Market Weekly: BNB Chain Hack, Mt.Gox Repayment, and Regulatory Tension

Blockonomi

The crypto market woke up last week to a series of gloomy news. Rumors swirled this morning that someone managed to hack into the BNB chain and stole away 2 million BNB worth more than $580 million. The attack was discovered through the key witness of suspicious token transfers.

BNB Bridge Hit

The suspicious wallet moved as much as possible to other chains and borrowed against the BNB on various DeFi protocols such as Fantom, Avalanche, Ethereum, etc. before BNB Chain suspended trading activities.

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The latest record of BSC Scan showed that the wallet, marked as BNB Bridge Exploiter, had run off with $421 million tokens.

BNB Chain and Binance’s founder Changpeng Zhao confirmed the attack on the BSC Token Hub. In the meantime, deposits and withdrawals on the blockchain were temporarily suspended.

The team requested all validators to halt the operation to solve the issue. Zhao affirmed that customers’ funds are still safe, estimating an actual loss of $100 million.

This is most likely the number of tokens removed from the BNB Chain ecosystem and transferred to other blockchains, while the remaining funds on the BNB Chain can be reimbursed in some way.

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According to the ecosystem’s newest update, the validators were reactivated but communication between BNB Beacon Chain and BNB Smart Chain is still on hold.

In addition, the team announced that it will discuss with the community what needs to be addressed in the near future to ensure decentralization as well as appropriate solutions for the stolen funds.

Cross-chain attacks remain an unsolved challenge in the cryptosphere. Prior to BNB Chain, several cross-chain bridges have come under attack including Wormhole ($325 million), Ronin ($622 million), Harmony Bridge ($100 million), and Nomad Bridge ($176 million).

Mt.Gox Repayment

There is strong speculation that Mt. Gox’s coming repayment may kill the next bull run. BTC creditors who were affected by the Mt. Gox incident can finally claim their crypto repayments. Under the settlement, a total of 140,000 BTC is set to be transferred to creditors in January 2023.

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It is a piece of good news for investors who lost money to the now-defunct cryptocurrency exchange.

However, given the sheer size of the deal, many Bitcoin investors expressed their concerns about dumping such a large amount of BTC in the market at the time. It poses a high risk of a sharp decline in Bitcoin price given the demand is considerably low at this time.

This could be avoided if the deal is distributed in fractions. Moreover, there’s a high possibility that the former Mt. Gox customers are early Bitcoin adopters, and their belief in the future of the largest cryptocurrency is likely solid.

In general, it is likely that BTC repayment to creditors will have little or no effect on the price of the digital asset market. However, investors should notice the payback plan and pay closer attention as the date approaches.

Urgent Call For Regulations

The debate over the regulation of cryptos continues to rage in the United States and the rest of the world.

While the market is still struggling to recover from the bear hit and macro conditions, problems within the market like the BNB Chain hack, ZCash spam attack, or scandalous events from troubled lending platforms continue to drag it down.

The theoretical major selloff as the result of Mt. Gox’s repayment signals an unfavorable coming scenario.

Global regulators are speeding up legal bill introduction to regulate the cryptocurrency market and protect consumers against fraudulent conduct as well as false advertisement. On October 5, the European Union (EU) approved the Markets in Crypto-Assets (MiCA) regulation.

The proposed law, which will be put to a vote on Monday, focuses on stablecoins, consumer safety, the transparency of cryptocurrency businesses, and the industry’s effects on the environment.

The law’s approval would have a measurable influence on the cryptocurrency industry.

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Author: Nicholas Say


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