Infamous Mixing Protocol eXch Drops USDT, USDC Amid Bybit Theft Scrutiny

eXch, a notorious centralized mixing protocol, is under intense scrutiny from U.S. authorities for its alleged role in laundering millions stolen by North Korean hackers from the Bybit exchange. In a bid to evade regulatory heat, eXch is restructuring its operations, which includes merging with an offshore entity, relocating from Belize, and delisting major stablecoins USDT and USDC.

• eXch faces regulatory scrutiny over Bybit theft laundering
• Protocol to merge with offshore entity, relocate from Belize
• USDT and USDC to be delisted, DAI and dynamic addresses to be used

The scale of cryptocurrency laundering is staggering, with billions of dollars at stake. eXch, a service that mixes cryptocurrencies to obscure their origins, finds itself in the crosshairs of U.S. law enforcement agencies. The protocol’s alleged involvement in laundering over $94 million stolen from Bybit by the Lazarus Group, a notorious North Korean hacking outfit, has intensified the pressure.

In response, eXch is pulling out all the stops to dodge the regulatory spotlight. The protocol plans to merge with an offshore entity, pack up and leave Belize, and bring in a fresh batch of shareholders and a new management board. It’s a classic case of out with the old, in with the new, but will it be enough to shake off the heat?

eXch’s troubles stem from its refusal to cooperate with blockchain investigators, further complicating its situation. To mitigate risks, the protocol is planning to delist USDT and USDC by July-August, citing the risk of being blacklisted. Instead, eXch will only support DAI, a decentralized stablecoin issued by MakerDAO. DAI has become the go-to choice for money launderers due to its resistance to asset freezing. Stablecoins, like USDT and USDC, are cryptocurrencies pegged to a stable asset like the US dollar, while DAI operates on a decentralized governance model, making it less susceptible to regulatory interventions.

But eXch’s strategy doesn’t stop there. The protocol plans to use dynamic addresses, which change frequently to make tracking harder, and change its Bitcoin aggregation address, where multiple Bitcoin transactions are combined, to further obscure its transactions. It’s a game of cat and mouse, with eXch trying to stay one step ahead of the authorities. And in a stark warning to its U.S. users, the protocol has updated its terms of service to inform them of the potential legal risks of using its service.

“Since it’s primarily coming from U.S.-based agencies, we will update our ToS to inform our users in the U.S. not to use our service and warn them about the risks of being prosecuted in their country for using a service like ours.” – eXch

The situation highlights the ongoing tension between privacy-focused services and the need for transparency and compliance with international laws. As regulators crack down on centralized exchanges, criminals are turning to decentralized tools like DAI and mixers to launder their funds. But with DAI’s stability potentially compromised by its new collateral backing with USDe, eXch’s strategy may face challenges in the long run.

Meanwhile, Bybit has launched a Lazarus Bounty program to encourage the public to help trace and freeze the stolen funds. However, with North Korea’s closed economy and its reliance on hacking and laundering as a successful industry, recovering the stolen assets remains a daunting task.

As the crypto world grapples with these challenges, the story of eXch serves as a reminder of the dark side of decentralization and the ongoing battle between privacy and compliance. It’s a complex landscape, where the principles of cryptocurrency are put to the test, and the future remains uncertain.

Key Takeaways and Questions

• What actions is eXch taking to evade regulatory scrutiny?

  eXch is restructuring by merging with an offshore entity, relocating from Belize, and changing its management and shareholders. It is also delisting USDT and USDC, supporting only DAI, and using dynamic addresses to obscure transactions.

• Why is eXch under investigation?

  eXch is under investigation for allegedly laundering over $94 million stolen from Bybit by North Korean hackers and for refusing to cooperate with blockchain investigators.

• What stablecoins is eXch planning to delist and why?

  eXch plans to delist USDT and USDC due to the risk of being blacklisted by regulatory authorities.

• How is eXch planning to obscure its transactions?

  eXch will use dynamic addresses and change its Bitcoin aggregation address to make it harder to link transactions to the protocol.

• What warning is eXch issuing to U.S. users?

  eXch is warning U.S. users about the potential legal risks of using their service, as it is being targeted by U.S. law enforcement agencies.