THORChain at crossroads: Decentralization clashes with illicit activity

Published

21 hours ago

March 11, 2025

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THORChain at crossroads: Decentralization clashes with illicit activity

THORChain has been called a money laundering protocol — a label no decentralized finance (DeFi) project wants unless it’s prepared to have regulators breathing down its neck.

Its supporters have fended off the criticism by championing decentralization, while its critics point to recent activities that showed some of the protocol’s centralized tendencies.

After exploiting Bybit for $1.4 billion, the North Korean state-backed hackers behind the attack, known as the Lazarus Group, flocked to THORChain, making it their top choice to convert stolen funds from Ether (ETH) to Bitcoin (BTC). Lazarus finished converting its Ether within just 10 days of the hack.

The controversy has triggered internal conflict, governance cracks and developer resignations, exposing a deeper issue and question: Can DeFi remain neutral when criminals exploit it at scale?

THORChain is not a mixer

THORChain is a decentralized swap protocol, so some say it’s unfair to call it a laundering machine, as the output is traceable. It’s not like a mixer, whose purpose is to conceal cryptocurrency fund trails — though the reasons for using mixers vary between users, with some simply wanting to preserve their privacy and others using them for illicit purposes.

Federico Paesano, investigations lead at Crystal Intelligence, argued in a LinkedIn post that it is misleading to state that the North Korean hackers “laundered” the Bybit hack proceeds.

“So far, there’s been no concealment, only conversion. The stolen ETH have been swapped for BTC using various providers, but every swap is fully traceable. This isn’t laundering; it’s just asset movement across blockchains.”

Decentralization, Cybercrime, North Korea, Cybersecurity, Money Laundering, THORChain, Features, Lazarus Group — *Tracing funds swapped to Bitcoin is time-consuming, but not impossible. Source:* *Federico Paesano*

Hackers also moved funds through Uniswap and OKX DEX, yet THORChain has become the focal point of scrutiny due to the sheer volume of funds that passed through it. In a March 4 X post, Bybit CEO Ben Zhou said that 72% of the stolen funds (361,255 ETH) had flowed through THORChain, far surpassing activity on other DeFi services.

A truly decentralized platform’s strength lies in its neutrality and censorship-resistance, which are foundational to blockchain’s value proposition, according to Rachel Lin, CEO of decentralized exchange SynFutures.

“The line between decentralization and responsibility can evolve with technology,” Lin told Cointelegraph. “While human intervention contradicts decentralization’s ethos, protocol-level innovations could automate safeguards against illicit activity.”

THORChain collected at least $5 million in fees from these transactions, a windfall for a project already struggling with financial instability. This financial benefit has further fueled criticism, with some questioning whether THORChain’s reluctance to intervene was ideological or simply a matter of self-preservation.

Governance cracks show when decentralization becomes a shield

The controversy sparked a dilemma on whether THORChain should act. In an attempt to block the hackers, three validators voted to halt ETH trading, effectively closing off their swapping route. However, four validators quickly voted to overturn the decision.

This exposed a contradiction in THORChain’s governance model. The protocol claims to be absolutely decentralized, yet it had previously intervened to pause its lending feature due to insolvency risks (swaps still remained operational).

Some crypto community members called out THORChain’s actions as selective decentralization, where governance intervention only occurs when it serves the protocol’s own interests.

The backlash was immediate. Pluto, a key THORChain developer, resigned. Another developer, TCB, who identified themselves as one of the three validators who voted to halt Ether trades, hinted at leaving unless governance issues were addressed.

Meanwhile, blockchain investigator ZachXBT called out Asgardex, a THORChain-based decentralized exchange, for not returning fees earned from hackers, while other protocols reportedly refunded ill-gotten gains.

THORChain founder John-Paul Thorbjornsen responded by claiming that centralized exchanges pocket millions from facilitating illicit transactions unless pressured by authorities.

“This pisses me off. Do we get ETH and BTC nodes to give back their transaction fees? What about GETH or BTCCore devs – who write the software, funded by grants/donations?” asked Thorbjornsen.

