Illustration by Siddhant Jumde
Nothing seems to be going right in the cryptocurrency world right now. In yet another blow to the credibility of crypto platforms, Singapore-based Vauld, a crypto lending platform founded by Indian entrepreneurs Darshan Bathija and Sanju Kurian, suspended its withdrawals and deposits in early July, leaving nearly 800,000 subscribers in the lurch. Media reports claimed that a majority of the Vauld users were Indian, and accounted for 20 per cent of the assets under management. The platform saw a daily volume of $10-15 million (Rs 79.5-119.2 crore). The company, which had aimed “to build a banking system which is more swift, secure and decentralised than traditional banks” through blockchains, blamed the volatile market conditions for its decision. Vauld’s move comes on the back of crypto platforms such as the US-based Celsius Network and Voyager Digital suspending trading, landing hundreds of thousands of investors in a soup.
Incorporated in 2018, Vauld encouraged long-term investing by offering users SIP (systematic investment plan) options and higher interest on crypto holdings. More than 275 coins were listed on its platform. Unlike other crypto exchanges, Vauld did not receive brokerage income but made money through interest by lending cryptocurrencies to others. However, with the big fall in crypto in May led by the crash of stablecoin TerraUSD, investors began to pull their money out of the exchange. “This (suspension of activities) is due to a combination of circumstances such as the volatile market conditions, the financial difficulties of our key business partners inevitably affecting us, and the current market climate,” Bathija, also the company CEO, said in a statement on July 4. He said customers had withdrawn over $197.7 million (Rs 1,572 crore) since June 12, when the crypto market fell, triggered by the collapse of TerraUSD, the Celsius Network crisis, and Three Arrows Capital, a Singapore-based crypto hedge fund, defaulting on its loans. On July 5, Vauld said it had signed a term sheet with Nexo, a crypto platform, where it may buy 100 per cent of the firm. The sale is yet to conclude.
Vauld had 275 coins on its platform and earned interest on crypto loans
Collapses such as these strengthen the argument against legitimising cryptos, even as a crypto bill is in the works. The Reserve Bank of India (RBI) has been a vocal critic. RBI governor Shaktikanta Das has said that anything that derives its value from makebelieve, with no underlying asset, is speculation under a sophisticated name.
As many as 15-20 million Indians had invested around $6 billion (Rs 47,712 crore) in crypto on digital platforms, per November 2021 industry estimates. Investors are also rattled by the 30 per cent tax imposed on crypto trading in this year’s budget, which took effect from July 1 this year. The 40 Indian crypto exchanges have seen a significant decline in daily trading, per media reports. Some did clarify that they were not in the crypto lending business. “The crypto industry has several business models. Some are inherently riskier than others and can come undone,” says Ashish Singhal, co-founder and CEO, CoinSwitch Kuber, a crypto exchange. Hence the bloodbath now.