WazirX is back after 15 months, but regaining users' trust won't be easy, experts say
The key worry, industry stakeholders and users said, was that the cryptocurrency exchange failed to let its users withdraw their full investments even after restarting operations.
New Delhi: WazirX, once India’s largest cryptocurrency exchange by active users and trading volumes, reopened trading and withdrawals on its platform after more than 15 months on Friday.
However, limited release of funds by the company to users has raised the hackles of both users as well as the crypto trade.
Even as users fretted about being short-changed by the exchange, industry stakeholders, lawyers and investors expressed scepticism about whether the erstwhile No.1 crypto exchange will be able to regain users’ trust and ensure legal compliance.
The exchange had daily average trading volumes of over $23 million in March 2022, as reported by Mint.
On day one of the platform’s return to trading, many users complained they were unable to access their full portfolio value, and in many cases even the full list of tokens they had invested in.
Mohit Gour, an investor, posted on X that his ₹1,39,000 portfolio showed a withdrawable balance of ₹50,000—a reduction of 65%. Syed Siraz, a second user, posted on X that his portfolio on the platform was a 10th of what it was 15 months ago.
The release of limited funds is part of a rebalancing and restructuring exercise announced in a town hall on 6 November 2024. The rebalancing of tokens was completed by January this year. As part of the plan, users would be able to access 85% of their investments on Friday, and the rest in a staggered manner over three years.
Responding to Mint’s queries, Nischal Shetty, founder of WazirX, explained the staggered nature of the plan. “If you had ₹100 worth of tokens in July 2024, you would have received ₹85 worth of tokens in the January 2025 rebalancing. If those tokens are today worth ₹150, then you get the entire 100% of those tokens, that is, ₹150 worth of tokens. No part of this ₹150 is held back."
Shetty further added that the company is also working to recover stolen assets and on profit distribution over the next three years, as per the rebalancing scheme. “To compensate creditors, we are issuing recovery tokens (RTs)," he said. “WazirX will purchase RTs based on profits and recovery efforts every quarter, starting from the date of issue of RTs."
The stolen assets mentioned by Shetty refers to a cyberhack on 18 July 2024 that WazirX suffered on one of its wallets, which halted operations and led to user funds being frozen.
Some users, while unhappy with the rebalancing, appear resigned. Nishant, who asked to be identified by one name, said while he didn’t agree with WazirX’s ‘rebalancing exercise’ to return users’ funds, “this is the best we can get for now".
“We’re all left with a feeling of being short-changed, and are going with the idea that something is better than nothing. The amount that the exchange owes users is much higher than what we can access today," he added.
Industry stakeholders agreed with Nishant’s assessment. A ₹1 lakh investment in bitcoin around the time WazirX was hacked in July 2024 translated to 0.0206 BTC tokens.
Under WazirX’s restructuring scheme, users would get back 85% of the value of their investments as of 1 January 2025. This would give the ₹1 lakh bitcoin investor a revised allocation of 0.0105 BTC. This holding would be worth ₹1.03 lakh today—about half what the original holding would have been worth.
‘Dented trust in crypto community’
WazirX’s return has generated sharp reactions from peers. Vikram Subburaj, founder and chief executive of homegrown crypto exchange Giottus, said WazirX’s restructuring exercise has dented Indians’ trust in the crypto community.
“Major hits included a revelation that the company is essentially immune to legal prosecution in India, which users found out at the time of the hack last year," Subburaj said.
“Now, its release of limited cryptocurrency funds to users after a long wait, coupled with moving its operating headquarters to Panama, do not instill confidence. Meanwhile other platforms are doing many things to assure users of actual transparency and accountability," he added.
Ashish Singhal, cofounder of CoinSwitch, India’s highest-funded cryptocurrency exchange, agreed that WazirX’s move significantly eroded trust.
“The industry’s collective focus should now be on rebuilding lost trust, most importantly by ensuring that users’ funds are fully recovered and protected going forward. The bigger lesson for investors is to be doubly sure about the platforms they choose, especially regarding trust, transparency and compliance," he said.
Lawyers also concurred that WazirX’s ‘return’ leaves a considerable dent in user trust, not just for the company but the crypto industry at large.
Anirudh Rastogi, founder and managing partner at Ikigai Law, said WazirX’s “continued partial access to funds—despite the overall appreciation in token values over the past year—highlights the limitations that remain in the absence of clear regulatory direction".
“The episode underscores the need for stronger investor safeguards and policy clarity to build enduring trust in the domestic crypto ecosystem. Without a formal mechanism for redressal or oversight, even genuine recovery efforts by exchanges fail to inspire confidence among investors," he added.
The WazirX Story
Incorporated in December 2017 as Zanmai Labs Private Limited, WazirX began operations in India in 2018. The exchange received a major fillip during the covid-19 pandemic, during which cryptocurrency investing exploded in India and worldwide.
WazirX’s troubles began much before the July 2024 hack that crippled its operations. On 1 April 2022, the imposition of a 30% tax on cryptocurrency gains, a 1% tax deducted at source (TDS) for all crypto trades above a certain threshold, and no option to book losses caused crypto trading volumes in India to crash more than 90% at the time.
Shortly afterward, Shetty, along with co-founder Siddharth Menon, relocated to Dubai and started his new web3 venture—Shardeum. In August that year, the exchange also ran into a dispute over its alleged takeover by Binance, the world’s biggest crypto exchange. Both firms have disputed the matter, the decision of which remains undisclosed as of today.
On 28 October 2024, Mint reported that a group of 11 users had filed a lawsuit with the National Consumer Disputes Redressal Commission (NCDRC) against WazirX. The consumer court said WazirX’s cryptocurrency holdings were based in Singapore and that it did not have jurisdiction over foreign lands, essentially leaving users with few options other than pursuing legal action in Singapore.
“For most users including me, this was not feasible since the legal costs would have been more than what many of us had invested," Nishant said.
After its hack last July, WazirX disclosed that it was pursuing a restructuring move in the Singapore High Court since its crypto holding subsidiary, Zettai Pte Ltd, was based there. The company used its India entity, Zanmai Labs, solely for handling transactions in rupee.
On 14 October, the High Court of Singapore approved WazirX’s application to restructure its company and move its assets. The resumption of operations comes 10 days after the court’s approval.
‘Panama entity won’t be involved’
Meanwhile, Shetty said that the company’s newly registered Panama entity “will not be involved" in India operations.
“The Indian entity is going to look after the complete crypto exchange operations. All core activities of the exchange, including crypto-to-crypto trading, user withdrawals and technical operations, will be handed over to Zanmai to ensure faster payouts to creditors. We amended the scheme in such a way that Zanmai India will be the fulcrum of WazirX activities, something which majority of creditors voted in favour of. This amended scheme was approved in the Singapore court," Shetty said.
Shetty also claimed the exchange “learned a lot" from last year’s hack. “We’ve implemented three key measures based on those lessons: a reputed and large cold wallet custody provider, insurance, and better risk management. We have partnered with BitGo for fund custody. They are one of the biggest custody partners in the ecosystem with over 2,000 institutional clients across the world. Bitgo currently manages over $90 billion in assets. Its solutions include up to $250 million in insurance coverage for the assets it holds, along with advanced security measures to prevent any potential breach."
He added, “Ensuring you divide cold wallets into multiple smaller wallets and reduce the risk surface area is another important step exchanges should take to prevent large attacks. Security is an evolving sector in crypto and we intend to continue to follow best practices and work with the top custody providers in the industry," he added.
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