Cryptocurrency mining hardware maker Bitmain and bankrupt crytpto mining firm Core Scientific have agreed on a combination of equity and cash to finalize the deal on the expansion of mining facilities.
The deal between the two mining companies will see Bitmain supply 27,000 Bitcoin (BTC) mining rigs for $23 million in cash along with $53.9 million worth of common stock of the bankrupt firm. Apart from the mining hardware purchase deal, Bitmain and Core Scientific have signed a new hosting arrangement to assist Bitmain’s mining operations.
The deal was finalized earlier last month when a court filing highlighted Bitmain’s plan to sell mining hardware in exchange for cash and equity as part of Core Scientific’s restructuring plan. Apart from Bitmain, the restructuring plan also included Anchorage, BlockFi and Mass Mutual Asset Finance. Apart from Anchorage, all other three firms chose a mix of cash and equity options to settle their claims.
The expansion and investment plan by Bitmain will come into force by the fourth quarter of this year pending approval from a judge slated for the final quarter. Once approved, the added hardware will potentially add 4.1 exahashes to Core Scinfitic’s hash rate. The two crypto mining focused companies have also agreed to work together to upgrade Bitmain’s last-generation miners hosted at Core Scientific’s data centres to increase the firm’s productivity further.
Core Scientific filed for Chapter 11 bankruptcy in December 2022, citing the financial crisis and declining price of Bitcoin as the key reasons behind their decision. The firm started facing trouble in the weeks leading upto its eventual collapse in December owing to the market turmoil.
Tether, the largest stablecoin issuer in the crypto market has seen a rise in its stablecoin lending, aka secured loans, in 2023, despite the firm having announced it will cut such loans down to zero in December 2022.
In the company’s latest quarterly report, Tether noted that its assets included $5.5 billion of loans as of June 30, up from $5.3 billion in last quarter. A Tether spokesperson told the Wall Street Journal (WSJ) that the recent rise in stablecoin lending was due to a few short-term loan requests from clients with whom the firm has “cultivated longstanding relationships.” The spokesperson also said that the company plans to cut such loans to zero by 2024.
Tether Stablecoin loans on the rise in 2023. Source: The Company
The stablecoin loans had become a popular lending product for the stablecoin issuer, allowing customers to borrow USDT from Tether in return for some collateral. However, these secured loans were always shrouded in controversy due to a lack of transparency on the collateral and the borrowers.
A WSJ report in December 2022 raised concerns about the products, as well about claims about these loans were fully collateralized. The WSJ questioned Tether’s ability to meet redemption requirements in times of crisis.
Tether addressed these controversies last year prior to announcing its plan to eliminate secured loans entirely in 2023. At the time the stablecoin issuer called the concerns around secured loans “FUD” and claimed the loans were over collaterized.
The recent rise in secured loans for Tether comes amid growing market dominance and profit for the firm. Tether reported $3.3 billion in surplus reserves up from just $250 million last year in September. Cointelegraph reached out to Tether for comments but has not yet received a response.
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South Korea’s second-largest city Busan is developing a public blockchain network compatible with mainstream blockchain platforms such as Ethereum and Cosmos. The aim is to integrate blockchain-based services from various blockchain mainnets onto a single platform at a city level and develop Busan into a Blockchain city.
Busan City has allocated a 100 billion won ($75 million) budget for open blockchain development compatible with global standards under the Blockchain Innovation Fund (BIF). The funds will be raised through investments from public financial institutions in Busan with nearly 100 private companies showing interest. BIF is a private fund that supports the development of Busan’s blockchain industry and infrastructure construction, led by financial and public institutions in Busan.
The public blockchain development is being done under the Busan Digital Asset Exchange Establishment Promotion Plan and Future Schedule plan with a focus on making Busan a Blockchain city.
Busan Blockchain City Development Plan. Source: News1
The official announcement noted that Busan city has been actively testing various use cases of Blockchain technology in its trade-free zone, however, most of these projects were carried out on different blockchains resulting in an ‘uncomfortable’ experience for businesses. This was one of the key reasons for city administration to zero on a public blockchain at the city level blockchain compatible with global blockchain networks such as Ethereum.
Busan City is also involved in the process of establishing the blockchain trust framework (BTF) technology standard conducted by the Korea Internet & Security Agency (KISA).
The project aims to improve the quality of private services and encourage interconnection between services by presenting requirements such as blockchain technical system, performance, and security level. The standard will also be utilized for public services within Busan City.
The long-term blockchain development plan also includes the development of the Busan digital asset exchange in the first half of 2024. The digital exchange will not only list virtual assets, but also tokenized securities, including precious metals and raw materials such as gold, copper and oil. In the future, the administration behind the projects aims to tokenize and trade global intellectual property rights (IP) and carbon emissions rights.
Japan’s largest investment bank Nomura’s digital asset subsidiary Laser Digital Asset Management has launched a Bitcoin Adoption Fund for institutional investors.
The official announcement noted the Bitcoin-based fund will be the first in a range of digital adoption investment solutions that the firm plans to introduce.
Nomura is a Japanese financial giant with over $500 billion worth of assets and offers brokerage services to leading intuitional investors. The Bitcoin fund launched by its digital asset arm will now offer investors direct exposure to Bitcoin for investors.
The Laser Digital Bitcoin Adoption Fund offers long-only exposure to Bitcoin. The financial giant has chosen Komainu as the regulated custody partner. The Bitcoin Fund is a portion of Laser Digital Funds Segregated Portfolio Company that has been registered as a mutual fund in accordance with in conjunction with the Cayman Islands Regulatory Authority.
Laser Digital Asset Management head Sebastian Gugliet said that Bitcoin is one of the enablers of this long-lasting transformational change and long-term exposure to Bitcoin offers a solution to investors to capture this macro trend.
The Bitcoin adoption fund might be the first of its kind launched by Nomura and its digital asset arm, but the Japanese investment banking giant has been investing in the digital asset ecosystem for quite some time already. In September 2022, the firm launched its digital asset venture capital arm to stay at the forefront of digital innovation. Earlier in August this year, Nomura’s crypto arm Laser Digital also won Dubai’s Virtual Asset Regulatory Authority (VARA) license to operate in the country.
The long only Bitcoin Adoption fund for investors in Japan comes amid a growing discussion around Bitcoin based investment products from regulated and mainstream financial giants. The United States Securities and Exchange Commission approved two Bitcoin based futures ETF even though there is a delayed decison on spot Bitcoin ETFs. Apart from U.S. Canada and Europe has also approved several Bitocin focused investment products over the past couple of years.
Hong Kong regulators are looking to tighten the noose around the crypto market after the arrest of six individuals following allegations of fraud around an unlicensed crypto exchange called JPEX.
John Lee Ka-chiu, the chief executive of Hong Kong, told reporters on Sept. 19 that the government would increase its efforts to inform investors and remind them to only utilise platforms that have been granted SFC licences, reported AP News.
The JPEX issue came to the fore last week when the country’s Securities and Futures Commission (SFC) notified the public that they had received over 1000 complaints related to the unregistered crypto exchange platforms with customers complaining about collectively losing over $128 million (1 billion Hong Kong won) due to the fraudulent exchange.
The SFC in its warning noted that JPEX was actively promoting the platform’s services and products to the Hong Kong public through online celebrities and over-the-counter money changers.
As the problems with JPEX became public with the warning from the SFC, many users of the platform found themselves unable to withdraw their funds while others complained about reduced wallet balances. After the Hong Kong watchdog’s warning to the exchange, the platform reportedly increased its withdrawal fee to $1,0000 to discourage users from withdrawing their assets.
The crypto exchange later blamed third-party market makers for the ongoing liquidity crisis on the platform that resulted in the hike of the withdrawal fee. The Hong Kong police also arrested influencer Joseph Lam (Lin Zuo) for his association with crypto exchange JPEX.
Hong Kong established itself as a growing crypto hub in 2023 working on various pro-crypto legislation and opening the crypto trading market for retail customers. However, unlicensed crypto platforms like JPEX have managed to fool many users in the country due to a lack of knowledge and awareness. The regulatory body is now working to educate people on using only licensed platforms for their crypto trading activities.
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Malta’s Financial Services Authority (MFSA) has begun public consultation over changes in its crypto regulations in order to align with Europe’s Markets in crypto-assets (MICA) regulations set to take effect in December 2024. The public consultation period is open until Sept. 29.
The revised rulebook proposes changes to the rules for exchanges, custodians and portfolio managers in order to align with the European Union’s MiCA. Malta first established its crypto framework in 2018 with the Virtual Financial Assets (VFA).
Some of the notable changes with respect to the VFA Rulebook are:
MFSA has removed the systems audit requirement for VFA license holders.
