SEC drops lawsuits; $1.5B stolen from Bybit

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Last week, the U.S. Securities and Exchange Commission (SEC) dismissed multiple lawsuits and shut down several ongoing investigations into major crypto companies, including Coinbase (NASDAQ: COIN), Robinhood Crypto (NASDAQ: HOOD), Uniswap, OpenSea, Gemini, and Consensys.

Under former SEC Chairman Gary Gensler, the SEC believed that many digital assets were actually securities, which led to aggressive enforcement actions. Companies found themselves battling costly lawsuits and investigations, and some even had to shut down their U.S. operations entirely. However, with Gensler out and Donald Trump, who is marketed as pro-crypto, back in office, regulatory scrutiny on the industry has practically disappeared as the new administration is taking a hands-off approach to crypto regulation. But is that really a good thing?

For businesses, the SEC’s decision to scale back on regulation and enforcement action means that there are far fewer legal hurdles they need to overcome, which translates to fewer costs associated with compliance and litigation, as well as the ability to do more business—which ultimately means more revenue and profit. With the burden of constant legal threats lifted, the SEC has created an environment encouraging innovation and growth. However, this deregulation also removes critical guardrails that previously kept fraud and bad actors in check. Without significant oversight, fraud is already rising, damaging consumer confidence and tarnishing the industry’s reputation.

While many crypto companies see this change as a victory, the long-term impact remains skewed toward negative outcomes because if fraudulent activity continues to increase while real industry innovation stalls, this regulatory shift might do more harm than good.

JUST IN: 🇺🇸 SEC says meme coins are generally not securities under federal law.

— Watcher.Guru (@WatcherGuru) February 27, 2025

Over $1.5 billion wiped out of crypto markets in 24 hours

This week, the crypto market took a big hit, experiencing multiple instances where over $100 million in liquidations occurred within 60-minute windows. At one point, nearly $1.5 billion was wiped from the market in a single day.

JUST IN: $1,480,000,000 liquidated from the cryptocurrency market in the past 24 hours.

— Watcher.Guru (@WatcherGuru) February 25, 2025

Several factors have contributed to the latest market downturn. The recent Bybit hack is now the largest hack in crypto exchange history, with $1.5 billion in ETH drained from the exchange. But even before the hack took place, there was a string of high-profile memecoin launches that turned out to be little more than Ponzi schemes, further affecting the trust and reputation of the industry—especially as they resulted in significant losses for retail investors.

What set the stage for all of this was the current administration’s decision to roll back crypto enforcement while doing little to provide an actual framework for sustainable industry growth. Removing guardrails without a clear path forward has left the market in limbo, with uncertainty continuing to affect overall sentiment.

At this point, there’s little incentive for sidelined capital to re-enter the market. Crypto’s biggest problem remains its inability to attract fresh inflows beyond its existing user base. The industry has entered a “doom loop,” where the same money cycles in and out without any meaningful value creation. Unless crypto companies start building real products and delivering tangible benefits, this downward spiral will likely continue, and any “bull run” will likely be short-lived.

To add insult to injury, according to CoinGecko, the industry’s total market cap has fallen by over $800 billion since its January peak. BTC, whose performance is often seen as a benchmark in the space, has dropped 22% from its January high of $107,126, which means the asset has officially entered bear market territory.

Who stole $1.5 billion from Bybit?

This week, the Federal Bureau of Investigation (FBI) announced that it believes the North Korean hacker collective Lazarus Group was responsible for the historic Bybit hack and that the agency expects the stolen assets to be laundered through various channels before being converted into fiat currency.

Despite Bybit securing emergency funding and replenishing its reserves within 72 hours, the attack highlights one of the cryptocurrency industry’s biggest weaknesses: security. High-profile breaches like this severely damage the industry’s credibility, reinforcing the perception that crypto is still not on par with traditional finance.

Even as centralized exchanges implement stronger security measures, hackers continue to find vulnerabilities. In 2024 alone, over $1 billion has been stolen from DeFi protocols.

The lack of strict regulatory oversight and universally accepted security standards means that even major platforms remain susceptible to billion-dollar heists. Compare this to traditional finance, where strict compliance requirements and insured customer deposits make breaches nearly impossible—especially on a large scale.

Massive thefts like this don’t just result in financial losses; they actively drive away institutional and retail investors. For crypto to be taken seriously within the banking and finance world, some of these fundamental issues must be addressed. Until the industry implements safeguards on par with those in traditional finance, major financial players may continue to take a “wait and see” approach before fully committing to crypto.

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