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Weekly Update #38

MARK COLLINS & DEMETRIOS TSEAS

Regulatory News:

U.S. Justice Dept charges three individuals for $1.89B cryptocurrency fraud scheme: On Jan 29, the U.S. Justice Department announced charges against two individuals and the guilty plea of a third individual for orchestrating a $1.89 billion cryptocurrency scheme, for allegedly co-founding HyperFund, also known as HyperTech, HyperCapital, HyperVerse, and HyperNation.  The defendants are being charged for promising investors substantial returns paid from cryptocurrency mining operations, which did not in fact exist.

German authorities seize bitcoins worth $2B in a biggest to-date seizure in Germany: On Jan 30, the German Police announced it has seized 50,000 bitcoins, with a value of approximately $2 billion in the Eastern state of Saxony.  The Saxon State Criminal Police Office said that this may by the biggest to-date seizure of its kind in Germany.  Police said they were investigating two men, suspected of running a piracy website until the end of 2013. An investigation is still underway and no charges have yet been filed. 

South Africa’s FSCA to start issuing first batch of crypto licenses: South Africa’s Financial Sector Conduct Authority (FSCA) will reportedly start issuing licenses to crypto asset service providers (CASPs) within the coming weeks. With the licensing regime, consumers should only interact with crypto firms that are licensed, and the lack of a license should be considered a ‘red flag.’

Argentina drops crypto regularization clause from new economic reform: On Jan 27, the Argentine tech-focused outlet iProUP reported that the clause about asset regularization suggesting a single-time tax on various types of previously undeclared assets, has been cut out of the Law of Bases and Starting Points for the Freedom of Argentines — an omnibus bill aiming to kickstart President Javier Milei’s policy agenda.  This part of the bill proposed a simple tax of 5% on all assets, declared by the end of March 2024, 10% from April until the end of June 2024 and 15% from July until the end of September.  Reportedly, the decision to eliminate the asset regularization from the bill was based on the fact that “it delayed the treatment” of the initiative in parliament.

EU’s ESMA consults on reverse solicitation and classification of crypto assets as financial instruments under MiCA: On 29 January 2024, the European Securities and Markets Authority (“ESMA”), the EU’s financial markets regulator and supervisor, published two Consultations Papers on guidelines under Markets in Crypto Assets Regulation (MiCA), one on reverse solicitation[1] and one on the classification of crypto-assets as financial instruments.  The consultation closes on 29 of April 2024. ESMA will consider the feedback it receives to the consultation in Q2 2024 and expects to publish a final report in Q4 2024.

Department of energy to survey BTC mining firms: The U.S. Department of Energy (DOE) has launched a mandatory survey to assess the energy consumption of the country’s cryptocurrency mining industry, citing the surge in Bitcoin prices as a driving factor. The Energy Information Administration (EIA) will collect data from commercial miners, focusing on changes in mining activity, energy sources, and concentrated mining regions, with the survey approved until July 2024. EIA

El Salvador’s pro-Bitcoin president wins reelection: Nayib Bukele won the election in a landslide winning nearly 85% of the vote and will serve for another 5-year term. Bukele Twitter

BTC-e founder faces 25 years in prison for role in money laundering: An indictment unsealed on Tuesday charges Aliaksandr Klimenka, a Belarusian and Cypriot national, with money laundering conspiracy and operating an unlicensed money services business. Klimenka allegedly controlled the BTC-e digital currency exchange, facilitating significant cybercrime and online money laundering activities, and faces a maximum penalty of 25 years in prison if convicted. DOJ

Crypto News:

Germany’s DZ Bank to pilot crypto trading this year: Germany’ second largest bank, DZ Bank will reportedly  pilot crypto trading this year, following the release of a cryptocurrency custody platform earlier in November 2023.

Visa enables crypto withdrawals on debit cards in 145 countries: On Jan 30, VISA reportedly strategically partnered with Web3 infrastructure provider Transak to introduce cryptocurrency withdrawals and payments through the Visa Direct platform.  The partnership allows users from 145 countries to directly convert 40+ cryptocurrencies to fiat, without relying on centralized exchanges.  This new integration allows users to withdraw cryptocurrencies like Bitcoin directly from a wallet like MetaMask to a Visa debit card. Available immediately, the integration enables one to exchange crypto to fiat and pay at 130 million merchant locations where Visa is accepted.

Super Bowl expected to be without crypto ads: Cryptocurrency exchanges are expected to be notably absent from ad spots during Super Bowl LVIII on Feb. 11, with companies focusing on “fun, humor, and entertainment” rather than financial technology, according to a CNN report. Following the collapse of FTX, eToro, Crypto.com, and Coinbase, the shift away from AI and crypto firms in Super Bowl ads reflects a departure from the trend seen in Super Bowl LVI in 2022. CNN

OPNX to shutter operations: OPNX, the crypto bankruptcy claims platform and exchange launched by the co-founders of the failed hedge fund Three Arrows Capital (3AC), is set to shut down by February 14, urging users to settle positions and withdraw funds by February 7. The closure follows the collapse of the $10 billion hedge fund in June 2022, with the founders, Su Zhu and Kyle Davies, facing additional challenges as Teneo seeks to recover $1.3 billion from them for allegedly taking on excessive leverage with investor funds. Yahoo Finance

Valkrie BTC ETF adds Bitgo as a custodian: Valkyrie has chosen BitGo as a custodian for its spot Bitcoin ETF, according to an SEC filing. While Valkyrie still plans to use Coinbase as a custodian, it aims to diversify its digital asset custodians by incorporating BitGo. SEC 8-K

Hacks and Exploits:

Abracadabra: Abracadabra.money suffered a $6.5 million hack on Ethereum due to a rounding issue in the CauldronV4 code, allowing attackers to manipulate debt calculations and drain MIM liquidity from cauldrons. The Abracadabra team has promised to buy back MIM from the market and burn it to restore the stablecoin’s peg, and despite a quick mitigation of the issue, MIM is currently trading around $0.97. Rekt

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Regulatory and Legislative Analysis – January 2024

Regulatory and Legislative Analysis – GLOBAL

Interpol releases analysis of the Metaverse’s key challenges threats and harms

On Jan 18, Interpol released a new white paper titled: “Metaverse, a law enforcement perspective: Use cases, crime, forensics, investigation and governance.” This document provides an in-depth analysis of the Metaverse from a law enforcement perspective. Interpol notes the Metaverse holds opportunities for law enforcement (i.e. advanced simulation and virtual crime scene preservation and immersive training).  However, the document also identifies current and potential Metacrimes such as grooming[1], radicalization[2], cyber-physical attacks against critical infrastructure, theft of 3D virtual/cultural property, trespassing in private virtual spaces and robbery from an avatar[3].  Some of the challenges currently faced by investigators include: the lack of standardization and interoperability; the fact that virtual worlds span across multiple jurisdictions; the added complexity of the Metaverse being accessed across multiple devices and systems.  Police may be faced with virtual crime scenes where there is no physical evidence to be collected – just digital interactions involving virtual assets such as cryptocurrencies and non-fungible tokens (NFTs), which underlines the need to define what constitutes crimes and harms in the Metaverse, from a regulatory and law enforcement perspective.

BIS Innovation Hub announces first six projects for 2024 work programme 

On Jan 23, the BIS Innovation Hub announced the first batch of six new projects in its 2024 Innovation Hub work programme.  Three of these projects involve experimentation in next generation quantum resistance communication channels, CBDCs privacy considerations, and tokenization. Specifically:  Project Leap starts its phase II, aiming to “quantum-proof” payment systems, after successfully establishing a quantum-safe communication channel between the central banks of France and Germany in its first phase.  Project Aurum enters a new phase in which it will study the privacy of payments in retail CBDCs. The goal is to leverage expertise from academia and privacy regulators to advance central banks’ understanding of privacy in the design of CBDC systems. The recently started Project Promissa tests the feasibility of tokenizing promissory notes, financial instruments that help fund multilateral development banks and other international financial institutions.

Regulatory and Legislative Analysis – NAM (United States & Canada)

CFTC Digital Assets and Blockchain Technology Subcommittee releases DeFi report

On Jan 8, the Digital Assets and Blockchain Technology Subcommittee of the Commodity Futures Trading Commission’s (CFTC’s) Technology Advisory Committee, released a report on Decentralized Finance (DeFi).  The report highlights that DeFi presents promising opportunities and complex, significant risks to the U.S. financial system, consumers, and national security.  In the absence of effective regulation, enforcement, and compliance, many of these DeFi projects, enterprises, and ecosystems have been vulnerable to fraud, mismanagement, and serious regulatory violations, in addition to periods of extreme high market volatility, exposing investors, customers, and other stakeholders to significant losses. A central concern relating to DeFi systems is the lack of, and some industry designs to avoid, clear lines of responsibility and accountability.  The central message of this report is that both government and industry should take timely action to work together, across regulatory and other strategic initiatives, to better understand DeFi and advance its responsible and compliant development.

