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The major cyber breach in India’s largest crypto exchange, WazirX and their subsequent socialisation of losses have sent alarm bells in the industry.
Reacting to WazirX’s Saturday announcement to distribute losses amongst affected and unaffected customers instead of dipping into their own profit reserves, Sumit Gupta, CEO of CoinDCX, another crypto exchange, noted on X, “Hate to be saying this, but the way WazirX is handling this entire situation isn’t community first and this in my opinion won’t go down well for them. This sadly is also hurting the other ecosystem participants. The first contribution to losses should ALWAYS come from the Company (i.e. WazirX in this case) and the treasury and assets the company holds. I have not seen any such commitment around this from the company side, instead 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.”
Turn-off for investors
Sidharth Sogani, Founder and CEO of Crebaco Global, a cryptocurrency analysis firm, noted that WazirX’s breach and subsequent actions are likely going to spook out retail investors, “India’s crypto market continues to be unregulated, so big ticket investors knew the risks very well. For retail investors with an average holding of $100-500 this is a complete turn-off, and they are likely not going to return back to crypto trading.”
Sogani added that WazirX breach will also impact the regulations for the crypto industry in the future. “We were expecting the new government to deliberate new regulations, set up a standing community. This process will no longer be smooth.”
On Saturday, WazirX announced its decision to socialise losses amongst its customers. Earlier this month. the crypto trading firm reported a major cyber breach which siphoned of $230 million or nearly 45 per cent of its digital assets.
WazirX announced that it will “rebalance” customer portfolios on its platform, returning only 55 per cent of their holdings, while locking the remaining 45 per cent in USDT-equivalent tokens. This will also impact customers whose tokens were not directly affected by the breach, with the company stating that “users with 100% of their tokens in the ‘not stolen’ category will receive 55 per cent of those tokens back.”
The security breach resulted in the theft of over 200 different cryptocurrencies, with the bulk of the losses concentrated in several popular tokens including Shiba Inu (SHIB), Ethereum, Polygon’s MATIC, and the meme cryptocurrency Pepe.
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