New Delhi, Aug 19 (IANS): The WazirX data security breach, which resulted in a massive theft of over Rs 2,000 crore worth of digital assets, has once again exposed persistent vulnerabilities within the crypto ecosystem, experts said on Monday, demanding a thorough investigation by state authorities considering the magnitude of the cyber-crime.
The mega theft occurred at a time when the country has put robust anti-money laundering rules and a tax structure for cryptocurrencies in place, and the Enforcement Directorate (ED) has been busting fake cryptocurrency rackets across the country.
According to cyber-security and legal experts, there are four important legal aspects of the WazirX controversy which need to be addressed urgently.
"First, its user agreement policy states that the exchange can indefinitely terminate or suspend a user’s account and decline to process any deposit or withdrawal even without proper due notice. One-sided agreements violate the New Consumer Protection Act, 2019, hence are unlawful," Virag Gupta, a Supreme Court lawyer and cyber law expert, told IANS.
Second, there was a significant delay in reporting this matter to the police. “Considering the magnitude of this crime, alleged to amount to more than Rs 2,000 crore, it cannot be restricted to a matter between investors and the exchange. Based on provisions of the Information Technology Act and new BNS (Bharatiya Nyaya Sanhita) Code, the exchange was duty-bound to inform police alongside other law enforcement authorities to maintain due process,” Gupta mentioned.
Third, the Income Tax and EDI (electronic data interchange) authorities need to investigate possible misuse of the captured amount for illegal purposes (like acts of terror and drugs, etc.). "While a clean chit has been given based on a third-party forensic assessment through a subsidiary of Google, the investigation was not comprehensive and only covered specific aspects and trails. It is critical for a thorough investigation to be led by state authorities considering the magnitude of the crime," Gupta told IANS.
Finally, this episode reiterates the increasing need for effective regulation and rules for crypto-trading in India which can help safeguard investors and broader national interests, said the expert.
In 2022, the Indian government introduced a 30 per cent tax on virtual currencies and a 1 per cent deduction for every crypto transaction.
WazirX’s accounts worth Rs 64.67 crore were frozen in August 2022 after the ED launched a money-laundering investigation into the crypto exchange's alleged role in assisting some Indian fintech firms and loan apps by transferring money for them to unknown foreign wallets, according to reports. The ED later lifted the ban on WazirX accessing its bank accounts, allowing the crypto exchange to resume its banking operations.
Prabhu Ram, VP-Industry Research Group, CyberMedia Research (CMR) told IANS that the WazirX breach highlights the critical imperative to have enhanced security protocols and robust risk management strategies to safeguard investor interest and assets. "Such incidents erode trust in the industry and emphasize the imperative for regulatory frameworks to address the growing challenges posed by cyber threats," Ram noted.