The capital requirements for Class 3 and 4 licence holders were reduced to $133,000 (€125,000) and $159,000 (€150,000) respectively.
The professional indemnity insurance requirement was removed.
The outsourcing requirements were updated in line with MiCA.
The service-specific rules of the MiCA were incorporated in the VFA rulebook where the requirements applicable to VFA exchanges, order execution and client suitability will be amended.
The requirements relating to client categorization have been removed.
The requirement for a Risk Management and the Internal Capital Adequacy Assessment Report has been removed.
With the passing of the MiCA regulations, all existing regulations in the European Union nations will be replaced by the universal MiCA laws. Malta, being one of the several EU countries, had two options: either to wait for 18 months before the MiCA laws come into effect or amend the existing regulations to align with the universal EU laws, and the regulators in the country chose the second option.
The regulators in an interview in October last year stated that early modifications to their existing crypto regulations would help VFA license holders to seamlessly transition to MiCA-based laws and obtain the EU license. Malta’s VFA framework was based upon Markets in Financial Instruments Directive (MiFID) principles and MiCA has derived several principles from the same rulebook.
South Korean regulators have turned their focus to over-the-counter (OTC) crypto trades amid growing concerns about its use for criminal activities. The financial regulators in the country are reportedly monitoring the OTC crypto market trades.
According to a report published in a local daily, deputy chief prosecutor Ki No-Seong and Park Min-woo of the Financial Services Commission (FSC) and other vital regulatory officials attended a session on “Criminal Legal Issues Related to Virtual Assets” with a focus on the unregulated OTC crypto market. During the event, deputy chief prosecutor No-Seong called for regulating the OTC crypto market due to money laundering concerns.
A google translated version of Seong’s statement read:
“Illegal virtual currency OTC companies have overseas corporations and are engaged in the business of converting illegally obtained virtual currency into Korean won or foreign currency. There is a need to regulate these companies as undeclared virtual asset trading businesses.”
The term “OTC crypto market” describes exchanges that are not officially recognised by the government. Virtual currency over-the-counter (OTC) transactions include all transactions outside regulated platforms including peer-to-peer (P2P) exchanges. According to the report, there are a total of 172 cryptocurrencies available on Upbit, the largest regulated crypto platform in South Korea, while OTC platforms offer upto 700 cryptocurrencies.
The report cited several instances of the use of OTC platforms to convert virtual assets into Korean won. The International Crimes Investigation Department of the Incheon District Prosecutors’ Office arrested and indicted three people on charges of engaging in illegal foreign exchange transactions between October 2021 and October 2022.
The arrested trio were found to be purchasing $70.9 million (94 billion won) worth of virtual currency from overseas OTC at the request of Libyans and then sending it to Korea to be converted into cash, according to the report. The value of unlawful foreign exchange transactions made using virtual currency was estimated by the Korea Customs Service to be worth $4 billion (5.6 trillion won) last year.
South Korea over the years has become a country known for its stringent crypto regulations over the years and has several regulations in place to tackle crypto-related crimes. The country’s regulators have become more proactive in the wake of the Terra-Luna collapse.
Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you the most significant developments from the past week.
The past week in DeFi saw Coinbase CEO stand up for the nascent ecosystem amid growing calls for enforcement action, while Polygon CEO has said that its $1 billion zero-knowledge proof rollup bet is paying off.
MakerDAO’s founder believes decentralized stablecoins could dominate crypto, while Solidus Labs says decentralized exchanges have become a magnet for wash trading.
The top 100 DeFi tokens had another mixed week with bearish domination as the majority of the tokens traded in red on the weekly charts.
Coinbase CEO champions DeFi, calls for court action to set legal precedent
Coinbase CEO Brian Armstrong has expressed his endorsement of DeFi protocols. In a recent social media post, Armstrong urged DeFi protocols to consider legal proceedings in court to set a precedent, as the legal system has consistently demonstrated its dedication to upholding the rule of law. The current approach is mainly pushing a crucial industry toward overseas jurisdictions, he said.
According to his post on X (formerly Twitter), the United States Commodities Futures Trading Commission should avoid taking enforcement actions against DeFi protocols, as they do not function as conventional financial service businesses, and it’s questionable whether the Commodity Exchange Act is even applicable to them.
Decentralized stablecoins could dominate crypto: MakerDAO founder
Decentralized stablecoins may eventually dominate the stablecoin market, so long as crypto “ends up living up to its potential,” says Rune Christensen, co-founder of DeFi pioneer MakerDAO.
Speaking to Cointelegraph’s Andrew Fenton at Token2049 in Singapore, Christensen aired his thoughts on the future of decentralized stablecoins, such as Dai (DAI), and their role in the wider crypto economy.
Polygon co-founder: $1B bet on ZK-rollups paying off
Polygon co-founder Sandeep Nailwal believes the layer-2 blockchain firm is reaping the benefits of allocating $1 billion to develop zero-knowledge (ZK) proof-powered scaling solutions for the Ethereum ecosystem.
Speaking at a keynote address during the latest edition of the Token2049 conference in Singapore, Nailwal touched on the development of “Polygon 2.0” scaling efforts and the promise of recursive ZK-proof technology to create a seamless interoperable blockchain ecosystem.
Decentralized exchanges are a magnet for crypto wash traders: Solidus Labs
Over 20,000 crypto tokens have been manipulated via decentralized exchange (DEX) wash trading over the last three years, according to market surveillance firm Solidus Labs.
In the second part of its “2023 Crypto Market Manipulation Report,” released on Sept. 12, Solidus says that among a sample of 30,000 Ethereum-based DEX liquidity pools, nearly 70% were found to have executed wash trades since September 2020, making up for around $2 billion worth of crypto.
DeFi group petitions to stop ‘patent troll’ targeting DeFi protocols
A DeFi advocacy body has petitioned the United States Patent and Trademark Office to review a patent owned by a company it accuses of being a “patent troll” — a firm that aims to profit from patent lawsuits.
In a Sept. 11 blog post, the DeFi Education Fund said that on Sept. 7, it filed an over 90-page petition to the Patent Trial and Appeal Board in a bid to cancel a patent owned by True Return Systems.
Data from Cointelegraph Markets Pro and TradingView shows that DeFi’s top 100 tokens by market capitalization had a mixed week, with most tokens trading in the red on the weekly charts. The total value locked into DeFi protocols remained above $49 billion.
Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education regarding this dynamically advancing space.
The United States Securities and Exchange Commission (SEC) has accused Binance.US of non-cooperation in the ongoing investigation against the crypto exchange, according to a court filing dated Sept. 14.
The SEC in its court filing noted that Binance.US’s holding company called BAM has produced only 220 documents during the discovery process. Many of the submitted documents under the Consent Order “consist of unintelligible screenshots and documents without dates or signatures.”
SEC added that BAM has refused to produce essential witnesses for deposition, instead agreeing only to four depositions of witnesses it has unilaterally deemed appropriate and said:
“It has responded to requests for relevant communications with blanket objections and has refused to produce documents kept in the ordinary course of its business, claiming those documents do not exist, only for the SEC to later receive such documents from other sources.”
The SEC also raised concerns over Binance.US’s use of Ceffu, wallet custody software provided by the global entity Binance Holdings Ltd. The SEC noted that BAM made inconsistent statements about Ceffu’s and Binance’s involvement in the wallet and customer funds management.
SEC said that BAM first claimed Ceffu was BAM’s wallet custody software and services provider but later stated that Binance was BAM’s wallet custody software provider. The regulators raised concern that the crypto exchange’s usage of Ceffu violates a prior agreement meant to prevent funds from being diverted abroad.
The SEC filed a lawsuit against Binance on June 5, pressing 13 charges against the crypto exchange including unregistered securities offerings, the Simple Earn and BNB Vault products, and its staking program. The SEC claimed that Binance.com, Binance.US, and BAM Trading should have registered as clearing agencies, broker-dealers, and exchanges, respectively. The unregistered offer and sale of Binance.US’ staking-as-a-service programme required BAM Trading to register as a broker-dealer as well.
South Korean Bitcoin lender Delio is reportedly preparing for an administrative lawsuit against regulators for the wrong interpretation of law leading to an investigation and hefty fine against the crypto lending firm.
Bitcoin lender Delio said the allegations of fraud and embezzlement levied by the Financial Service Committee (FSC) are baseless, according to a report published in a local daily. The crypto lender claimed that the regulator implied the law unreasonably in a situation where there were no clear regulations for virtual asset deposit and management products.
