THORSwap Slams Emergency Brake as Regulators Come Knocking

The cross-chain decentralized exchange is to transition to “maintenance mode” in a bid to curb criminal activity.

Thorswap is under construction.
Created by Kornelija Poderskytė from DailyCoin
  • THORSwap to enter “maintenance mode” at the behest of authorities.
  • The decision to switch to maintenance mode was aimed at curbing criminal activity.
  • The crypto community responded negatively to the move.

The cypherpunk dream was to build a global network of permissionless peer-to-peer value exchange, free from the watchful eye of “Big Brother.” However, the largely unregulated crypto landscape has attracted its fair share of bad actors, forcing authorities to intervene in ways that can constitute regulatory overreach.

As it emerged that the THORChain network was being used to obfuscate illicit funds from the FTX hack, decentralized exchange THORSwap recently announced that it was going into “maintenance mode” at the request of authorities. 

THORSwap Enters Maintenance Mode

In a tweet to its users, THORSwap expressed concern about the persistent use of its platform to move illicit funds. The team condemned such activity, stating that criminality has no place on the platform. 

After consulting with its legal team and law enforcement, THORSwap decided to temporarily set its exchange interface to “maintenance mode” in order to curb criminal activity using its platform. However, the team stressed that the move was a short-term measure until “a more permanent and robust solution” could be found.

While THORSwap has not provided specific details of criminal activity on its platform, it is widely known that hackers and scammers have often taken advantage of THORSwap’s cross-chain functionality without undergoing KYC verification.

More recently, the previously dormant FTX hacker who made off with $600 million in the aftermath of the exchange’s collapse, recommenced activity by using THORSwap to exchange tokens to the value of $99 million.

The FTX hacker incident highlights the ideological tug-of-war between authorities stamping down on criminals and the crypto community’s right to freely transact without state interference.

Crypto Community Responds

The crypto community was largely critical of THORSwap’s decision to go into maintenance mode. Coder Magoo PhD summed up the sentiment by labeling the move a rug pull at the hands of regulators. Others pointed out that truly decentralized systems cannot be shut down or asked to go offline, and that such a move was akin to a death sentence. 

MetaMask’s lead product manager Taylor Monahan chimed in that the most appropriate solution is to find the right balance between the two extremes of being fully permissioned and “cheering on criminals”. 

On the Flipside

  • Although crypto users have a right to censorship-free transacting, authorities must also clamp down on criminal activity. 
  • THORSwap going into maintenance mode at the behest of authorities calls into question its use of the word “decentralized” in its marketing material. 

Why This Matters

The idealization of permissionless peer-to-peer transacting is incongruent with the reality of the crypto landscape. True permissionlessness risks allowing criminals free reign to do as they please, which is an ethically untenable position to hold.

Learn more about user demand for permissionless protocols here:
ThorChain (RUNE) Booms Amid Wider Market Downturn

Discover more on Trust Wallet’s secretive tweet here:
Trust Wallet Token Surges 13% Following Cryptic Tease

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Samuel Wan

Samuel Wan is a finance professional turned crypto journalist, known for his insightful reporting on market trends, regulatory changes, and technological developments within the digital asset industry. His ability to simplify complex concepts and report the facts has made him a trusted source in the crypto community. Beyond his writing, Samuel is an active mountain biker and gamer.