WazirX Poll Explained: Impact On Users, Tax Implications, Withdrawal Limits

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As a long-term crypto investor with several years of experience under my belt, I have faced my fair share of market volatility and exchange hiccups. However, nothing quite compares to the recent WazirX hack and the subsequent poll that left me feeling utterly powerless and uncertain about my investments.

In simple terms, WazirX’s recent survey offers two possibilities for users to recover part of their funds that were affected by a major hack. This article elucidates these choices, their consequences on users, tax considerations, and limitations on withdrawals. Furthermore, the importance of the August 3 deadline has been clarified.

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.
  • 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.
  • Thus, users opting for this will have second priority in receiving any potential recovery proceeds.

The latest poll results, which are updated every quarter-hour, serve as a guiding factor for WazirX’s upcoming decision. WazirX intends to take into account the poll’s outcome, ongoing investigations, the platform’s liquidity situation, and any developing circumstances before making its final call. At present, a significant number of users have expressed their preference for the second option due to their desire for swift withdrawal processing.

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.

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 intends to impose daily withdrawal limits on 55% of user funds. Consequently, account holders are unable to quickly withdraw their accessible assets, thereby reducing their financial agility.

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.
  • WazirX 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 poses tough decisions for users, each carrying substantial consequences. Additionally, factors like snapshot date, tax obligations, and withdrawal restrictions compound the challenge. Consequently, the August 3 deadline holds great importance as it will shape the future actions and give voice to users’ perspectives. Therefore, the exchange must strike a balance between restoring equity and maintaining stability, drawing lessons from past experiences of similar platforms.

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2024-07-28 11:54