WazirX, one of India’s prominent cryptocurrency exchanges, has recently unveiled its proof-of-reserves (PoR) report, sparking discussions around transparency in the cryptocurrency sector. According to an announcement on October 25, the report reveals that more than 40% of customer assets are maintained on third-party exchanges. With this disclosure, WazirX aims to offer a degree of transparency that is often lacking in the crypto industry. The PoR dashboard, which allows for independent verification of wallet addresses, details the specific holdings for each asset, attempting to bolster user trust amidst a backdrop of security concerns.
As of October 24, WazirX reported total holdings of approximately $298.17 million spread across 242,000 wallets. Of this amount, a substantial $126.91 million is stored externally, raising questions about the security of user funds and the potential risks associated with entrusting assets to third parties. WazirX has acknowledged $14.25 million in less liquid assets, further complicating its financial landscape, while the remarkable $157.01 million held on-chain showcases its commitment to blockchain transparency.
The exchange mentioned three unnamed third-party exchanges where significant funds have been directed. Speculation within the crypto community hints at major players such as Bybit, KuCoin, and Huobi potentially being involved, although WazirX remains silent on this front. Co-founder Nischal Shetty has communicated the intent to reach out for permissions to disclose these platforms’ identities, an effort that indicates a desire for greater transparency while also respecting third-party confidentiality.
While the exchange boasts its most substantial asset, 1140 BTC worth nearly $77.9 million, concerns linger regarding the security of its assets. The fallout from a significant cyberattack in July, which led to a staggering $235 million loss in client funds, has cast a long shadow over WazirX’s reliability. Although, in the wake of this breach, the platform has reinstated Indian Rupee (INR) withdrawals, cryptocurrency withdrawals continue to be suspended as WazirX consolidates its reserves.
In response to this turbulent backdrop, WazirX is in the process of securing a new third-party custody provider that can offer fund insurance—a critical step toward enhancing customer protection. The emphasis on risk management and the need for fund insurance reflects a growing recognition within the industry of the inherent risks associated with digital asset custody. WazirX’s forward-looking approach to seeking a custody provider suggests a transition towards a more robust safety net for users, seeking to minimize future losses regardless of potential worst-case scenarios.
Furthermore, collaboration with the Financial Intelligence Unit and other regulatory bodies indicates that WazirX is actively engaged in remedial actions and asset recovery efforts. While the exchange focuses on regaining customer trust, the complexities of operating in a post-breach landscape highlight the balancing act that crypto exchanges must perform in maintaining security while encouraging user engagement.
As WazirX navigates the tumultuous waters of the cryptocurrency industry, its recent disclosures and efforts towards securing customer assets signal an awareness of the critical need for transparency and security. Moving forward, the exchange will need to strengthen its infrastructure and provide clearer communication to its users regarding the status of their funds. The importance of building a resilient platform cannot be overstated as WazirX and similar exchanges strive to restore confidence in a rapidly evolving market.
