Singapore investment firm Temasek Holdings has reduced compensation for the execs responsible for the firm’s investment into the now-defunct crypto exchange FTX. 

Temasek was once the second-largest outside investor of FTX, with 7 million shares, according to Forbes. The firm however was forced to answer for its investment play after the exchange collapsed.

According to a May 29 report from Bloomberg, Temasek has now concluded its internal review of the $275 million investment loss incurred from FTX, which it initiated shortly after the exchange collapsed in November 2022.

While the findings revealed that there was “no misconduct” internally, it was reported that both its investment team and senior management took “collective accountability,” and had their compensation reduced.

The $275 million FTX investment which is now written off, was said to be 0.09% of Temasek portfolio value of more than $293 billion, at the time of collapse.

Temasek has stood by its claims that it conducted an extensive due diligence process into FTX before making its investment.

In a seperate May 29 Bloomberg statement, Temasek’s chairman, Lim Boon Heng, said that “there was fraudulent conduct intentionally hidden from investors, including Temasek,” suggesting that it has had a major impact on the firm:

“We are disappointed with the outcome of our investment, and the negative impact on our reputation.”

Singapore’s Deputy Prime Minister Lawrence Wong previously reiterated similar words at a parliament meeting in November 2022, just days after FTX collapsed.

“What happened with FTX, therefore, has caused not only financial loss to Temasek but also reputational damage” Wong said.

Related: FTX founder Sam Bankman-Fried urges court to dismiss charges

Temasek stated that when it conducted its due diligence, it reviewed FTX’s financial statements, assessed regulatory risks with crypto market financial service providers, and sought legal advice over nine months from Feb. to Oct 2021.

It was added that the firm also engaged with people with firsthand knowledge of FTX, including employees, other investors, and industry participants.

In more recent news, Temasek denied rumours that it had invested $10 million into Array, the developer of the algorithmic currency system based on smart contracts and artificial intelligence.

In a short statement on May 2, the firm addressed the circulating news articles and tweets regarding Temasek’s investment, dismissing them by stating “this news is incorrect.”

Magazine: FTX 2.0 coming up, Multichain FUD and Worldcoin raises $115M: Hodler’s Digest, May 21-27

An Ether (ETH) wallet that has been inactive since Ethereum’s ICO (Initial Coin Offering) in 2015, has suddenly awoken after eight years of dormancy, moving a total of 8,000 ETH in just two minutes.

The wallet received the 8,000 ETH after participating in Ethereum’s ICO (Initial Coin Offering) in 2015 and remained inactive until May 27. On that day, its owner began with a cautionary transfer of 1 ETH to a new wallet. One minute later they transferred the remaining 7,999 ETH to the new wallet address.

At the time of writing, the ETH stash is worth approximately $14.7 million.

This transaction was first noticed by blockchain analytics service Lookonchain, which informed its 219,000 Twitter followers of the transfer.

In the comments section of the post, there was some community speculation around the reason for the transfer. One commenter suggested that the owner had just been released from prison, while another made a humorous remark that they were transferring funds from an old Ledger — a pointed comment about the company’s controversial new Recover upgrade.

At the time, the 8,000 ETH was purchased at a price of just $0.31 per token, which places the initial investment amount at around $2,500.

At today’s prices of $1,917, this marks a staggering 590,000% gain for the owner.

This isn’t the only ICO-era Ether wallet to re-awaken in recent months. On April 24, another wallet which received 2,365 ETH ($4.5 million) made its first transaction in nearly 8 years, after the owner transferred just 2,360 ETH to a new wallet address.

On March 5, another ETH wallet transferred 10,226 ETH ($19.6 million) out to new wallet address after remaining dormant for five years.

The new wallet address is also one with little in the way of any significant transaction history. The only other ETH transaction recorded in the new wallet is a 207 ETH ($380,000) incoming transaction that was made just a few minutes prior to the most recent transfer. Notably, the additional 207 ETH were sent from another wallet that remained completely inactive since June 12, 2017.

Related: Arbitrum-based Jimbos Protocol hacked, losing $7.5M in Ether

Interestingly, the new wallet also contains $46 worth of a memecoin called Gensler (GENSLR), and just $0.24 worth of a dragon-inspired token called Dejitaru Tsuka (TSUKA), according to data from Web3 wallet tracker DeBank.

The Ethereum ICO occurred in two primary stages. The first stage was the pre-sale, and between July 22 and Sept. 2, 2014 the sale of Ethereum tokens to new investors raised $18 million. The going exchange rate for the pre-sale was 1 BTC — for 2,000 ETH. The second stage was the official launch of the Ethereum blockchain which occurred on July 30, 2015. This meant that some investors waited more than a year to be able to redeem and use their ETH.

