Regulatory shifts in the US and Europe are reshaping the crypto landscape, with authorities reconsidering their approach to enforcement. In the US, the Securities and Exchange Commission (SEC) is reportedly moving to drop its case against crypto YouTuber Ian Balina, reflecting a broader policy shift under the new administration. Meanwhile, in Europe, regulators are examining whether OKX’s Web3 services fall under the Markets in Crypto-Assets (MiCA) framework after allegations that they were used to launder funds from the Bybit hack.
EU Regulators Scrutinize OKX Over Potential Role in $100 Million Bybit Hack Laundering
The European Union’s financial regulators are reportedly investigating cryptocurrency exchange OKX over its Web3 wallet and decentralized finance (DeFi) platform, which may have been used to launder $100 million in stolen funds from the Bybit hack, according to a March 11 report by Bloomberg.
This scrutiny follows concerns that OKX’s services may fall under the Markets in Crypto-Assets (MiCA) regulatory framework, which governs digital assets across the EU. The controversy stems from whether OKX’s decentralized platform and wallet should be subject to the same compliance standards as centralized exchanges.
Sources cited in Bloomberg’s report state that national regulators from EU member states met on March 6 at a gathering hosted by the European Securities and Markets Authority’s (ESMA) Digital Finance Standing Committee to discuss OKX’s involvement.
At the core of the discussion is whether OKX’s Web3 proxy and wallet service played a direct role in processing illicit transactions linked to the $1.5 billion hack of Bybit in January. Bybit CEO Ben Zhou has claimed that 40,233 ETH (worth approximately $100 million) was laundered through OKX’s Web3 proxy, with some funds now untraceable.
With OKX having secured a full MiCA license in January, regulators are assessing if its Web3 wallet service and decentralized exchange fall under MiCA oversight. If found to be in violation of EU regulations, penalties could follow.
Authorities from Austria and Croatia were particularly vocal, arguing that OKX’s Web3 service should fall under EU regulatory purview, despite the exchange asserting that it operates as a decentralized platform. Under MiCA, fully decentralized platforms might be exempt from stringent compliance measures, but the case for OKX remains ambiguous.
Amid these allegations, OKX has denied being the subject of any formal investigation by EU regulators. In a statement posted on X, the exchange rejected Bybit’s claims, accusing the firm of spreading misinformation about OKX’s Web3 wallet and platform.
OKX’s Web3 wallet has 53 million addresses and can connect to 100 blockchains, making it one of the most expansive decentralized ecosystems in the crypto space. The company maintains that its self-custodial nature means it does not have direct control over users’ transactions, which differentiates it from centralized services that facilitate laundering through custodial accounts.
The Bybit hack, which saw the theft of $1.5 billion worth of Ethereum (ETH) and ETH-related tokens, is now considered the largest crypto hack in history. Cybersecurity experts and blockchain analytics firms have attributed the attack to Lazarus Group, a North Korean-affiliated hacking syndicate responsible for numerous high-profile crypto thefts.
Bybit CEO Ben Zhou has taken an aggressive stance against the hackers, publicly declaring war on the Lazarus Group and working with authorities to trace and recover stolen assets. So far, 3% of the stolen funds have been frozen, while 20% remain untraceable, raising concerns about how hackers are laundering assets through DeFi services and decentralized wallets.
MiCA’s Challenge: Regulating Decentralized Finance
The controversy surrounding OKX shows the ongoing challenge regulators face in applying traditional compliance measures to decentralized finance (DeFi) and non-custodial wallet services.
Under MiCA regulations, crypto service providers operating in the EU must comply with stringent anti-money laundering (AML) and Know Your Customer (KYC) requirements. However, fully decentralized platforms remain a gray area. The EU’s approach to DeFi regulation remains unclear, with policymakers struggling to define what constitutes “sufficient decentralization” under MiCA.
The OKX case could set a precedent for how DeFi platforms and non-custodial wallets are treated under the EU’s evolving crypto regulatory framework.
