CoinDCX has established a $6 million contingency fund to protect customer funds during the Indian crypto market’s $230 million WazirX hack recovery.
According to a press release, the ‘Crypto Investors Protection Fund’ will function as a safety net to mitigate user losses in the event of a security breach or other unforeseen circumstances that could jeopardize customer funds. Sumit Gupta, co-founder of CoinDCX said:
This dedicated fund will provide an additional layer of protection, ensuring that our customers’ assets remain secure and intact”Â
The fund’s size will be further increased by CoinDCX, which will commit 2% of its brokerage income over time, with an initial allocation of 50 crores, approximately $6 million.
Gupta has stated that the fund will be subject to annual evaluations and continuous monitoring to guarantee its sustainability. Additionally, the company has implemented a governance framework to ensure the transparency of the process while managing the fund’s credit and utilization.
The CIPF was established shortly after WazirX, which housed the majority of Indian cryptocurrency investors, was compromised for a total of over $230 million. Due to the incident, the exchange was unable to sustain a 1:1 collateral and was deprived of 45% of its customer assets.
In order to alleviate customers’ anxieties, the exchange proposed a “socialized loss strategy” that would grant users immediate access to 55% of their assets while the remaining portion would be secured in Tether’s USDT.
Nevertheless, the strategy was unsuccessful, as crypto investors interpreted it as an attempt to circumvent complete responsibility for the losses and as unjust. In the end, the exchange was compelled to abandon the plan.Â
The cryptocurrency sector has been subjected to a series of cyber assaults since its inception, and contingency funds such as the CIPF are not a novel concept.
In response to the persistent nature of these assaults, numerous significant cryptocurrency exchanges have implemented comparable funds as a safety net.
For example, in 2018, Binance established the Secure Asset Fund for Users, which is responsible for allocating a portion of its trading fees.
In 2019, HTX, a cryptocurrency exchange, established a reserve fund of 20,000 BTC. Meanwhile, OKX maintains a fund dubbed Risk Shield, which allocates a portion of its revenue.