Dormant wallets with vast sums of crypto can awaken for a variety of reasons. Sometimes dormant wallets reawaken because they’ve been hacked. Other times, it’s simply because the owner may have forgotten about it and upon its re-discovery, have decided that it’s possibly a good time to sell.

Crypto City: Guide to Osaka, Japan’s second-biggest city

In late 2024, citizens of the United States will take to the voting booths to elect their next president — a four-year term that could have a vast impact on the next crypto bull run.

Though polls are set to open on Nov. 5, 2024, dozens of U.S. politicians have already signaled an intention to contest President Joe Biden for the country’s top position.

The current Biden administration appears to have been taking an increasingly anti-crypto stance. Meanwhile, former president Donald Trump is again bidding for the job — setting the stage for a rematch. Others are seeking to carry the Democrat and Republican presidential nominations.

‘No fundamental value’: Joe Biden — Democrat

The current president of the United States, Joe Biden, kicked off his re-election bid on April 25, and is at the moment, the likely favorite for the Democrat’s presidential nominee.

Biden’s attitude toward crypto is possibly best summarized by his 2023 Economic Report of the President which included a section on crypto for the first time since it began in 1950.

The section aimed to debunk the “Perceived Appeal of Crypto Assets.” It argued crypto doesn’t deliver on “touted” benefits and claimed “many of them have no fundamental value.”

Biden has rallied against perceived crypto “tax loopholes” and even opposed a debt ceiling agreement with Republicans as he claimed it protected “wealthy tax cheats and crypto traders.”

His March 2022 executive order culminated with the first framework for crypto. He’s called for a 30% tax on crypto mining electricity usage, doubling capital gains taxes and cracking down on crypto wash sales.

‘Not a fan of Bitcoin’: Donald Trump — Republican

The former president turned NFT salesman Trump threw in his non-consecutive re-election bid on Nov. 15, 2022. According to current polling, he’s the favored Republican nominee.

Trump has said crypto “may be fake” and is “a disaster waiting to happen.” He’s also said Bitcoin (BTC) “just seems like a scam” and didn’t like it “because it is another currency competing against the dollar.”

In July 2019 as president, Trump tweeted he was “not a fan of Bitcoin and other cryptocurrencies” claiming their value was “based on thin air.”

During his presidency, Trump targeted crypto use in financial crimes and purportedly told his Treasury Secretary Steven Mnuchin to “go after Bitcoin” in a conversation on trade sanctions against China. “Cryptocurrencies” were mentioned in his 2021 budget proposal but only for explaining their use in crimes.

He did, however, mull a capital gains tax cut which could have been favorable to crypto users. Trump administration officials did once tout distributed ledger technology (DLT) as a tech that could benefit government operations and bolster the country’s cybersecurity defenses.

‘Every right to do Bitcoin’: Ron DeSantis — Republican

Ron DeSantis said he would “protect” Bitcoin in his May 24 presidential bid announcement on Twitter. Polls taken before the Florida governor’s announcement have him second favorite to Trump.

During his Twitter Space campaign kick-off, DeSantis said “You have every right to do Bitcoin” and would “protect the ability to do things like Bitcoin.”

He called out Congress, claiming it “never addressed” crypto and said regulators had made it so “that people can not operate in that space.”

His 2022–2023 budget proposal for the state of Florida proposed the government allows businesses to pay state fees with cryptocurrencies.

DeSantis is probably better known as an anti-central bank digital currency (CBDC) figure.

He passed laws in Florida prohibiting the use of a federal CBDC as money and banned the use of foreign CBDCs. He’s also rallied against the Federal Reserve’s FedNow 24/7 instant payments system, claiming it’s a CBDC precursor.

‘Bitcoin should not be regulated as a security’: Vivek Ramaswamy — Republican

Pharmaceutical firm founder Vivek Ramaswamy has also signaled a pro-crypto stance but is considered a long shot for the Republican nomination.

In mid-May, Ramaswamy tweeted “Bitcoin should not be regulated as a security.” At the Bitcoin 2023 conference, he announced he would accept campaign donations in Bitcoin.

At the conference, Ramaswamy reaffirmed Bitcoin should not be considered a security, saying “We need to keep it that way.”

Related: New White House standards strategy could have implications for crypto industry KYC

“Bitcoin is finite in its quantity, there is no issuer. It should never have been treated as a security under the current securities laws,” he said.

‘A major innovation engine’: Robert F. Kennedy Jr. — Democrat

Robert F. Kennedy Jr is seen as unlikely to be put forward by the Democrats for president — but he has signaled pro-crypto stances.

Earlier in May he said “crypto technologies are a major innovation engine” and called Bitcoin a “symbol of democracy and freedom” in a speech at the Bitcoin 2023 conference.

He is accepting BTC for campaign donations, the first presidential candidate to ever do so.