The U.S. SEC approves the first 11 Bitcoin ETFs

On Jan 10, the U.S. Securities and Exchange Commission (SEC) approved the first 11 spot Bitcoin Exchange-Traded Funds (ETFs), introduced by the world’s largest asset managers, approval which from a regulatory standpoint also highlights the evolving nature of cryptocurrency regulation.  The list includes: ARK21 Shares Bitcoin ETF, Bitwise Bitcoin ETF, Blackrock’s iShares Bitcoin Trust, Franklin Bitcoin ETF, Fidelity Wise Origin Bitcoin Trust, Grayscale Bitcoin Trust, Hashdex Bitcoin ETF, Invesco Galaxy Bitcoin ETF, VanEck Bitcoin Trust, Valkyrie Bitcoin Fund, Wisdom Tree Bitcoin Fund.  There are two types of ETFs: Spot bitcoin ETFs that invest directly in bitcoin as the underlying asset.  The fund’s performance is derived mainly from the appreciation or depreciation in the price of bitcoin the fund holds.  Investors can invest in a spot Bitcoin ETF, without having to purchase, directly hold, or manage the underlying asset, with the actual funds (Bitcoin) actually being held and managed by a third-party custodian. Spot Bitcoin EFTs are listed and traded on NYSE Arca, Cboe BZX and Nasdaq.  Bitcoin Futures ETFs are backed by bitcoin derivatives that derive their value (speculate) from the future price of bitcoin.  Investors may purchase the right – but not the actual underlying asset – to buy or sell bitcoin at some point in the future, for a predetermined price. By purchasing the right to buy or sell, an investor expects to profit from an increase or decrease in the price of the underlying asset.  Similar to spot Bitcoin ETFs, investors can invest in Bitcoin via a Bitcoin Futures ETF without the need to purchase, hold or manage the underlying asset.  Bitcoin futures ETFs, regulated by the Commodity Futures Trading Commission (CFTC), must trade on CFTC-regulated exchanges and have been around for several years.  One day later on Jan 11, U.S. Senator Elizabeth Warren criticized the SEC as being “wrong on the law and wrong on the policy” in approving ETFs, arguing that “If the SEC is going to let crypto burrow even deeper in our financial system, then it’s more urgent than ever that crypto follow basic anti-money laundering rules”.

Genesis Global Trading settles with the NYDFS and will pay $8M

On Jan 12, the New York Department of Financial Services (NYDFS) announced a $8 million penalty against Genesis Global Trading Inc., for compliance failures after an investigation that violated DFS’s virtual currency and cybersecurity regulations and left the company vulnerable to illicit activity and cybersecurity threats. In connection with this settlement, Genesis Global Trading will surrender its New York BitLicense.

Four individuals charged for laundering millions from crypto investment scams

On Dec 14, the U.S. Department of Justice (DoJ) charged four US nationals for exfiltrating nearly $80M as part of a cryptocurrency investment scam. The individuals would open shell companies and bank accounts to launder the money they would extract from the victims lured into the schemes via dating apps, instant messaging platforms and social media. The fraudsters now face up to 20 years in prison.

Donald Trump says he will never allow the creation of a CBDC if reelected

On Jan 16, and during a campaign speech in New Hampshire, former President Donald Trump stated that “To protect Americans from government tyranny, as your President, I will never allow the creation of a central bank digital currency” if reelected. He warned that a CBDC would be a “dangerous threat to freedom” and would give the federal government “absolute control over your money”.  On the flipside the Bank of International Settlements issued a paper back in June 2023, suggesting that there could be 15 retail and 9 wholesale CBDCs publicly circulating in 2030.

U.S. Treasury and IRS announce that businesses do not have to report receipt of digital currencies above $10K as cash, until regulations are issued

On Jan 16, following a revision of the “Infrastructure Investment and Jobs Act” the Treasury Department and the Internal Revenue Service announced that U.S. businesses do not have to report the receipt of digital assets over $10K the same way as they must report the receipt of cash until Treasury and IRS issue regulations.  However, the announcement does not affect the rules in effect before the Infrastructure Investment and Jobs Act for cash received in the course of a trade or business, which must be reported on Form 8300, Report of Cash Payments over $10,000 Received in a Trade or Business, within 15 days of receiving the cash.

TUSD loses its 1:1 parity, regains parity two days later

On Jan 16, TrustToken’s TrueUSD stablecoin (TUSD) reportedly lost its 1:1 parity with the US dollar, falling to $0.9688 (Jan 26), but gradually regained its parity a few days later.  This coincided with a massive sell-off of the asset on Binance. The TUSD/USDT pair on Binance saw a total sales volume of around $435.4 million in TUSD, representing a net outflow of $66.1 million, over uncertainties regarding its reserves and an instability related to a hacking incident that targeted the cryptocurrency exchange Poloniex.

Canadian judge rules freezing of trucker’s bank account unconstitutional 

On Jan 23, a Canadian federal judge ruled that the emergency law invoked by Prime Minister Justin Trudeau’s government to freeze funds, including cryptocurrencies, donated to protesting truckers was unreasonable and unconstitutional. The court found that there was no national emergency justifying the use of the Emergencies Act in response to the “Freedom Convoy” protests against COVID-19 restrictions, where truckers blocked streets in Ottawa.

Bitwise becomes the first Bitcoin ETF to publish its wallet address for anyone to verify fund balances

On Jan 24, Bitwise Asset Management published the bitcoin address of its spot Bitcoin ETF (BITB) holdings, 1CKVszDdUp4ymGceAZpGzYEFr4RPNHYqaM.  In doing so it became the first bitcoin ETF provider to do so in the US as it allows anyone to verify the fund’s balance, by using any publicly available bitcoin explorer.

Ether Spot ETF applications decisions delayed by the SEC

Following the approval of 11 spot Bitcoin Exchange-Traded Funds (ETFs) by the Securities and Exchange Commission (SEC) earlier in January, companies are moving to bring spot Ethereum (ETH) ETFs to the market. BlackRock, Grayscale, Fidelity, Invesco and VanEck are among the companies that have filed for a spot ETH ETF.  On Jan 25, the SEC announced that it is extending the 45 days period stipulated by the law, to determine its decision on BlackRock’s proposal for an Ether (ETH) spot exchange-traded fund EFT claiming the need for more time to review its decision.

Regulators in Alaska and Florida ask Binance US to discontinue its operations 

On Jan 25, the Wall Street Journal reported that regulators in Florida and Alaska have asked Binance.US to discontinue its operations and no longer serve their native residents, following former CEO Changpeng Zhao’s guilty plea.  Reportedly the Alaska Division of Banking and Securities has declined to renew Binance U.S. license. When checked (29 Jan 2024) in Alaska’s MSB licensee listing, BAM Trading Services Inc. (doing business as Binance US) license nr. 012960 appears as: “Approved Conditional”. Additionally, Florida’s Office of Financial Regulation took action by issuing an emergency suspension order against Binance US.  When checked, the Binance US website indicates that its license in Florida nr. FT230000290 expires April 30, 2024.

CFTC issues warning on AI crypto investment schemes 

On Jan 25, the Commodity Futures Trading Commission’s (CFTC) Office of Customer Education and Outreach issued a customer advisory, warning the public about Artificial Intelligence (AI) scams.  The CFTC warns against AI scams promising unrealistic returns on investments like bots and crypto schemes. Scammers exploit the hype around AI to lure victims with guaranteed profits, often through social media. To avoid falling prey, research platforms and personnel, seek trusted advice, understand risks, and be wary of online promotions. The advisory reminds all that AI can’t predict the future and high-return promises are likely red flags.

U.S. Justice Dept charges three individuals for $1.89B cryptocurrency fraud scheme

On Jan 29, the U.S. Justice Department announced charges against two individuals and the guilty plea of a third individual for orchestrating a $1.89 billion cryptocurrency scheme, for allegedly co-founding HyperFund, also known as HyperTech, HyperCapital, HyperVerse, and HyperNation.  The defendants are being charged for promising investors substantial returns paid from cryptocurrency mining operations, which did not in fact exist.

Regulatory and Legislative Analysis – EMEA

Spain’s Central Bank partners with three companies to test CBDC

 On Jan 3, Banco de España, Spain’s Central Bank, published a resolution announcing its partnership with Cecabank, Abanca, and Adhara Blockchain., to test a wholesale central bank digital currency (CBDC).  The testing of the wholesale CBDC will involve simulating the processing and settlement of interbank payments using a single tokenized wholesale CBDC and multiple wholesale CBDCs issued by different central banks, while in another part of the experiment, the wholesale CBDC will be used to settle a simulated tokenized bond.

Central Bank of Nigeria approves the launch of a Nigerian Naira stablecoin

The Africa Stablecoin Consortium (ASC), a consortium of Nigerian financial institutions, FinTech’s and blockchain experts, is set to launch a compliant Nigeria Naira (cNGN) stablecoin on February 27, 2024.  cNGN is a stablecoin pegged 1:1 to the Nigerian Naira (1 cNGN=1NGN), backed 100% by ASC’s reserves and can move easily across the blockchain.  ASC states via its website that cNGN is compliant with the regulatory requirements and standards set by the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC), the Nigerian Financial Intelligence Unit (NFIU), and engages with them to ensure compliance, consumer protection, and transparency.

Coinbase partners with stablecoin exchange Yellow Card to expand in Africa

On Jan 11, Coinbase announced that they are expanding access to their products in Africa, starting with 20 countries across the continent.  Coinbase’s new partnership with leading African stablecoin exchange Yellow Card will help millions of users gain access to USDC on Coinbase’s layer-2 blockchain called “Base”. Yellow Card proclaims itself as the largest and first licensed stablecoin on/off ramp in the African continent.  Operating across 20 countries, Yellow Card provide access to USDT, USDC and PYUSD via their local currency directly and through their API.  Coinbase wallet users will be able to easily send USDC without fees on any platform where they can share a link, including WhatsApp, iMessage, Telegram, popular social media apps etc.

