CoinDCX Announces Rs 50 Million Investor Protection Fund Following WazirX Hack

Indian cryptocurrency exchange CoinDCX announced the launch of a Crypto Investor Protection Fund (CIPF) worth Rs 50 crore on Wednesday, August 7. The move by CoinDCX comes after WazirX users suffered losses following a hack that drained one of its wallets of over $230 million (roughly Rs 1,900 crore). With this, CoinDCX has become the first Indian cryptocurrency exchange to launch a fund pool in a bid to protect its users in situations of financial vulnerability.

Announcing the CIPF, CoinDCX co-founder Sumit Gupta said, “This dedicated fund will provide an additional layer of protection, ensuring that our clients’ assets remain secure and intact in the extremely rare event of a security breach or adverse event.”

In the first phase of its launch, the CIPF mutual fund is worth Rs 50 crore, but this amount will increase in the coming times. According to Gupta, two per cent of the total brokerage income will be pumped into the fund to ensure that the locked-in amount increases gradually over time.

“We will continue to monitor the size of the fund, keeping the balance at an adequate level to protect our users’ assets. The CIPF will be one of its kind and will be an important step towards building long-term confidence in the Indian crypto ecosystem,” Gupta added.

The CoinDCX team also shared details about this announcement on social media platforms, stating that this emergency corpus for investors is part of the exchange’s “defense in depth” philosophy.

WazirX wallet was hacked on July 18 under the watch of Liminal Custody. Both WazirX and Liminal cited their internal investigations to deny responsibility for the breach to their respective sides.

WazirX has suspended deposits, withdrawals and trading on its platform since the attack allegedly facilitated by North Korean group Lazarus.

In an effort to restore financial balance, the struggling exchange has come up with a controversial plan whereby “users who have 100% of their tokens in the ‘non-stolen’ category will receive 55% of those tokens back. The remaining 45% will be converted into USDT-equivalent tokens and locked.”

WazirX users have criticized the plan, which imposes losses even on those whose funds were not stolen in the attack. Many in the crypto industry have called on WazirX to reconsider its approach, but the exchange is sticking to its original plan.

CoinDCX’s CIPF is designed to provide support in similar situations, should they arise within its ecosystem in the future.

“Impressive! This is definitely a great initiative from the CoinDCX team; a good approach in these difficult times and will only boost user confidence,” Sana Afreen, Director of Partnerships at Rizzle, told Gadgets360, commenting on the development. Afreen has funds stored in WazirX and is waiting for the platform to restart services.

Several players in the crypto world, however, remain concerned that such corpora could only work if they are on a large scale, as the damage caused by hackers could easily exceed CoinDCX’s Rs 50 crore – and what happens then could completely nullify the availability of such a pool of funds.

In 2022, when crypto exchange FTX crashed in the US, Indian exchanges had rushed to adopt the trend of publishing regular transparency reports to give a glimpse of their treasuries to their users and ensure financial security. CoinDCX, with this CIPF corpus, could have triggered another trend, which may or may not be adopted by other Indian exchanges.

Cryptocurrency is an unregulated digital currency, is not legal tender and is subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any kind offered or endorsed by NDTV. NDTV will not be liable for any loss arising from any investment based on any recommendation, forecast or other perceived information contained in the article.