More than six months after a cyberattack on India’s cryptocurrency exchange WazirX, its founder, Nischal Shetty, has emphasized the urgent need for theft insurance in the crypto industry. He also detailed the company’s ongoing efforts to recover the $234.9 million (around ₹2,000 crore) loss suffered by its users.
Crypto Security and Market Perception
What is your take on apprehensions about crypto following the WazirX incident?
“We are at the cusp of a new technology. There are maybe 50 or 100 million people globally who are completely into crypto and understand it. Eventually, it’ll reach 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. When a breach of crypto happens, the impact is 100 times that of data theft because real value is also involved.”
Improving Security Measures
How would you want the security aspect to improve?
“There are two broad ways to deal with thefts: self-custody of assets or working with third-party custodians that have insurance. I would say insurance is the ultimate solution. However, insurance will evolve, and maybe in three to five years, it will be easier to get. We are working with custodians who are large, multi-billion-dollar companies and have insurance. We’ve been able to identify a few of them and are in the last stages of integrating with them. I think insurance is going to be one of the last lines of defense for people who put their funds on centralized exchanges.”
Insurance Adoption in Crypto
Is the insurance sector warming up to the crypto space?
“I think so, but not at a great pace because of regulations. It’s far easier for insurance to work in a regulated environment. As regulations heat up, insurance players will also start getting involved. In three to five years, it might become commonplace for insurance providers to offer coverage for funds, making it safer to deal with crypto exchanges.”
India’s Crypto Regulation Landscape
Your opinion about the state of crypto regulation in India?
“If you look at it piece by piece, there’s been progress. Holistically, we don’t have regulations. With the Trump administration in the US going forward with cryptos and Europe regulating crypto assets, I think India will start working towards regulation in the next few years. We need clarity on how to run exchanges in India. The US calls for licensing of exchanges. A complete regulatory framework won’t work right now because there is no playbook.”
Efforts to Retrieve Stolen Funds
Has all of the stolen valuation been retrieved, all the tokens and the money?
“About $230 million was stolen, of which $3 million was frozen in the beginning. We are still tracing the funds. The good thing about blockchain is you can see where the funds go. On the flip side, you can also mix funds, and that makes the job of tracing harder. It’s not that easy to recover the funds when they’re purely on-chain. A lot of those funds are still in the mixing phase right now.”
Recovery Strategy and Compensation
How are you working on the recoveries?
“About 45 percent of the USD value was stolen, leaving behind $250–260 million. Markets have gone up, so the remaining funds have grown in size. What we’re able to return from the remaining existing liquid funds is about 85 percent by value. For the remaining 15 percent, we’ve provided recovery tokens. They will be allocated to everyone’s portfolio. We are also going to work on profit generation. The profit that the business generates will be distributed to the token holders.
It starts from 100 percent profits up to the first $30 million that we make. After that, 50 percent of the profit. Whoever’s holding the token will get these profit shares for three years. We’ve also announced a decentralized exchange (DEX) that will have its own tokens. A percentage of those would be distributed to the token holders to use on the decentralized exchange as fees or for staking.”
