Indian cryptocurrency exchange CoinDCX has taken a proactive step to protect its users by setting up an investor protection fund. This decision comes shortly after the unfortunate $230 million hack that hit another major Indian crypto exchange, WazirX.
In an interview with CoinDesk, CoinDCX’s co-founder Sumit Gupta emphasized the importance of such a fund in the crypto ecosystem. He mentioned that if more exchanges followed suit, it would be beneficial for all users. The investor protection fund, initially funded with approximately $6 million (INR 50 crore) from the company’s profits, aims to compensate users in the event of rare scenarios like security breaches.
The recent hack at WazirX, where nearly 45% of customer funds in one wallet were compromised, served as a wake-up call for the industry. Gupta expressed his concerns about the proposed plan by WazirX to manage the customer funds post-hack, highlighting the need for a more robust security measure like the investor protection fund.
Gupta clarified that the fund’s creation was not solely a response to the WazirX incident but a proactive measure to safeguard CoinDCX users. He acknowledged that achieving 100% security in the crypto space is challenging, which is why diversifying funds and implementing additional security measures are crucial.
The $6 million initial fund is just the beginning, as CoinDCX plans to contribute 2% of its monthly brokerage income to further strengthen the fund. Gupta emphasized the importance of continuously evaluating and increasing the fund size to ensure adequate protection for users. He cited international exchanges that have similar protection funds and expressed the company’s commitment to setting a standard in India.
With the increasing popularity of cryptocurrencies, security breaches and hacks have become a significant concern for users. The establishment of an investor protection fund by CoinDCX sets a positive precedent for the industry, emphasizing the importance of safeguarding user funds and maintaining trust in cryptocurrency exchanges.
As the crypto industry continues to evolve, initiatives like the investor protection fund can play a crucial role in enhancing security standards and building a more resilient ecosystem. It is essential for exchanges to prioritize user protection and take proactive measures to mitigate potential risks in the ever-changing landscape of cryptocurrencies.