EBA issues guidance to crypto-asset service providers to effectively manage their exposure to ML/FT risks

On Jan 16, the European Banking Authority (EBA) extended its Guidelines on Money Laundering (ML) and Terrorist Financing (TF) risk factors to crypto-asset service providers (CASPs). The new Guidelines highlight ML/TF risk factors and mitigating measures that CASPs need to consider, representing an important step forward in the EU’s fight against financial crime.  Sector specific guidance is provided on the factors that CASPs should consider when assessing ML/TF risks including transfers from/to self-hosted addresses, decentralized platforms, transfers to CASPs that are not authorized, the use of anonymity enhanced (privacy) coins, links to high-risk jurisdictions etc.  By extending the scope of the ML/TF Risk Factors Guidelines, the EBA harmonizes the approach that CASPs across the EU should adopt when implementing the risk-based approach to AML/CFT as part of their business.  The extended Guidelines will apply from 30 December 2024.

German authorities seize bitcoins worth $2B in a biggest to-date seizure in Germany

On Jan 30, the German Police announced it has seized 50,000 bitcoins, with a value of approximately $2 billion in the Eastern state of Saxony.  The Saxon State Criminal Police Office said that this may by the biggest to-date seizure of its kind in Germany.  Police said they were investigating two men, suspected of running a piracy website until the end of 2013. An investigation is still underway and no charges have yet been filed.

Regulatory and Legislative Analysis – APAC

South Korea regulator proposes ban on credit card payments for crypto

On Jan 4, Korea’s Financial Services Commission (FSC) announced its intension to partially amend its “Enforcement Decree of the Credit-Specialized Financial Business Act”.  Based on this draft, the FSC is recommending that credit card payments for crypto be prohibited, due to concerns about illegal outflow of domestic funds overseas due to card payments on overseas virtual asset exchanges, money laundering, speculation, and encouragement of speculative activities. Organizations, or individuals who wish to provide feedback on this amendment, may submit their opinions until Feb 13.

Huobi Korea will be shutting down its services on Jan 29

Huobi Korea announced it will be shutting down its services on January 29, 2024, citing a difficult “business environment” as the reason for the closure and following shut down of other South Korean exchanges such as Cashierest and Coinbit in November.

UNODC issues report finds casinos, junkets and cryptocurrency to have emerged as a critical ML piece in East and Southeast Asia

On Jan 15, The United Nations Office on Drugs and Crime (UNODC) issued a report titled: ‘Casinos, Money Laundering, Underground Banking, and Transnational Organized Crime in East and Southeast Asia: A Hidden, Accelerating Threat’.  The report highlights that illegal online casinos, e-junkets, alongside illegal or underregulated cryptocurrency exchanges have proliferated in recent years and have emerged as a critical piece of the underground banking and money laundering infrastructure in East and Southeast Asia, fueling transnational organized crime in the region.  “It’s clear that the gap between organized crime and enforcement authorities is widening quickly. If the region fails to address this criminal landscape the consequences will be seen in Southeast Asia and beyond as criminals look to reinvest profits and innovate operations,” stated Benedikt Hofmann, UNODC Deputy Regional Representative. “We trust the report will prove as a useful reference for deeper engagement between countries in Southeast Asia, UNODC, and international partners,” Hofmann said. “At this point, we are just scratching the surface.”

OKX granted VASP license by Dubai’s VARA

On Jan 16, OKX announced that is Dubai subsidiary OKX Middle East Fintech FZE was granted VASP license by the Virtual Assets Regulatory Authority (VARA) in Dubai.  The license is non-operational and remains subject to the fulfilment of specific conditions and qualifications for operational approval. Once operational, the VASP license will allow OKX Middle East to extend its approved suite of duly regulated virtual assets activities and to provide spot services and spot-pairs, to institutional and qualified retail customers via the OKX App and OKX.com exchange.

Binance Thailand now open to all eligible users

On Jan 16, Binance announced that having secured licenses to operate as a digital exchange and broker in Thailand, Gulf Binance is launching full operations of it digital asset exchange and brokerage platform, Binance TH by Gulf Binance, to all eligible users.

Hong Kong’s SFC reportedly receives it first spot Bitcoin ETF application

On Jan 26, Hong Kong’s Securities and Futures Commission (SFC) reportedly received its first spot Bitcoin ETF application by Harvest Hong Kong — one of China’s largest fund managers.

Regulatory and Legislative Analysis – LATAM

In a first of its kind, landlord and tenant sign BTC rental contract in Argentina

On Jan 15 and in a first of its kind agreement, landlord and tenant reportedly signed a BTC rental contract in Rosaria, the third most populated city in Argentina.  The monthly payment under the signed contract will be equal to $100 in Bitcoin.  Both the landlord and the tenant are presumed experienced crypto users, and will transfer the funds monthly via Fiwind a local crypto platform.

Venezuela terminates controversial Petro cryptocurrency after 5 years

On Jan 15, Venezuela reportedly ended its controversial Petro cryptocurrency.  Announced in December 2017, the Petro was a central bank digital currency created by Venezuela using blockchain technology and was supposed to be backed by the country’s oil and mineral reserves.  It was intended to supplement Venezuela’s plummeting hard bolivar currency as a means of circumventing U.S. sanctions. On August 2018, the sovereign bolivar was introduced, with the government stating it would be linked to the Petro coin.

 

[1] Cyber grooming is when someone (often an adult) befriends a child online and builds and emotional connection with future intentions of sexual abuse, sexual exploitation of trafficking.  Perpetrators often take on fake identities of a child of teen and approach their victims in child-friendly websites, leaving children vulnerable and unaware of the fact that they have been approached for purposes of cyber grooming.  Source: https://www.csa.gov.gh/cyber_grooming.php   In Virtual Reality, it is easy for cyber groomers to disguise their true identity and age using avatars. It is a new form of sexual harassment. 

[2] Radicalization is defined as the action or process of making someone become more radical (=extreme) in their political or religious beliefs.  Source: https://dictionary.cambridge.org/us/dictionary/english/radicalization

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Weekly Update #37

MARK COLLINS & DEMETRIOS TSEAS

Regulatory:

BIS Innovation Hub announces first six projects for 2024 work program: On Jan 23, the BIS Innovation Hub announced the first batch of six new projects in its 2024 Innovation Hub work program. Three of these projects involve: experimentation in next generation quantum resistance communication channels; CBDCs privacy considerations; and tokenization. Specifically,  Project Leap starts its phase II, aiming to “quantum-proof” payment systems, after successfully establishing a quantum-safe communication channel between the central banks of France and Germany in its first phase. Project Aurum enters a new phase in which it will study the privacy of payments in retail CBDCs. The goal is to leverage expertise from academia and privacy regulators to advance central banks’ understanding of privacy in the design of CBDC systems. The recently started Project Promissa tests the feasibility of tokenizing promissory notes, financial instruments that help fund multilateral development banks and other international financial institutions.

Bitwise becomes the first Bitcoin ETF to publish its wallet address for anyone to verify fund balances: On Jan 24, Bitwise Asset Management published the bitcoin address of its spot Bitcoin ETF (BITB) holdings, 1CKVszDdUp4ymGceAZpGzYEFr4RPNHYqaM.  In doing so it became the first bitcoin ETF provider to do so in the US as it allows anyone to verify the fund’s balance, by using any publicly available bitcoin explorer.

Ether Spot ETF applications decisions delayed by the SEC: Following the approval of 11 spot Bitcoin Exchange-Traded Funds (ETFs) by the Securities and Exchange Commission (SEC) earlier in January, companies are moving to bring spot Ethereum (ETH) ETFs to the market. BlackRock, Grayscale, Fidelity, Invesco and VanEck are among the companies that have filed for a spot ETH ETF.  On Jan 25, the SEC announced that it is extending the 45 days period stipulated by the law, to determine it decision on BlackRock’s proposal for an Ether (ETH) spot exchange-traded fund EFT claiming the need for more time to review its decision.

Regulators in Alaska and Florida ask Binance US to discontinue its operations: On Jan 25, the Wall Street Journal reported that regulators in Florida and Alaska have asked  Binance.US to discontinue its operations and no longer serve their native residents, following former CEO Changpeng Zhao’s guilty plea.  Reportedly the Alaska Division of Banking and Securities has declined to renew Binance U.S. license. When checked (29 Jan 2024) in Alaska’s MSB licensee listing, BAM Trading Services Inc. (doing business as Binance US) license nr. 012960 appears as: “Approved Conditional”.  Additionally, Florida’s Office of Financial Regulation acted by issuing an emergency suspension order against Binance US.  When checked, Binance US website indicates that its license in Florida nr. FT230000290 expires April 30, 2024.

Hong Kong’s SFC reportedly receives it first spot Bitcoin ETF application: On Jan 26, Hong Kong’s Securities and Futures Commission (SFC) reportedly received its first spot Bitcoin ETF application by Harvest Hong Kong — one of China’s largest fund managers.