THORChain’s growing regulatory risks, as previously demonstrated by privacy tools

For now, THORChain has avoided any direct enforcement actions from governments, but history suggests that DeFi protocols facilitating illicit finance may not escape scrutiny forever. Tornado Cash, a well-known crypto mixer, was sanctioned by the US Treasury in 2022 after being used to launder billions of dollars, though it was later overturned by a US court. Similarly, Railgun came under FBI scrutiny in 2023 after North Korean hackers used it to move $60 million in stolen Ether.

Railgun presents a unique case, as it’s marketed as a privacy protocol rather than a mixer or a DEX. But the distinction still draws comparisons to THORChain, given that privacy protocols frequently face criticism for potentially enabling illicit activities.

“Critics often claim that privacy-focused projects enable crime, but in reality, protecting financial privacy is a fundamental right and a cornerstone of decentralized innovation,” Chen Feng, head of research at Autonomys and associate professor and research chair in blockchain at the University of British Columbia’s Okanagan Campus, told Cointelegraph.

“Technologies like ZK-proofs and trusted execution environments can secure user data without obscuring illicit activity entirely. Through optional transparency measures and robust onchain forensics, suspicious patterns can still be detected. The goal is to strike a balance: empower users with privacy while ensuring the system has built-in safeguards to discourage and trace illicit use.”

Lin of SynFutures said continued illicit use of decentralized protocols would “absolutely” lead to drastic measures from authorities.

“Governments will likely escalate measures if they perceive decentralized protocols as systemic risks. This could include sanctioning protocol addresses, pressuring infrastructure providers, blacklisting entire networks or going after the builders,” she said.

Rising pressure against THORChain

THORChain supporters argue it is being unfairly singled out, as hackers have also used other DeFi protocols. But regulators tend to focus on the biggest enablers, and THORChain processed the vast majority of the stolen funds from the Bybit hack. This makes it an easy target for enforcement actions ranging from Office of Foreign Assets Control (OFAC) sanctions to developer prosecutions.

“When the huge majority of your flows are stolen funds from north korea for the biggest money heist in human history, it will become a national security issue, this isn’t a game anymore,” TCB wrote on X.

“The threshold you want to be credibly decentralized you need a network of 1000+ unique validators. There is a reason why @Chainflip fixed this issue on the network level so quickly and all front end are applying censorship.”

If regulators decide to crack down, the consequences could be severe. Sanctions on THORChain’s validators, front-end service, and liquidity providers could cripple its ecosystem, while major exchanges might delist RUNE (RUNE), cutting off its access to liquidity.

There is also the possibility of legal action against developers, as seen in the Tornado Cash case, or pressure to introduce compliance measures like sanctioned address filtering — something that would contradict THORChain’s decentralized ethos and alienate its core user base.

THORChain’s entanglement with North Korean hackers has put it at a crossroads. The protocol must decide whether to take action now or risk having regulators step in to make that decision for them.

For now, the protocol remains firm in its laissez-faire approach, but history suggests DeFi projects that ignore illicit activity don’t stay untouchable forever.

Magazine: THORChain founder and his plan to ‘vampire attack’ all of DeFi

Politics

America must back pro-stablecoin laws, reject CBDCs — US Rep. Emmer

Published

8 mins ago

March 12, 2025

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America must back pro-stablecoin laws, reject CBDCs — US Rep. Emmer

US Representative Tom Emmer argued for prioritizing pro-stablecoin legislation in a March 11 House Financial Services Committee hearing, while calling central bank digital currencies (CBDC) a threat to American values.

On March 6, Emmer reintroduced the CBDC Anti-Surveillance State Act in the House of Representatives. Emmer renewed his call for Congress to pass the legislation at the March 11 hearing. The legislation aims to block future administrations from launching a US CBDC without explicit approval from Congress.

“CBDC technology is inherently un-American,” Emmer said at the hearing, warning that allowing unelected bureaucrats to issue a CBDC “could upend the American way of life.”

