Key facts
- Blockstream will not pay a ransom to hackers who stole funds from the Liquid Network.
- Hackers demanded a 10% bounty from Blockstream to return approximately 598 BTC.
- A revised CLARITY Act proposes that US regulators determine compliance rules for non-decentralized DeFi protocols.
- The European Securities and Markets Authority (ESMA) warned of increased financial risks due to crypto's integration with traditional finance.
Blockstream, a Bitcoin infrastructure company, has stated it will not pay a ransom to hackers who stole funds from the Liquid Network. The hackers had demanded a 10% bounty from Blockstream's own funds to return the remaining Bitcoin, warning of a 15% loss for Liquid holders otherwise. Blockstream characterized the actions as theft and urged the hackers to return the Bitcoin voluntarily, stating it would work with law enforcement and forensic specialists to trace the assets if they did not.
On September 6, the Liquid Network paused operations after hackers withdrew approximately 4,000 BTC, then valued at about $320 million, from its federation wallet. The actors subsequently returned 3,400 BTC after Blockstream confirmed that affected bridge nodes had been patched, leaving about 598 BTC outstanding.
In the United States, a revised version of the CLARITY Act has been proposed, which would direct regulators like the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to determine the compliance obligations for individuals or groups controlling "non-decentralized finance trading protocols." The proposed definition includes protocols whose functionality can be altered by a person or coordinated group, or whose controllers can restrict users, or whose transactions are not solely governed by code. The Treasury would also establish how Bank Secrecy Act obligations apply to these controllers.
Meanwhile, Europe's securities regulator, the European Securities and Markets Authority (ESMA), has warned that increasing connections between crypto-asset markets and the broader financial system could amplify financial risks. In its latest risk monitoring report, ESMA highlighted the growing adoption of tokenized equities and recent decentralized finance (DeFi) exploits as potential drivers of financial spillovers. The regulator also expressed concerns about prediction markets, citing heightened risks of insider trading and market manipulation.