CFTC issues warning on AI crypto investment schemes: The CFTC warns against AI scams promising unrealistic returns on investments like bots and crypto schemes. Scammers exploit the hype around AI to lure victims with guaranteed profits, often through social media. To avoid falling prey, research platforms and personnel, seek trusted advice, understand risks, and be wary of online promotions. Reminding all that AI can’t predict the future and high-return promises are likely red flags. CFTC

Canadian judges rule freezing of trucker’s bank accounts unconstitutional: A Canadian federal judge has ruled that the emergency law invoked by Prime Minister Justin Trudeau’s government to freeze funds, including cryptocurrencies, donated to protesting truckers was unreasonable and unconstitutional. The court found that there was no national emergency justifying the use of the Emergencies Act in response to the “Freedom Convoy” protests against COVID-19 restrictions, where truckers blocked streets in Ottawa. Attorney General of Canada

Crypto News:

Avalanche foundation to set rules on meme coin issuance: Avalanche’s $100 million meme coin fund seeks to boost community-driven projects, but with strict criteria. Tokens must be independent, with creators having relinquished control and no team allocations. Security audits, diverse ownership (top 100 holding less than 60%), and healthy liquidity of at least $200,000 with 50+ providers are essential. While meeting these minimums (2,000+ holders, $1 million market cap, and $100,000 daily trading volume) doesn’t guarantee funding, red flags like whale dominance and non-whitelisted launches can sink a meme coin’s hopes. Think of it as a popularity contest with strict entrance requirements, where community engagement and financial stability reign supreme. CoinDesk

Ethical hackers expose BTM vulnerabilities: Bitcoin ATM provider Lamassu Industries addressed a security vulnerability discovered by ethical hackers who gained full control of the ATMs in 2023. The security researchers identified and exploited vulnerabilities, allowing potential attackers to manipulate ATM interactions, steal Bitcoin from users, and trick them into entering sensitive information, emphasizing the importance of prompt updates to address these issues. IOActive Labs

Nasdaq releases annual global crime report: Nasdaq’s “Global Financial Crime Report” for the past year did not mention Bitcoin or cryptocurrencies, reinforcing the perception that fiat currency is more frequently associated with facilitating crimes. The report revealed that financial crime remains a multi-trillion-dollar issue, estimating that around $3.1 trillion in illicit funds flowed through the global financial system in 2023, with $782.9 billion linked to drug trafficking, $346.7 billion to human trafficking, and $11.5 billion used for terrorist financing. Report

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Weekly Update #36

MARK COLLINS & DEMETRIOS TSEAS

Regulatory:

UNODC issues report, finds casinos, []junkets and cryptocurrency to have emerged as a critical ML piece in the East and Southeast Asia: On Jan 15, The United Nations Office on Drugs and Crime (UNODC) issued a report titled: ‘Casinos, Money Laundering, Underground Banking, and Transnational Organized Crime in East and Southeast Asia: A Hidden, Accelerating Threat’. The report highlights that illegal online casinos, e-junkets, alongside illegal or underregulated cryptocurrency exchanges have proliferated in recent years and have emerged as a critical piece of the underground banking and money laundering infrastructure in East and Southeast Asia, fueling transnational organized crime in the region. “It’s clear that the gap between organized crime and enforcement authorities is widening quickly. If the region fails to address this criminal landscape the consequences will be seen in Southeast Asia and beyond as criminals look to reinvest profits and innovate operations,” stated Benedikt Hofmann, UNODC Deputy Regional Representative. “We trust the report will prove as a useful reference for deeper engagement between countries in Southeast Asia, UNODC, and international partners,” Hofmann said. “At this point, we are just scratching the surface.”

Venezuela terminates controversial Petro cryptocurrency after 5 years: On Jan 15, Venezuela reportedly ended it controversial Petro cryptocurrency. Announced in December 2017, Petro was a central bank digital currency created by Venezuela using blockchain technology, supposed to be backed by the country’s oil and mineral reserves. It was intended to supplement Venezuela’s plummeting hard bolivar currency as a means of circumventing U.S. sanctions. On August 2018, the sovereign bolivar was introduced, with the government stating it would be linked to the Petro coin.

EBA issues guidance to crypto asset service providers to effectively manage their exposure to ML/FT risks: On Jan 16, the European Banking Authority (EBA) extended its Guidelines on Money Laundering (ML) and Terrorist Financing (TF) risk factors to crypto asset service providers (CASP). The new Guidelines highlight ML/TF risk factors and mitigating measures that CASPs need to consider, representing an important step forward in the EU’s fight against financial crime. Sector specific guidance is provided on the factors that CASPs should consider when assessing ML/TF risks including transfers from/to self-hosted addresses, decentralized platforms, transfers to CASPs that are not authorized, the use of anonymity enhanced (privacy) coins, links to high-risk jurisdictions etc. By extending the scope of the ML/TF Risk Factors Guidelines, the EBA harmonizes the approach that CASPs across the EU should adopt when implementing the risk-based approach to AML/CFT as part of their business. The extended Guidelines will apply from 30 December 2024.

OKX granted VASP license by Dubai’s VARA: On Jan 16, OKX announced that is Dubai subsidiary OKX Middle East Fintech FZE was granted VASP license by the Virtual Assets Regulatory Authority (VARA) in Dubai. The license is non-operational and remains subject to fulfilment of specific conditions and qualifying for operational approval. Once operational, the VASP license will allow OKX Middle East to extend its approved suite of duly regulated virtual assets activities and to provide spot services and spot-pairs, to institutional and qualified retail customers via the OKX App and OKX.com exchange.

Binance Thailand now open to all eligible users: On Jan 16, Binance announced that having secured licenses to operate as a digital exchange and broker in Thailand, Gulf Binance is launching full operations of it digital asset exchange and brokerage platform, Binance TH by Gulf Binance, to all eligible users.

Donald Trump says he will not allow the creation of a CBDC if reelected: On Jan 16, and during a campaign speech in New Hampshire, former President Donald Trump stated that “To protect Americans from government tyranny, as your President, I will never allow the creation of a central bank digital currency” if reelected. He warned that a CBDC would be a “dangerous threat to freedom” and would give the federal government “absolute control over your money”. On the flipside the Bank of International Settlements issued a paper in June 2023, suggesting that there could be 15 retail and 9 wholesale CBDCs publicly circulating in 2030.

U.S. Treasury and IRS announce that businesses do not have to report receipt of digital currencies above $10K as cash, until regulations are issued: On Jan 16, following a revision of the “Infrastructure Investment and Jobs Act” the Treasury Department and the Internal Revenue Service announced that U.S. businesses do not have to report the receipt of digital assets over $10K the same way as they must report the receipt of cash until Treasury and IRS issue regulations. However, the announcement does not affect the rules in effect before the Infrastructure Investment and Jobs Act for cash received in the course of a trade or business, which must be reported on Form 8300, Report of Cash Payments over $10,000 Received in a Trade or Business, within 15 days of receiving the cash.

Interpol releases analysis of the Metaverse’s key challenges threats and harms: On Jan 18, the Interpol released a new white paper titled: “Metaverse, a law enforcement perspective: Use cases, crime, forensics, investigation and governance”. This document provides an in-depth analysis of the Metaverse from a law enforcement perspective. The Interpol notes that the Metaverse holds opportunities for law enforcement i.e. advanced simulation and virtual crime scene preservation and immersive training. However, the document also identifies current and potential Metacrimes such as grooming:1:, radicalization:2:, cyber-physical attacks against critical infrastructure, theft of 3D virtual/cultural property, trespassing in private virtual spaces and robbery from an avatar. Some of the challenges currently faced by investigators include: the lack of standardization and interoperability; the fact that virtual worlds span across multiple jurisdictions; the added complexity of the Metaverse being accessed across multiple devices and systems. Police may be faced with virtual crime scenes where there is no physical evidence to be collected – just digital interactions involving virtual assets such as cryptocurrencies and non-fungible tokens (NFTs), which underlines the need to define what constitutes crimes and harms in the Metaverse, from a regulatory and law enforcement perspective.

Crypto news:

Frigid temps drive BTC’s hashrate down 34%: Unusually cold temperatures in Texas led to a 34% decline in the Bitcoin network hash rate between Jan. 11 and Jan. 15, with some miners reducing operations due to the strain on the state’s energy grid. Texas, hosting about 29% of the Bitcoin hash rate in the U.S., saw mining firms relocate there from China following a crackdown on BTC miners; however, some operations were curtailed to support the state’s electric grid during extreme weather conditions. Cointelegraph

TUSD loses its 1:1 parity, regains parity two days later: On Jan 18, Trust Token’s TrueUSD stablecoin (TUSD) reportedly lost its 1:1 parity with the US dollar, falling to $0.9715. At the time of this report (Jan 20), it appears to have gradually regained its parity to $0.9887. This coincided with a massive sell-off of the asset on Binance. The TUSD/USDT pair on Binance saw a total sales volume of around $435.4 million in TUSD, representing a net outflow of $66.1 million, over uncertainties regarding its reserves and an instability related to hacking incident that targeted Poloniex.

In a first of its kind, landlord and tenant sign BTC rental contract in Argentina: On Jan 15, and in a first of its kind agreement, landlord and tenant reportedly signed a BTC rental contract in Rosaria, the third most populated city in Argentina. The monthly payment under the signed contract will be equal to $100 in Bitcoin. Both the landlord and the tenant are presumed experienced crypto users, and will transfer the funds monthly via Fiwind a local crypto platform.

Trezor reports phishing breach: The hardware wallet manufacturer reported a security breach exposing contact information of around 66,000 users due to unauthorized access to a third-party support portal on Jan. 17. While no funds were compromised, users who interacted with Trezor’s support team since December 2021 may be at risk of phishing attacks, with at least 41 users receiving phishing emails and eight having their details compromised on a third-party vendor’s trial discussion platform. Trezor

ETF’s hoover up $4B in BTC after only six trading days: The recently approved Bitcoin exchange-traded funds (ETFs) now collectively hold 95,000 Bitcoin, with assets approaching $4 billion after six days of trading. Inflows into these ETFs have exceeded outflows from the Grayscale Bitcoin Trust, leading to a decrease of $2.8 billion in GBTC’s assets under management. Bloomberg analyst

Hacks and Exploits:

Socket: Socket’s Bungee bridge lost $3.3 million in an attack on addresses previously approved on the Ethereum-based SocketGateway contract. The vulnerability, resulting from a new route added to the bridging contract three days before the exploit, as funds stolen included ETH, MATIC, WBTC, WETH, and DAI, totaling approximately $3.3 million. CoinDesk

:1:Cyber grooming is when someone (often an adult) befriends a child online and builds and emotional connection with future intentions of sexual abuse, sexual exploitation of trafficking. Perpetrators often take on fake identities of a child of teen and approach their victims in child-friendly websites, leaving children vulnerable and unaware of the fact that they have been approached for purposes of cyber grooming. Source: https://www.csa.gov.gh/cyber_grooming.php In Virtual Reality, it is easy for cyber groomers to disguise their true identity and age using avatars. It is a new form of sexual harassment.