Kennedy called Biden’s proposed 30% crypto miner energy tax “a bad idea” and opposes CBDCs as they “vastly magnify the government’s power.” He opposes the Fed’s FedNow system for a similar reason.

The others

The third favorite declared Republican candidate Nikki Haley hasn’t publicly addressed her views on crypto.

Democratic nominee Marianne Willamson hasn’t either but has implied disappointment at the Canadian government blocking crypto wallets during the trucker protests in 2022.

Republican Senator Tim Scott is also a bidder and similarly has no stated crypto policies. He did, however, have plans to develop a crypto “bipartisan regulatory framework.”

He’s been critical of the securities regulator’s handling of FTX and questioned if they’ve been “asleep at the wheel.”

Cointelegraph contacted the campaigns of Haley, Williamson and Scott to clarify their positions on crypto but did not receive a response.

Magazine: Crypto regulation — Does SEC Chair Gary Gensler have the final say?

With its historic Merge event in September, Ethereum has become a proof-of-stake blockchain. The mechanism now used to confirm transactions relies on validators staking their Ether (ETH). Ethereum’s March upgrade, codenamed Shanghai, finally enabled stakers to withdraw their locked Ether. 

The Ethereum ecosystem’s “investment themes” have included a) decentralized finance (DeFi) b) stablecoins c) Bitcoin (via wrapped versions of BTC) and d) non-fungible tokens (NFTs). With the upgrade, the network also began providing fixed-income assets.

There are currently several ways people make money on or using Ethereum. Broadly, they can be grouped into “investment themes,” including: a) decentralized finance (DeFi); b) stablecoins; c) Bitcoin (BTC) (via wrapped versions of BTC); and d) nonfungible tokens (NFTs). Following Shanghai, the network began to offer fixed-income assets.

Risk-free rate

Yield is one of the core pillars of traditional finance (TradFi). A rise or fall in yield leads to an increase or decrease in the perceived risk of other financial assets. Thus, movements in the benchmark rate set by the United States Federal Reserve provide the rationale behind investment decisions, in general.

Related: Ethereum is going to transform investing

Accordingly, compliance professionals use trends in the risk-free rate to detect irrational movement of funds in capital markets, as such fund flows might be attempts to launder money. The reasoning here is that launderers of illicit funds do not actively chase financial gains like regular investors, as the sole purpose of money laundering is to obfuscate the trail of dirty money.

With Ethereum’s staking yield denoting the “risk-free rate” of the crypto ecosystem, the Shanghai upgrade may have enhanced the state of crypto forensics.

TradFi forensics focuses on activity — crypto forensics focuses on entities

Financial crime risk in TradFi is managed using automatic systems that alert institutions to probable illicit use of financial assets. While data scientists design and deploy models to raise red flags over suspicious transactions, investigation teams still must assess resultant leads and evaluate if Suspicious Activity Reports (SARs) need to be filed.

An interesting point of contrast between forensics for TradFi and crypto is that the latter focuses more on the criminal entity than the activity itself. In other words, investigators analyze networks of crypto wallets to identify transfers of criminal assets.

Money laundering occurs in three stages: a) Placement: proceeds of crime enter the financial system; b) Layering: complex movement of funds to obscure the audit trail and sever the link with the original crime; and c) Integration: criminal proceeds are now fully absorbed into the legal economy and can be used for any purpose.

For crypto assets, it is convenient to design solutions to detect the placement of illicit assets. This is because most laundered money originates from crypto-native crimes such as ransomware attacks, DeFi bridge hacks, smart contract exploits and phishing schemes. In all such offenses, a perpetrator’s wallet addresses are readily available. Consequently, once a crime has been committed, relevant wallets are monitored to analyze asset flows.

In contrast, forensic experts working for, say, a bank do not have any visibility into the offense — such as human or drug trafficking, cybercrime or terrorism — when criminal proceeds are being injected into a bank’s ecosystem. This makes detection extremely difficult. Hence, most Anti-Money Laundering (AML) solutions are designed to identify layering.

Ethereum’s staking rewards make it easier to detect unusual activity

To design solutions to detect layering, it is imperative to think like criminals, who craft complex flows of funds to obfuscate the money trail. The time-tested approach to exposing such activity is to spot the irrational movement of assets. This is because money laundering does not have the goal of generating profit.

With Ether’s post-Shanghai staking yields providing benchmark interest rates for crypto, we can formulate baseline risk-reward structures. Armed with this, investigators can systematically spot financial behavior running counter-intuitive to trends in the benchmark rate.

Related: Thanks to Ethereum, ‘altcoin’ is no longer a slur

To illustrate, there might be a pattern where an address or a group of addresses that points toward an entity that consistently takes on high risk while earning below the risk-free rate. A situation like that would almost certainly be investigated at a bank.