The report revealed that the Financial Intelligence Unit (FIU) recommended the dismissal of Delio CEO Jeong Sang-ho through a sanctions announcement on Sept. 1. Delio claimed that this was a clear indication that the financial authorities were putting pressure on Delio to close down the business rather than giving them a chance to revive. The FIU also imposed a three-month business suspension on Delio and a fine of $1.34 million (1.83 billion won.)
Delio CEO Jeong Sang-ho said that these FIU sanctions leave a lot of room for unreasonable legal interpretation and arbitrary application,” and such behaviour by financial authorities could kill the domestic virtual asset industry.”
The major issue of conflict remains the interpretation of the existing laws, around whether a lending company that lends cash using virtual assets as collateral is considered a virtual asset business operator and whether the act of imposing a lock-up constitutes ‘storage’ of virtual assets under the Special Financial Services Act.
Delio argued that it is unclear whether virtual asset deposits and management products are considered financial products under the current law. One of the lawyers for the firm noted that there are no provisions for virtual asset-related laws and regulations regarding the virtual asset management business.
The lawyer said that the FIU arbitrarily interpreted virtual asset deposits and management products as financial investment products and sanctioned them which is the case of wrong interpretation of the law.
Google Cloud has joined forces with a Web3 startup to develop user-centric developer tools for decentralized finance (DeFi) to lower the barrier of entry into the decentralized world.
The DeFi infrastructure provider Orderly Network has teamed up with Google Cloud to develop off-chain components of DeFi infrastructure focused on tackling self-custody and transparency challenges. Orderly will be a DeFi infrastructure provider, available on Google Cloud Marketplace.
Google Cloud told Cointelegraph that the partnership was struck in light of increasing interest from clients exploring blockchain workloads on Google Cloud.
Rishi Ramchandani, Head of APAC Web3 GTM, Google Cloud Asia Pacific told Cointelegraph that the surge in demand highlights the necessity for a tailored Web3 product suite. He added:
“Working with Orderly Network to build robust infrastructure will help address the gaps in DeFi adoption and growth, and ensure scalability in the continuously evolving space through the development of secure and user-centric enterprise developer tools.”
Orderly hopes to distribute the DeFi load into on-chain and off-chain components to ensure a balance between speed with sufficient decentralization. The firm claimed this distribution would streamline operations without compromising the inherent advantages of a decentralized system. These off-chain components will ensure that crucial interactions are carried out on-chain while interactions that can be efficiently handled off-chain are processed away from the main blockchain.
Cointelegraph got in touch with Arjun Arora, COO at Orderly Network, to understand how their collaboration with Google will help in making DeFi mainstream. Arora told Cointelgraph that to achieve mainstream adoption, blockchain technology must outperform current solutions and Orderly is building a trading Lego for seamless dApp integration across blockchains with a focus on merging the best of decentralzied exchanges (DEXs) and centralized exchanges (CEXs.)
“Our collaboration with Google ensures our matching engine competes with centralized systems seen in traditional finance, but the rest of our infrastructure and liquidity network retains all the benefits of self-custody and transparency seen in decentralized finance.”
DeFi’s biggest challenge comes from the entry barrier and the security issues that have plagued the ecosystem for a long. With the likes of Google Cloud entering the DeFi infrastructure market with Orderly as its key partner, the collaboration aims to build a secure environment and tools to resolve these issues.
Telegram integrates TON crypto wallet, TON price jumps 7%
Messaging app Telegram endorsed TON network as its blockchain network of choice for Web3 infrastructure, boosting the TON token price by 7%.
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Popular messaging app Telegram has finally unveiled a crypto wallet nearly three years after it first revealed plans to build a Web3 ecosystem. The wallet was unveiled during the ongoing Token2049 event in Singapore.
Telegram unveils TON based self custody wallet integration. Source:X
The crypto wallet is developed on the Open Network (TON) blockchain and is now available to its 800 million users worldwide. The TON wallet integration into Telegram helped the price of TON coin soar by nearly 7% on the announcement.
TON Foundation said that the projects built on the TON blockchain will get priority access to the messaging app’s advertising platform, Telegram Ads. The wallet feature is currently available in the settings and global rollout will begin in November later this year excluding the United States and few other countries.
This is a developing story, and further information will be added as it becomes available.
Alex Mashinsky, the founder and former CEO of now bankrupt crypto lender Celsius, filed a new motion in court seeking the dismissal of the Federal Trade Commission (FTC) case against him “in its entirety.”
The legal counsel for the former Celsius boss argued that the allegations against their client do not support the claim that he knowingly made a misstatement to “fraudulently obtain customer information from a financial institution.” According to the lawyers, the accusations do not meet the standards for a claim under the Gramm-Leach-Bliley Act (GLBA). This 1999 law requires knowingly making false claims to collect customer information fraudulently from a financial institution.
Additionally, the lawyers claimed that because Mashinsky resigned from his position as CEO of Celsius on Sept. 27, 2023, the complaint cannot prove that he “is violating” or “is about to violate” the law.
The FTC issued a $4.7-billion fine against bankrupt crypto lender Celsius Network in July and filed a lawsuit against the Celsius founder along with Celsius’ co-founders Shlomi Daniel Leon and Hanoch “Nuke” Goldstein. Mashinsky’s legal team was also representing Goldstein.
Lawyers claimed that the FTC seems to be basing its case against Goldstein solely on the fact that he retweeted a blog post by Celsius. According to Goldstein, this behaviour is being misconstrued as a sign of complicity or participation in the alleged misconduct.
Celsius was one of the largest crypto-lending platforms headed by Mashinsky before it imploded in 2022. The founder resigned as CEO in September later the same year and by the end of 2022, the United States Justice Department indicted the former CEO on multiple charges of criminal fraud. Mashinsky has pleaded not guilty to multiple charges filed against him and was out on bail on a $40 million bond.
Former FTX CEO Sam Bankman Fried’s lawyers have requested for a pre-trial release citing a lack of adequate internet connectivity in the federal jail. SBF’s legal team argued that poor internet connection is a hindrance in their defence preparation and leads to a loss of time.
The court filing dated Sept. 8 was the second such request for pre-trial release within the last week and came after the Appellate judge denied SBF’s request for immediate release from jail on Sept.6. The judge then referred the motion to the next three-judge panel.
The SBF legal team argued that despite government assurance that their client would have access to a laptop on weekdays from 8 a.m. until 7 p.m., those promises haven’t materialized. The lawyers also cited several instances where SBF’s access to an internet laptop was cut short due to jail proceedings.
The first instance was on Sept. 1, when Bankman-Fried was called back to his cell at 2:30 p.m. for a headcount, costing him four hours of preparation. In a second instance on Sept. 6, SBF wasn’t released from his cell until 11:00 a.m. When Bankman-Fried tried to access the discovery database, the poor internet connection allowed only one document from the database to be reviewed. The legal team in their filing noted:
“Despite the Government’s efforts, there does not appear to be a way to solve the internet access problem in the cellblock. That means that Mr. Bankman-Fried has no way to review and search documents in the discovery database or the AWS database before the trial. The defendant cannot prepare for trial with these kinds of limitations.”
After his arrest in the Bahamas on Dec. 12 last year, SBF was released on a $250 million bond following which he spent the majority of his time confined to his parents’ California home. However, his bail was revoked on Aug. 11 after SBF was found to be trying to contact and intimidate former FTX executives and witnesses in the lawsuit.
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Since then, Bankman-Fried’s legal team has filed multiple appeals to request pre-trial release, however, judges reviewing such motions have argued he has violated bail conditions on several occasions and thus an immediate release cannot be granted.
India is working on a crypto regulatory framework based on the joint recommendations of the International Monetary Fund (IMF) and the Financial Stability Board (FSB) that could result in legal legislation in the next 5-6 months. Siddharth Sogani, the CEO of CREBACO that has worked with government agencies and ministries, told Cointelegraph that the Indian government is working on a five-point crypto legislature with a global approach.
The IMF-FSB crypto recommendations call for regulating the crypto market rather than a blanket ban approach. The IMF-FSB recommendations are a set of regulatory guidelines/suggestions that the G20 countries can work on to formulate their independent yet collaborative crypto legislative.
Cointelegraph reached out to CREBACO, a blockchain analytic firm that offered consulting services to several G20 committees and nations to get insight into India’s crypto approach. Sogani, the CEO of the firm told Cointelegraph that based on their meetings with the government officials, India is currently working on a five-point regulatory approach with a focus on global collaboration on certain aspects such as crypto taxation.
Talking about the five-point framework, Sogani noted that the government is focusing on:
Setting up advanced Know Your Customer (KYC) for crypto companies which covers the Foreign Account Tax Compliance Act (FATCA), and Existing anti-money laundering Standards.
Crypto platforms would be required to release Proof-of-reserve audits on real real-time basis to regulators.
