The Indian government’s probe into the $230 million cyberattack on cryptocurrency exchange WazirX has hit a stumbling block due to the lack of clear regulations governing the sector. A senior finance ministry official disclosed that the government is closely monitoring the rising incidence of cryptocurrency-related hacks and frauds across the country, with the WazirX case being the most significant.
The Financial Intelligence Unit (FIU) of India, a key body under the finance ministry’s Department of Revenue, initiated an investigation at WazirX’s Mumbai office in July 2024. According to an official involved in the matter, the team gathered preliminary information, including details of how the hack occurred, the specific wallet used for the illicit transfers, and associated internet protocol addresses.
However, the absence of a robust regulatory framework in India has proven to be a major obstacle. “One of the major challenges we face is the absence of any kind of regulation in the country. However, in the case of WazirX, we are continually in touch with them and requesting the necessary details,” said another official familiar with the investigation. Crypto platforms operating in India are required to register with the FIU, which also has the mandate to investigate offenses such as money laundering.
Nearly a month after the initial investigation, WazirX, which has been at the center of this high-profile breach, issued a statement denying any compromise of its information technology systems. Instead, the exchange pointed the finger at its wallet service provider, Liminal Custody, as the source of the security lapse. The company cited a forensic analysis conducted by Mandiant, a subsidiary of Google, to support its claims.
“While a detailed report is forthcoming, the findings largely indicate that the issue leading to the cyberattack originated in Liminal. The wallet that was attacked was managed using Liminal’s digital asset custody and wallet infrastructure,” WazirX said in its statement.
As the investigation continues, the case underscores the pressing need for comprehensive regulations in India’s rapidly growing cryptocurrency sector. The lack of clear guidelines not only complicates enforcement but also leaves the industry vulnerable to future incidents of a similar nature. With the stakes high, industry observers and government officials alike are calling for swift action to establish a regulatory framework that can keep pace with the evolving landscape of digital assets.
