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February 19, 2021

Treasury’s 2nd Crypto Enforcement Action in Two Months | India Moves to Ban Crypto | Arrests in Massive SIM Card Hack | CBDC News Round-Up | Bitfinex Repays Half Billion Dollar Loan | TRISA Testnet Launched


  • Treasury Issues 2nd Crypto Enforcement Action in Two Months
  • India to Implement Blanket Ban on Cryptocurrency Use
  • UK Arrests Eight Men Involved in SIM Card Hack
  • Paypal Hopes to be CBDC Distributor, Japan Wants G7 to Discuss CBDCs, and Korea Starts First CBDC Phase 
  • Quickread: Bitfinex Clears Debt to Sister Company Tether
  • TRISA Testnet Launches


BitPay Enters into $507K Settlement with US Treasury Over Multiple Crypto Sanctions Violations

On February 18, the US Treasury’s Office of Foreign Assets Control (OFAC) entered into a $507K settlement with cryptocurrency payment provider BitPay. The enforcement action claims BitPay allowed persons from sanctioned jurisdictions, such as North Korea, Iran, Sudan, and Syria, to transact with merchants in the United States using crypto from BitPay’s platform.

While BitPay screened its direct customers—the merchants— against OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”) and conducted due diligence to ensure they were not located in sanctioned jurisdictions, OFAC claims BitPay failed to screen location data that it obtained about its merchants’ buyers. This resulted in 2,102 transactions on behalf of individuals who, based on IP addresses, were located in sanctioned jurisdictions.

Why it matters:

This is OFACs second enforcement action in two months against a virtual asset service provider for sanctions violations related to blocked geos. It is vital for VASPs to screen IP data to ensure they aren’t engaging in sanctioned transactions.

Read the press release:


Cryptocurrency Use to be Banned Throughout India 

The Indian government has announced they will enact a blanket ban against cryptocurrency use, causing panic among cryptocurrency holders in the country. Mining, selling, holding, issuing, and transferring cryptocurrency in India will all be illegal in 3-6 months. Holders are now left with three options: liquidate their holdings, transfer their cryptocurrency to a trusted friend or relative, or send their cryptocurrency to a self-hosted wallet.

Unfortunately, all three options introduce problems. By cashing out, cryptocurrency users lose the opportunity to continue to grow their holdings. In transferring their value to a friend or relative, the responsibility of paying taxes on the holdings is also transferred. Finally, despite the privacy of self-hosted wallets, authorities could trace the flow of funds if they were previously stored in a centralized, exchange-hosted wallet.

Why it Matters:

It appears that the strict ban against any cryptocurrency usage is meant to ensure that India’s CBDC, the digital rupee, will be the sole digital currency used in the nation. Nischal Shetty, the founder of the WazirX exchange, warned that imposing a ban would, “only result in an underground cryptocurrency market forcing genuine investors to function in an unregulated environment.”

Read more in Bloomberg here:


Eight Men Arrested in 100 Million-Dollar SIM Card Swap Hack

The United Kingdom’s National Crime Agency, with assistance from the Department of Homeland Security and the FBI, arrested eight men connected to a $100 million SIM card swap hack. Personal information, money, and bitcoin were stolen from high profile celebrities, athletes, and musicians in the United States. To execute these thefts, the criminals replaced their victims’ phone SIM cards, enabling them to access information and gain control of social media and cryptocurrency accounts.

There have been numerous instances of similar crimes committed over the years where personally identifiable information acquired through SIM card swaps was used to steal millions of dollars. As recently as last year, the National Crime Agency was able to uncover an entire criminal network that was taking over social media accounts and impersonating their victims.

Why it Matters:

These types of ploys can be extremely damaging, but SIM card swaps are just one of a multitude of strategies bad actors can deploy to acquire personally identifiable information that can be leveraged to gain control of user accounts. Such scams underline the importance of data and financial security and the value provided by decentralized systems that eliminate single points of failure. In the case of SIM card swap hacks, even 2-factor authentication is not enough to protect a person from falling victim.

Read more in Crowdfund Insider:


CBDC Round-Up: PayPal Eyes Distribution, Japan’s Finance Minister Wants CBDCs to be Discussed at Next G7, and Korea Starts First Phase of its CBDC 

PayPal announced that CBDCs could be distributed through their digital wallets, offering up their payment rails to use by central banks. PayPal recently saw a 12% increase in weekly transactions from customers using their cryptocurrency services. CEO Dan Schulman told investors that the payments giant also has plans for smart contracts and tokenization of non-crypto assets. Schulman said that “this is a once in a multi-decade opportunity where the fundamental rails of the system are going to be redefined and we have a chance to help shape that.”

In light of the ongoing CBDC pilot program underway in China, Japanese Finance Minister Taro Aso told reporters that CBDCs should be a topic of discussion at the upcoming G7 conference. Aso also raised the subject at last year’s G20, asking fellow members to think about potential risks stemming from China’s CBDC testing. Believing that China’s CBDCs would forever disrupt the global monetary market, Aso has pushed for stronger regulations to mitigate the inevitable impacts. Japan has plans to launch a digital yen and there are a good number of brokerages and retailers looking to be chosen to test it.

Alongside China and Japan, the central Bank of Korea (BoK) announced it will be testing a CBDC. A spokesperson said that the testing phase will occur within a controlled environment to ensure safety. The bank has also released a supplemental book that goes into detail about legal roadblocks that could impact a CBDC release. Bank officials predicted that issuing a CBDC would likely cause Korea’s GDP to increase by 3%. Other positive results would be the elimination of printing needs and associated cash transfer fees and delays.

Why it Matters:

Countries continue to jockey for position in the race to deploy a viable CBDC, a potential path to durable global financial leadership. Though the United States is well behind many countries in CBDC development, U.S. Senator Cynthia Lummis of Wyoming acknowledged the need to stay abreast of China by implementing crypto-friendly regulations. Companies like PayPal are taking advantage of the growing interest in CBDCs by offering up their existing wallet infrastructure. It’s reasonable to predict that other payment companies and technology companies will soon follow suit.

Read more in CoinDesk, BTC Manager, and BeInCrypto:


Quick Read: Bitfinex Says It Returned Massive Tether Loan

Legally embattled cryptocurrency exchange Bitfinex has announced that it repaid the outstanding $550 million from a $750 million dollar loan floated by its sister company, Tether. The loan itself is one of the issues at the center of market manipulation charges Bitfinex faces. Whether this action will assist Bitfinex or its parent company, iFinex, in court remains unclear.

Read more:

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