A uniform taxation policy across the nations.
Crypto exchanges could gain the similar status of authorized dealers (similar to banks) under the guidelines of the Reserve Bank of India (RBI).
Key positions may be mandatory such as Money Laundering Reporting Officer (MLRO) for crypto platforms.
Sogani noted that the world has realized that banning crypto is futile and several nations are moving towards a regulatory approach rather than a blanket ban. The likes of the United States and Europe have already got some specific crypto regulations in place while India took the taxation route. He added:
“Regulations are inevitable, this ecosystem has grown substantially strong without regulations. Just imagine how well would it grow with proper regulations in place. Also, regulated markets reduce the risks of scams and illicit activities.”
India has called for a global approach to crypto regulations for a while, with Prime Minister Narendra Modi reiterating the same during the recently concluded G20 summit. One of the executives at the Finance Ministry confirmed that they have taken the IMF-FSB crypto recommendations and will focus on formulating regulations around it in the coming months.
The Finance Ministry executive said that IMF-FSB recommendations offer a good “framework to decide our own way forward. The foundation is ready, beyond that how much we want to go it is for us to decide in the coming months and then take a call.”
The official also cleared that banning cryptocurrencies is no longer an option and noted that “If you want to ban it (cryptocurrency), go ahead and ban it. But if the rest of the countries are not banning it, it will be extremely difficult for one country to ban it.”
India currently doesn’t have any specific crypto regulations in place, though the country imposed a 30% tax on crypto gains in 2022. However, the joint crypto recommendations and the Finance Ministry’s assurance that a crypto framework could materialize into a formidable legislation in the coming few months is an optimistic sign for the crypto industry in the country.
Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you the most significant developments from the past week.
The past week in the DeFi ecosystem was filled with ups and downs, from the United States Commodity Futures Trading Commission’s (CFTC) investigation into multiple DeFi protocols to Binance CEO Changpeng “CZ” Zhao’s forecast that DeFi would outgrow centralized finance (CeFi) in the next bull run.
While CZ anticipates a bright future for DeFi, a report from the Bank for International Settlements (BIS) argues that a pure form of DeFi cannot survive independently and has little use case in the real world.
The Shiba Inu ecosystem’s layer-2 network, Shibarium, has continued its rapid growth post-relaunch, with over one million wallets created; however, its progress has yet to impact the price of the Shiba Inu (SHIB) token.
The top 100 DeFi tokens had a late Friday surge, with most of the tokens posting positive weekly gains.
Binance CEO CZ forecasts DeFi outgrowing CeFi in the next bull run
Binance CEO Changpeng Zhao predicts that DeFi has the potential to surpass centralized CeFi in the next bull run.
During a Sept. 1 live X (formerly Twitter) Spaces, titled CZ AMA, Zhao shared his thoughts on the future of DeFi. “I think the more decentralized the industry becomes, the better,” he declared, adding that it may not be long before it takes over CeFi trading volumes.
CFTC cracks down on DeFi protocols Opyn, ZeroEx and Deridex
The U.S. CFTC is taking regulatory action against three DeFi protocols for allegedly failing to register various derivatives trading offerings. The U.S. commodities regulator announced it had issued orders against protocols Opyn, ZeroEx and Deridex in a Sept. 8 statement.
Deridex and Opyn were charged for failing to register as a swap execution facility or designated contract market and failing to register as a futures commission merchant. The two protocols also failed to comply with customer provisions set out in the Bank Secrecy Act, the CFTC said.
“Pure” DeFi has little chance for real-world use because of need for oracles: BIS
The need for an oracle in DeFi is a major impediment to adoption in the real world, according to the authors of a Bank for International Settlements bulletin. The problems with oracles are both practical and principled, and the study’s authors saw no way around them.
An oracle is a third party that provides real-world data flowing to or from a DeFi protocol. An oracle is centralized by nature, and its presence means a protocol is not fully decentralized — if that is tolerated, then trustlessness is lost, the authors said. That is likely to be a fatal flaw for use with real-world assets, the authors wrote.
Binance to reimburse users $1 million for Cyber Earn incident
Crypto exchange Binance is refunding users $1 million of Tether (USDT) over its handling of the CyberConnect (CYBER) token incident.
As described by the exchange on Sept. 7, a price discrepancy on listed CYBER tokens occurred the week prior due to a liquidity crunch constricting CYBER cross-chain bridges on the Korean cryptocurrency exchange Upbit. This led to arbitrageurs borrowing CYBER from Binance to profit from the difference. In turn, Binance users who staked CYBER in its Flexible Earn Program were barred from redemptions, as the staked assets had been borrowed, reaching the loan limit.
Shibarium hits one million wallets amid meteoric growth, SHIB yet to catch up
The total number of wallets on Shiba Inu’s newly launched layer-2 network, Shibarium, has surpassed the one million mark in a meteoric rise since its relaunch.
The milestone — announced in a Sept. 3 blog post by the official Shibarium team — means there were at least 900,000 wallets created since Shibarium’s relaunch on Aug. 28, and only two weeks after the Shibarium network first went live — albeit with some technical hiccups.
Data from Cointelegraph Markets Pro and TradingView shows that DeFi’s top 100 tokens by market capitalization had a late bullish surge, with most tokens trading in the green on the weekly charts. The total value locked into DeFi protocols touched $49.73 billion.
Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education regarding this dynamically advancing space.
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The former CEO of Turkish crypto exchange Thodex, Faruk Fatih Özer, was sentenced to 11,196 years in prison by a Turkish court on charges of “establishing, managing and being a member of an organization”, “qualified fraud”, “laundering of property values”.
The Anatolian 9th High Criminal Court sentenced Ozer along with his two siblings to the same jail sentence of 11 thousand 196 years, 10 months and 15 days in prison along with a $5 million fine, reported Turkish state-run news agency, Anadolu Agency.
The Turkish crypto exchange was one of the largest digital asset trading platforms in the country before it abruptly imploded in 2021. The exchange halted services of the platform abruptly without prior notice and the founder Özer fled the country along with users’ assets totalling $2 billion total in crypto. At the time Ozer had refuted all claims of a possible exit scam.
The founder of the crypto exchange claimed in court that he and his family are facing injustice. He said Thodex was just a crypto company that went bankrupt and had no criminal intentions. A Google-translated version of Özer’s court statement read:
” I am smart enough to manage all institutions in the world. This is evident from the company I founded at the age of 22. If I were to establish a criminal organization, I would not act so amateurishly. What is in question is It is clear that the suspects in the file have been victims for more than 2 years.”
The long-drawn-out case against the Thodex crypto exchange had 21 defendants out of which five attended the court hearing in person. The court acquitted 16 defendants of “qualified fraud” due to lack of evidence, and ordered the release of four defendants. The other defendants in the case received varying degrees of sentences based on their involvement in the fraud.
Blockchain analytic firm Lookonchain flagged a crypto wallet allegedly belonging to Polygon Foundation that transferred large amounts of Matic tokens on Binance. Polygon Labs founder Sandeep Nailwal refuted the claim and said it was a case of mislabeling and the wallet doesn’t belong to Polygon Foundation.
Lookonchain flagged two wallets “Polygon Foundation: 0x8d36” and “Polygon Foundation: 0xf957” that collectively deposited over $5.5 million worth of MATIC onto Binance over the past 30 days with more than half of the amount deposited over the past two days.
Matic deposited on Binance from Polygon Foundation labeled wallets. Source: Etherscan
Polygon Labs CEO Marc Boiron was the first to flag the issue of mislabelling to which the blockchain analyst responded that the wallets were labeled by another crypto analytic firm, Nansen.
Nansen responded that they go through a rigorous process before labelling such wallets and explained that these two wallets in question had shown strong links to key members of the Polygon.
The firm cited key instances of interaction by Polygon Labs executives with wallet address 0x8d365687a75dc7688864822869ae0551bb6fc105, where in one instance leads growth at Polygon Sanket had sent ETH to the mentioned address and the same address has received tokens from private rounds Polygon invested in such as Hot Cross.
For the second wallet address: 0xf957fa14ea72a9ecd7bdc06c5be89a5a34c7aa89, Nansen claimed that their “counterparties consist of the previous address 0x8d3 and with other entities that are tied closely with Polygon with the head of Investments being one example. “
However, Nansen concluded that since Polygon Labs’ CEO has publicly refuted the claims about these address’s links to the firm, they are going to remove the label. Boiron thanked Nansen for removing the label and acknowledged that labelling wallets is not an easy task. Polygon didn’t respond to Cointelegraph’s requests for comments at press time.
