WazirX crypto exchange co-founder Nischal Shetty claimed recently that the exchange management is in plans to build the largest decentralized exchange (DEX) of India, which will not be registered in India, similar to WazirX whose parent company is registered in Singapore.
In the latest committee of creditors (CoC) meeting held virtually, Shetty discussed the idea of starting a DEX and a native token to compensate the 4.4 Million users of WazirX exchange who suffered a substantial 45% loss on their funds after a cyber hack of Rs 2000 crore on July 18. The WazirX management intends to re-start trading on WazirX exchange and launch the new DEX simultaneously from January 2025.
During the CoC meet, when one of the members questioned Nischal whether the new DEX will be registered in India, he replied stating, “The DEX would need to be through a DAO. Due to the complexities of establishing such a structure in India, the entity will be registered outside the country as a nonprofit foundation.”
The meeting also discussed the plans including resuming operations at WazirX and establishing a new DEX which is intended to facilitate real-time cryptocurrency swaps between wallets, allowing users to maintain self-custody of their funds, contrasting with the previous custodial model used in WazirX’s peer-to-peer transfers.
The statement of Nischal again raises some serious questions such as if the platform operates outside of India will it gain the user’s trust? Users already lost their trust in the exchange and the founder.
Moreover, when a COC member asked Nischal, Have any funds been raised for the DEX yet? He responded, “Not yet, but the plan is to reach out to investors once the initial version of DEX is ready.”Â
The firm aims to become the largest DEX in India within 12 months which is another big claim to make given WazirX is suffering from credibility issues. Since the DEX is still in the design phase and is expected to have a test version for user experience by January 2025, it raises the question of why such a bold claim is being made before the official launch.
Long Delays In RecoveriesÂ
The exchange stated that they are currently developing a financial forecast for the three-year Scheme period and developing assumptions for profit-sharing arrangements with Scheme Creditors.Â
The time period shared by wazirX clearly indicates that the overall restructuring process may lead to significant delays that could negatively impact users.
Besides this there is one more loophole, the firm still heavily relies on the users. The firm stated that future profits will be dependent on the proportion of the current users that will continue to use the platform once it is reopened, and the anticipated growth in users and user balances.
The users are already frustrated with all the drama, missed the bull run, and lost their hard-earned money then why they will trust the exchange again? Furthermore, the exchange doesn’t clarify how they will rebuild the trust of existing users.
Final Thoughts
WazirX’s ambitious plans to launch a decentralized exchange and restructure its operations face significant hurdles that cannot be ignored. The decision to register the DEX outside India through a DAO structure may further erode the users trust.
The success of their restructuring heavily depends on retaining existing users and attracting new ones. WazirX’s vision of becoming India’s largest DEX within 12 months appears more aspirational than realistic. However, the time will tell the real story, will these plans succeed or not?
Also Read: Who is SK Masud Alam, the Trojan Horse who brought down WazirX?
