While WazirX’s restructuring demonstrates a structured and court-approved recovery process, the ongoing liquidation of FTX following its 2022 collapse highlights the challenges and inefficiencies that can emerge in unregulated cryptocurrency markets. Once one of the world’s largest crypto exchanges, FTX filed for bankruptcy, initiating a protracted and costly liquidation process that has thus far provided little relief to its creditors. Since filing for bankruptcy, the liquidation of FTX has been plagued by inefficiencies, with nearly $950 million spent on legal and administrative fees alone. After all these years, the liquidation recovery will be paid in fiat as per the 2022 value, depriving the users of the current bull run. On the other hand, WazirX has resorted to providing 85% funds in tokens and recovery tokens as a way for users to participate in the exchange’s future profits and asset recoveries.
The contrasting approaches to cryptocurrency insolvencies offer important regulatory lessons for India. The FTX debacle, which has left users facing significant delays and legal fees while recovering only a fraction of their assets, underscores the dangers of an unregulated cryptocurrency market. In contrast, WazirX’s restructuring, guided by the Singapore High Court, demonstrates the value of a transparent, legally governed framework in ensuring timely and equitable asset distribution.
For India, the key takeaway is clear: there is an urgent need to establish a robust regulatory and legal framework for the cryptocurrency sector. Such regulations should prioritise asset protection through proper custody rules, ensure clear mechanisms for court-supervised restructuring and institute strong oversight to prevent mismanagement. India needs to urgently protect users, enhance market stability and foster responsible innovation in the fast-evolving digital asset space.