On Jan. 23, President Donald Trump signed an executive order prohibiting “the establishment, issuance, circulation, and use” of a CBDC in the US. Emmer said that the legislation he reintroduced could “prevent a future administration from creating such an obvious tool for financial surveillance against its own citizens” if signed into law, citing concerns about privacy and financial independence.

At the same hearing, Paxos CEO Charles Cascarilla urged lawmakers to create consistent stablecoin regulations across jurisdictions to avoid regulatory arbitrage. Paxos, a significant issuer of stablecoins, recommended clear guidelines and reciprocal rules with global regulators:

“We want to make sure we have the same set of rules in the US as we have around the world so that there isn’t some arbitrage that is possible to issue from another jurisdiction. And by having that same set of rules that everyone has to meet in order to access the US market, it will actually create a race to the top, not a race to the bottom.”

Emmer, a Minnesota Republican, also criticized inherent privacy risks associated with CBDCs, saying that stablecoins could bring traditional finance onchain at a global scale while reserving privacy:

“This underscores why we must prioritize pro-stablecoin legislation alongside anti-CBDC legislation.”

Against the backdrop of rapid pro-crypto developments, a report by the Center for Political Accountability (CPA) raised concerns about the growing political influence of crypto companies in the US and potential risks to regulatory stability.

Cryptocurrency firms shelled out a cumulative $134 million on the 2024 US elections in “unchecked political spending,” which presents some critical challenges, the March 7 report said.

Magazine: Mystery celeb memecoin scam factory, HK firm dumps Bitcoin: Asia Express

Politics

Nigeria’s crypto future: Striking a balance between innovation and regulation

Published

8 mins ago

March 12, 2025

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Nigeria’s crypto future: Striking a balance between innovation and regulation

Opinion by: Mohammed Idris, Minister of Information of Nigeria

Nigeria has emerged as one of the most active and dynamic crypto markets in recent years. From bustling tech hubs in Lagos to grassroots communities in smaller cities, young Nigerians have turned to cryptocurrencies to address fundamental economic challenges, from hedging against inflation to accessing global markets in a way traditional finance often does not allow.

As minister of information, I have seen firsthand how digital innovation has become crucial to the Nigerian story. Cryptocurrencies, blockchain technology and other digital assets are no longer on the fringes of our economy; they are fast becoming central to how our people transact, create and build.

This rise in crypto adoption has not, however, come without challenges. Questions around regulation, consumer protection, security and misuse of digital assets have fueled debates in Nigeria and globally. I write to clarify Nigeria’s position: We are committed to fostering an inclusive digital asset ecosystem that is both innovative and responsible.

Nigeria is a crypto hub

According to several international reports, Nigeria consistently ranks among the top countries in terms of crypto adoption. Our population — over 200 million strong, with a median age under 20 — is naturally inclined toward new technologies. Crypto has become more than a speculative tool; it’s a lifeline for freelancers, small businesses and families receiving remittances.

Yet despite the widespread use of cryptocurrencies, Nigeria has wrestled with how to regulate this sector effectively. Earlier approaches included restrictions on financial institutions from facilitating crypto transactions, which inadvertently pushed much of the activity underground, away from proper oversight.

Nigeria moves toward robust regulation

Under the administration of President Bola Ahmed Tinubu, Nigeria is reassessing its approach. We are moving away from blanket restrictions toward thoughtful, balanced regulation that acknowledges both the risks and the transformative potential of crypto and blockchain technologies.

Our objective is to create a regulatory framework that fosters innovation, ensures market integrity and protects Nigerian consumers. This involves active engagement with stakeholders from crypto startups and blockchain developers to international partners and regulatory bodies.

Recent: Nigeria to tax cryptocurrency transactions for revenue boost

Nigeria’s stance is simple. We support innovation that benefits our people, but we will not allow misuse that harms them.

We recognize the legitimate use cases for cryptocurrencies, including:

Financial inclusion for the unbanked and underbanked.
Cross-border payments and remittances that avoid high fees.
Access to global markets for Nigerian entrepreneurs and freelancers.
New digital economies, such as decentralized finance (DeFi) and non-fungible tokens (NFTs), offer opportunities for wealth creation.

