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Highlights
- WazirX has recently revealed a poll for its users to determine a fair recovery plan.
- However, the suggested plan has major flaws that could increase tax burden.
- The poll indicates that the exchange will also restrict financial flexibility by limiting withdrawals for its users.
The latest WazirX poll presents two options for users to regain partial access to their funds following a significant hack. This report explains these options, their impact on users, tax implications, and withdrawal limits. Moreover, the significance of the critical August 3 deadline has been decoded.
The WazirX Poll Options
1. Access 55% of Your Funds Without Withdrawals, First Priority to Potential Recovery Proceeds:
- This option allows users to access 55% of their portfolio without the ability to withdraw these funds immediately. The remaining 45% will be converted into Tether (USDT) or other tokens available with the Indian exchange.
- Hence, users choosing this option will have priority when potential recovery proceeds are distributed.
2. Access 55% of Your Funds With Withdrawals, Second Priority to Potential Recovery Proceeds:
- This option enables users to access and withdraw 55% of their portfolio. The token conversion applies here as well.
- Thus, users opting for this will have second priority in receiving any potential recovery proceeds.
Poll results, updated every 15 minutes, are intended to guide WazirX’s final decision. The exchange will consider the poll’s outcome, ongoing investigations, platform liquidity, and evolving circumstances. Currently, the majority of users are preferring the second option as they want speedy withdrawals.
How Will It Impact On Users?
Users face several challenges due to the hack and the subsequent poll options.
1. Snapshot Date Controversy:
- The snapshot for valuing user portfolios is set for July 21, three days post-hack. Critics argue this is unfair as WazirX continued to allow deposits and trading after halting withdrawals on July 18.
- This allowed ‘illegal’ trading, as WazirX did not have the token backing for these transactions due to the loss of 45% of user funds. Moreover, prices plummeted due to panic selling as people sold their crypto for INR after knowing that the fiat reserve was unaffected. Nonetheless, the panic situation led to further losses.
2. Replacement of Stolen Tokens:
- Users will receive a basket of tokens equivalent in value to their stolen tokens based on average prices from CoinMarketCap and select global exchanges as of July 21, 2024, at 8:30 p.m. IST.
- This replacement ensures users can access the value of their stolen tokens but does not address the issue of the snapshot date.
Also Read: Weekly Crypto Insights: Bitcoin, Ripple, & WazirX Steal Spotlight
WazirX Poll Raises Tax Concerns
1. Forced Token Conversion:
- The replacement of stolen tokens involves converting them into a balanced crypto basket. In India, this transfer of crypto assets incurs a 1% TDS (Tax Deducted at Source).
- The responsibility of bearing this TDS is unclear. This will add to users’ financial burden as they already face significant losses and restricted access to their funds.
2. Capital Gains Tax:
- If users held tokens that appreciated in value, such as Shiba Inu (SHIB), and these tokens were stolen, their replacement with a different token might be considered a sale.
- This could attract a 30% capital gains tax on the profit. Moreover, this is unjust as users are already disadvantaged by the hack and the locking of 45% of their funds.
Exchange Withdrawal Limits
WazirX plans to set daily withdrawal limits for the 55% of funds users can access. This means users cannot swiftly withdraw even the unlocked portion of their assets. Hence, it further restricts their financial flexibility.
August 3 Deadline’s Importance
- The poll’s deadline for user responses is August 3, 2024, at 07:00 a.m. IST. This date is crucial as it marks the final opportunity for users to voice their preference on how to proceed.
- The exchange will resume platform operations shortly after the poll, making this deadline critical for shaping the recovery process and future operations.
Bottom Line
The WazirX poll presents users with challenging choices, each with significant implications. Furthermore, the snapshot date, tax burdens, and withdrawal limits add to users’ difficulties. Hence, the August 3 deadline is pivotal for determining the next steps and ensuring users’ voices are heard. Thus, the crypto exchange must balance fair recovery with operational stability, learning from past experiences of other exchanges.
Also Read: WazirX Update: Indian Exchange Plans to Lock 45% Assets In Recovery Plan
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