As a seasoned analyst with years of experience navigating the tumultuous world of cryptocurrencies, I can’t help but feel a profound sense of deja vu when I hear about WazirX’s latest predicament. It seems like just yesterday we were witnessing the fall of Mt. Gox, another giant in the crypto sphere that crumbled under the weight of cyberattacks.
Today, WazirX’s legal team stated that their exchange’s clients question if the platform should be restored to its original state using cryptocurrency.
Another Jolt For The Affected WazirX Users
On July 18, 2024, a significant security incident occurred at one of India’s major cryptocurrency exchanges, WazirX, allowing hackers to make off with around $230 million worth of customers’ digital assets. In a recent update, it appears that the exchange’s legal counsel is suggesting that users may not be able to fully recover their lost funds, even with the ongoing restructuring efforts in place.
During a call with reporters, George Gwee, a director at Kroll – the firm assisting WazirX with its restructuring efforts, shared that it’s uncertain if around 43% of the money deposited by users on WazirX can be retrieved. However, he mentioned that in an optimistic outlook, as much as 55-57% of the funds might be recovered.
For people not already aware, a restructuring usually happens after a major event at a company, where they rearrange their operations, finances, and management structure in order to make changes.
For users impacted by WazirX’s restructuring, their remaining digital assets will be distributed proportionately. In simpler terms, they may also participate in discussions about sharing the exchange’s profits derived from its income-producing offerings and solutions.
Jason Kardachi, managing director at Kroll, noted:
As an analyst, I must clarify that given the nature of cryptocurrencies, it’s highly improbable that we can fully restore the losses incurred by affected individuals. However, any benefits we gain or assistance from ‘white knights’ (benevolent parties) or external sources can contribute significantly to the overall recovery within the crypto sphere. Regrettably, I don’t foresee a scenario where everyone can be made whole again, considering that approximately half of the crypto holdings have been affected by the cyberattack.
Yet, Kardashi hinted at a potential positive outcome, stating that an upturn in the broader cryptocurrency market could mean that investors might regain a larger portion of their initially invested capital, expressed in U.S. dollars.
The hack that occurred at WazirX stands as the most significant cryptocurrency exchange hack ever experienced within India. Following the hack, the company has implemented numerous strategies, some of which were not effective, aimed at reimbursing users who suffered losses by having their assets held on the platform.
One suggested action was the plan called “socialize the loss” or the “55/45 method,” which meant that every user, regardless of whether they were affected by the hack, could only trade 55% of their tokens. The rest, 45%, would be transformed into stablecoins and kept in the exchange. As expected, this proposal sparked significant resistance within the Indian cryptocurrency community, leading WazirX to decide against distributing user losses.
An examination of the WRX token’s price chart showcases the exchange’s volatile path since the hack. Since March 2024, when the token reached nearly $0.37, it has been on a continuous decline, dropping to as low as $0.12 just after the theft occurred.
What Lies Ahead For India’s Crypto Ecosystem?
Despite the recent setbacks experienced by WazirX causing ripples within India’s emerging cryptocurrency sector, the nation’s active user involvement remains promising, potentially positioning India as a significant player and influential market in the global cryptocurrency landscape.
Yet, there are several challenges that need to be addressed for India to contend as a major player in the worldwide cryptocurrency market. For example, the strict tax laws governing crypto transactions within the nation discourage individual investors and traders from engaging in this sector.
Concurrently, the highest monetary authority in India, the Reserve Bank of India (RBI), is encouraging Indian financial institutions to adopt cutting-edge technologies such as artificial intelligence (AI) and blockchain.
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2024-09-03 05:10