New Delhi: WazirX, the leading cryptocurrency exchange in India, announced on Thursday that it has experienced a significant data security breach. The breach allegedly led to the transfer of digital assets valued at roughly $234 million to an unidentified address. Notably, pressure to regulate cryptocurrency exchanges still exists.
The cryptocurrency exchange has temporarily stopped allowing user withdrawals from the exchange and confirmed the security vulnerability on social media platform X.
“We’re aware that one of our multi-sig wallets has experienced a security breach. Our team is actively investigating the incident. To ensure the safety of your assets, INR and crypto withdrawals will be temporarily paused,” said the company.
A multisig wallet is a crypto wallet that requires two or more private keys to unlock and withdraw funds.
In another X post, the company acknowledged a cyber attack occurred in “one of our multisig wallets involving a loss of funds exceeding $230 million”. Starting in February 2023, this wallet was run using Liminal’s digital asset custody and wallet infrastructure services.
WazirX claims the cyber attack stemmed from a discrepancy between the data displayed on Liminal’s interface and the transaction’s actual contents.
In December last year, regulatory pressure from the government and a strict crypto tax regime caused the cryptocurrency exchange WazirX to witness a sharp decline in trade volume, which plummeted to $1 billion in 2023, a staggering 90% decrease from 2022. The Indian government imposed a 30% tax on virtual currencies in 2022, with a 1% discount for each cryptocurrency transaction. The Foreign Exchange Management Act of 1999 (FEMA) and the Prevention of Money Laundering Act of 2002 (PMLA) both have sections pertaining to cryptocurrency instances that the Enforcement Directorate (ED) investigated in the same year.
According to sources, WazirX’s accounts totalling Rs 64.67 crore were frozen in August 2022 after the ED opened a money laundering inquiry into the cryptocurrency exchange’s purported assistance in helping 16 Indian fintech companies and loan apps by transferring funds to unidentified foreign wallets. WazirX was later permitted to resume its banking activities after the ED removed the prohibition on accessing its bank accounts.
