WazirX, a prominent cryptocurrency exchange operating out of India, has taken a significant step by disclosing its proof-of-reserves (PoR) report, illustrating a complex landscape of how customer assets are managed. As of October 24, the report reveals that a staggering 40% of customer assets, totaling approximately $126.91 million, are held on third-party exchanges. This move is part of WazirX’s larger strategy to enhance transparency in an industry often criticized for its opacity.
The PoR dashboard serves as a tool not just for WazirX but for customers and analysts alike, who now have the ability to independently verify wallet addresses and asset holdings. According to the company’s statement, this transparency can help build trust within a community that has suffered from numerous high-profile security breaches and failures of other cryptocurrency exchanges.
WazirX’s asset breakdown indicates that it currently controls $298.17 million across 242,000 wallets, with $157.01 million stored on-chain and $14.25 million in less liquid assets. The most valuable asset, as reported, is a substantial holding of 1,140 BTC, equivalent to approximately $77.9 million. This distribution raises questions about the risk associated with holding a significant percentage of assets off the main platform, reliant on third-party exchanges for custody.
Notably, WazirX faced a serious challenge this past August when it severed ties with its previous third-party custody provider, Liminal, following a massive cyberattack that compromised $235 million in client assets. This incident underscores the urgent need for effective asset management and security measures in cryptocurrency exchanges. The halting of cryptocurrency withdrawals during the incident created widespread frustration among users, further complicating WazirX’s efforts to maintain customer trust.
In light of these challenges, WazirX has expressed a commitment to securing a new third-party custodian that can provide fund insurance. This step is viewed as not just a precautionary measure but a necessary evolution in risk management within the volatile landscape of digital assets. Nischal Shetty, co-founder of WazirX, emphasizes that the platform actively seeks permission from the third-party exchanges where funds are held to disclose their names, aiming for increased accountability and transparency.
Moreover, the exchange is collaborating closely with India’s Financial Intelligence Unit and other government agencies in the ongoing investigation regarding the cyberattack. By intensifying efforts to recover lost assets and instituting robust preventive measures, WazirX is positioning itself to regain user confidence and restore full functionality to its services.
The recent disclosure of WazirX’s proof-of-reserves report marks a pivotal moment for the exchange, highlighting the challenges of asset management and security in the cryptocurrency space. As WazirX navigates the aftermath of recent setbacks, its commitment to transparency and proactive risk management could serve as a model for other exchanges. However, the ongoing struggle to rebuild trust with customers and maintain a secure platform is an ongoing challenge that requires vigilance and adaptability in an ever-evolving digital landscape.