NAIROBI (CoinChapter.com)—Following a $230 million security breach at WazirX that exposed 45% of its holdings, Indian cryptocurrency exchanges are under more scrutiny. In light of this tragedy, concerns over these platforms’ dependability and safety have increased.
Crypto tax specialist Sonu Jain questioned the legitimacy of Indian exchanges by pointing out that users often must travel to Singapore for legal disputes, further questioning the integrity of Indian exchanges.
Questionable Practices Erode Trust in Indian Crypto Exchanges
Jain pointed out that these exchanges engage in questionable practices that further erode customer trust. For instance, they impose monthly fees on users who do not trade, charge for adding nominees, and even demand payment for enhanced Know Your Customer (KYC) processes.
Moreover, they operate their trading desks, potentially trading against their users—a clear conflict of interest.
Additionally, these exchanges restrict users from self-custodying their funds, a fundamental principle in the crypto industry that ensures user control over their assets. Instead, they compel users to keep their funds in the exchange, which exposes them to substantial risks, as seen in the WazirX case.
Jain also criticized some exchanges for licensing “self-custody” wallets, questioning the legitimacy of such practices and their implications for customer protection. The Indian crypto market’s unclear regulations and monitoring make these problems worse, giving customers few options in the event of a disagreement or loss.
India to Involve Industry Stakeholders in Shaping Crypto Policy
The Indian government is developing a consultation document to balance innovation and regulation. The move could be crucial in improving the nation’s crypto policy.
The Secretary of the Department of Economic Affairs is spearheading this initiative, which shows a proactive attitude to tackling the issues facing the cryptocurrency industry.
Anticipated for publication in September or October of 2024, the report will solicit feedback from industry participants to guarantee a comprehensive regulatory structure.
This move comes after Prime Minister Narendra Modi called for a global framework to govern cryptocurrencies and emerging technology during the G20 Summit. By including stakeholders in this consultation, the government is taking a step towards more precise and efficient regulations for India’s cryptocurrency industry.
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