be in charge of engaging with various stakeholders, including the government.

On how the government’s views are evolving on crypto in light of current events, Gupta said, “It would be difficult to give a sense of that because the industry association is leading the effort. The government should also take cognizance that Indian companies are taking that step towards transparency and being resilient in a challenging market. Indian exchanges not being affected in this market is a strong sign of confidence. So hopefully things should improve”

When it comes to investors, he believes that there will be more trust and confidence in high market cap tokens like Bitcoin, Ethereum etc. However, the bear market coupled with the FTX crash has not completely pushed investors away.

“In terms of trading activity, I think investors will continue to invest. Especially with lower prices, many may see this as an opportunity to invest and hold for the long term. A lot of high-frequency and speculative trading has moved to global exchanges due to TDS in India. We are still seeing good consumer confidence,” he said.

“Of course, first-time investors coming into the market has slowed down. But people who genuinely believe in crypto and decentralisation are investing. Products like SIP are picking up because there is no TDS involved.”