Experts said on Monday that the WazirX data security breach, which led to the massive theft of digital assets valued at over Rs 2,000 crore, has once again revealed enduring vulnerabilities within the cryptocurrency ecosystem. Given the scope of the cybercrime, they demand that state authorities conduct a thorough investigation.
The massive heist happened at a time when the nation had implemented strict anti-money laundering regulations, established a cryptocurrency tax framework, and the Enforcement Directorate (ED) was dismantling fictitious cryptocurrency networks all around the nation.
Experts on cyber-security and law assert that there are four significant legal facets of the WazirX debate that require immediate attention.
The exchange may, according to its user agreement policy, suspend or cancel a user’s account at any time, refuse to process a deposit or withdrawal, and do so even in the absence of appropriate notice. One-sided contracts are illegal since they don’t comply with the New Consumer Protection Act of 2019 “The Supreme Court lawyer and cyber law specialist Virag Gupta told.
Secondly, there was a notable postponement in notifying the authorities about this issue. “This crime cannot be limited to a dispute between investors and the exchange, given its scale—it is estimated to have cost over Rs 2,000 crore. In order to uphold due process, the exchange was required by the Information Technology Act and the new BNS (Bharatiya Nyaya Sanhita) Code to notify the police and other law enforcement agencies, according to Gupta.
Third, the authorities in charge of income tax and electronic data interchange (EDI) must look into any potential exploitation of the seized funds for illicit activities (such as drug and terror attacks, etc.). “Although a third-party forensic evaluation conducted by a Google subsidiary resulted in a clean sheet, the study was incomplete and only looked at certain areas and evidence. Given the seriousness of the act, state authorities must conduct a comprehensive investigation,” Gupta stated.
The expert concluded by saying that this instance highlights the growing necessity for efficient legislation and guidelines governing cryptocurrency trading in India in order to protect both investors and larger national interests.
The Indian government imposed a 30% tax on virtual currencies in 2022, with a 1% discount for each transaction made using a cryptocurrency.
According to reports, the ED opened a money-laundering inquiry into WazirX’s purported assistance in helping some Indian fintech companies and loan apps by transferring funds to unidentified foreign wallets, resulting in the freezing of the cryptocurrency exchange’s accounts worth Rs 64.67 crore in August 2022. WazirX was later permitted to resume its banking activities after the ED removed the prohibition on it accessing its bank accounts.
The WazirX hack, according to Prabhu Ram, VP-Industry Research Group, CyberMedia Research (CMR), told that stronger risk management techniques and improved security measures are essential to protecting investor interests 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 stated.