The world’s leading crypto exchange by trading volume Binance has seen the departure of 10 key executives from various departments in the first nine months of 2023. While executive departures from a company are a norm based on their preset contractual obligations, the number of executives leaving Binance amid growing regulatory troubles has been a key talking point in the crypto community.
The latest to join the list is Helen Hai, the executive vice president of the crypto exchange, who announced her resignation from her post on Sept. 6. On the same day, Gleb Kostarev, Binance’s vice president of Eastern Europe, Turkey, the Commonwealth of Independent States, Australia, and New Zealand, also announced his resignation, as did Russia and CISgeneral manager Vladimir Smerkis.
The list of key executives to leave Binance in 2023:
September 6, 2023: Helen Hai, Binance Executive Vice President and Head of Global Fiat, announces resignation.
September 6, 2023: Vladimir Smerkis, general manager for Russia and CIS at Binance announced his departure.
August 31, 2023: Leon Foong, Binance Head of Asia-Pacific, announces resignation.
July 7, 2023: Steven Christie, Binance senior vice president for compliance, announces resignation.
July 6, 2023: Patrick Hillmann, Binance’s chief strategy officer, announces resignation.
July 6, 2023: Han Ng, Binance general counsel, announces resignation.
July 6, 2023: Steve Milton, Binance Global vice president of marketing and communications, announces resignation.
July 6, 2023: Matthew Price, Binance Senior Director of Global Investigations and Intelligence, announces resignation
Four top executives from Binance reportedly all left on the same day after Binance’s response to the Department of Justice investigation. A Fortune report claimed that these top executives were not happy with the crypto exchange’s response. However, Binance CEO Chang Peng Zhao dismissed all such reports labelling them as FUD.
Zhao took to X (formerly Twitter) to address the growing chatter around the departure of key executives again on Sept. 6. While reposting a Cointelegraph report on the Kostarev exit, Zhao said that many members from Binance are moving into bigger roles, some outside of Binance as well.
Cointelegraph reached out to Binance to enquire about the community concerns around executive departures but Binance said they don’t have any comments to offer.
Most of the executives leaving the crypto exchange have said that their departure was routine and they share a good relationship with the crypto exchange and its CEO. However, the crypto community has become a bit more sceptical about exchanges post-FTX collapse.
Binance over the years has faced regulatory troubles in more than a dozen countries. The crypto exchange on-boarded many former government officials and compliance officers to help it mitigate the regulatory complexities, however, in 2023, many of these executives have left the crypto exchange.
The United States Attorney’s Office has filed an affirmation of the denial of bail to former FTX CEO Sam Bankman-Fried, claiming that he could attempt witness tampering, and stating that no release conditions would assure the safety of the witnesses. Prosecutors responded to several claims made in his appeal against the bail revocation, calling it “meritless.”
The prosecutors in their response argued that SBF was found to have twice committed/attempted witness tampering in violation of the court orders. Thus, in light of the continued evasions of his pre-trial release conditions, Bankman-Fried was unlikely to abide by the conditions of release.
The first time SBF attempted to contact witnesses came to light in January earlier this year when the former FTX CEO initiated contact with the then-General Counsel of FTX US, who is also a potential trial witness represented by counsel.
The second such instance came in July 2023, when a New York Times report published private journal messages of Caroline Ellison, the former CEO of Alameda and SBF’s associate. SBF’s counsel confirmed that the journal was leaked by the former FTX CEO himself. The prosecutors reached out to the District Court to highlight how SBF had covertly provided private and potentially embarrassing writings of Ellison to discredit her and potentially influence the perception of the jury in the case when it goes to trial.
On July 26 during a court conference, prosecutors appealed to revoke SBF’s bail plea based on his violations of the bail conditions and attempts to influence witnesses. Federal judge Lewis Kaplan from the District Court for the Southern District of New York, revoked SBF’s bail on Aug. 11 after he was found to have contacted witnesses in an attempt to influence or intimidate them. The former FTX CEO had been out on bail on a $250 million bond since December 2022.
On Aug. 28, SBF lawyers appealed against the revocation of the bail ruling and claimed that the former FTX CEO was well within his right to talk to the press about Caroline Ellison as it was protected under the First Amendment. However, prosecutors argued that Judge Kaplan took SBF’s First Amendment rights into consideration in the ruling. The judge in the ruling had noted that “the law is that once communication is undertaken as part of or with the intent to intimidate or influence a witness, it’s a crime, and the First Amendment has nothing to do with it.”
The prosecutors made two key arguments against the SBF appeal:
The District Court did not clearly err in finding probable cause to believe Bankman-Fried twice committed attempted witness tampering while on pretrial release.
Judge Kaplan did not clearly err in finding probable cause that Bankman-Fried attempted to tamper with Witness 1
The prosecutors also argued that the defendants didn’t argue or dispute against the ruling in SBF’s attempt to witness former FTX US counsel which the judge found a clear attempt of witness tampering.
A report from the World Federation of Exchanges (WFE) noted that 40% of the crypto trading platforms are decentralized and make use of distributed ledger technology. On the other hand, the majority, or 60%, of platforms make use of Central Limit Order Books (CLOBs), quite similar to regulated exchange platforms.
The WFE report noted that there are a total of 500 crypto trading platforms offering various crypo linked products and services. The survey saw participation from several crypto platforms offering key insights into retail and institutional demands.
The report noted that many crypto platforms opted to rely on an off chain CLOB system for price oracles, quote display and order execution. These entities only use the blockchain for settlement and custody purposes This means traders do not interact directly with the DLT, which eventually helps in saving on transaction cost. In this way, the transaction fees only apply when orders are settled on the blockchain. Crypto-trading platforms with this type of arrangement are called centralized platforms (CEX).
According to the survey, retail demand for crypto-linked products and services is higher compared to institutional demand, except for custody services. Institutional giants have shown a greater requirement for crypto custody services, and demand is higher. Based on the different types of product demands by the two segments of investors, the report estimates that retail customers are less aware about the importance of investor protection.
Talking about the liquidity and customer demand, the report found that centralized exchanged enjoy a higher trading activity despite decentralized platforms offering lower transaction fees. The report also shed light on the difference in price for same trading pairs on different platforms, leading to arbitrage opportunities. However, the WEF report claimed this type of price fluctuation highlights a potential inefficiency issue in the crypo market.
The report further found that despite most countries imposing know-your-customer requirements, both centralized and decentralized crypto trading platforms have fallen short in implementing such measures due to lack of uniform crypto regulations.
Magazine: How to protect your crypto in a volatile market: Bitcoin OGs and experts weigh in
The price of the native token of decentralized finance (DeFi) cross-chain bridge Synapse (SNY) plummeted on Sept. 5 after an unknown liquidity provider on the platform dumped nearly 9 million SYN tokens and pulled all stablecoin liquidity from the bridge.
The official X account for Synapse acknowledged the liquidity rug by an “unknown liquidity provider,” while clarifying that the Synapse bridge didn’t face any security breach.
The unknown liquidity provider in question was traced to Nima Capital, one of the long-term capital partners of the project. The venture capital firm had received a grant from the project in return for locking $40 million worth of liquidity in SYN. Etherscan data suggest the unknown whale that dumped the SYN token received 10 million SYN($3.4M) from “Synapse: Executor 2” wallet on April 5 and currently holds no SYN tokens in the wallet.
The VC firm rug pulled its users just eight months before the agreed governance proposal. This became evident after the Nima Capital website went offline and the project also locked their X (formerly Twitter), going dark online, prompting many to call it a VC rug.
Rug pulls are quite a common form of scam in the DeFi ecosystems where the project creators or developers often change code or pull the plug on the project after the native token of the project reaches a certain price threshold. However, a rug pull by a VC firm is uncommon.
The price of the native token SYN fell more than 20% as a result of the token dump, registering a multi-week low of $0.30 before recovering to above $0.35 later in the day.
While DeFi bridges made interoperability easier among different protocols, these bridges are often the primary target of exploiters with some of the biggest DeFi hacks taking place on these cross-chain bridge protocols.
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On Aug. 29, crypto asset manager Grayscale Investments scored a major victory against the United States Securities and Exchange Commission in its efforts to convert its over-the-counter Grayscale Bitcoin Trust (GBTC) into a listed Bitcoin exchange-traded fund (ETF). The U.S. Court of Appeals Circuit Judge Neomi Rao ordered Grayscale’s petition for review be granted and the SEC’s order to deny the GBTC listing application be vacated. Previously, Rao said that the SEC did not “offer any explanation” as to why Grayscale was in the wrong.
