The foundation principle of blockchain technology is transparency. This is what crypto exchanges have sold to millions of devoted fans, scaring them with the bogeyman of the traditionally obscure banking system. So, the community was naturally enraged when WazirX exchange management decided to ignore the transparency model in their post-hack response to 4.4 million users.
Instead of maintaining an open line of communication and transparency with their users, especially after a major hack that resulted in the loss of ₹2,000 crore worth of funds (45% of user holdings), WazirX ended up in a position where it required a judge to compel them to provide clarity.
On Thursday, judicial commissioner Kristy Tan of Singapore Courts approved the moratorium application by WazirX co-founder Nischal Shetty vis-a-vis Zettai, the parent entity, thereby giving four months protection to Shetty and exchange management from any legal repercussions.
However, in the court order, Judicial Kristy Tan also put four conditions to Shetty to fulfil in the next six weeks.
- Publish Wallet Addresses of WazirX through court affidavit.
- Public Book of Accounts of WazirX through court affidavit.
- Respond to users’ queries and grievances.
- Run a poll seeking support for the restructuring process on an independent platform.
WazirX’s situation is an example of what should never happen in an industry built on the idea that “code is law“ and the decentralised systems which ensure increased transparency. When trust is broken, it can destroy users’ beliefs and harm the platform’s reputation.
Instead of sharing information with its users immediately post the hack, WazirX indefinitely delayed the transparency measures until it was mandated by the Singapore High Court. This brings up a question: Did WazirX really need a judge to get involved in this before it could provide the transparency that users expected right from the start?
Instead of immediately addressing user concerns and explaining the situation, WazirX management indulged in blame games where they put allegations against their erstwhile partner Binance and erstwhile security partner Liminal Custody. This is where transparency failed. It was only after Judicial Commissioner Kristy Tan of the Singapore High Court stepped in that WazirX was compelled to take action.
If we consider the four conditions out by the judge then they appear to be exactly what the WazirX users have been demanding for the past two months. However, the exchange management had refused to divulge any information regarding their operations, ownership tussles, the July 18 hack and subsequent remaining crypto funds to their users.
Conclusion
As an exchange, WazirX has failed to ensure transparency right from the time hack occurred. Like all exchanges, WazirX depends on user trust. People in the crypto community expect exchanges to be more open, especially when they are dealing with their hard-earned money. By failing to maintain transparency, WazirX not only damaged its reputation but also forced users into a position where they had to go on legal intervention to receive basic information about their funds.
The approval of the moratorium by the Singapore High Court and the judge’s four conditions highlight just how far WazirX had strayed from the core values of blockchain.
Also Read: WazirX Moratorium Approved by Singapore Court: What Now?