:2:Radicalization is defined as the action or process of making someone become more radical (=extreme) in their political or religious beliefs. Source: https://dictionary.cambridge.org/us/dictionary/english/radicalization

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Weekly Update #35

MARK COLLINS & DEMETRIOS TSEAS

Regulatory:

CFTC Digital Assets and Blockchain Technology Subcommittee releases DeFi report: On Jan 8, the Digital Assets and Blockchain Technology Subcommittee of the CFTC’s Technology Advisory Committee, released a report on Decentralized Finance (DeFi). The report highlights that (DeFi) presents promising opportunities and complex, significant risks to the U.S. financial system, consumers, and national security. In the absence of effective regulation, enforcement, and compliance, many of these DeFi projects, enterprises, and ecosystems have been vulnerable to fraud, mismanagement, and serious regulatory violations, in addition to periods of extreme high market volatility, exposing investors, customers, and other stakeholders to significant losses. A central concern relating to DeFi systems is the lack of, and some industry designs to avoid, clear lines of responsibility and accountability. The central message of this report is that both government and industry should take timely action to work together, across regulatory and other strategic initiatives, to better understand DeFi and advance its responsible and compliant development.

The U.S. SEC approves the first 11 Bitcoin ETFs: On Jan 10, the U.S. Securities and Exchange Commission (SEC) approved the first 11 Bitcoin Exchange-traded Funds (ETFs), introduced by the world’s largest asset managers. From a regulatory standpoint, this approval also highlights the evolving nature of cryptocurrency regulation. The list includes: ARK21 Shares Bitcoin ETF, Bitwise Bitcoin ETF, Blackrock’s iShares Bitcoin Trust, Franklin Bitcoin ETF, Fidelity Wise Origin Bitcoin Trust, Grayscale Bitcoin Trust, Hashdex Bitcoin ETF, Invesco Galaxy Bitcoin ETF, VanEck Bitcoin Trust, Valkyrie Bitcoin Fund, Wisdom Tree Bitcoin Fund. There are two types of ETFs: spot bitcoin ETFs that own bitcoin, actually held by a third-party custodian, and bitcoin futures ETFs that are backed by bitcoin derivatives that derive their value (speculate) from the future price of bitcoin. In both cases investors invest in Bitcoin without the need to purchase, hold or mange the underlying asset. One day later on Jan 11, U.S. Senator Elizabeth Warren criticized the SEC as being “ wrong on the law and wrong on the policy ” in approving ETFs, arguing that “ If the SEC is going to let crypto burrow even deeper in our financial system, then it’s more urgent than ever that crypto follow basic anti-money laundering rules”.

Genesis Global Trading settles with the NYDFS and will pay $8M: On Jan 12, the New York Department of Financial Services (NYDFS) announced a $8 million penalty against Genesis Global Trading Inc., for compliance failures after an investigation, that violated DFS’s virtual currency and cybersecurity regulations and left the company vulnerable to illicit activity and cybersecurity threats. In connection with this settlement, Genesis Global Trading will surrender its New York BitLicense.

Coinbase partners with stablecoin exchange Yellow Card to expand in Africa: On Jan 11, Coinbase announced that they are expanding access to their products in Africa, starting with 20 countries across the continent. Coinbase’s new partnership with leading African stablecoin exchange Yellow Card will help millions of users gain access to USDC on Coinbase’s layer-2 blockchain called “Base”. Yellow Card proclaims itself as the largest and first licensed stablecoin on/off ramp in the African continent. Operating across 20 countries, Yellow Card provide access to USDT, USDC and PYUSD via their local currency directly and through their API. Coinbase wallet users will be able to easily send USDC without fees on any platform where they can share a link, including WhatsApp, iMessage, Telegram, popular social media apps etc.

Crypto News:

Blackrock’s CEO backs Ether ETF: BlackRock CEO Larry Fink expressed support for the creation of an ETF, following the launch of the much-anticipated Bitcoin BTC ETF. Fink sees these ETFs as crucial steps toward tokenization, believing that this trend will address issues like money laundering and corruption, and he views cryptocurrencies, particularly Bitcoin, as an asset class offering protection against geopolitical risks, comparing it to the historical role of gold. Yahoo

Vanguard restricts customers from purchasing BTC ETF products: Vanguard has prohibited clients from purchasing newly approved Bitcoin ETFs, such as BlackRock’s iShares Bitcoin Trust (IBIT) and Grayscale Bitcoin Trust (GBTC), citing reasons like regulatory restrictions and a focus on asset classes aligned with long-term investment portfolios. This move contrasts with the approach of competitors like VanEck, Fidelity, and Invesco, which have embraced Bitcoin ETFs. Marketwatch

Circle reportedly files for IPO: Circle, the issuer of USDC and the second-largest stablecoin, has reportedly filed for an IPO in the United States. While the filing did not disclose the number of shares to be sold or the proposed price range, Circle anticipates the IPO to proceed after the U.S. Securities and Exchange Commission completes its review, contingent on market conditions. Reuters

ETH devs split over Vitalik’s suggestion to increase gas fee limit: The Ethereum community remains divided on Vitalik Buterin’s proposal to increase the gas limit by 33%, aiming to enhance network throughput. While Buterin suggests the boost could accommodate more transactions per block, concerns raised by developers such as Marius van der Wijden include potential drawbacks like accelerated growth in the blockchain state’s size, impacting storage access speed and synchronization times. MariusVanDerWijen Github

Hacks and Exploits:

Orbit Chain: A cross-chain bridging project, was the victim of a hack resulting in the loss of over $80 million in assets, with the attacker gaining access to seven out of ten multisig signers. The majority of the stolen funds were in stablecoins, including $30M in USDT, $10M USDC, and $10M DAI, 231 WBTC( $10M) and 9,500 ETH ($21.5M). concerns are raised about the security of multisig structures and potential compromises of private keys in the crypto space. Blockworks

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Top Story:

  • The U.S. Securities & Exchange Commission (SEC) approved all 11 spot Bitcoin ETFs yesterday January 10th, 2024! As of today, January 11th, 2024 the ETFs are trading with surpassing $1.2B in trading volume just in the first 30 min.

Technology Recap:

Bitcoin:

  • Antoine Poinsot posted to Delving Bitcoin further details around v3 transaction relay policy and ephemeral anchors. These would go hand-in-hand with how Lightning Network allows on-chain transactions to pay fees exogenously.

Ethereum:

  • On January 17th, 2024 at 06:32 UTC Dencun will go live on Goerli testnet. This will be the last upgrade on Goerli before core teams stop supporting it. Assuming the upgrade goes well, the Sepolia and Holesky testnets will be next in the coming weeks.
  • Vitalik Buterin posted support for an immediate 33% gas limit increase on Ethereum.
  • The Ethereum Foundation research team hosted a Reddit AMA on January 10th, 2024. A lot of the discussion was around EIP-4844 and gas limits.
  • Trenton Van Epps shares Capital and Enclosure in Software Commons: Linux & Ethereum.
  • Paradigm releases reth alpha.14! This release includes hardcoded timestamps for the Ethereum testnet hardforks for Dencun.

Other Chains: 

  • Base shares their 2024 vision to build a global on-chain economy.
  • Offchain Labs publishes what new upgrades are in development for Arbitrum One and Nova.
  • Uniswap shares EIP-6963 support by allowing users a communication channel between wallets and apps.
  • Keep3r network publishes an update on evolving the Keep3r network and utilization across network incentives.
  • BracketX introduces Passage, an all-new volatility market to play short-term price action.
  • A researcher dives into the architecture of upgradable contracts and the use of the Proxy pattern.
  • C3 launches a public mainnet and invites users to join the future of trading through a self-custodial trading experience.
  • To ensure clear distinctions between Aleo and AleoSwap, the team has transformed and rebranded AleoSwap to AlphaSwap.
  • Synthetix launches on Base!
  • Uniswap’s 30-day volume on Arbitrum hit $12.03B as compared to ~$3B on Polygon.
  • Morpho Blue is now live on mainnet! Morpho Blue allows users to lend and borrow on Ethereum.

Hacks | Vulnerabilities | Exploits:

  • De.Fi Rekt reports crypto loss ~$1.95B in 2023.
  • Scam Sniffer shares that crypto phishing scams drained ~$300M from 320,000 users in 2023.
  • On December 25th, 2023 Telcoin was exploited on Polygon for ~$1.25M due to an uninitialized contract.
  • On December 26, 2023 Levana was exploited on Cosmos for ~1.14M due to price oracle manipulation. The exploit lasted for 12 days by draining roughly 4% of Levana liquidity.
  • On December 26, 2023 Thunder Terminal was compromised after leaking their session tokens which resulted in a loss of $250K on Ethereum.
  • On December 28th, 2023 INSC NFT was compromised via access control rights which resulted in their assets being stolen on Ethereum.
  • On December 30th, 2023 Channels Finance was exploited for $320K on BSC due to price oracle manipulation.

