Bybit’s Crypto ’Kill Switch’ Bombshell: 16 Blockchains Can Freeze Your Assets—Are You at Risk?

Your keys, your crypto? Not so fast. Bybit just dropped a truth bomb exposing the fine print nobody reads—16 major blockchains have built-in kill switches to freeze funds. Here's why it matters.

The Illusion of Decentralization Cracks

Exchanges pitch self-custody as the holy grail, but the underlying chains? They’re playing by Wall Street rules. Smart contracts can be smarter than you—especially when devs hold admin keys.

16 Chains, 16 Backdoors

From Ethereum rivals to Binance’s playground, the ‘immutable’ code isn’t always immutable. Upgradeable contracts mean freeze powers hide in plain sight—usually buried in Section 12.3 of a 50-page whitepaper.

Bankers Are Laughing

While crypto bros rage about CBDCs, their favorite altcoins already function like them. The irony? TradFi’s ‘regulated’ systems often have clearer bailout rules than your favorite ‘decentralized’ chain.

Wake-up call: true sovereignty requires reading beyond the marketing. Or just keep gambling—the house always wins.

It found that major chains, including Binance-backed BNB Chain, VeChain, Chiliz, Viction, and XinFin’s XDC Network, have hardcoded freezing functions, allowing developers or validators to halt transactions or lock specific wallets.

BNB Chain, Aptos Among Networks With Built-In Freezing Mechanisms

Bybit’s researchers categorized these control mechanisms into three main types: hardcoded freezing, configuration-based freezing, and on-chain contract freezing.

Ten of the 16 blockchains rely on configuration files like YAML, ENV, or TOML to manage private blacklists accessible only to validators or foundations.

Examples include Aptos, EOS, and Sui, which can freeze funds via validator-level configuration changes.

Another five networks, including BNB Chain, embed freezing features in their source code, allowing blacklisted wallets to be blocked at the protocol level.

They noted that the Heco Chain (Huobi Eco Chain) stands out as the only network using a smart contract-based blacklist, executing freezes through an on-chain contract.

Though designed for security, some of these mechanisms introduce new risks of centralization and censorship.

“The existence of fund-freezing functions, even when implemented for security purposes, challenges the notion of full decentralization,” Bybit’s researchers wrote.

The Lazarus Security Lab also identified 19 additional blockchains that could introduce similar capabilities with minor protocol modifications.

Among them are several built on the Cosmos ecosystem, which uses “module accounts,” addresses controlled by on-chain logic rather than private keys.

Module accounts could theoretically freeze addresses by hard fork adjustments. Though no Cosmos-based chains have done so yet.

“This function could, in theory, be modified in the future to add a hacker’s address,” the report said.

A Debate Over Security vs. Decentralization

The findings add fuel to an ongoing debate in the crypto industry over whether blockchains should have the power to intervene in user transactions.

Supporters argue that such features are essential for responding to hacks or criminal activity, while critics warn that they undermine the foundational principles of decentralization and censorship resistance.

Bybit just confirmed 16 coins can literally freeze your funds.

3 types of “freezing”:
– Hardcoded in protocol (like $BNB)
– Validator / Foundation control (like $SUI, $APT)
– On-chain contract execution (like HECO)

Everyone screams “decentralization,”
but most don’t realize how… pic.twitter.com/LtTfAWMuo2

Advocates of freezing mechanisms point to the rise in crypto-related crimes, where court-authorized freezes can recover or contain stolen assets.

Fund-freezing capabilities can also help prevent money laundering or terrorist financing and provide protection for investors in cases of fraud.

The moment your funds can be frozen, you’re not in crypto anymore.

This is a reminder.

If code can freeze your funds, it was never your money.

Decentralisation was the point.

Somewhere along the way, everyone forgot that. https://t.co/p7tZNc0ke3

Opponents, however, argue that such powers create central points of control, allowing foundations or validators to block transactions arbitrarily.

This, they say, erodes trust in blockchain immutability and opens the door to censorship. Once a chain has a “kill switch,” even if unused, it can no longer be considered permissionless in practice.

The timing of Bybit’s research is noteworthy. It comes just months after the exchange suffered a $1.5 billion cold wallet hack, one of the largest in the industry’s history.

In that incident, coordinated efforts with partners such as Circle, Tether, THORchain, and Bitget led to the freezing of $42.9 million in stolen funds, while the METH Protocol recovered an additional $43 million worth of tokens.

The event showed both sides of the fund-freezing argument. While the intervention helped recover tens of millions of dollars, it also reinforced how centralized the power to freeze assets has become, even on networks marketed as decentralized.

The report stops short of making policy recommendations but urges greater transparency around such features.

“Blockchains that include freezing capabilities should disclose them clearly,” the authors wrote, warning that undisclosed intervention points could mislead users about the degree of control they truly hold over their funds.