Chainflip, a decentralized exchange, is upgrading its system to prevent hackers from using its platform to launder funds stolen in a recent $1.4 billion hack on Bybit, a cryptocurrency exchange. The upgrade will allow Chainflip’s brokers to identify and block suspicious deposits of Ethereum (ETH) and ERC-20 tokens, aiming to protect liquidity providers and users from illicit activities. This decision is part of Chainflip’s wider effort to safeguard its network and improve its competitiveness. The protocol update is nearly ready for deployment and should be active within a few days. This change follows the detection of attempts by the Bybit hackers, linked to North Korea’s Lazarus Group, to swap tokens on Chainflip. Meanwhile, Bybit has been working to recover from the breach, though the attackers quickly laundered a significant portion of the stolen assets. Other exchanges, like eXch, have resisted cooperation due to past grievances with Bybit.

• What happened?
  Chainflip, a decentralized exchange (DEX), announced a protocol upgrade to prevent the hackers behind the $1.4 billion Bybit hack from using its platform for laundering stolen assets. The upgrade, called 1.7.10, will enable broker operators to block suspicious transactions of ETH and ERC-20 tokens. This action was taken after Chainflip detected Bybit hackers attempting to swap USDC through its service.
• Who does this affect?
  This upgrade affects Chainflip liquidity providers (LPs) and regular users by safeguarding them from exposure to illicit activities on the platform. It also impacts the broader crypto market by setting a precedent for enhanced security measures against large-scale hacks. Additionally, it affects other exchange platforms like SwapKit and Rango DEX aggregator, which will enforce the new security measures.
• What does this mean?
  The upgrade has significant market implications as it strengthens trust in the security and reliability of decentralized exchanges like Chainflip. By proactively blocking illicit flows, Chainflip aims to enhance its liquidity and pricing competitiveness over time, potentially attracting more users and investors. This move could encourage other exchanges to adopt similar security measures, impacting how cryptocurrency exchanges operate with regard to preventing money laundering.