The nation’s biggest cryptocurrency exchange, WazirX, is nearing the launch of its decentralized exchange, according to co-founder Nischal Shetty. The co-founder said that a decentralized exchange is like building software where peer-to-peer cryptocurrency trades can be facilitated.
Unlike a centralized setup, where an exchange is the custodian of a customer’s cryptocurrency and controls who can or cannot open an account on it, a decentralized exchange operates without an intermediary organization for clearing transactions. The trades are executed on self-executing smart contracts.
The decentralized exchange is undergoing testing and will be launched next month, said Shetty. WazirX was, in June, issued a show-cause notice by the Enforcement Directorate that sought explanation regarding transactions worth Rs 2,790.74 crore due to foreign exchange violations. The ED had asked WazirX earlier this month to explain why “withdrawal from crypto wallets” was not a violation of India’s foreign exchange regulations.
“Because a DEX (decentralized exchange) does not own the data, even the authorities can’t go to the developer of the exchange and say I want the data,” Shetty said, adding that the data is available on the blockchain for everyone to see.
A decentralized exchange can be used by anyone in the world and does not require a user to undergo any identification checks like ‘Know Your Customer’. Essentially, users go on the platform to conduct peer-to-peer transactions and hold the crypto on their private wallets.
A growing number of 7.5 million WazirX users are interested in trading on a decentralized exchange, he said. Uniswap, MDEX are some of the decentralized exchanges worldwide. Shetty believes that WazirX can provide something unique to the customers, especially for those who use their brand but need to go to a rival one for decentralization.
Currently, there are no laws in India governing cryptocurrency, including centralized or decentralized exchanges. There is no indication on when the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 will be tabled. This Bill, in its current form, is expected to criminalize not only trading but also the holding of cryptocurrency assets.