The HTX exchange, formerly known as Huobi Global, is now switching its hot wallets, making it more difficult to implement sanctions screening, according to security firm TRM Labs.
In a follow-up report after the UK imposed sanctions on the exchange in May, TRM Labs found that its typical address list sanctions screening method could not keep up with HTX’s actions.
HTX has remained operating under the same brand but has rebuilt its on-chain plumbing, revolving hot wallets, and funding addresses on regular cycles across TRON, Ethereum, BNB Smart Chain, and Solana.
According to the security company, enforcing sanctions now requires tracking behaviors as much as tracking addresses.
Address list scanning can’t keep up. Fixed blocklist going out of date within hours and will clear most HTX activity after setting. Behavior-based attribution tracks cyclical infrastructure as new wallets come online.
Will HTX’s operations attract more scrutiny?
In most traditional cases, a hot wallet linked to a particular exchange or individual will be blacklisted for sanctions screening. When a positive red flag appears, it can be blocked or funds frozen.
Many exchanges were activated after that The United Kingdom imposed sanctions HTX on charges of transporting Russian money. Bybit, Binance, and even Hyperliquid were checked against flows from HTX-linked wallets. Whether innocent or not, any HTX streams were flagged and frozen.
After the sanctions, the exchange was immediately owned by Justin Sun It moved $1.3 billion of its reserve funds To an undisclosed third party. Security analysts saw the move as a way to prevent “government overreach” in the event that the UK decided to freeze the exchange’s funds.
Besides using an unknown third party for custody, the exchange has now opted to use hot wallets for a limited period before eliminating them. It remains to be seen whether this will protect its users or increase scrutiny of the exchange.
For TRM Labs Chief Policy Officer Ari Redbord, institutional screening must adapt to reduce the risk of HTX exposure. He said,
HTX changes its portfolios every few hours to stay one step ahead of static list-based screening. Achieving this (institutional screening) requires behavior-based detection that identifies HTX wallets when they come online.
However, the HTX Bitcoin (BTC) The exchange reserve fell sharply after the sanctions from 9.4 thousand to 8.4 thousand coins in the last two months. This translates to a 10% decrease in Bitcoin reserves after the UK sanctions.
It remains to be seen whether the UK will intensify regulatory pressure on the exchange following the latest TRM Labs report.
Final summary
- HTX exchange reportedly transferred $1.3 billion to an unknown third party and is rotating hot wallets hourly amid UK sanctions.
- Bitcoin exchange reserves on the platform owned by Justin Sun decreased by 10% to 8.4 thousand BTC.
