Indian cryptocurrency exchange CoinDCX has introduced an investor protection fund to safeguard users from losses due to security breaches.
This initiative was announced by Sumit Gupta, the co-founder of CoinDCX, in an interview with CoinDesk.
Starting with nearly $6 million (INR 50 crore) sourced from profits, Gupta hopes other exchanges will adopt similar measures to benefit the ecosystem.
“This fund represents around 1.8% of the roughly $350 million in customer funds we hold,” Gupta explained. “We plan to increase it gradually, contributing 2% of our monthly brokerage income. The idea is to start somewhere and then reassess this figure over time. While international exchanges have implemented similar measures, we aim to set a precedent in India.”
The move follows a $230 million hack at rival exchange WazirX last month, which impacted 45% of customer funds held in a single wallet. Gupta criticized WazirX’s response plan and added that CoinDCX’s funds are diversified across multiple wallets to reduce risk.
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Gupta noted, “This is about 1.8% of our $350 million in customer funds. We can’t ensure 100% security, but we aim to protect our customers even in rare cases of breaches.”
WazirX founder Nischal Shetty described the hack as unprecedented, but Gupta insists CoinDCX’s fund is a proactive measure, not a reaction to WazirX’s incident.
“Absolute security cannot be guaranteed,” Gupta admitted. “Our approach ensures that even in the rare event of a breach, our customers remain protected. Unlike WazirX, we diversify our funds across multiple wallets. This fund is another measure in our ongoing efforts to enhance security.”
India’s WazirX crypto exchange came under fire after unveiling a plan to implement a “socialized loss strategy” in response to the July 18 security breach that resulted in the loss of $230 million, or about 45% of its assets.
The breach targeted WazirX’s multisig wallet on the Ethereum network. Over 200 different crypto assets were stolen, including Shiba Inu, Ethereum, Polygon, and PePe memecoin.
However, many criticized this approach, arguing that it unfairly penalizes users for the breach. CoinDCX co-founder Sumit Gupta stated that the company should first absorb the losses before passing them on to customers. “Making customers directly absorb the 45% losses is utter nonsense. The poll options are also framed in a manner to protect the business first and not the customers,” Gupta added.
