Masks Off: Crypto Industry Responds to Binance Hack by Acting Like Banks

The crypto industry has spent the past day congratulating itself for the speed with which stablecoin issuers and other parties froze portions of the roughly $6.3 billion that left Binance wallets in the largest crypto theft on record on Thursday. Roughly $3 billion of that has been verified as frozen on various blockchains, according to the exchange. While the response from various crypto industry participants likely blocked billions of dollars worth of crypto theft, it has also reminded everyone that much of the supposed decentralization found in this space is more theater than technical reality.

Indeed, Binance itself is a centralized honeypot that holds customer assets in hot wallets controlled by the company, and the measures implemented by the exchange and other parties once the hack became apparent were reminiscent of what traditional banks use when something goes wrong. Most notably, Tether froze more than 1.567 billion USDT and Circle froze more than 800 million USDC, according to TRM Labs. Additionally, Trump-affiliated World Liberty Financial froze tens of millions of USD1, and Arbitrum’s Security Council intervened to move approximately $30 million in ETH and ARB out of the attacker’s control on the Ethereum layer-two network. According to Binance co-founder Yi He, Ripple also froze roughly $200 million worth of assets. While the industry treated the freezes as a success story, critics noted that the same tools undercut the technology’s original value proposition of removing trusted third parties from digital financial systems.