cyberdudebivash.com | cyberbivash.blogspot.com | cryptobivash.code.blog
Background & What Changed
- On September 2025, the Government of India mandated cybersecurity audits for all cryptocurrency exchanges, custodians, and intermediaries, in response to a surge in cyber thefts in the sector. The Economic Times+1
- These audits must be conducted by security auditors registered with CERT-In, India’s nodal cybersecurity agency. Business Standard
- The directive came from FIU-India (Financial Intelligence Unit) via a letter dated 15 September, and affects Virtual Digital Asset (VDA) service providers. Business Standard
Why This Move Matters
- Security gap response: Acknowledges that many exchanges have had weak security postures — frequent hacks, internal thefts etc.
- Trust & investor protection: Helps protect users’ funds by ensuring platforms adhere to minimum cybersecurity standards.
- Regulatory alignment: Exchanges are already under AML/KYC/ FIU obligations; this adds cyber-resilience as another compliance pillar.
- Standardization: Having CERT-In-approved auditors and baseline guidelines ensures audits are meaningful, not just procedural.
BASIS: CERT-In Guidelines & Standards
- CERT-In recently issued Comprehensive Cyber Security Audit Policy Guidelines which require that audits cover:
- Vulnerability assessments & penetration testing
- Network security, cloud security, application security
- Secure code review, APIs, third-party dependencies
- Incident response readiness, data handling, and log management, etc. azb
- These guidelines also require audits at least annually, with higher frequency depending on risk level, criticality of assets, or sectoral regulation. azb
What Crypto Exchanges Need to Audit & Be Audited On
Here are the core domains for audit under this mandate—based on CERT-In’s guidelines and the specific risks in crypto exchanges:
| Audit Domain | Key Focus Areas |
|---|---|
| Identity & Access Management (IAM) | Who has privileged access (admins, devops, custodians), how are credentials stored, use of MFA / hardware keys, least privilege principle. |
| Authentication & Authorization Flaws | Role-based access control, broken auth APIs, service accounts, session management. |
| Network & Infrastructure Security | Exposed endpoints, network segmentation, firewall rules, Forensic logging, cloud infrastructure misconfigurations. |
| Application & Smart Contract Security | Code vulnerabilities, web app / API security, smart contract audit if applicable. |
| Third-party and Dependency Risks | Libraries, SDKs, providers, SDK versions, libraries used in wallets / UI / backend. |
| Incident Response & Logging | Log collection, retention, alerting, ability to respond to incidents quickly. |
| Data Protection & Encryption | How customer data is stored, encrypted, in transit; policies for cryptography in wallet/custody. |
| Cyber Risk & Business Continuity | Disaster recovery, backup integrity, business continuity plans. |
Key Challenges & Risks Ahead
- Scope creep: Exchanges may not know all their risk areas (e.g., smart contract risks, DeFi integrations, cross-chain bridges).
- Cost & resource burden: Smaller exchanges may struggle with costs of thorough audits and ongoing compliance.
- False compliance: Audits may be superficial unless auditor independence and technical credentials are good.
- Lag in enforcement: Without strong regulatory enforcement, some may delay or under-report.
- Transparency & public trust: Users must be able to see audit compliance status (maybe via disclosures) to differentiate trustworthy platforms.
What Good Audit Looks Like — Best Practices
To meet BOTH regulatory compliance and genuine security, exchanges should follow these best practices:
- Choose a CERT-In-approved Auditor
- Confirm empanelment status, technical team credentials, prior experience with crypto.
- Define Scope Broadly & Tailored to Crypto
- Include smart contracts / blockchain nodes.
- Include custodial wallet infrastructure.
- Include bridges, oracle services, hot/cold wallets.
- Use Industry Benchmarks & Standards
- OWASP ASVS / API Security standards.
- Blockchain smart contract security best practices (formal verification if possible).
- Incident Response frameworks (CERT-In, NIST, etc.).
- Frequency & Triggered Audits
- Annual full audit.
- Additional audits after any major change: redesign, major upgrade, adding new wallet type, integrating new chains.
- Transparency & Remediation Tracking
- Publish audit executive summary (not necessarily everything, but high-level).
- Track remediation of vulnerabilities, disclose timelines.
- Continuous Monitoring
- Not just audit and forget. Use monitoring tools: WAFs, anomaly detection, bug bounty programs, real-time threat intelligence.
Compliance & Enforcement: What Has Been Announced
- Exchanges must engage security auditors empaneled by CERT-In. Business Standard+1
- FIU letter directs that designated directors, principal officers, and CCOs of VDA platforms comply immediately. Business Standard
- CERT-In’s guidelines allow for consequences for non-compliance (audit failures, deficiencies), though regulatory enforcement details are still evolving. azb
Detection & Audit Readiness Checklist (For Exchanges)
Here’s a checklist to verify readiness, spot gaps, and prepare for audits or regulatory review:
- All privileged accounts use MFA / hardware keys.
- Inventory of all external / internal dependencies and SDKs.
- Regular pentesting and code review of all APIs and smart contracts.
- Secure wallet infrastructure: separation between hot wallet / cold wallet, limited signing paths.
- Strong logging and alerting, with logs retained per CERT-In / FIU / RBI (if applicable) guidelines.
- Network segmentation: custody systems isolated, internal management API access restricted.
- Incident response plan in place with drills.
- Transparency in disclosure: users informed of audit compliance status.
What Investors & Users Should Expect
- Exchanges should publish whether they have completed CERT-In audits, and summary findings.
- Users should prefer platforms with independent audits and strong security disclosures.
- Be wary of platforms that are silent on audits, or use vague language.
Broader Context & The CyberDudeBivash View
- This is a big step for Indian crypto regulation, aligning it with global best practices.
- India is moving from purely financial regulation (KYC/AML) to cyber regulation / technology risk governance.
- Crypto exchanges are now being treated as critical digital financial infrastructure from a cyber standpoint.
CyberDudeBivash Recommendations & Services
If you are a crypto platform in India or an investor:
- We provide Audit Readiness Assessments for crypto exchanges: gap analysis vs CERT-In guidelines & threat modeling.
- We offer packaged Incident Response Plans & “What to do after audit fail” playbooks.
- We maintain Crypto Exchange Security Certification consulting, helping platforms meet rigorous audit criteria.
- We deliver user-educational content so investors understand audit disclosures and risk signals.
Contact: iambivash@cyberdudebivash.com
#CyberDudeBivash #CryptoRegulationIndia #CERTIn #CryptoSecurityAudit #ExchangeCybersecurity #VDACompliance #CryptoInvestorProtection #AuditStandardsIndia #CyberResilience #DigitalAssetsSecurity
Cyberdudebivash 
Leave a comment