Cryptocurrency Security in India: Lessons from the CoinDCX and WazirX Hacks
UPSC Relevance
Prelims: Science and Technology (Cryptocurrency, Blockchain, Cybersecurity), Indian Economy (Regulation, Financial Intelligence Unit - FIU), Governance (CERT-In).
Mains:
GS Paper 3: Science and Technology- developments and their applications and effects in everyday life; Awareness in the fields of IT, Computers; Challenges to internal security through communication networks; Basics of cyber security; Money-laundering and its prevention.
Key Highlights from the News
CoinDCX, a prominent crypto exchange in India, experienced an internal account hack, resulting in a loss of approximately $44 million.
The company stated that the hack affected a 'hot wallet', but customer funds stored in secure 'cold wallets' were safe.
CoinDCX clarified that the company would bear the loss and had informed the Indian Computer Emergency Response Team (CERT-In) about the incident.
Compared to last year's WazirX hack, this incident is different. In the WazirX hack, customer funds were directly lost and have not been recovered for over a year.
Crypto trading in India remains largely unregulated. Although exchanges are registered with the Financial Intelligence Unit (FIU), investors cannot expect significant government assistance in case of a hack.
Experts advise investors to use self-custody methods, such as offline hardware cold wallets, if they want full control over their crypto assets.
A key saying in the crypto world is: "not your keys, not your crypto/coins".
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