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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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