Key Takeaways:
- EU regulators are investigating OKX’s role in laundering $100M from the Bybit hack.
- The focus is on whether OKX’s Web3 service falls under MiCA regulations.
- Malta may consider penalties, including revoking OKX’s MiCA permit.
According to reports, European Union regulators are intensifying scrutiny on OKX’s Web3 service following concerns that it was used to launder $100 million from the Bybit hack. The authorities suspect that North Korean hackers employed the platform to launder stolen cryptocurrencies, and an extensive investigation is underway.
EU 27 regulators gathered recently to discuss the matter, where there was concern regarding if the Web3 platform should be covered under the bloc’s new Markets in Cryptoassets (MiCA) regulations. The exchange has marketed its Web3 product as a decentralized finance system, offering users self-custodian wallets and access to multiple exchanges and blockchains.
But regulators argue that inclusion into the core OKX platform would bring it under the oversight of MiCA. Austria and Croatia were among the nations that demanded more regulation, citing the issue of regulatory loopholes that could be used to carry out illegal activities.
Malta’s Role and Potential Penalties
The focus by the EU on the exchange has also put Malta, where the exchange is in possession of a MiCA pre-authorization, under the limelight. It received approval to conduct business in the European Economic Area (EEA), and it is a development that is being reassessed.
A number of regulators are urging Malta’s financial regulator to examine if the exchange’s Web3 activities are in line with MiCA. The evaluation may result in penalties, including the revocation of the exchange’s MiCA license or limiting its activities in the EU.
One recent session included a presentation that mentioned that the Web3 offering by the exchange is linked to its main website, and the terms and conditions reflect an OKX Singapore entity as the main operator.
Though the Singaporean arm of OKX is not immediately involved, regulators are concerned that the setup allows illicit transactions to be carried out. That leaves the door open to more sanctions, particularly if authorities determine that laundered funds originated from sanctioned entities.
Growing Pressure on OKX Amid Legal Challenges
OKX’s problems with regulators do not only lie in the EU. The exchange recently acknowledged processing over $1 trillion worth of unauthorized transactions by American customers, leading to a $504 million fine. Recent European regulator attention is an added complication to its business internationally, putting strain on its compliance.
European authorities will step in if national authorities fail to. Non-compliance under Article 64 of MiCA can lead to license revocation. Malta will negotiate with OKX but is not yet acting against Bybit.
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