Rumors started spreading on Thursday that the entire team behind blockchain bridge Multichain had been arrested by Chinese authorities. Early reports indicated that law enforcement had taken custody of the project’s wallet containing crypto assets worth $1.6 billion.
It’s, however, unclear if the arrest actually happened. Nonetheless, several companies have since responded to the situation. Crypto exchange Binance, for example, has announced halting the withdrawals and deposits for various tokens of the bridge. The trading platform says it is waiting for the Multichain team to clarify the issue before resumption.
Multichain is among the biggest blockchain bridges in the crypto world, facilitating the swapping of cryptocurrencies across multiple chains. It allows several networks like Avalanche, Binance Chain, Ethereum, and Polygon to interact.
Since yesterday, Multichain has not posted anything on its social media accounts, which is uncommon. Chinese authorities also haven’t published any information addressing the arrest incident. Only China-based media outlets have shared details regarding the matter.
Fantom’s Exposure to Multichain’s Crisis
Meanwhile, developments around Multichain have raised concerns over the Fantom blockchain. Research company Thanefield Capital took to Twitter on Friday morning to write that 40% of Fantom’s crypto assets are issued by Multichain, signaling heavy reliance on the bridge.
In a tweet, Fantom’s team addressed the concerns claiming that Multichain was “running as normal.” Further, the company’s Director, Andre Cronje, spoke in an interview with The Block, where he disclosed that Fantom withdrew $2.3 million worth of Multichain’s native token, MULTI, from SushiSwap on Thursday evening, claiming that the firm no longer saw the point of providing liquidity amid uncertainty.
Blockchain analytics company Arkham Intelligence tweeted that several MULTI whales like Hashkey Group already were transferring their holdings to centralized exchanges such as Gate.io to cash them out. That is evidenced by the drop in MULTI’s price over the last 24 hours. It’s down 26% to trade at $3.37 as of this writing.
However, the arrest of Multichain’s team appears not to have caused any significant panic in the wider decentralized finance space. Data on DeFi Llama shows that during the past 24 hours, daily bridged volume rose by 520%, with deposits exceeding withdrawals by over $19 million.
Is This the End of Multichain?
Meanwhile, Dovey Wan, the founder of Primitive Ventures, a crypto investment fund, says Multichain may be forced to shut down over the coming days, arguing that Chinese authorities have recently been targeting China-based crypto projects, which they consider to have huge funds under their custody.
Co-founder of Ethereum, Vitalik Buterin, who hasn’t commented on the Multichain crisis, has previously cautioned crypto users about too much reliance on cross-chain bridges. In a blog post published on May 20, the tech guru advised users to only hold crypto assets on the blockchain they originate from.
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