WazirX, one of India’s leading cryptocurrency exchanges, is seeking creditor approval for a proposed asset redistribution scheme as it struggles with financial distress and operational challenges. The approval process, which requires consent from at least 50% of creditors by volume and 75% by value, is scheduled to take place between March 19 and 28.
The exchange has faced mounting difficulties, including an ownership dispute with Binance, tensions with Coinswitch, and escalating liabilities. Further compounding its challenges, WazirX suffered a security breach in July last year, resulting in a loss of over $230 million. The company currently has claims worth $546.5 million and $302 million in assets.
Liquidity Challenges and Operational Uncertainty
Nischal Shetty, founder of WazirX, acknowledged the liquidity constraints facing the exchange, particularly for Indian Rupee (INR) transactions. However, he noted that crypto-to-crypto transactions, such as those involving USDT (Tether), were easier to facilitate due to access to global liquidity sources.
“The challenge is on the INR part of it. While we haven’t hammered on that, I think it’s a post-voting process for us. For the USDT, which is like the crypto-to-crypto market, it is fairly straightforward since you can always pull in liquidity easily from other sources since it’s global,” Shetty told Business Standard.
If the scheme is approved, creditors will receive an initial distribution of the available liquid assets within ten business days of its implementation. Additionally, they will be issued recovery tokens that can be redeemed as part of the company’s recovery plan. Shetty further stated that once WazirX resumes full operations, the platform’s operational profits would be allocated to users.
“For the next three years, the profits we generate will be distributed. For the first $30 million (in shared profits), about 100% will be distributed, following which 50% for the (next) three years,” he said.
Financial Performance and Market Response
Zettai, WazirX’s parent company, reported a consolidated loss of $809,490 in the 2023-24 financial year, an improvement from the $1.34 million loss recorded in FY23. However, its revenue declined by 42.5% to $6.97 million in FY24, down from $12.13 million in the previous fiscal year.
Despite efforts to stabilize operations, WazirX anticipates significant market volatility when it reopens.
“Initially, there will be a high number of sellers because there are people who’ve been waiting to sell assets and take advantage of the price movement. So the task will be to bring in more buyers who deposit rupees,” Shetty added.
Ownership Dispute with Binance
WazirX’s ongoing ownership dispute with Binance remains unresolved. Last year, Binance refuted WazirX’s claims that the global exchange owned the platform, stating that it did not operate the company. However, Shetty has maintained that Binance did acquire WazirX, leaving the current ownership status in question.
As WazirX navigates these challenges, the outcome of the creditor approval process and the platform’s ability to regain trust in the crypto market will be crucial in determining its future trajectory.
