CoinDCX sets up crypto investors protection fund, allocates ₹50 crore

India’s largest crypto exchange, CoinDCX, has set up the Crypto Investors Protection Fund (CIPF) which is designed to compensate users for losses incurred in scenarios like security breaches or other adverse events. With an initial allocation of ₹50 crore, CoinDCX will work towards increasing its size, said Sumit Gupta, co-founder of CoinDCX.

“Given the current events, we want to ensure customers continue to have a long-term trust in the ecosystem. Internationally, some larger exchanges have set aside funds like this, but this a first-of-its-kind among Indian crypto exchanges,” he told businessline, adding, “We don’t expect anything to happen from a security point of view because of our strong posture as an organisation. But in case of any adverse events or breaches, this fund will ensure CoinDCX customers’ assets remain protected.”

The organisation will add 2 per cent of its brokerage income to the corpus and look at increasing the fund size over time. “We have used our own reserves and balance sheet to carve out this fund. 100 per cent of the fund is in-house and free for all CoinDCX customers. In case of any security breach, we will use capital from this fund to compensate users so they don’t lose out. It is the company’s responsibility to ensure customer assets are protected,” said the co-founder.

Along with security breaches, users will be compensated from this fund in case of an error on the organisation’s end. However, individual negligence on the user’s behalf is not covered. “The company cannot be held liable in cases like these, but in case of issues because of the platform or losses to the customers, we will look at deploying this fund,” Gupta stated.

Alongside this, he mentioned that a governance framework for the credit and utilisation of the CIPF has been set up to ensure management and transparency. “We want to make sure no individual alone is taking a call on how and when to use the fund. There should be an independent structure or a group to remove subjectivity around the utilisation of the fund.”

The assets under management at CoinDCX are diversified across multiple vaults. The Exchange claims that it implements security measures like multi-party computation (MPC), two-factor authentication (2FA), and other advanced encryptions. “We make sure our custody partners are also insured. So, our custody is insured up to $450 million on top of the CIPF,” said Gupta.