Blockchain investigator ZACHXBT has raised concerns about the crypto industry’s ability to deal with security breaches and illegal fund movements following his recent involvement in the freeze on funds from the BYBit hack.
He argued that persistent vulnerabilities and inadequate responses from key players would allow malicious actors to take advantage of their massive weaknesses.
General disorders
Zachxbt said many of these exploits are caused by problems caused by fundamental flaws in both distributed and centralized platforms.
According to his findings, some “so-called decentralized protocols” generate almost all the volumes and income from illegal actors, such as the Democratic Republic of Korea (DPRK).
He noted that these platforms are not responsible for promoting illegal financial activities. Intensive exchange, on the other hand, delays responses to verified threat intelligence and allows stolen assets to be washed within minutes.
Additionally, approval (KYT) solutions designed to detect illegal fund movements are frequently circumvented. At the same time, customer (KYC) measurements often fail due to user data breach and the ability to purchase accounts.
Zachxbt stressed that KYC issues are not limited to crypto, but reflect the wider regulatory failures in financial surveillance.
Barriers to effective solutions
While acknowledging the risk of excessive government intervention, Zachxbt said he doubts the industry can effectively self-regulate.
He has identified several obstacles to meaningful reform, including large exchanges and services that lack a rapid response team that can address validated threat intelligence in real time.
Additionally, these platforms often fail to support users affected by hacking and may withhold account data to limit liability. The legal recovery process for victims is slow, with certain exchanges resisting efforts to return stolen funds.
Centralized Stablecoin publishers do not block addresses directly tied to major hacking, allowing illegal actors to maintain access to Stablecoin liquidity. He argues that compliance tools used by major companies such as Coinbase and Circle do not regularly flag illegal activities.
On the other hand, some distributed protocols are unable to reevaluate their designs despite most of the transaction volumes derived from illegal sources.
ZachxBT pointed to new blockchain networks and cross-chain bridges that ignore basic analytics or security measures. He also flagged the over-the-counter trading cluster in China that operates in Tron.
Despite raising these concerns, Zachxbt makes it clear that while not advocating for an increase in government oversight, the crypto sector has not been able to actively address the security gap.
Without industry-wide improvements in incident response, Stablecoin publisher policies, and analytics integration, the chances of a problem being resolved are unlikely. Zachxbt’s findings suggest that for now, illegal actors are ahead of industry security measures.
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