As regulators continue to examine OKX’s operations, it remains to be seen whether formal action will be taken against the exchange. If the EU determines that OKX’s Web3 service falls under MiCA, the company could face compliance requirements, fines, or operational restrictions.
SEC to Drop Case Against Crypto YouTuber Ian Balina in Major Shift Under New Administration
In other news, the United States Securities and Exchange Commission (SEC) is reportedly moving to dismiss its lawsuit against Ian Balina, CEO of Token Metrics and a prominent YouTuber with over 100,000 subscribers. The case, which accused Balina of violating securities laws by promoting Sparkster (SPRK) tokens in 2018, was originally filed in 2022 but appears to be another casualty of the SEC’s changing stance on crypto enforcement under the new Trump administration.
Balina confirmed the news in a March 11 interview, stating that the SEC had informed him of its intent to recommend the court drop the case. The decision reflects the regulator’s evolving priorities following the departure of former SEC Chair Gary Gensler in January and the appointment of acting Chair Mark Uyeda by President Donald Trump.
The SEC’s lawsuit against Balina stemmed from his alleged failure to disclose compensation received for promoting SPRK tokens. The September 2022 complaint claimed that Balina agreed to receive a 30% bonus on the $5 million worth of tokens he purchased during the Sparkster initial coin offering (ICO) in 2018 but did not inform his social media followers about this arrangement.
In May 2024, a judge ruled that SPRK tokens were securities, reinforcing the SEC’s case. Balina’s legal team had planned to appeal the decision, and a jury trial was initially scheduled for January 2025 before being postponed to a later, undetermined date.
At the time of publication, no official filing had been made in the US District Court for the Western District of Texas to dismiss the case. However, if the case is formally dropped, it would mark a significant retreat from the SEC’s aggressive enforcement actions against crypto influencers.
Balina, who has been an outspoken critic of the SEC’s enforcement-first approach, welcomed the development and pointed to political shifts in Washington as the key driver of the SEC’s decision.
Despite celebrating the likely dismissal, Balina admitted the legal battle had been costly, saying “It definitely was not cheap, cost a lot of money in terms of legal fees, which definitely sucks. Makes me wish the SEC hadn’t put priority on all this.”
The SEC’s move to drop the Balina case aligns with a broader policy shift under President Trump, whose administration has taken a more favorable stance toward crypto. Since Trump took office in January 2025, the SEC has dropped or scaled back enforcement actions against several major crypto firms, including:
Robinhood Crypto
Gemini
Uniswap
OpenSea
Coinbase
Consensys
Kraken
Additionally, the SEC has backed off efforts to classify crypto firms as exchanges under new regulatory rules, a significant win for the industry.
Critics have suggested that the crypto industry’s financial support for Trump’s campaign and inauguration may have played a role in these regulatory decisions. Many major crypto firms and executives backed pro-crypto candidates in the 2024 election cycle and were prominent donors to Trump’s inauguration fund.
The close relationship between the new administration and the crypto sector was further highlighted on March 7, when Trump hosted a crypto summit at the White House, attended by representatives from Robinhood, Gemini, Coinbase, and Kraken.
The SEC’s Ripple Case Still in Play
While the SEC has backed off in several cases, one major lawsuit remains unresolved: the commission’s legal battle with Ripple Labs. The case, which has been ongoing since 2020, saw a $125 million ruling against Ripple in August 2024. However, both Ripple and the SEC have filed appeals, leaving its long-term impact on crypto regulation uncertain.
With the SEC’s approach to crypto regulation shifting, many in the industry expect a more business-friendly environment in the coming years. The potential dismissal of Balina’s case could set a precedent for other crypto influencers and projects that previously faced regulatory scrutiny.
However, questions remain about how the SEC will approach new crypto-related cases under Chair Mark Uyeda. While enforcement actions may be scaling down, the need for clear regulatory guidelines remains a pressing issue.
For now, Balina’s case represents another win for the crypto industry as Washington redefines its approach to digital assets. Whether this shift leads to long-term regulatory clarity or simply temporary deregulation remains to be seen.
This article was originally Posted on Coinpaper.com
