WazirX Founder Nischal Shetty Discloses Proof-of-Reserves Plan

The latest initiative comes as WazirX faces scrutiny over its recent movement of $72.13 million worth of crypto assets to rival exchange Bybit.

Indian cryptocurrency exchange, WazirX, is introducing a Proof of Reserves (POR) system following the recent large-scale fund transfers and a $230 million hack in July 2024. The initiative comes as the exchange faces scrutiny over its recent movement of $72.13 million in crypto assets to rival exchange Bybit.

In a recent announcement, WazirX founder Nischal Shetty disclosed the steps the exchange is taking to enhance transparency. After filing a fourth affidavit and sharing wallet addresses, the next step involves creating a consolidated view of the exchange’s token holdings.

“This means creating a page where we pull data from various wallets and display the balances for everyone to see,” Shetty stated in a post on X.

The process is complicated by the large number of wallets used by WazirX, with over 240,000 unswept wallet addresses that contain relatively small balances. Shetty acknowledges the difficulty in managing these accounts but outlines the plan to initially show total balances for these addresses to keep the information manageable.

The Proof of Reserves will be categorized into three distinct sections: cold wallets, third-party custody, and the 240,000+ unswept balances. The second category, third-party custody, remains particularly dynamic, with challenges surrounding legal and compliance requirements for new custody providers.

“During this interim period, balances will be held on exchanges that support these tokens,” Shetty adds. He also notes that while discussions have taken place with five custody providers, none of them currently support all the tokens held by the Indian exchange.

The introduction of the POR system follows revelations that WazirX transferred $72.13 million in crypto to the Bybit exchange. This fund movement was identified through a public dashboard created by the team at CoinSwitch, a platform that has become involved in analyzing WazirX’s recent wallet disclosures.

In addition to the transfer to Bybit, approximately $1.5 million was also sent to KuCoin. These transfers have raised questions about the exchange’s fund management practices, particularly in light of the July hack.

The compromised exchange has made over 240,000 wallet addresses public as part of an affidavit filed with the High Court of Singapore following the cyberattack. However, the volume of disclosed addresses has proven difficult for many users to analyze, prompting CoinSwitch to step in with its public dashboard.

The dashboard, developed by CoinSwitch’s team, aims to simplify the interpretation of the complex dataset released by WazirX. Ashish Singhal, co-founder of PeepalCo, shared the tool with the public to assist investors in navigating the situation.

CoinSwitch’s involvement in the matter is not without its own interests. The company has deposits with WazirX that it claims were illegally frozen, leading CoinSwitch to pursue legal action against