invezz.com
30 October 2024 15:18, UTC
THORSwap, a decentralized exchange (DEX) running on the THORChain network, has faced a steep decline in the price of its native token, THOR, following an incident involving illicit fund movements.
The THORSwap token price has plummeted by 55.5% over the past month, with losses of 36.9% in the past two weeks alone.
This downturn has persisted despite THORSwap’s efforts to re-establish trust with users by implementing stringent security measures and introducing new features, including an innovative wallet integration.
On October 6, 2024, THORSwap paused operations after detecting suspicious transactions tied to funds from the FTX hack.
Blockchain analytics firm Elliptic reported that an anonymous hacker linked to the defunct FTX crypto exchange had used THORSwap to convert 72,500 Ether (ETH) — approximately $120 million at the time — into Bitcoin (BTC).
After this conversion, funds were funnelled through sanctioned cryptocurrency mixers, making traceability more difficult.
This movement raised concerns across the crypto community, leading THORSwap to temporarily suspend its platform and enter what it called “maintenance mode.”
Fellow THORChads, A pressing and persistent concern has recently come to light: the potential movement of illicit funds through THORChain and, specifically, THORSwap. Such activities have no place on the THORSwap platform, and THORSwap stands firmly against any and all criminal…
The decision to pause transactions was not made lightly.
THORSwap sought advice from legal and law enforcement advisors before acting to prevent further misuse.
After six days in maintenance mode, on October 12, 2024, THORSwap resumed its services, assuring users of enhanced security protocols, developed in collaboration with an unnamed “industry leader” in compliance with anti-money laundering (AML) regulations.
Through a post on X, THORSwap explained that they worked closely with the new partner to improve address screening protocols, adding “guardrails” to prevent the flow of illicit funds.
The updated terms of service, released on October 11, explicitly require users to comply with AML regulations and prohibit engagement in any activity that might violate sanctions.
THORSwap restricted access to users in countries under sanctions by the US, UK, and the EU, including Myanmar, Cuba, Iran, Iraq, North Korea, Sudan, Syria, and Zimbabwe.
According to the new terms, THORSwap reserves the right to terminate any account without notice if violations occur, aiming to prevent future incidents like the FTX-related misuse.
Despite these proactive steps, the new policies have sparked debate over THORSwap’s decentralization, with some users questioning whether these updates align more with the operating principles of centralized exchanges (CEXs).
Notably, Erik Voorhees, founder of ShapeShift, clarified that THORSwap, though built on the decentralized THORChain network, is a centralized company responsible for decisions regarding its interface.
You’re referring to Thorswap which is not Thorchain. The former is a centralized company that made a decision about their own interface. The latter is a decentralized protocol that isn’t censoring anything and can be accessed in myriad ways.
While navigating these challenges, THORSwap simultaneously introduced a new feature to appeal to both new and experienced crypto users.
On October 14, the platform integrated Exodus’ Passkeys Wallet, a multi-chain solution that offers enhanced security through Multi-Party Computation (MPC) and biometrics.
The Passkeys Wallet enables users to create and manage wallets directly on THORSwap without traditional seed phrases, browser extensions, or email verification.
It supports various blockchains, including Bitcoin, Ethereum, BNB Smart Chain, and Arbitrum, providing seamless cross-chain swaps for users.
Despite THORSwap resolving the issue around the illicit fund movement on its platform and even integrating Passkey Wallet to offer multi-chain accessibility, the price of THORSwap token remains on a downtrend, with a recent 24-hour change of -23.4% and a 7-day change of -33.8%.
Although the new security and user experience upgrades underscore THORSwap’s commitment to platform integrity and accessibility, the fallout from the illicit fund incident continues to cast a shadow on THOR’s valuation.
Whether the DEX’s efforts will restore investor confidence and stabilize the THORSwap token price remains to be seen.
However, THORSwap’s evolving policies and technological advancements suggest a platform striving for resilience amid uncertainty.
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