By Mark Hunter
6 days agoWed Aug 07 2024 07:19:34
Reading Time: 2 minutes
- CoinCDX has initiated a customer protection fund to compensate victims of security breaches
- The fund has launched with $6 million from company profits and will be increased over time
- This initiative has echoed Binance’s SAFU fund, which holds around $1 billion in stablecoins
Indian crypto exchange CoinCDX has initiated a customer protection fund which will pay out victims of any breach of its security following the $230 million hack on fellow Indian exchange WazirX. The fund, which will be populated with company profits, has launched with $6 million and will be added to over time. The move echoes Binance’s SAFU fund which holds around $1 billion in stablecoins and performs the same function.
WazriX Hack Prompts New Fund
The new fund was revealed by CoinDCX co-founder Sumit Gupta, who told Coindesk that the initiative aims to safeguard users against significant losses from rare incidents like security breaches. Such an incident famously happened last month when hackers infiltrated a multi-signature WazirX wallet and stole $230 million worth of various cryptocurrencies, including BTC, ETH, USDT, and USDC.
The attack was attributed to the notorious Lazarus Group, which exploited a mismatch between the information displayed on Liminal’s interface and the actual transaction details. This discrepancy allowed the hackers to manipulate transaction data and seize control of the wallet.
Following the breach, Gupta criticized WazirX’s proposed management plan for the hacked funds, alleging that WazirX’s handling of the situation “isn’t community first” and was “also hurting the other ecosystem participants.”
2% of Income to be Added Each Month
Gupta told Coindesk that CoinDCX’s new fund represents approximately 1.8% of their $350 million in customer funds and will be expanded over time, noting that the exchange hopes to contribute 2% of its monthly brokerage income to the fund, adding, “The idea is to start somewhere and reassess this number as we progress. International exchanges have set similar precedents, and we aim to lead by example in India.”
The fund’s purpose is to provide compensation for users affected by extraordinary events, thereby enhancing trust in the platform, and Gupta urged other exchanges to adopt similar measures, believing it would strengthen the overall ecosystem.
Binance set up its SAFU fund in July 2018 for the same purpose, a fund which now holds more than $1 billion in stablecoins ready to pay out victims.
Addressing concerns about CoinDCX’s own security, Gupta acknowledged that no system can guarantee absolute safety:
While no platform can ensure 100% security, we strive to protect our customers even against the slightest chance of a breach. Diversifying our funds across multiple wallets is a step in that direction.
