A portion of the funds from cryptophan has recently been sent to the Binance cryptocurrency exchange. In response, Changpeng Zhao (CZ), the CEO of Binance, has frozen the funds, raising questions about anonymity and the fungibility of cryptocurrency.
Cryptopia is a small exchange with a daily trading volume of about 2 million dollars. The exchange was violated on the evening of 13 January for an estimated value of $ 3.5 million in cryptocurrency. The company announced the attack on January 15th.
Now, hackers are probably looking for ways to recycle, convert and cloud the source of these funds. Especially now that the New Zealand authorities are involved.
As part of this process, hackers sent 31.320 Metal (MTL) ERC20 token on Binance. Trading at around $ 0.24 at the time of printing, this amounts to around $ 7,500 in stolen cryptocurrency. After receiving a tip on Twitter, Changpeng Zhao immediately frozen the funds:
As soon as we checked, we managed to freeze some of the funds. I do not understand why hackers keep sending to Binance. Social media will be pretty quick to report it and we will freeze it. It is a high risk maneuver for them. https://t.co/i0PeahLzic
– CZ Binance (@cz_binance) January 16, 2019
Implications for Feasibility
Feasibility, as it applies to cryptocurrency, is the concept that every given currency is identical and substitutable for any other currency in the same denomination. To give an example of non-cryptocurrency, an ½ ounce of pure gold is equivalent to any other ounce of pure gold. Correspondingly, someone might think that a bitcoin is equivalent to any other bitcoin.
The problem is reduced to traceability. If that bitcoin is tainted by money laundering or criminal activity, then it is not equivalent in value or utility to another bitcoin "clean". These contaminated coins could lead to the blacklist of exchanges. If they are discovered involved in criminal activities, future recipients may be subject to legal consequences.
Frozen funds demonstrate non-fungibility
There is no doubt that the freezing of hacker funds was justified. Exchanges should work together to inhibit illegal activities and make it more difficult to engage in harmful criminal behavior.
However, the very fact that Binance was able to identify stolen funds and freeze them altogether could be a more general concern.
If someone receives $ 20 in cash, the previous owners of that money are largely untraceable. If someone receives $ 20 in bitcoins, all the precedents wallet the addresses attached to that transaction are visible. And, if the bitcoin is treated as a commodity, then this could have interesting legal consequences.
If a person unconsciously receives illicit funds, how will the forces of the order deal with these cases and who assume the burden of control?
For other products, if the stolen goods are bought unknowingly, the forces of the order have the right to seize these assets and return them to the original owner. Those who intend to resell the products have an even greater responsibility to assess whether the purchased goods have been stolen.
However, it is still unclear whether exchanges, businesses and individuals should go through similar processes. If they do, it introduces another complication and a cost for cryptocurrency transactions.
Private coins like Monero and Zcash offer a potential solution: use technology to obfuscate transaction history.
But both of these coins need to achieve the network effects already established by Bitcoin and Ethereum, which have already been accepted in an even greater number, although still limited, by sellers. Moreover, there is still a non-zero risk that regulators succumb to public perception that these currencies are used by "criminals and tax evaders" and place a general ban on private currencies.
Other ways in which crypto users have tried to limit personal responsibility include maintaining anonymity between wallet addresses and personal identification, using new ones wallet addresses for each transaction, using cryptocurrency mixers, coin washing in a freely regulated exchange or other systematic ways to obfuscate the transaction history of funds before making a purchase. If these activities fall into a legal gray area it is another matter.
There is still no clear solution to the fungibility problems. Until then, it is likely that over time regulatory authorities and order forces will set a clearer precedent through unenforced enforcement.
Disclaimer: The opinions of our writers are exclusively their own and do not reflect the opinion of CryptoSlate. None of the information you read about CryptoSlate should be taken as investment advice, nor does CryptoSlate approve any projects that may be mentioned or linked in this article. Buying and exchanging cryptocurrencies should be considered a high risk asset. Please do your due diligence before taking any action related to the content of this article. Finally, CryptoSlate assumes no responsibility in case of loss of money in cryptocurrency trading.
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