Amid the collapse of cryptocurrency exchange FTX, CoinSwitch on Thursday (November 17), citing an independent third-party audit firm, said it holds sufficient reserves to match customer investments.
The consulting firm INMACS claimed to have verified that CoinSwitch’s overall holdings of virtual digital assets (VDAs) and INR balances were higher than those of its customers’ VDA and INR balances on the platform.
This comes nearly four months after the crypto giant engaged INMACS to conduct the audit process, with the firm finally carrying out the agreed-upon procedures (AUP) earlier this month.
“This report is our effort to affirm that our holdings are greater than what customers have purchased on CoinSwitch. INMACS’ independent report is a testament to our commitment and proactive approach to risk and compliance measures. We will continue to evaluate other ways of establishing trust and transparency as we help India participate meaningfully in the global crypto revolution,” CoinSwitch CEO and cofounder Ashish Singhal said.
The full report is yet to be made public. However, the crypto exchange did release the process requirements of the report:
- INMACS is said to have obtained web-login data from CoinSwitch as well as a detailed listing of crypto custody services and counter-party sources (including crypto exchanges and wallet addresses)
- Afterwards, the audit firm also obtained individual Indian fiat currency (INR) balances with banks, payment gateways, and crypto exchanges using snapshot of web-logins on the web-portal of these sources or banks, payment gateways, and crypto exchanges statements of account provided by CoinSwitch
- Information pertaining to VDA holdings was directly acquired by INMACS from CoinSwitch’s database
- Subsequently, CoinSwitch’s VDA and INR holdings were compared with customers’ VDA and INR holdings to see if there were any discrepancies
“INMACS successfully completed the agreed-upon procedures and found that total CoinSwitch holdings are greater than customer holdings. That is, the total INR and VDA holdings held by CoinSwitch are greater than the VDA and INR held by CoinSwitch on behalf of the users of its platform,” said CoinSwitch.
Assuaging FTX Fears
The claims by the crypto exchange comes at a time when the collapse of FTX has made crypto investors nervous. The industry was already in the middle of a crypto winter and raging market volatility, and the FTX saga has only added to the woes.
In the past few weeks, the drama at FTX has seen Binance’s CEO Changpeng Zhao threatening to sell all the FTT tokens he owns. FTT is the native token of FTX. Zhao later followed it up with assurances to rescue the troubled crypto exchange. Amidst this public drama, wary investors withdrew $6 Bn worth of funds in a few days, thrusting the platform into bankruptcy.
At the centre of the crisis was the fact that FTX held only $900 Mn in easily sellable assets against liabilities of $9 Bn.
CoinSwitch’s statement seems to be targeted at assuring retail investors that their investment is safe.
Indian crypto exchanges have been under scrutiny in the country this year. Over the course of the year, either notices were served or premises related to major crypto players including CoinDCX, and WazirX were raided by the Enforcement Directorate in connection with money laundering probes.
Other players such as Vauld have declared bankruptcy and have suspended operations, leading to concerns about investors’ assets. While the situation is still evolving, it remains to be seen whether the government will intervene and regulate the space.