In this edition, we look at the Bybit heist, the largest of its kind in crypto’s history, and how the industry has responded. Then we return to the US, as we knew we would, and note the differences in how the country’s federal and state governments approach crypto adoption through legislation and regulation. Let’s take a look at how these key stories are affecting the crypto market this week.
In the UAE, Bybit launched a $140M bounty program to recover $1.5B stolen in a record-breaking Ethereum heist, highlighting industry-wide security vulnerabilities and the methods employed to counter and combat crypto crime.
In the US at national government level, the SEC’s approval of the first interest-bearing stablecoin registered as a security has marked a regulatory shift which provides increased oversight of digital assets, signaling greater scrutiny of stablecoins in the US financial landscape.
The last story in our roundup this week is at the US state legislature level, where Montana’s House of Representatives narrowly rejected the Bitcoin Reserve Bill, aimed at investing state funds in high-value assets like Bitcoin. This reflects ongoing debates over cryptocurrency’s role in public finance while 24 other US states moved forward with similar legislation.
Read on to find out more about each of these stories in more detail.
Bybit offers $140M bounty to retrieve $1.5B stolen in record crypto heist
The Dubai-based crypto exchange Bybit, the second largest in the world, has set up a bounty reward program that offers almost 10%, or up to $140 million, to crypto industry sleuths and investigators who help to recover the $1.5B stolen in a crypto heist on February 21, 2025.
The theft of 400,000 Ethereum (ETH), the world’s second most valuable crypto network after Bitcoin, occurred when, according to Crystal’s Director of Blockchain Intelligence, Nick Smart, “the thieves were able to manipulate Bybit into approving a transaction that granted them control over their assets held in ‘cold storage.’ In effect, the attackers were able to replace Bybit’s vault keys with their own, giving them free access to whatever was held there.”
Bybit’s CEO and co-founder, Ben Zhou, announced the recovery bounty program on February 22. He thanked Bybit’s industry partners and the broader crypto community for their support during the first 24 hours of the attack, which helped stem the flow of illicit funds through the blockchain and assisted in stabilizing the market. He also promised to overhaul the exchange’s security systems, improve its liquidity, and remain an ally to Bybit’s industry partners.
He further added that Bybit wants to “officially reward our community who lent us their expertise, experience and support through the Recovery Bounty Program, and our efforts to make this difficult lesson a valuable one does not stop here.”
Although not the first of its kind, Bybit’s bounty program could mark a turning point in how crypto firms handle security breaches—prioritizing transparency, close collaboration and solidarity within the crypto industry, and immense financial incentives to recover stolen assets, which could become a new industry standard in addressing major hacks.
Find out more about this story at Decrypt.
US SEC approves first interest-bearing stablecoin registered as a security
The US Securities and Exchange Commission (SEC) has marked a new milestone by approving the first-ever interest-bearing stablecoin to be registered as a security on February 20, 2025. The YLDS stablecoin, a product of the digital assets trading platform, Figure Markets, is pegged to the US dollar, has a yield rate of 3.8%, and is subject to SEC oversight.
While other stablecoins accrue interest via their reserves without distributing it to holders, YLDS lets users earn interest on a daily basis and maintain their cryptocurrencies’ liquidity. A significant feature of this opportunity to earn interest is the regulatory requirement that YLDS customers must complete Know Your Customer vetting before doing so.
Figure Markets CEO, Mike Cagney, was bullish about the SEC approval, suggesting that the precedent could mean traditional financial institutions might become redundant if cryptocurrencies offer the same services. Although he did not provide the numbers of new customers, he expected high uptake since YLDS are a ‘compliant, transparent alternative to unregulated stablecoins.’
The SEC’s decision regarding YLDS highlights the growing regulatory scrutiny of stablecoins in the US. Alongside this announcement, the SEC introduced the Cyber and Emerging Technologies Unit (CETU). This development follows the introduction of a discussion draft bill, known as the STABLE Act, on February 5 by two prominent Republican representatives. The bill focuses on stablecoin adoption and governance.
This shift in how US federal authorities classify stablecoins means that the SEC will have greater oversight powers over digital assets. Crypto firms’ compliance teams will have to adjust their current systems to accommodate the developing stablecoin regulatory ecosystem.
Find out more about this story at Yahoo Finance.
Montana state legislature rejects Bitcoin Reserve Bill
The US State of Montana’s House of Representatives rejected the proposed Bitcoin Reserve Bill (House Bill 429) on February 22, 2025. House Bill 429 aimed to create a statewide revenue account that invested in high-value assets, including cryptocurrencies, which reached a market capitalization of over $750B during the previous calendar year. Bitcoin was the only investment option to do so.
The narrow margin of 51-49 votes against it reflected the legislature’s fierce debate about the contended Bill.
The ultimately persuasive arguments against adopting the Bill’s proposals included that it was irresponsible and speculative to invest taxpayers’ money in relatively nascent entities like non-fungible tokens and cryptocurrencies.
Supporters believed establishing such a revenue account would return money to the taxpayers, result in tax cuts, and supply financial relief. Meanwhile, some lawmakers recognized the Bill’s potential, but wanted more amendments made to its current form.
House Bill 429’s ten-week journey through the Montana legislature has ended. It will have to be started again from scratch if supporters wish to re-introduce it. Meanwhile, 24 other US states have passed legislation to implement Bitcoin reserves, four of which are still being debated in State Houses.
Crypto exchanges should take heed of differing levels of adoption and skepticism towards the crypto industry at US federal and state levels, as it could influence how and where they position their businesses.
However, the SEC ruling, the closeness of the vote in Montana, and almost half of US states adopting Bitcoin reserve legislation bodes well for the future of the US industry. Exchanges should continue to monitor the developing and varied legislative environment.
Find out more about these stories at Cointelegraph.
