Building trust in the crypto industry should be a shared responsibility The WazirX cyber-attack highlights the urgency for robust regulations and collaboration between local crypto players and regulatory bodies to ensure security and foster growth
Innovation is not a one-time wonder. It needs persistence to keep the wheels in motion. One reason India has come to become the world’s leader in IT & ITES is that the government has focused on skill development and enabled policies, helping local players grow. These efforts have contributed to the establishment of prominent companies, increased foreign direct investment, and created numerous job opportunities. The government was remarkably proactive in achieving that feat.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} After over three decades of the IT boom, when an interest seems to be growing towards cryptocurrency, Indians await similar policy interventions to regularise the sector and bring in more incentives to bolster the industry.
WazirX, a cryptocurrency exchange platform established in 2018, quickly rose to prominence in India's rising cryptocurrency market. The platform made crypto a popular investment choice. Despite facing regulatory hurdles and market volatility, the company has been able to maintain its position as one of India's top crypto exchanges.
However, on July 18, 2024, the platform suffered a $230 million cyber-attack perpetrated by North Korean hackers This breach significantly impacted user sentiment in the crypto ecosystem. Regardless, the platform is undergoing a restructuring under the High Court of Singapore, and is set to distribute almost 85% worth of user funds from the time of the cyber-attack in April, less than a year after the incident.
Robust Risk Management Framework
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As new technologies integrate into the economic landscape, there is a need for reassessing the nation’s existing risk management frameworks. The first step in this process is a deeper understanding of risks associated with emerging technologies. A flexible risk management strategy developed by the Ministry of Electronics and Information Technology (MeitY) in collaboration with the Ministry of Finance will be essential to navigate these complexities in crypto which merges the best of both tech and finance and focusses on creating value based on a digital ledger.
But what makes it so urgent is the array of risks that is lurking in the geopolitical space that has come under the radar of national security agencies across the world. Proper regulatory intervention would mean that a thorough analysis of international security risks is conducted.
ET CONTRIBUTORSWazirX is on the brink of bouncing back from a massive setback with its restructuring scheme approved by the Singapore courts. The proposed scheme involves an initial distribution of 85% users’ investment in April 2025, to be made in crypto. This could be one of the fastest in the industry. In comparison, the Mt. Gox case has taken 10 years, while the FTX case has taken more than 3 years to resolve. The alternative to this scheme is liquidation, which is a bad option as it substantially increases costs and the time taken, potentially up to five years, with the distribution being made in fiat currency (USD). Voting for the scheme makes it the obvious choice for WazirX users.This incident also raises pertinent questions about the future of crypto regulation. Crypto platforms have been advocating for formal regulations in the industry to bring in method and structure, and avoid legal penalties resulting from ambiguity of existing terms. The absence of such regulations has forced many crypto companies to self-regulate.
Need for Strong Local Players
When it comes to assets like crypto, investors might find it risky but they don’t want to be left out of the global adoption race. India’s growing presence in the global crypto market owes much to domestic platforms. Policies need to be created in collaboration with domestic companies to showcase real use cases and cyber protocols.
Domestic crypto players can play a pivotal role in positioning India as a global leader in digital assets, especially as the cryptocurrency landscape evolves. Lately there have been significant international shifts, as the one underway in the U.S. with President Trump's pro-crypto stance fuelling massive crypto adoption, encouraging institutional and retail investors to increase their participation. To match up, India must leverage the strengths of local platforms to create a conducive environment for both retail and institutional investors.
Collaboration is the key
India needs to foster collaboration between regulatory bodies and the private sector to build a more dynamic and forward-thinking approach. A bi-annual forensic investigation to assist crypto platforms must be commissioned by regulatory authorities to keep track of KYC norms, security upgrades, and a relief trust which protects the companies and its users in case of vulnerabilities arising due to force majeure events.
There should also be a contingency plan that is created in partnership with think tanks and financial institutions that offers a recovery roadmap along with insurance cover up to a certain amount. Regular assessments of investor risk appetite, informed by real-time data and market trends, would enable identification of risks early and adjust safeguards accordingly.
Ultimately, India’s policy approach should be characterized by agility, foresight, and inclusivity so it can better safeguard the industry while promoting innovation. India exchanges can help in facilitating initiatives like Bitcoin reserves that the USA is undertaking. Platforms with high liquidity can enable institutions to buy and sell Bitcoin quickly at competitive prices. Crypto exchanges can also help Indian institutions diversify their reserves by offering a range of crypto assets.
The Future
An assurance should be provided by regulators where laws they introduce are neither too stringent, nor too lenient, so as to make sure all stakeholders are compliant, but no new prospects are stifled. The government must act on safeguarding companies which are bold enough to set foot in emerging technologies, as opposed to just urging investors to exercise caution. Private players have always been key in enabling tech adoption for the Indian government. When it comes to leveraging home-grown businesses to shape reforms, sky's the limit.
This article is contributed by Lloyd Mathias, Business Strategist and an Independent Director
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This story originally appeared on: India Times - Author:Faqs of Insurances
