Indian crypto entrepreneurs said they are implementing measures to provide full transparency on their reserve funds to win back investor confidence after the collapse of FTX, the world’s third-largest crypto exchange by trading volumes.
After the collapse sent shockwaves across the crypto landscape, cofounder of CoinDCX Sumit Gupta took to Twitter to say that the crypto exchange will publish its proof of reserves by the fourth week of November. CoinSwitch’s cofounder Ashish Singhal has already declared that its crypto and fiat currency holdings exceeded the total amount held on behalf of its users.
The moves follow Binance founder Changpeng Zhao’s promise to disclose its proof of reserves in order to provide full transparency on the extent to which it can cover potential customer withdrawals. Binance, the world’s largest crypto exchange, was an investor in FTX and pulled out of a deal to acquire the exchange.
Pending clarity on possible cryptocurrency rules and regulations in India, crypto exchanges in the country have recognised the need for robust self-regulation and have performed well to date.Except for a few occasions when users have been unable to withdraw funds due to technical glitches, Indian crypto exchanges have provided steady services to the country’s 100 million crypto investors and have avoided financial irregularities that have plagued exchanges such as FTX.
In India, it is estimated that about half a million crypto investors have been impacted by the steep fall in FTX’s native FTT token and are staring at an over 90 percent depreciation of their invested capital.
Not only did Bitcoin and other major cryptocurrencies drop to their lowest price point for the year, the ensuing liquidity crisis also threatens to engulf more crypto firms and has frayed investor nerves even further.However, more than the direct impact on exchanges, it is the dent in investor confidence that will continue to weigh down on trading volumes.
Understanding the potential of large-scale panic among Indian investors, leading crypto exchanges CoinDCX, CoinSwitch and WazirX were quick to issue statements about their healthy balance sheets and assure users there was no impact of FTX’s bankruptcy on their operations.
CoinDCX reaffirmed its decision not to issue a native token like FTX. WazirX reiterated that it employs one of the world’s best custody services. Additionally, the exchanges clarified that they do not assume debt based on their users’ crypto assets and rely solely on trading fees or commissions for revenue.
However, there are crypto firms that offer crypto lending and staking services that could be impacted by the FTX crisis. This has prompted some Indian crypto investors to move their digital assets to non-custodial storage solutions like hardware wallets. Others have shifted their trading to more reliable crypto exchanges to avoid any further loss of holdings.
While the overall crypto market fell by over 20 percent in terms of market capitalisation in the aftermath of the FTX collapse, trading volumes fell by a larger degree at crypto exchanges like Zebpay (-40 percent) and Bitbns (-32 percent) over the same period.Quick gains
An important reason Indian crypto exchange trading volumes were hardly affected is due to their limited exposure to FTX and the FTT token.
That said, monthly trading volumes are less than 50 percent of what they were in January this year for almost all Indian crypto exchanges, highlighting the impact of the recent crypto tax levied by the Indian government and the spate of bad news engulfing the broader crypto community.While it remains to be seen if another wave of liquidity-driven challenges will impact the global crypto ecosystem, Indian crypto exchanges and investors have demonstrated a steely resilience in the midst of the ongoing crypto winter.