European regulators are closely examining the role of OKX in laundering funds from a massive cyber heist on Bybit.

National regulatory bodies across the European Union deliberated on the issue during a meeting led by the European Securities and Markets Authoritys (ESMA) Digital Finance Standing Committee on March 6.

OKX Faces Intense Scrutiny

The focus of the inquiry is OKXs Web3 service, which happens to be a decentralized finance (DeFi) platform and self-custodial wallet that facilitates access to multiple blockchains and exchanges. Reports indicate that hackers, allegedly tied to North Korea, funneled approximately $100 million in stolen cryptocurrency through this platform.

Bloomberg report suggests that authorities are now assessing whether OKXs Web3 service falls under the jurisdiction of the EUs newly implemented Markets in Cryptoassets (MiCA) regulation, which aims to oversee digital asset providers and ensure compliance with financial security measures.

Some regulators, particularly from Austria and Croatia, argued that OKXs Web3 service should be subject to MiCAs regulatory framework despite fully decentralized platforms being exempt under the rules that came into force in late 2024.

A key point of discussion at the meeting was whether the platforms integration into OKXs main website and its connection to an OKX Singapore entity constituted grounds for enforcement under MiCA. A regulatory presentation at the meeting reportedly outlined how OKXs user interface enables token swaps and wallet connections directly through its website, suggesting centralized oversight rather than a purely decentralized model.

Additionally, officials raised concerns about potential violations of sanctions against North Korea, given the laundering activities linked to the attack. The outcome of this regulatory scrutiny could lead to penalties for the crypto and further discussions on the application of EU financial laws to similar platforms.

OKX Responds

OKX has firmly rejected claims, calling the Bloomberg report misleading. The exchange clarified that its Web3 wallet and swap features function similarly to those of other major crypto platforms, and serve as aggregators to improve user efficiency rather than facilitating illicit transactions.

According to OKX, its immediate response to the Bybit breach included freezing related funds on its centralized exchange and introducing a new tool to detect and block hacker-linked addresses from accessing its decentralized exchange or wallet services. The company expressed disappointment over Bybits statements and argued that they contributed to misinformation by wrongly implying an investigation into OKX.

It even went on to emphasize that regulatory scrutiny is not directed at its operations but rather stems from broader industry discussions on decentralized finance regulations. Additionally, OKX suggested that the real issue lies in Bybits security shortcomings, rather than any wrongdoing on its part. The exchange strongly refuted what it described as false claims that misrepresented its role in the aftermath of the cyberattack.