Initial enthusiasm in the crypto community about the victory was tempered by the understanding of the limits of the court’s decision. “So far, every time they lose in court they just shamelessly say the judge got it wrong and pursue more shenanigans,” Delphi Labs general counsel Gabriel Shapiro said. According to Zero Knowledge Consulting managing partner Austin Campbell: “For many companies, fighting back is incredibly expensive (you will win, but you’ll be bankrupt when you do) or you’re a financial conglomerate where the SEC can fuck up the rest of your business in the meantime. Gangster behavior.”
Meanwhile, the SEC has postponed its decisions on six applications for spot Bitcoin ETFs. It has designated a longer period in which it may review applications from WisdomTree, VanEck, Invesco Galaxy, Bitwise and Valkyrie, as well as the Wise Origin Bitcoin Trust proposed by Fidelity. The SEC will have another 45 days upon publication in the Federal Register to consider the proposed rule changes allowing the listing of the investment vehicles, giving the regulator until October to approve, deny or delay a decision.
Travel Rule comes into effect in the United Kingdom
Crypto asset businesses in the United Kingdom could now begin withholding certain crypto transfers to comply with the new Travel Rule for crypto that came into effect last week. From now on, if an inbound payment is received from a person or entity from an overseas jurisdiction that hasn’t implemented the Travel Rule, the virtual asset service provider must make a “risk-based assessment” as to “whether to make the crypto assets available to the beneficiary.” The same rule applies to Brits looking to send payments outside the United Kingdom.
First unregistered securities sales claim against NFT offering in the United States
The SEC has accused Impact Theory — a media and entertainment company headquartered in Los Angeles — of engaging in unregistered securities transactions by selling nonfungible tokens (NFTs) to investors from October to December 2021. Allegedly, it raised almost $30 million through the sales of NFTs it called Founder’s Keys, which were offered in three tiers. The company “encouraged potential investors to view the purchase of a Founder’s Key as an investment into the business,” according to the SEC.
A People’s Court in China published a report on the legality of virtual assets, analyzing the criminal law attributes of these digital assets. The court noted in its report that virtual assets under the current legal policy framework are still legal property and protected by law.
The “Identification of the Property Attributes of Virtual Currency and Disposal of Property Involved in the Case” report acknowledged that virtual assets have economic attributes and thus can be classified as property. Although China has deemed all foreign digital assets illegal by imposing a blanket ban, the report argues that virtual assets held by individuals should be considered legal and protected by law under the current policy framework.
The race to list the first spot-traded Bitcoin (BTC) exchange-traded fund (ETF) in the United States has seen the entrance of major financial institutions like BlackRock, Fidelity and VanEck.
While the U.S. Securities and Exchange Commission (SEC) first approved a Bitcoin-linked Futures ETF in October 2021, the current filings are for spot Bitcoin ETFs. Following Grayscale’s recent legal victory against the SEC’s review of its spot Bitcoin ETF proposal, many now believe approval of the investment funds is more likely.
The interest of BlackRock — the world’s largest asset manager with over $8 trillion worth of assets under management — prompted several other institutions to refile for a spot Bitcoin ETF.
Most of these asset managers had to either withdraw their spot Bitcoin ETF filings or face rejection due to the SEC’s reservations concerning a spot-derived ETF. Here are the key Bitcoin ETF applicants:
BlackRock: BlackRock filed for a spot Bitcoin ETF on June 15, with Coinbase as the crypto custodian and spot market data provider and BNY Mellon as its cash custodian. The filing shocked the crypto and traditional finance world, and the firm’s CEO, Larry Fink, had previously called BTC an index for money laundering. On July 15, the SEC formally accepted BlackRock’s spot Bitcoin ETF application for review.
WisdomTree: The New York-based asset manager first filed for a spot Bitcoin ETF in the U.S. on Dec. 8, 2021, which was rejected by the SEC in 2022. The agency claimed the ETF fell short in terms of investor protection; however, with BlackRock’s entry in the spot Bitcoin ETF race, WisdomTree refiled with the SEC on July 19.
Valkyrie Investments: Asset management firm Valkyrie filed its first spot Bitcoin ETF application in January 2021 but faced rejection from the SEC, like many other asset managers. However, with the rejuvenated enthusiasm around a spot Bitcoin ETF, Valkyrie refiled its application on June 21. The ETF would refer to the Chicago Mercantile Exchange’s (CME) reference price for Bitcoin and trade on NYSE Arca, with Xapo as the crypto custodian.
ARK Invest: ARK filed an application for its ARK 21Shares Bitcoin ETF in June 2021. ARK Invest has partnered with Swiss-based ETF provider 21Shares to offer the fund, and it will launch on the Chicago Board Options Exchange (Cboe) BZX Exchange under the ticker symbol ARKB if approved.
VanEck: VanEck is one of the earliest Bitcoin ETF applicants, making its first filing in 2018. The asset manager withdrew its application in September 2019 and made a second attempt with the SEC in December 2020, with shares of the trust set to trade on the Cboe BZX Exchange. The firm filed a new application in July 2023.
Fidelity/Wise Origin: Fidelity Investments first applied for a spot Bitcoin ETF in 2021 and refiled for its Wise Origin Bitcoin Trust on July 19, 2023. The Wise Origin Bitcoin Trust would see Fidelity Service Company serving as the administrator while Fidelity Digital Assets will act as the BTC custodian.
Invesco Galaxy Bitcoin ETF: Invesco first filed an application for its Invesco Galaxy Bitcoin ETF jointly with Galaxy Digital on Sept. 22, 2021. The joint venture refiled its application in July. The joint Bitcoin ETF would be “physically backed” by Bitcoin, with Invesco Capital Management as the sponsor.
Bitwise: Bitwise first filed for a spot Bitcoin ETF in October 2021, only to face rejection from the SEC. The asset manager refiled its application in August 2023.
GlobalX: Fund manager GlobalX joined the ETF race in 2021, along with several other financial giants, when it filed for a spot Bitcoin ETF. The fund manager refiled its application in August 2023, becoming the ninth applicant. The firm named Coinbase as its surveillance-sharing partner.
In light of Grayscale’s recent legal victory and the wave of renewed applications, ETF analysts at Bloomberg have raised their expected approval chances for a spot Bitcoin ETF to 75% from 65%.
As expected, the SEC has delayed its decision on all seven applicants. Analysts had predicted that the SEC may not decide on an ETF until early 2024 when the final deadlines approach (listed below).
John Glover, chief investment officer at crypto lending platform Ledn, told Cointelegraph that the ARK 21Shares “verdict slated for Jan. 10 will be the first real indicator as to whether the SEC is ready to start approving these types of applications. The final deadline is up at that point, and a decision will need to be made one way or another.”
Why has the SEC rejected spot Bitcoin ETFs in the past?
In its earlier rejection of VanEck’s spot Bitcoin ETF, the SEC claimed that the Bitcoin market is not big or mature enough to sustain ETF market demand. The commission also said the price volatility and inadequate level of trading surveillance could potentially leave the market prone to fraud and manipulation.
However, with the entrance of BlackRock, market pundits have started to believe that the chances of a spot Bitcoin ETF being approved are good.
One of the major factors preventing a spot ETF from getting approved is the nature of the fund.
A futures ETF is based on futures contracts rather than the digital asset itself, which is an important distinction. The futures markets are already heavily regulated to prevent market manipulation, thus making it easier for the SEC to approve such ETFs.
At the heart of these spot ETF rejections is the issuer’s requirement to incorporate a “surveillance-sharing agreement” with a sufficiently large and regulated Bitcoin-related market. Such agreements are integral in ensuring that the SEC can conduct exhaustive investigations in the event of any market irregularities.
A Bitfinex Alpha analyst told Cointelegraph that one of the vital concerns behind the rejection of spot Bitcoin ETFs is the regulator’s ability to track and continuously ensure asset safety and custody. However, for that to happen, the U.S. needs more regulatory and legal infrastructure before the “SEC or other involved parties would be comfortable in allowing an ETF provider to handle it.”
“If not, then the entire purpose of an ETF (which is to circumvent dealing with digital asset wallets or crypto exchanges) is defeated. Thus, it would not be fair to say that spot Bitcoin ETFs do not propose manipulation concerns in the SEC’s eyes. The ProShares Bitcoin ETF disapproval dated back to 2018 clarifies this very point. Another concern with regard to the document’s literature was the ability of the Bitcoin market to handle the volume that would be brought in via the introduction of a spot ETF,” the analyst added.
The SEC is mainly concerned about the robustness of the trading venues. The regulator oversees futures exchanges like the CME and the Cboe, and any futures ETFs will be restricted to only trading on those regulated venues. Whereas there are no SEC-regulated spot exchanges.
