In a bid to enhance transparency and reassure users regarding fund security, WazirX, one of India’s prominent cryptocurrency exchanges, has recently released its proof-of-reserves (PoR) report. The document indicates that a significant portion of customer assets—over 40%—is held on various third-party exchanges. This strategic move, announced on October 25, underscores the necessity for trust in the fluctuating world of cryptocurrencies, where security concerns frequently arise.
The PoR dashboard established by WazirX is designed to allow independent verification of wallet addresses and the specific holdings associated with each asset. As of October 24, the exchange reported a total of $298.17 million distributed across approximately 242,000 wallets. Within this sum, only $157.01 million is stored directly on the blockchain, while a substantial $126.91 million resides in external accounts on other exchanges—a point that raises important questions about liquidity and risk.
In its disclosure, WazirX clarified that no assets are under third-party custody, yet the exposure to external exchanges for over 40% of customer assets presents a potential risk factor. The exchange has not named the third-party platforms that hold these funds, which has led to a wave of speculation within the crypto community. Possible candidates for these exchanges include well-known platforms such as Bybit, KuCoin, and Huobi. WazirX co-founder Nischal Shetty has stated that the company is reaching out to these exchanges to seek permission to reveal their identities. This move reflects a commitment to transparency, yet it also highlights the complexities involved in managing substantial third-party relationships in the crypto world.
Given the tumultuous backdrop of cryptocurrency trading, especially following recent security breaches, WazirX is keen to demonstrate its commitment to protecting customer assets. The exchange is in the process of sourcing a new third-party custodian that can provide fund insurance—an increasingly essential feature in managing the risks associated with digital asset custody. In a statement, WazirX acknowledged the imperative of securing its clients’ funds, particularly after a tumultuous period that saw it sever ties with its former custodian, Liminal, after a cyberattack led to a significant loss of client funds.
The cyberattack not only triggered a halt on all crypto withdrawals but also significantly affected user access to funds held on the exchange. While withdrawals in Indian rupees (INR) have resumed, the suspension of crypto withdrawals remains in effect as the platform works diligently to stabilize its reserves. The exchange is also actively collaborating with the Financial Intelligence Unit and other regulatory bodies to restore trust and recover the impacted assets.
A Path Forward for WazirX
As WazirX endeavors to navigate these turbulent waters, its dual focus on transparency and security may serve as a blueprint for other exchanges facing similar challenges. The decision to disclose asset holdings and explore insurance options signals a proactive approach to mitigating risks for users in a landscape rife with uncertainty. Nevertheless, the exchange must continue to communicate effectively and restore user confidence in a sector where trust is paramount. The success of these initiatives will determine WazirX’s ability to not only recover from recent setbacks but also to thrive in a competitive environment where security and customer confidence are increasingly crucial.
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