Mainstream Recap:

  • VanEck shares a new advertisement on how users can now buy and hodl Bitcoin via their ETF.
  • Circle Internet Financial, the company behind USDC, filed for a U.S. IPO on Thursday, January 11th, 2024.
  • Coinbase releases their Q1 2024 Guide to Crypto Markets in collaboration with Glassnode.
  • Gemini shares thoughts on being the custodian of VanEck’s newly launched spot bitcoin ETF.
  • Polygon announces Verify, by Fox Corporation built on Polygon PoS. Verify allows media companies to register content and grant usage rights. With this, users can verify the origin of a piece of content through the open protocol.

This Week’s Cup of Coffee:

This week, we are headed to Rotterdam, NL for a cup of Ethiopia – Enat Buna from A Matter of Concrete. This roast can be brewed both as espresso or filter with different tasting notes depending on the brew. For espresso it will yield notes of orange, gingerbread and spices while via filter you will get more strawberry and fig notes. Sip up and enjoy!!

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Weekly Update #34

MARK COLLINS & DEMETRIOS TSEAS

Regulatory:

Four individuals charged for laundering millions from cryptocurrency investment scams: Four US nationals were charged for exfiltrating nearly $80M as part of a cryptocurrency investment scam. The individuals would open shell companies and bank accounts to launder the money they would extract from the victims lured into the schemes via dating apps, instant messaging platforms and social media. The fraudsters now face up to 20 years in prison. DOJ

US court approves order for Binance to pay US$2.7 billion to CFTC: A US federal judge has approved the order for the cryptocurrency giant Binance to pay $2.7B for money laundering. This comes following the CEO’s admission to breaking US anti-money laundering laws in the world’s biggest cryptocurrency exchange. TheBusinessTimes 

Spain’s Central Bank partners with three companies to test CBDC: On Jan 3, Banco de España, Spain’s Central Bank, published a resolution announcing its partnership with Cecabank, Abanca, and Adhara Blockchain., to test a wholesale central bank digital currency (CBDC).  The testing of the wholesale CBDC will involve simulating the processing and settlement of interbank payments using a single tokenized wholesale CBDC and multiple wholesale CBDCs issued by different central banks, while in another her part of the experiment, the wholesale CBDC will be used to settle a simulated tokenized bond.

Central Bank of Nigeria approves the launch of a Nigerian Naira stablecoin: The Africa Stablecoin Consortium (ASC), a consortium of Nigerian financial institutions, fintechs, and blockchain experts, is set to launch a compliant Nigeria Naira (cNGN) stablecoin on February 27, 2024.  cNGN is a stablecoin pegged 1:1 to the Nigerian Naira (1 cNGN=1NGN), backed 100% by ASC’s reserves and can move easily across the blockchain.  ASC states via its website that cNGN is compliant with the regulatory requirements and standards set by the CBN, the Securities and Exchange Commission (SEC), the Nigerian Financial Intelligence Unit (NFIU), and engages with them to ensure compliance, consumer protection, and transparency.

Huobi Korea will be shutting down its services on Jan 29, 2024: Huobi Korea announced it will be shutting down its services on January 29, 2024, citing a difficult “business environment” as the reason for the closure and following shut down of other South Korean exchanges such as Cashierest and Coinbit in November.

South Korean regulator to weigh in on banning crypto purchases with credit cards: The Financial Services Commission (FSC) in South Korea is considering a ban on using credit cards for cryptocurrency purchases, aiming to address concerns about the “illegal outflow of domestic funds overseas. In addition, the FSC had previously suggested rules to safeguard crypto exchange users, mandating the storage of at least 80% of customer deposits in cold wallets and requiring exchanges to compensate customers for using their deposits. FSC & Press release

Hacks and Exploits:

Tallying up 2023 hack statistics: In 2023 hackers and scammers caused a total loss of $1.8 billion, with 17% attributed to the Lazarus Group linked to North Korea, according to a report from Immunefi. The year’s largest hacks included Mixin Network ($200 million), Euler Finance ($197 million), and Multichain ($126 million), with law enforcement identifying $309 million associated with the Lazarus Group, indicating a 52% decline in losses compared to the previous year. Immunefi

A supply chain attack on crypto hardware wallet ledger led to the theft of $600K: A threat actor has stolen $600K worth of virtual assets by targeting crypto hardware wallet Ledger. Using a phishing email containing a malicious script, the actor targeted a module within Ledger’s main package manager, therefore uploading a crypto drainer. Nonetheless, Ledger security teams were able to bring down the malware, delete the malicious modules and made Tether aware who then froze the addresses. Securityaffairs

Atomic Wallet launches $1M bug bounty amid hacking lawsuit: The Atomic Wallet developer has launched a $1M bug bounty for whitehat hackers to find vulnerabilities in its open-source code. Critical risk vulnerabilities will receive a reward of up to $100k. The announcement comes amid a class-action lawsuit against the company, following the exfiltration of $100M worth of crypto. CoinTelegraph

Former Amazon engineer pleads guilty to stealing $12.3M of crypto in first ever hacking case involving smart contracts: A former security engineer has hacked the codes of two cryptocurrency exchange platforms, resulting in $12.3M of stolen crypto. The engineer exploited a vulnerability in the platforms’ smart contracts, submitting false statements which lead to millions in revenue. The hack comes amid an increasing number of attacks targeting the open-source codes of the smart contracts. Business Insider

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Technology Recap:

Bitcoin:

  • Core developers started a working group around the cluster mempool proposal. This proposal aims to make it easier to operate on the mempool while respecting the required ordering of transactions. In this design, clusters of one or more related transactions can be split into fee-rate sorted chunks. Any chunk can thus be included in a block as long as all previous higher fee-rate unconfirmed chunks are included earlier in the same block. 

  • David Perkins of Ren Protocol publishes an article on A Framework for Application-Specific Bitcoin Bridges

Ethereum:

  • Vitalik Buterin shares an article on how to Make Ethereum Cypherpunk Again.

  • On December 30th, 2023, Vitalik shared an updated roadmap for Ethereum. 

  • Ethereum researchers publish an article on the path towards scaling the Ethereum Data Availability layer post EIP-4844. With this, they envision scaling to 32/64 blobs which is 10x EIP-4844. 

  • Christine Kim of Galaxy provides insights into the last All Core Devs Execution Call of 2023 with focus on: Dencun updates for testnets, precompile address ranges, and the Prague/Electra upgrade slated before the end of 2024. 

Other Chains: 

  • Parallel Network is introduced! Parallel is the first omni-chain layer-2 powered by Arbitrum. This platform unifies liquidity from any chain into a single account. 

  • Haptic Finance, a trustless protocol for options on Optimism, is now available for early access. The protocol combines automated liquidity management (ALM) vaults with always-on option markets. 

  • ERC-7412 is introduced which allows smart contract engineers to incorporate off-chain data by calling functions on oracle contracts. The functionality uses Synthetix Multicall3 implementation that acts as a forwarder via ERC-2771

  • Mantle provides insights into how liquid staked tokens (LSTs) have created a new sector of DeFi which people are now naming LSDFi.

  • Helius shares insights into transitioning Solidity programming from Ethereum to Solana. 

  • Amongst the 70+ chains in the Cosmos ecosystem, Sommelier has emerged as the largest gainer in terms of YoY percentage TVL growth. They have soared from $1M to ~$61M as of December 27th, 2023. 

  • GrowThePie shares that there were ~900M transactions on layer-2 networks in 2023. 274M on Arbitrum, 218M on zkSync, 127M on Optimism, and 93M on Immutable. 

  • StarkWare shares a Year-in-Review with focus on their layer-2 network and open-sourced elements such as Stone Prover, Starknet Sequencer, and Papyrus full nodes. 


Hacks | Vulnerabilities | Exploits:

  • On December 20th, 2023, Transit Finance was exploited for ~$110K on BSC due to a function vulnerability which passed faulty input validation. 

  • On December 22nd, 2023, Pine Protocol was exploited for ~$90K on Ethereum due to having both the old version and new version of their smart contracts sharing the same address. This shared pool address between the two contracts resulted in the execution of fund transfers originating from the same address for different pools. 

  • On December 31st, 2023, Orbit Chain was exploited for ~$81.6M on Ethereum due to insufficient access rights and the misuse of valid signatures. The address drained Orbit’s vaults of Ether, USDT, USDC, DAI, and WBTC. 


Mainstream Recap:

  • There are 11 spot Bitcoin ETF filers (Grayscale, ARK, iShares, Bitwise, VanEck, WisdomTree, Invesco Galaxy, Wise Origin, Valkyrie, Hashdex, and Franklin) that are being watched closely which are aiming for a potential approval between January 8th and 10th, 2024. 

  • CoinCenter shares that there are new crypto tax reporting obligations that took effect on January 1st, 2024 for those who receive $10K or more in crypto. 

  • Alex Pruden, the CEO of Aleo Systems Inc., has stepped down from his position and transitioned into the role of Executive Director of the Aleo Foundation. 

  • Jesse Pollak of Coinbase’s Base network shares thoughts on how there is belief that most new users in the space will simply on-board directly via layer-2 networks. 


This Week’s Cup of Coffee:

This week, we are headed to San Francisco, CA for a cup of Ethiopian – Gubata Farmers Group from Sightglass Coffee. This Ethiopian roast yields light flavors of strawberry and stone fruit with subtle undertones of cocoa and caramel. I’d suggest brewing this one via pour-over for the best quality! Sip up and enjoy!! 

