1. EU Regulatory Background and the OKX Incident
EU regulators are reviewing OKX's Web3 services, primarily because hackers used OKX's Web3 platform to launder $1.5 billion stolen from Bybit. Regulators believe that despite OKX's claims of its Web3 services being decentralized, their close integration with the OKX exchange may subject them to the regulations of the crypto asset market (MiCA). This incident has prompted the EU to strengthen its regulation of cryptocurrency platforms, especially regarding the compliance of wallets, DEX, and cross-chain functionalities.
2. Industry Rectification Trends
In response to regulatory pressure, multiple exchanges are taking the following measures:
(1) Wallet Splitting and Independent Operations
Exchanges will separate wallet functions into independent apps to comply with regulatory requirements for decentralized services. This separation aims to reduce the direct association between wallets and exchanges, lowering regulatory risks.
(2) Removal of DEX and Cross-chain Functions
Wallet apps no longer include decentralized exchanges (DEX) and cross-chain functionalities to avoid being classified as providers of financial services. This initiative aims to circumvent the strict regulations of MiCA on financial services.
(3) Cancellation of Official Financial Management Services
Wallets will no longer provide official financial management services such as CeDeFi (centralized decentralized finance) to reduce compliance risks. Such services often involve fund pool management and profit distribution, which can easily be viewed as financial products.
OKX's previously launched 'Ouyi Protect' service has emphasized users' control over their assets, and may further weaken official financial management functions in the future.
(4) Subject Isolation and Compliance
The issuing and operating entities of wallets will be completely isolated from exchanges to meet regulatory requirements for independent operations. This isolation includes the separation of legal entities, technical architecture, and the flow of funds.
OKX may separate its Web3 wallet business into a subsidiary and undergo stricter audits and compliance reviews.
3. Industry Impact and Future Outlook
Tightening Regulations: The EU's MiCA regulations will come into full effect by the end of 2024, with stricter oversight on stablecoins, wallets, and DeFi platforms. The OKX incident is just the tip of the iceberg, and more exchanges may face similar scrutiny in the future.
User Education: Exchanges and wallet platforms are strengthening user security education, for example, OKX provides risk warnings and transaction interception features through 'Ouyi Protect' to help users identify phishing attacks and malicious authorizations.
Technological Innovation: Despite increasing regulatory pressure, the industry is still exploring technological innovations, such as OKX's AI monitoring system and on-chain risk control mechanisms, aimed at enhancing security and transparency.
The EU's regulatory review of the OKX wallet is driving the compliance process across the entire cryptocurrency industry. Exchanges are attempting to find a balance between compliance and innovation through measures such as wallet splitting, removing high-risk features, and isolating operating entities. In the future, as the MiCA regulations are fully implemented, the industry may further differentiate, with compliance capabilities becoming a key competitive factor for platforms.