Department of Justice announcement caused chaos… for no reason at all
A real nail-biting experience
The crypto community was thrown into a frenzy on Wednesday when the Department of Justice (DOJ) announced a press conference concerning a “major international cryptocurrency action.” In anticipation of the announcement, Bitcoin dropped 4.6% and Ethereum shed 5%. Many in the crypto market feared that another major player, like FTX, would be targeted by federal prosecutors.
However, when the announcement was made, it was revealed that the DOJ was targeting Bitzlato, a Hong Kong-based crypto exchange. The exchange’s founder, Russian national Anatoly Legkodymov, also known as “Gandalf,” was arrested for allegedly failing to establish anti-money laundering requirements for Bitzlato. The exchange is believed to have processed $700 million in illicit funds, primarily from transactions related to the dark web marketplace Hydra.
Say Who now??
While the DOJ touted the arrest as a significant blow to the “cryptocrime ecosystem,” many in the crypto community were left scratching their heads as few had ever heard of Bitzlato. In terms of size, the Chinese exchange held a maximum of $6 million in funds at its peak, according to analytics firm Arkham.
The community took to Twitter to lambast the DOJ for unnecessarily causing market panic and for targeting a relatively small player in the crypto market. Prior to the announcement, many speculated that the DOJ would be targeting Binance, the world’s largest crypto exchange, which has been under investigation for four years. Binance had been closely tied to the collapse of rival firm FTX and had recently admitted to unorthodox business practices.
Huge opportunity emerging for exchanges to capture all that massive Bitzlato volume now.— Hsaka (@HsakaTrades) January 18, 2023
This event highlights the ongoing challenges and uncertainty that government agencies face when trying to regulate the crypto market. The market is constantly evolving and it is difficult for regulators to keep pace with the latest developments. This has led to a patchwork of regulations across the globe and a lack of consistency in how the crypto market is regulated.
While the DOJ’s action may have been a disappointment for many in the crypto community, it is clear that government agencies are taking the issue of crypto regulation seriously and are looking for ways to combat illegal activities in the crypto market. It remains to be seen how the situation with Bitzlato will unfold and what impact it will have on the crypto market.