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Regulatory and Legislative Analysis – December 2023

Regulatory and Legislative Analysis – GLOBAL

Egmont Group releases report summary highlights for Terrorist Finance Risks of Virtual Assets

The Egmont Group (EG) released its Public Summary Report on Abuse of Virtual Assets (VAs) for Terrorist Financing Purposes. The report places emphasis on pinpointing vulnerabilities associated with virtual assets (VAs), showcasing EG Financial Intelligence Units’ (FIUs) best practices to counter the exploitation of VAs for terrorist financing as VAs pose a potential threat for TF.  The complexity of virtual assets tracing, coupled with the movement of funds for TF purposes, poses investigative challenges for authorities. Understanding trends and sharing best practices in emerging technologies can aid in the identification of potential vulnerabilities associated with new technologies. Of the FIUs surveyed for the report, 45% indicated their jurisdictions lacked regulatory requirements for VA transactions. Among the participating FIUs, 36% reported having a clear definition of VAs, 26% said they did not have definitions regarding VA, 6% failed to respond, and 32% provided alternative definitions of VA.

The International Organization of Securities Commissions publishes its final report with policy recommendations for Decentralized Finance

The International Organization of Securities Commissions (IOSCO) published its final report, outlining nine policy recommendations to address market integrity and investor protection issues in Decentralized Finance (DeFi). The recommendations encompass the need to: Understand DeFi products, services, activities etc.; Identify responsible persons and entities of a purported DeFi arrangement that could be subject to its applicable regulatory framework; Achieve common standards of regulatory outcomes; Identify and address of conflicts of interest; Identify and address material risks including operational and technology risks; Require clear, accurate and comprehensive disclosures; Enforce applicable laws; Promote cross-border cooperation and information sharing; Understand and assess interconnections among DeFi, the broader crypto-asset market, and traditional financial markets.

The Bank for International Settlements published a consultative document on amendments to its standards on cryptoassets exposure of banks

The Bank for International Settlements (BIS) published a consultation document on targeted amendments to its standard on the prudential treatment of banks’ crypto asset exposures. The BIS is seeking feedback on proposed amendments to SCO60: Cryptoasset Exposures. The review aims to assess, among other considerations, whether banks can include stablecoin exposure in the Group 1b category (i.e. cryptoassets with effective stabilisation mechanisms). Additionally, corresponding changes to the composition of the reserve assets for stablecoins are under scrutiny.  Banks must perform due diligence concerning the stabilization mechanism of the cryptoasset and its effectiveness. Banks exceeding the 1% of Group 2 (unbacked cryptoassets) limit must address the calculation of capital requirements. The deadline for responses is 28 March 2024.

Regulatory and Legislative Analysis – NAM (United States & Canada)

KuCoin to pay $22M, exit New York to settle State lawsuit

On December 12, Seychelles-domiciled virtual asset exchange KuCoin, agreed to pay $22 million and cease operations in New York State to settle charges brought by the New York’s State Attorney General. The lawsuit, initiated in March, accuses KuCoin, of failing to register before allowing investors to trade cryptocurrencies on its platform.  The exchange will refund $16.77 million to New York customers and pay $5.3 million to the New York Attorney General’s Office. KuCoin CEO Johnny Lyu confirmed the settlement via X, stating it solidifies their commitment to compliant operation.

Coinbase introduces spot crypto trading on its international exchange

On December 13, Coinbase announced spot crypto trading for international institutional investors, allowing them to trade BTC-USDC and ETH-USDC pairs.  The service is offered via Coinbase International Exchange (doing business as Coinbase Bermuda), a new entity established in May 2023. Coinbase International Exchange obtained a class F license from the Bermuda Monetary Authority in April 2023, with registration number 202302164.

CoinList settles with Office of Foreign Assets Control for $1.2M for sanctions violations

On December 13, the Office of Foreign Assets Control (OFAC) announced it had settled with San Francisco-based virtual asset service provider CoinList Markets LLC (CLM). The settlement requires CLM pay $1,207,830 to settle its potential civil liability arising from processing 989 transactions on behalf of users ordinarily resident in Crimea between April 2020 and May 2022, in violation of OFAC’s Russia/Ukraine sanctions. The settlement amount reflects OFAC’s determination that CLM’s apparent violations were not voluntarily self-disclosed and were non-egregious.

Financial Stability Oversight Council issues its annual 2023 report, highlights digital asset vulnerabilities

On December 20, the Financial Stability Oversight Council (FSOC) issued its 2023 Annual Report, a new analytic framework for financial stability risks and final guidance on its nonbank financial company determinations process.  The 2023 Annual Report, among other things, highlights areas of risk that FSOC believes should be monitored and addressed in the near future. Chapter 3.1.5. covers digital assets and highlights vulnerabilities inside the crypto-asset ecosystem which include: Price volatility, the high use of leverage, the level of interconnectedness within the industry, operational risks, and the risk of runs on crypto-asset platforms and stablecoins. Vulnerabilities may also arise from key ownership concentration, cybersecurity risks, and the proliferation of platforms acting outside of or out of compliance with applicable laws and regulations.

Regulatory and Legislative Analysis – EMEA

France’s Société Générale issues a first digital green bond on Ethereum

On December 4, Société Générale (SG) announced the issuance of its inaugural digital green bond as a Security Token, directly registered by SG-FORGE. SG-FORGE, a regulated subsidiary of the SG group, is authorized to provide digital asset structuring, issuing, exchange and custody services, licensed as an investment firm under MiFID 2 under the supervision of the Autorité de Contrôle Prudentiel et de Résolution (ACPR).  SG-FORGE is registered as a Digital Asset Service Provider (DASP) with the AMF. The issued bond is structured as a EUR 10 million senior preferred unsecured bond with a maturity of 3 years. An amount equivalent to the net proceeds of this bond will be exclusively used to finance or refinance Eligible Green Activities, as defined in the Sustainable and Positive Impact Bond framework of SG.

Crypto.com received UK’s FCA EMI Authorization

On December 4, Crypto.com announced that it had received authorization from UK’s Financial Conduct Authority (FCA) to operate as an Electronic Money Institution (EMI). As a result, the company will introduce a range of UK-localized e-money products. This approval follows Crypto.com’s registration as a cryptoasset business with the FCA in August 2022.

Binance withdraws its application for a license in Abu Dhabi

On December 8, Binance reportedly withdrew its application for an investment management license in Abu Dhabi, having deemed it unnecessary to the company’s global needs. The exchange still has an application to offer custody of digital assets to professional clients, according to its website.  The decision to pull the license application was “unrelated” to the U.S. settlement, according to a Binance spokesperson. One day earlier, on December 7, a US federal judge ordered former Binance CEO Changpeng Zhao to remain in the U.S. while awaiting sentencing, citing concerns about the risk of flight.

ECB calls for expression of interest to explore new technologies for wholesale central bank money settlement

On December 13, the Eurosystem invited financial market stakeholders, urging them to formally express their interest in participating in the upcoming planned exploration of new technologies for wholesale central bank money settlement. Financial market stakeholders will take part in trials with central bank money settlement and in experiments with mock settlement in a controlled testing environment. The trials and experiments will be conducted with three Eurosystem solutions enabling wholesale financial transactions recorded on distributed ledger technology platforms to be settled in central bank money within T2, the Eurosystem’s real-time gross settlement (RTGS) system.

Circle launches its EURC stablecoin on the Solana blockchain, receives provisional approval as a DASP in France

On December 18, U.S.-based Circle, the issuer of USDC dollar-pegged stablecoin, announced  it had launched EURC, its Euro-backed stablecoin on the Solana blockchain.  With this launch, Solana is now the fourth blockchain where EURC is natively available alongside Avalanche, Ethereum and Stellar.  With plans for EURC to achieve full Markets in Crypto Assets (MiCA) conformity as an e-money token when the new European regime enters into application, developers and users of EURC on Solana can continue to expect the highest standards of trust, and transparency and reliability.  On December 21, Circle announced it had received provisional approval as a Digital Asset Service Provider (DASP) from French regulator Autorité des Marchés Financiers (AMF) and announced Coralie Billman would lead Circle in France. Final approval is contingent on receiving an e-money license. Under the European Union’s (EU) MiCA Regulation, registration with one EU regulator allows a provider to operate across the EU.

Swiss FINMA issues staking guidance

On December 20, the Swiss Financial Market Supervisory Authority (FINMA) released new guidance specifically addressing staking services. The primary emphasis of the guidance was on safeguarding customers in case of a staking service provider’s bankruptcy.

Regulatory and Legislative Analysis – APAC

Hong Kong’s SFC warns public of HongKongDAO and BitCuped for involvement in suspected virtual asset-related frauds

On December 6, Hong Kong’s Securities and Futures Commission (SFC) issued a public warning regarding suspected virtual asset-related frauds involving entities operating under the names “Hong Kong Digital Research Institute” or “HongKongDAO” and “BitCuped.” HongKongDAO issued a token named “HKD” or “HongKongDAO” (HKD Token), which is available for purchase on HongKongDAO’s website. The SFC suspects that HongKongDAO may potentially be disseminating false and misleading information through online channels. According to the SFC, BitCuped falsely claimed that “Laura Cha” and “Nicolas Aguzin” serve as its Chairman and Chief Executive Officer respectively, despite having no affiliations with BitCuped. In response, the Hong Kong Police, at the SFC’s request, has taken steps to block access to the websites of HongKongDAO and BitCuped. The SFC also issued cease and desist letters to relevant website operators urging them to stop offering for purchase a token issued by HongKongDAO.

Hong Kong regulators unveil public consultation paper, proposing legislation to regulate stablecoin issuers and consider authorizing Exchange Traded Funds

On December 27, Hong Kong’s Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA), jointly issued a consultation paper, proposing legislation to regulate stablecoin issuers in Hong Kong. Stakeholders and the public are encouraged to provide feedback by February 29, 2024.  On December 22, the Hong Kong Securities and Futures Commission (SFC) and the HKMA issued a joint circular detailing the requirements under which the securities regulator would consider authorizing investments funds with exposure to virtual assets of more than 10% of their net asset value.