However, not everyone agrees with the SEC’s assumptions about the vulnerabilities of the spot crypto ETF market. James Koutoulas, the founder of a futures-focused hedge fund Typhon, told Cointelegraph:
“I can attest that the crypto futures are far inferior to the spot in terms of tracking error. The concept that a U.S. regulator can provide adequate ‘surveillance’ against market manipulation on a global 12-figure market is delusional. So, honestly, it probably comes down to passing the buck to the CFTC rather than retaining accountability. Given the SEC has an ‘investor protection’ mandate.”
He added that by continuing to reject the simplest products like a BTC ETF, the ”SEC keeps pushing demand for crypto offshore and unregulated players. While a BTC ETF may not be perfect, it is much safer than buying BTC with Gensler’s family friend SBF [Sam Bankman-Fried] at FTX.”
Richard Gardener, CEO of tech infrastructure firm Modulus, believes futures ETFs have long been seen as more palatable for regulators and that the decision over a spot ETF is a matter of when not if.
He told Cointelegraph that a spot BTC ETF is “coming, sooner rather than later, and the heavy investment from major players like BlackRock and Fidelity signal this. As long as the major players are in the hunt, the industry is seen as viable in the long term, despite any short-term setbacks. If the SEC continues to refuse to act, politicians will be forced to act and develop their own answer to the crypto dilemma.”
Ether futures ETF have more chances of approval
While crypto enthusiasts would prefer to see spot ETFs, which would legitimize crypto as an asset class, U.S. regulators seem more likely to support futures ETFs.
Bloomberg analysts have predicted that the chances of approval for an Ether (ETH) futures-derived ETF are over 90%, with nearly a dozen institutions lined up for approval.
Reports in financial media suggested a high possibility of the SEC approving an Ether futures-based ETF as soon as October.
Ken Timsit, managing director at blockchain startup accelerator Cronos Labs, told Cointelegraph that the “thesis in favor of futures is that futures would enable investors to send signals about the price evolutions expected by the market, which in turn would help to dampen the volatility of Bitcoin and Ethereum price and counterbalance the large price swings that we have seen recently.”
Doug Schwenk, CEO of Digital Asset Research, told Cointelegraph that the “near-term psychological impact would most likely give a boost to crypto markets as another proof point that regulators remain open to evolving the listed space and continued hope for the elusive spot ETF.”
OKX cryptocurrency exchange has entered the final stage before acquiring a virtual asset service provider license (VASP) in Hong Kong. The crypto exchange expects the final approval for a VASP by March next year.
Li Zhikai, the global chief commercial officer of OKX, in an interview, said that they are actively engaged in a dialogue with the banks and are currently waiting for the group to be issued a license and start a business. The crypto exchange has started the preparatory work such as technology docking.
Hong Kong became a pro-crypto nation in 2023 and announced a licensing regime for crypto exchanges to offer their services to retail customers. While more than 80 crypto firms initially showed interest in opening an office in the country, only a couple of crypto platforms such as HashKey and OSL gained the necessary license to start retail crypto trading services.
HashKey started offering retail crypto trading services to Hong Kong users on Aug. 28. The regulatory body in the country has opened only Bitcoin (BTC) and Ether (ETH) trading for retail customers to cut back on the risk involved with investing in new crypto tokens. The regulations also put a 30% cap on investors that only allows them to invest one-third of their net income.
Apart from HashKey and OSL, Huobi and Gate.Io have also applied for retail crypto trading services and are currently waiting to get the regulatory nod. Previously, a Gate.Io executive shared the regulatory experience in Hong Kong and told Cointelegraph that compared to other regulators, the Hong Kong Securities and Futures Commission (SFC) has a stricter requirement for virtual asset service providers. The regulator has made it compulsory for crypto platforms to offer insurance/compensation arrangement requirements to help protect clients. Apart from that the crypto exchanges are required to hold 98% of assets in cold wallet storage.
Cointelegraph reached out to OKX to get their views on the regulatory experience and their expectations from the Hong Kong retail market but didn’t get an immediate response.
Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you the most significant developments from the past week.
In this week’s newsletter, Ethereum staking services have agreed upon a 22% limit on all validators to ensure fair markets. August proved to be another costly month for DeFi as several protocols were collectively exploited for $16 million. In separate exploit news, Balancer protocol lost nearly $900,000 due to a vulnerability flagged months ago.
Shibarium’s second launch proved more stable as the layer-2 protocol already has over 100,000 new wallets, and USD Coin (USDC) is set to debut on Coinbase’s layer-2 platform later this week.
The DeFi market had another late-week bearish decline due to an overall market fall after news dropped of a delay in the decision on approval of a spot Bitcoin’s spot exchange-traded fund (ETF). Most DeFi tokens traded in the red, and the total value locked in DeFi tokens remained below $50 billion.
Ethereum staking services agree to a 22% limit for all validators
At least five Ethereum liquid staking providers have either imposed or are working to impose a self-limit rule in which they promise not to own more than 22% of the Ethereum staking market — in a move seen as ensuring the Ethereum network remains decentralized.
Among the Ethereum staking providers either already committed or working to commit to the self-limit rule are Rocket Pool, StakeWise, Stader Labs and Diva Staking, according to Ethereum core developer Superphiz.
$16 million in crypto lost to DeFi hacks in August: Report
In August, $15.8 million in cryptocurrencies was lost in DeFi hacks and exploits, specifically. According to an Aug. 31 report by blockchain security firm Immunfi, a combined $23.4 million in crypto was lost to a combination of hacks, exploits and fraud, a significant decrease compared with the $320.5 million lost in July. All exploits consisted of attacks against DeFi protocols, and not a single incident affected centralized finance entities.
Five of the 21 security incidents reported occurred on the Ethereum blockchain, while four occurred on the BNB Chain. Coinbase’s highly anticipated layer-2 solution, Base, experienced four security exploits shortly after its launch on Aug. 9.
Balancer exploited for close to $900,000 after vulnerability warning
Ethereum automated market maker and DeFi protocol Balancer was exploited for nearly $900,000, the company confirmed on X (formerly Twitter) on Aug. 27, just days after disclosing a vulnerability that affected several pools.
An Ethereum address allegedly belonging to the attacker has been revealed by blockchain security expert Meier Dolev. Following the exploit, the address received two transfers of Dai (DAI) stablecoin worth $636,812 and $257,527, respectively, bringing its total balance to over $893,978.
USDC will launch natively on Base network — Jeremy Allaire
Circle’s United States dollar stablecoin, USDC, will launch natively on the Base network “next week,” according to an Aug. 29 social media post from CEO Jeremy Allaire. The new version will replace the current USD Base Coin (USDbC) that most users rely on as a substitute.
Coinbase’s Base network launched on Aug. 9. At the time, no native version of USDC existed on the network. Users could not deposit cash into a Circle account and receive equivalent USDC on Base. To solve this problem, the Base team allowed users to bridge USDC from Ethereum via an official bridge app. The token issued by the bridge is called “USDbC” and is backed by native USDC locked on the Ethereum network.
Shibarium wallets surpass 100,000 after SHIB devs relaunch bridge
Shibarium, a new layer-2 network for the Shiba Inu (SHIB) token, has surpassed 100,000 wallets on its platform, with 35,000 coming within 24 hours of Shibarium’s relaunch on Aug. 28. Shytoshi Kusama, the lead developer and co-founder of Shiba Inu, confirmed Shibarium was back up and running in an Aug. 28 blog post.
At the time, Kusama noted that Shibarium tallied 65,000 wallets across 350,000 transactions — however, those figures have rocketed upward since, increasing 55.8% and 20.2%, respectively, according to Shibariumscan.io.
Continue reading
DeFi market overview
Data from Cointelegraph Markets Pro and TradingView shows that DeFi’s top 100 tokens by market capitalization had a bearish week, with most tokens trading in the red on the weekly charts. The total value locked into DeFi protocols touched $49.25 billion.
Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education regarding this dynamically advancing space.
People’s courts in China exercise judicial power independently and are not subject to interference by an administrative or public organization. These courts try criminal, civil, administrative, and cases that involve economic disputes.
The report titled “Identification of the Property Attributes of Virtual Currency and Disposal of Property Involved in the Case,” acknowledged that virtual assets have economic attributes and thus can be classified as property, reported a local daily. Although China has deemed all foreign digital assets illegal by imposing a blanket ban, the report argued that virtual assets held by individuals should be considered legal and protected by law under the current policy framework.
The report also added suggestions to deal with crimes involving virtual assets and noted that since the money and property involved in the case cannot be confiscated, it should be based on the unification of criminal and civil law order. Such cases should be treated separately to achieve balanced protection of personal property rights and social and public interests.
China imposed a blanket ban on all crypto-related activities and banned foreign crypto exchanges from offering their services to mainland customers. However, despite a hostile national policy on virtual assets, the Chinese courts have offered a contrasting stance on Bitcoin and other virtual assets over the years.
