Nichal Shetty, the founder and CEO of WazirX, one of India's largest cryptocurrency exchanges, shared his thoughts on the need for theft insurance in the crypto industry. In an exclusive interview with BusinessLine, Shetty discussed the importance of security measures to protect investors' funds, which were hit hard by a hacking attack on WazirX over six months ago.
WazirX was affected by a massive hack that resulted in the loss of $234.9 million (approximately ₹2,000 crore) in investor funds. Shetty acknowledged that this incident has led to a loss of faith among investors in the crypto industry. However, he believes that the sector is still in its early stages and will learn from these experiences.
"We are at the cusp of a new technology. There's maybe 50 or 100 million people globally who are completely into crypto and understand it. Eventually, it'll reach all 8 billion people, but it is in these early days of rapid growth that an industry learns how to deal with things. Theft is one of the biggest attack vectors for this sector," Shetty explained.
Shetty emphasizes that theft insurance is a crucial solution to mitigate this risk. "Insurance is the ultimate solution. Now, this industry is new and insurance is not easy to come by. However, insurance will evolve and maybe in three to five years, it will be easier to get insurance. For now, we are going with custodians who are large multi-billion dollar companies and have insurance," he said.
Regarding the regulatory environment in India, Shetty believes that there is progress being made but a complete framework is still lacking. "If you look at it piece-by-piece, there's been progress. Holistically, we don't have regulations. The TDS part, 1 per cent TDS makes it difficult for people to get involved in terms of trade, but maybe it helps the government with tracing transactions," he observed.
Shetty also highlighted the importance of finding reliable custody providers and considering in-house solutions as alternative security measures. "This might demotivate some people, but if that is your concern, you should not get involved in cryptocurrency and you should wait for this space to evolve," he advised investors.
In terms of recovering the stolen funds, WazirX has made significant progress. About $230 million was stolen, with $3 million frozen initially. Shetty revealed that about 85% of the remaining liquid funds have been recovered, while 15% remain pending. A recovery token has been introduced to represent the pending value, which will be allocated to investors and used for profit generation.
"We've also announced a decentralized exchange DEX that will have its own tokens. A percentage of those would be distributed to the recovery token holders to use on the decentralised exchange as fees or for staking," Shetty added.
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