CoinDCX, one of the country’s biggest cryptocurrency exchanges, has recently announced that the firm has allocated Rs 50 crores as a part of its Crypto Investors Protection Fund (CIPF) which will compensate users for the funds lost in security breaches. This announcement came in just days after WazirX, another of the country’s biggest cryptocurrency exchanges, was breached by hackers which reportedly led to a loss of more than $230 million.

Sumit Gupta, the co-founder of CoinDCX also commented that if the other crypto exchanges did the same then “it would be better for the ecosystem”. The investor protection fund is designed to “compensate users for losses incurred in extremely rare scenarios such as security breaches” and at the start it will hold nearly $6 million (INR 50 crore), which comes solely from “our profits,” Gupta said. “The initial starting point, which is 50 crores, we have given it ourselves. We have used it from our balance sheet, our reserves. This is approximately 1.8% of the roughly $350 million customer funds we hold and we intend to continue to increase it over time. We will contribute 2% of whatever monthly brokerage income we make. The thought was to start somewhere and then continue to reevaluate this number moving forward. International exchanges have done this. But in India we want to at least take the lead and start this as a standard.”  

He stated that the company would reassess both the brokerage amount and the fund’s pool size annually. CoinDCX is among the first cryptocurrency exchanges in the country to implement a customer compensation fund. CoinDCX also has insurance coverage through its existing custody partners. Gupta explained that every exchange utilizes custody partners to store their assets, with portions kept in cold or warm wallets (hardware or software wallets). These custody partners provide insurance coverage. “Our custody partners have insurance of up to $450 million,” he shared.

However, Gupta emphasized that the fund would not cover losses incurred by individual investors due to customer-end issues, such as password leaks. The fund’s introduction follows growing concerns among crypto investors about the security of their investments on Indian exchanges in the wake of the WazirX heist. These concerns were further fueled by WazirX’s initial plan to “socialize the losses,” spreading the financial impact across its customers. 

Last month, WazirX’s founder Nischal Shetty informed CoinDCX that the hack of his exchange was an exceptionally rare incident, possibly the first of its kind. Gupta refuted the notion that the creation of the fund was prompted by the possibility of a similar rare event occurring at CoinDCX following the WazirX incident. 

Shortly after the crypto heist, WazirX entered damage control mode, suspending operations and withdrawals on the platform. Nischal Shetty, WazirX’s cofounder, initially suggested that customers absorb 45% of the losses from the hack, a proposal that drew heavy criticism from the crypto community. 

During this period, CoinDCX’s Gupta criticized WazirX’s socialized loss strategy, labeling it as “utter nonsense” and warning that WazirX’s handling of the situation could negatively impact the entire Indian crypto ecosystem and its stakeholders. 

Following backlash over its 55-45 approach—where WazirX planned to unlock 55% of users’ portfolio tokens for trading while locking the remaining 45%—the crypto exchange has reportedly scrapped the plan.