Amid troubles with the government law enforcement agencies and the downturn in the ongoing global crypto winter, the country's largest crypto exchange WazirX has laid off 40% of its staff, which is around 50-70 of its total 150 employees in India. The laid-off employees are reportedly from customer support, human resource, public policy and communications, analysis teams, team heads and managers.

"As India's no 1 exchange, our priority is to be financially stable and to continue serving our customers. To achieve this, we've had to reduce our staff to weather the crypto winter," says a statement by the crypto exchange, as per CoinDesk. WazirX, like other exchanges in India, has seen a massive fall in trading volumes this year since the government introduced TDS on crypto and restricted banking access to these platforms in order to curb frauds and money laundering cases. CoinGecko data shows Wazirx daily trading volumes falling from a one-year high of 478 million on October 28, 2021, to 1.5 million on October 1, 2022.

WazirX says the current downturn is similar to the one faced during the year 2018, and that after the current bear market, a spectacular bull market rally is widely expected. It said the current global economic slowdown has caused the bear phase in the crypto industry. However, the Indian market also has its own set of issues, including concerns around taxes, regulations and banking access, it said, adding that this has resulted in a dramatic fall in volumes in all crypto exchanges.

The crypto platform has of late come under the ED radar over its misuse for money laundering activities. The troubles mounted when the CEO of global crypto exchange Binance, Changpeng Zhao, after the ED raids in August said Binance does not own WazirX. The deal, believed to have closed in 2019, had never materialised, said Zhao, which led to a public spat between WazirX co-founder and CEO Nishcal Shetty and Zhao, better known as CZ. Binance said it only provides wallet services for WazirX. Shetty, however, said WazirX is owned by Binance, and does not belong to its parent Zanmai Lab.

The ED raids at WazirX were conducted in the loan app fraud case, which has been a cause of concern for the government as well as the Reserve Bank. During searches, WazirX’s bank balances worth ₹64.67 crore were frozen. During later searches, more funds were frozen. Not only WazirX but the ED is also probing the role of other major crypto exchanges, NBFC and fintech companies over predatory lending practices and money laundering allegations. On September 12, the ED unfroze Rs 370 crore in the bank accounts of the crypto unicorn.

What is loan app fraud?

Various fintech companies backed by Chinese funds could not get an NBFC license from the RBI for carrying out lending business in India, so they devised the MoU route with defunct NBFCs to piggyback on their license and started disbursing loans through mobile apps. These Chinese fintech entities employ telecallers who misuse personal data and use abusive language to extort high-interest rates from the loan takers.

After the criminal investigation began, many Chinese Apps shut shop and diverted the huge profits earned through extortion tactics, out of India. While doing a fund trail investigation, the ED found a large number of funds were diverted by the fintech companies to purchase crypto assets and then launder them abroad. Most of these funds, says the ED, were diverted via the WazirX exchange and then diverted to unknown foreign wallets. Later, the company said it had no idea about the purpose of such transactions on its platform, and that the platform, like any other platform, could have been "misused". The company said it has no association with any of the alleged accused fintech and instant loan app entities, which appear to be the subject of the ED probe.

What is crypto winter?

If we see the value of every significant crypto in the first half of 2022, they have consistently dropped. A handful of crypto-related companies are facing severe financial difficulties, including bankruptcy. This period of market cooling is known as “crypto winter.” Like other asset classes, the crypto market also saw a huge sell-off this year. From a market valuation of $2.7 trillion on November 7, 2021, the m-cap of the top 100 cryptocurrencies on July 24, 2022, reduced to $1 trillion, a 62% decline.

"Winters in the crypto market might be depressing but bear in mind that bull markets also follow bear markets. The stock market’s prices have continually risen throughout history, as seen. Cryptos can be quite volatile, but this sector has always bounced back and done exceptionally well," said WazirX.

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