The first instance of such difference arose in September 2022, when a lawyer suggested that crypto holders in China are protected by the law in case of theft, misappropriation or breach of a loan agreement despite the ban on crypto. Later in May 2022, a Shanghai court affirmed that Bitcoin qualifies as virtual property and thus is subject to property rights.
China’s hostile stance against Bitcoin and other cryptocurrencies has been a long-drawn one. However, over the past few years, the government seems to have softened its stance. This was evident from the rise in Bitcoin mining share of China which dropped to zero post blanked ban but rose to take the second spot within a year. Similarly, Binance
A People’s Court in China published a report on the legality of virtual assets analyzing the criminal law attributes of these digital assets. The court in its report noted that virtual assets under the current legal policy framework are still legal property and protected by law.
Welcome to the latest edition of Cointelegraph’s Nifty Newsletter. Keep reading to stay up-to-date with the latest stories on nonfungible tokens. Every Wednesday, the Nifty Newsletter informs and inspires you to dig deeper into the latest NFT trends and insights.
In this week’s newsletter, the United States Securities and Exchange Commission (SEC) registered its first unregistered securities sales claim against nonfungible token (NFT) offerings. An OpenSea manager accused of insider trading was sentenced to three months in prison and fined $50,000, and Trump NFT prices shot up after the former U.S. president’s mugshot went viral.
SEC charges podcaster in first unregistered securities sales claim against NFT offering
The SEC has charged a media and entertainment company with conducting unregistered securities sales when it sold NFTs to investors between October and December 2021.
Impact Theory, a Los Angeles-based company that produces entertainment and educational content, including several podcasts, allegedly raised almost $30 million through the sales of NFTs called Founder’s Keys, which were offered in three tiers.
OpenSea manager accused of insider trading sentenced to 3 months in prison, $50,000 fine
A federal judge has sentenced former OpenSea product manager Nathaniel Chastain to three months in prison for wire fraud and money laundering related to insider trading on the platform.
In an Aug. 22 announcement from the U.S. Department of Justice, U.S. Attorney Damian Williams said Chastain had been sentenced to three months in prison, three months of home confinement and three years of supervised release in addition to being ordered to pay a $50,000 fine and forfeit ill-gotten Ether (ETH) from the NFT trades. Inner City Press reported he would be required to surrender himself on Nov. 2, with Chastain’s lawyers planning to appeal the decision and request bail.
NFT marketplace Rarible sees uptick after commitment to royalties
NFT marketplace Rarible has seen a substantial uptick in trading volume during the 24 hours following a public statement in support of maintaining NFT creator royalties.
It comes as competitor NFT marketplaces such as OpenSea have reversed support for royalties and royalty enforcement — prompting other NFT projects to also begin rewinding support for OpenSea. Data from the analytics platform DappRadar shows that 24-hour fiat trading volume on Rarible jumped nearly 585% — reaching over $45,000 on Aug. 23.
Donald Trump NFT prices spike following release of mugshot in Georgia criminal case
The price of NFTs featuring Donald Trump surged after news outlets released a photo of the former U.S. president as part of his criminal case in the state of Georgia for allegedly attempting to subvert the will of voters in the 2020 election.
According to data from NFT marketplace OpenSea, the floor price of Trump’s line of digital trading cards first released in December 2022 increased more than 62% from 0.138 to 0.224 Ether on Aug. 24, shortly after the former president’s mugshot became public. The image, which shows Trump looking angrily at the camera amid his surrender at the Fulton County Sheriff’s Office, has gone viral as the first mugshot of a current or former U.S. president facing criminal charges.
Ordinals still make up the majority of Bitcoin txs despite the price collapse
Ordinal inscriptions have continued to dominate activity on the Bitcoin network over the past week despite the cryptocurrency’s recent price decline and suggestions that the hype around Bitcoin NFTs has died.
On Aug. 21, Ordinals developer “Leonidas” pointed out that the Bitcoin network had 530,788 transactions over the previous 24 hours, with 450,785 being Ordinals-related transactions.
Thanks for reading this digest of the week’s most notable developments in the NFT space. Come again next Wednesday for more reports and insights into this actively evolving space.
Indian Prime Minister Narendra Modi called for a global collaboration on formulating crypto regulations during the Group of 20 (G20) summit. G20 President India has taken up the task of advocating for a comprehensive global framework for regulating cryptocurrencies.
G20 is the premier forum for international economic cooperation that plays a critical role in strengthening global architecture and governance on all major international economic issues. India currently holds the Presidency of the G20.
During an interview with a local daily, the Indian PM talked about the role of emerging technologies such as blockchain and cryptocurrency. Modi noted that the nature of such emerging technologies will have an impact on the global scale. Thus, the rules, regulations and framework around it should not belong to one country or a group of countries.
Modi cited the example of the aviation industry and said just like air traffic control or air security have common global rules and regulations, emerging technologies like cryptocurrency should also see a worldly consensus. He further added that India is doing its part in the crypto regulatory conversation:
“India’s G20 presidency expanded the crypto conversation beyond financial stability to consider its broader macroeconomic implications, especially for emerging markets and developing economies. Our presidency also hosted enriching seminars and discussions, deepening insights into crypto assets.”
India released its presidency note that included its input on the global framework for crypto. The suggestions on the crypto framework were aligned with the guidelines written by the Financial Stability Board FSB, the Financial Action Task Force (FATF) and the International Monetary Fund (IMF). The note also contained additional suggestions with a focus on developing economies.
Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you the most significant developments from the past week.
The past week in DeFi saw developers behind Base and Optimism protocols join hands to develop a revenue and governance sharing framework. The $1.5-billion Multichain hack has seen some new evidence — read our detailed investigation to learn about every aspect of the exploit and the plight of the victims thereafter.
Blockchain security provider Quantstamp introduced a new DeFi tool to detect flash loan attack vulnerabilities in several protocols. Shiba Inu’s Ethereum layer 2, Shibarium, is gearing up for a relaunch after its first public launch was met with FUD, technical errors and more.
The DeFi market had a mixed week as the total value locked in DeFi protocols remained in the same range as last week but saw a minor dip of about $70 million.
Base, Optimism unveil shared governance and revenue-sharing framework
Developers behind the Base and Optimism networks have jointly announced a revenue-sharing and governance-sharing agreement. Coinbase, the parent company of Base, has also published a list of “principles of neutrality” it will follow to prevent Base from becoming centralized.
This announcement was made through three separate blog posts on Aug. 24: one from the jointly controlled Optimism Collective, one from Base and one from Coinbase.
Multichain victims search for answers in $1.5B exploit as new evidence emerges
On July 14, developers of the $1.5-billion Chinese cross-chain protocol Multichain confirmed users’ worst fears. The protocol’s CEO, identified only as “Zhaojun He,” was arrested by Chinese authorities in Kunming on May 21 after months of repeated denials on official communication channels. Also allegedly arrested was Multichain’s core team, which was operating in Shanghai.
It was never disclosed why Zhaojun had been arrested or what the charges were. However, evidence suggests that Multichain funds may have been seized as part of an anti-money laundering operation in the context of a greater crackdown on crypto by Chinese authorities. In addition, an alleged fake ID used by the CEO to register Multichain’s operations only draws more questions.
Quantstamp introduces tool to detect protocols’ flash loan attack vulnerability
Blockchain security provider Quantstamp has launched an automated service to detect flash loan attack vectors in smart contracts. The new service is being called Economic Exploit Analysis and is based on research done at the University of Toronto.
Economic Exploit Analysis will be available to protocols, whether they have been deployed or not. It will enhance Quantstamp’s audits by identifying flash loan attack vulnerabilities in a client’s code. The service will be available on any Ethereum Virtual Machine (EVM)-compatible blockchain and is non-exhaustive — that is, it may not detect all attacks.
Progress is underway in the field of blockchain technology, with the highly anticipated public launch of the Shibarium L2 happening soon. The Shiba Inu team has announced that the platform is running smoothly and just needs to be made public.
The team behind Shibarium, an Ethereum L2 network, has indicated that the platform is currently live and in private mode, having functioned smoothly during its two-day test, and is on the verge of becoming available to the public.
Despite the late market turmoil, DeFi’s total value locked in DeFi protocols saw a bullish surge in the past week. Data from Cointelegraph Markets Pro and TradingView shows that DeFi’s top 100 tokens by market capitalization had a bullish week; however, the late Thursday dip washed away the gains, leaving most tokens trading in the red on the weekly charts. The total value locked into DeFi protocols touched $49.1 billion.
Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education regarding this dynamically advancing space.