India’s government blocks URLs for nine offshore VASPs after issuing compliance “Show Cause Notices”

On December 28, India’s Financial Intelligence Unit (FIU IND) issued compliance Show Cause Notices[1] for nine offshore Virtual Digital Asset Service Providers (VDA SPs): Binance, KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex.  The Director FIU IND requested the Secretary, Ministry of Electronics and Information Technology to block the URLs of the nine entities allegedly operating illegally because they did not comply with the provisions of the Prevention of Money Laundering Act  2002  (PML Act) in India. VDA SPs operating in India (both offshore and onshore) and engaged in activities like exchange between virtual digital assets and fiat currencies, transfer of virtual digital assets, safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets etc. are required to register with FIU IND as Reporting Entity and comply with the set of obligations as mandated under PML Act. The obligation is activity-based and is not contingent on physical presence in India. The regulation casts reporting, record keeping, and other obligations on the VDA SPs under the PML Act which also includes registration with the FIU IND. As of January 2024, 31 VDA SPs registered with FIU IND. However, several offshore entities though catering to a substantial part of Indian did not register but fell under the purview of the Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework.

MUFG Japan’s largest financial institution announces partnership with JPYC, the Yen-backed stablecoin

On December 5, 2023, Japan’s Mitsubishi UFJ Financial Group, Inc. (MUFG) announced[2] a partnership with JPYC, the yen-backed stablecoin, that will unlock new stablecoin-based services such as cross-border payments. MUFG is Japan’s largest financial institution. MUFG will integrate JPYC into Progmat, an issuance and management platform for a range of digital assets, launched in Sept 2023, in partnership with other major Japanese banks.

Regulatory and Legislative Analysis – LATAM

Brazilian bank Itaú Unibanco launches a crypto trading and custody program

On December 4, Reuters reported that Itaú Unibanco, Brazil’s largest bank by assets, is launching a crypto trading service for clients of its investment platform. The service is initially offering crypto trading in bitcoin and ether, but the bank also reportedly aims to add others as well, according to the bank’s digital asset head Guto Antunes. Antunes also noted that Itaú clients will initially not be able to deposit and withdraw cryptocurrency using external crypto wallets. The news comes as Itaú and other large banks in Brazil are reportedly preparing for the launch of the digital Brazilian real, the Drex.  

Circle and Nubank partner to increase digital dollar access in Brazil

On December 5, both Circle and Brazilian neobank Nubank announced the introduction of the Circle-issued stablecoin USDC on Nubank’s crypto platform, Nubank Cripto. Nubank serves approximately 90 million customers Brazil, Mexico, and Colombia. Jeremy Allaire, co-founder and CEO of Circle, noted that, “We continue to see strong demand across Latin America for access to dollars, specifically in Brazil, which has emerged as a driving force for digital currency use and adoption in the region…Our partnership with Nubank marks a significant moment in expanding the global reach of USDC, and an important step towards building the new internet financial system.”

El Salvador announces “Freedom Passport” program, accepting $1 million in Bitcoin or Tether

On December 7, 2023, the government of El Salvador and stablecoin issuer Tether jointly announced the launch of the country’s “Adopting El Salvador Freedom Passport Program”, which is designed to attract high-net worth individuals within the digital asset community. Individuals who invest the equivalent of $1 million in either bitcoin or Tether (USDT) will be eligible for an El Salvadorian passport. The program reportedly is limited to 1,000 spots per year and all applicants are required to go through a KYC verification process. While the price is considerably higher than other countries’ visa investment programs, both Tether and the El Salvadorian government noted this as an opportunity to continue advancing digital asset technology and innovation in blockchain-based payment rails.

Argentinian government states that contracts can now be settled in bitcoin and other cryptocurrencies

On December 21, 2023, Argentina’s Minister of Foreign Affairs, International Trade and Worship, Diana Mondino posted on X (formally Twitter) that contracts in the country could now legally be settled in bitcoin. The post came a day after a presidential decree titled “Bases for the Reconstruction of the Argentine Economy.” Article 1196 of the decree states that parties of a contract, “have the liberty to specify the amounts and the type of currency used for the bond or security deposit, as well as the method for its reimbursement upon the lease’s conclusion.” While the decree does not specifically mention cryptocurrency, such provisions give debtors the choice to pay in currencies not recognized as legal tender in Argentina. Mondino further stated that parties to a contract may also settle in “any other crypto and/or species,” including commodities such as “kilos of steer or liters of milk”. President Javier Milei appointed Mondino as the foreign minister following his election victory in November 2023.

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Weekly Update #33

MARK COLLINS & DEMETRIOS TSEAS

Regulatory:

France’s Société Générale issues a first digital green bond on Ethereum: On Dec 4, Société Générale(SG) announced it has issued its first digital green bond as a Security Token directly registered by SG-FORGE, a regulated subsidiary of the SG group that provides Digital Assets structuring, issuing, exchange and custody services licensed as an investment firm and authorized to provide MiFID 2 investment services under the supervision of ACPR and registered as a Digital Asset Service Provider (DASP) with the AMF. This inaugural operation is structured as a EUR 10m senior preferred unsecured bond with a maturity of 3 years. An amount equivalent to the net proceeds of this bond will be exclusively used to finance or refinance Eligible Green Activities, as defined in the Sustainable and Positive Impact Bond framework of SG.

Binance withdraws its application for a license in Abu Dhabi: On Dec 8, Binance reportedly withdrew its application for an investment management license in Abu Dhabi, having deemed it unnecessary to the company’s global needs. The exchange still has an application to offer custody of digital assets to professional clients, according to its website. The decision to pull the license application was “unrelated” to the U.S. settlement, the Binance spokesperson reportedly said. One day earlier on Dec 7, a US federal judge reportedly ordered that former Binance CEO Changpeng Zhao must remain in the U.S. while awaiting sentencing, determining theirs is too much of a flight risk.

Ordinals added to National Vulnerability Database: The National Vulnerability Database (NVD) identified Bitcoin’s inscriptions as a cybersecurity risk, revealing a “flaw” exploited by the Ordinals Protocol in 2022. The vulnerability, allowing data masking as code in certain Bitcoin versions, is under analysis and could lead to blockchain spamming, impacting network size and performance.. The Ordinals Protocol’s popularity increased data embedding in Bitcoin transactions, causing network congestion. NIST

CZ ordered to remain stateside prior to sentencing: Binance founder CZ has been ordered to remain in the United States until his sentencing in February, as a federal judge deems him a flight risk due to substantial wealth and property abroad, coupled with no ties to the U.S. Zhao, who pleaded guilty to money laundering, faces up to 18 months in prison and has agreed not to appeal any sentence up to that length; the judge granted the government’s motion, stating that Zhao has not provided clear evidence he is not likely to flee to the United Arab Emirates, where he resides. CoinDesk

Taiwan publishes CBDC study: Taiwan’s central bank has completed a feasibility study on wholesale central bank digital currency (CBDC) and is actively considering its implementation, seeking feedback from businesses and academics. Deputy Governor Mei-lie Chu emphasized the advantages of CBDCs and tokenization of real-world assets, particularly with unified ledger technology, as part of the country’s broader Banking 4.0 initiative, incorporating AI and advanced digital technology into banking.

US, Japan, South Korea hold security summit on North Korea: National security officials from the U.S., South Korea, and Japan held discussions in Seoul regarding North Korea’s crypto thefts and its nuclear and ballistic missile programs. The meeting focused on trilateral initiatives, including efforts to respond to North Korea’s use of cryptocurrency to fund its illicit weapons of mass destruction programs, as well as addressing the country’s relationship with Russia. White House

Crypto News:

Despite making Bitcoin legal tender, adoption in El Salvador lags: Although El Salvador’s government promotes widespread cryptocurrency adoption, a recent CoinGecko report highlights the country’s limited number of crypto owners, with approximately 1.72% of its population owning Bitcoin. El Salvador ranks 55th on the global crypto adoption index, trailing behind nations with higher growth rates in crypto ownership. CoinGecko

Block introduces new Bitcoin hardware wallet: Financial payment processor Block has introduced “Bitkey” a self-custody Bitcoin wallet available as a mobile app or hardware storage in over 95 countries. Priced at $150 and featuring a two-of-three multi-signature setup, Bitkey requires a mobile key, a hardware key, and a server key, with both user fingerprint and phone approval for transactions. Bitkey

IBM introduces new cold storage solution: IBM has introduced the IBM Hyper Protect Offline Signing Orchestrator (OSO), a new technology designed to deploy cold storage solutions for digital assets. OSO automates transactions, addressing limitations in traditional cold storage by employing a time-release mechanism and a policy engine, reducing the risk of insider attacks and human errors associated with manual procedures, making it an efficient and secure solution for digital asset transactions. IBM

Bitzlato founder agrees to dissolve exchange: Anatoly Legkodymov, co-founder of Hong Kong-based crypto exchange Bitzlato, has pleaded guilty to operating an unlicensed money transmitter that processed funds from ransomware attacks, illicit drug deals, and other crimes. Legkodymov, who is a majority owner in the exchange, agreed to dissolve Bitzlato, releasing claims over approximately $23 million in seized assets; Bitzlato had been sanctioned by the U.S. government in January for allegedly laundering around $700 million worth of funds, with the Treasury Department designating it as a “primary money-laundering concern.” DOJ

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