A leading cryptocurrency exchange has temporarily paused its Web3 decentralized exchange (DEX) aggregator after consulting with European regulators.
On March 17, the exchange announced this decision as part of its initiative to enhance security protocols and prevent potential misuse of its platform.
Connection to Bybit Hack
The suspension is occurring amid an investigation by European authorities regarding claims that hackers associated with North Korea’s Lazarus Group utilized the Web3 platform to launder proceeds from the recent Bybit hack.
According to a recent report, regulators from all 27 EU member states addressed this concern at a European Securities and Markets Authority (ESMA) meeting on March 6.
Bybit’s CEO, Ben Zhou, confirmed that the hackers used the Web3 service to wash approximately $100 million of the $1.5 billion that was stolen.
In light of these developments, EU regulators are considering whether the platform is subject to the Markets in Crypto-Assets (MiCA) regulatory framework and are evaluating potential penalties for the exchange.
Exchange’s Position
The exchange asserts that it was misidentified in the laundering activities due to erroneous labeling by blockchain explorers and other decentralized exchanges.
It emphasized that it is collaborating with these explorers to ensure accurate reporting of transactions and prevent incorrect identification of its aggregator as the trade point.
The statement elaborated:
“We understand the importance of transparency, which is why we are working closely with blockchain explorers to rectify incomplete labeling. Our aim is to guarantee that explorers accurately represent the actual DEX handling trades, rather than wrongly associating our aggregator with the transaction point.”
Furthermore, the platform clarified that its aggregator does not hold user assets but simply provides access to liquidity from various decentralized protocols.
To further bolster security, the exchange has launched a system that can identify hacker addresses in real time and block them from reaching its centralized exchange.
The CEO of the exchange recently stated on social media:
“We have implemented numerous controls for our Web3 service to combat misuse, including IP blocking for banned markets and a real-time detection and blocking system for questionable addresses.”