At the same time, we are determined to address concerns around fraud, money laundering, terrorism financing and other illicit activities. Effective regulation, rather than prohibition, is the path forward.

Nigeria and blockchain

Nigeria sees blockchain technology as more than just crypto trading. Blockchain can be a powerful governance, transparency and service delivery tool.

Already, conversations are underway on how blockchain can improve public systems, such as:

Land registries to reduce fraud and strengthen property rights.
Identity management systems to enhance financial inclusion.
Supply chain monitoring to improve food security and public procurement.

A collaborative approach

Nigeria is not navigating this journey alone. As we develop new policies and frameworks, we look to global best practices and seek collaboration with international platforms and regulators.

We invite crypto companies, investors, innovators and advocates to engage with us. We aim to create a transparent and predictable environment where businesses can thrive while ensuring Nigerian citizens are protected from undue risks.

Nigeria’s approach to crypto is evolving, and with good reason. The potential for digital assets and blockchain to contribute to economic growth, job creation and financial empowerment is too significant to ignore.

To realize these benefits, we must build trust in the system through effective regulation, education and international cooperation.

To the global crypto community, I say this: Nigeria is open to innovation, but we are equally committed to ensuring that such innovation operates within a secure, transparent and inclusive framework.

We look forward to working together — for the benefit of Nigerians and the global advancement of responsible crypto adoption.

Opinion by: Mohammed Idris, Minister of Information of Nigeria.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Politics

EU retaliatory tariffs threaten Bitcoin correction to $75K — Analysts

Published

42 mins ago

March 12, 2025

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EU retaliatory tariffs threaten Bitcoin correction to K — Analysts

The European Union’s latest retaliatory tariffs have deepened macroeconomic uncertainty, prompting crypto analysts to forecast increased volatility for Bitcoin prices, which may drop below the critical $75,000 support level.

The EU will impose counter-tariffs on 26 billion euros ($28 billion) worth of US goods starting in April, the European Commission announced on March 12, responding to US President Donald Trump’s recent move to impose 25% tariffs on steel and aluminum imports.

This move is the latest retaliatory tariff announcement in response to US import tariffs, which may trigger renewed trade war concerns and market volatility in the near term.

EU retaliatory tariffs threaten Bitcoin correction to $75K — Analysts — *Source: European Commission*

“Counter tariffs aren’t a positive signal as they suggest a potential bounce back from the other side again,” according to Marcin Kazmierczak, co-founder and chief operating officer of blockchain oracle solution firm, RedStone.

This may see Bitcoin (BTC) revisit $75,000, he told Cointelegraph, adding that “given stablecoins and RWAs [real world assets] remain at all-time-highs, it has the potential to rebound.”

“I don’t believe that news will have a strong impact for now, but we’ll observe the response on the US end,” he added.

Other analysts still eye a temporary Bitcoin retracement below $72,000 as part of a “macro correction” during the current bull market cycle before Bitcoin’s next leg up.

Still, import tariffs are not the only factor influencing Bitcoin’s price, Ryan Lee, chief analyst at Bitget Research, told Cointelegraph, adding:

“The prices are correlated with wider economic conditions but are also influenced by factors beyond trade policies. Worldwide institutional adoption, regulatory updates and high utility make it more resilient than traditional financial instruments.”

Europe announced its retaliatory tariffs the same day Trump’s increased 25% tariffs on all steel and aluminum imports took effect. Europe’s current suspension of tariffs on US goods will end on April 1, and its new tariffs will take full effect by April 13.

Global trade tariff uncertainty may limit markets until April 2

Traditional and cryptocurrency markets may be limited by tariff-related concerns until April 2, according to Aurelie Barthere, principal research analyst at Nansen.”

“Tariff noise is likely to continue till after April 2, and the reciprocal tariff announcements, and then negotiations, and put a lid on risk appetite.”

“That said, we observed tentative stabilization in the major US equity indexes and BTC yesterday, at the low of their respective RSI, which we are monitoring,” she added.

Trump threatened to “substantially increase” duties on cars entering the US from Canada, set to take effect on April 2, unless Canada decides to drop some of its trade tariffs.