Case in point, such a transaction surveillance architecture can be used to detect the wash trading of NFTs. Here, multiple market participants collude to carry out numerous NFT trades with the goal of layering criminal assets or manipulating prices. Since earning profits is not the intention behind the vast bulk of these transactions, such activity will raise a red flag.

Similarly, in a situation where proceeds of terrorism are being layered via DeFi protocols, detection of irrational asset movements can provide substantial leads to investigators, even without knowledge of the actual crime.

Financial crime and DeFi

Traditional capital markets are often used to covertly move funds to circumvent sanctions and finance terrorist activity. Analogously, DeFi ecosystems present an attractive target for financial crime due to the ability to move vast sums of assets between jurisdictions using blockchain.

Further, there has been a significant shift in activity from centralized exchanges to decentralized exchanges due to recent fiascos like the collapse of FTX. This increase in DeFi volumes has made it easier for illegal flows to remain obscure.

Even more compelling is the introduction of better compliance controls by centralized crypto service providers – often mandated by regulators – which are likely driving criminals to seek out new channels for money laundering.

Consequently, illicit flows to DeFi could originate from an expanded set of crimes. This paradigm shift in crypto markets will require forensics teams to increase their capabilities of investigating complex fund flows across diverse protocols without prior knowledge of the source of criminal assets.

Accordingly, compliance efforts need to pivot around the discovery of layering typologies. In fact, with the rapid progress in blockchain interoperability, systematic surveillance to detect criminal transfers has become even more crucial.

Our ability to detect suspicious activity in crypto is less than ideal, partly due to crypto’s extreme price volatility. The volatility renders static risk thresholds ineffective and can enable money laundering to go undetected. In this sense, if and when Ethereum sets a benchmark rate, it will provide a means of establishing baseline rationality for fund flows and thus spotting outliers.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Crypto insurance providers spend enormous amounts of time judging whether to provide coverage to a crypto company, and almost none of them offer assurances to individuals, insurance and crypto executives told Cointelegraph.

Last year saw $3.9 billion stolen from crypto companies, decentralized finance platforms and users, a massive 22% rise from the prior year — and that’s only counting hacks and exploits. Some believe 2023 could be even worse.

Raymond Zenkich, president of cryptocurrency insurance firm Evertas, told Cointelegraph that it’s a complicated process to initially assess the risks of a crypto platform.

He explained that initially, an underwriting — the process of evaluating and analyzing the risks of insuring the assets — is performed “based on a very detailed application form” that involves crunching 2,000 variables across 20 risk areas.

“A significant risk factor is key management: whether keys are stored in hot, warm, or cold wallets,” Zenkich noted.

He added that it doesn’t just stop there, as “there are several gradations of hot and warm, each with their own risk profile.”

On April 14, cryptocurrency exchange Bitrue suffered a hot wallet exploit, with attackers stealing nearly $23 million worth of crypto assets. The affected hot wallet held less than 5% of the exchange’s overall funds, and the remaining wallets have “not been compromised,” according to the firm.

Zenkich explained that after determining the level of storage risk, the firm will then need to look at thousands of “business, technology, and operational variables,” before being able to work out how much of a premium to charge, stating:

“Once we have the answers to all the applicable questions, we determine what kind of premium we would need to charge to justify taking on the risk.”

That being said, crypto insurance providers are usually unwilling to insure individuals whodon’t hold assets on an exchange — such as through self-custody or other means.

Adrian Przelozny, CEO of the Australian crypto exchange Independent Reserve, said that this is because it “would be very hard” for a customer to prove to the insurance provider they actually lost the crypto and didn’t just take it themselves.

Przelozny explained that while the provider only insures assets on the exchange platform itself, its “customers have a direct relationship with the insurer,” and “can choose to have 100% insurance coverage,” for a small fee when signing up.

He added that it’s a long insurance contract with many events covered, from hacks to “theft caused by our team.”

Related: Can you recover stolen Bitcoin from crypto scams?

Meanwhile, a spokesperson for cryptocurrency exchange Binance told Cointelegraph that its emergency insurance fund, the Secure Asset Fund for Users (SAFU), is managed internally.

“It is a fund that is owned by Binance [that] was established in July 2018 to protect users’ interests,” they said. 

“A verified loss sustained by a user from a vulnerability or other deficiency in Binance’s security systems and/or security protocols would be covered by SAFU,” said the spokesperson.

Simon Dixon, CEO of online investment platform BnkToTheFuture, however, believes there are things that traditional insurance providers can learn from their crypto counterparts to improve their practices.

“There is an opportunity to improve on traditional insurance with Smart Contracts and make it more accessible to all which I look forward to seeing grow as an industry, with our sector’s usual growing pains.”

Magazine: Hyperbitcoinization is underway, RFK seeks Bitcoin donations and other news: Hodler’s Digest, May 14-20

The United States looks to avoid a catastrophic debt default after the White House and the House Republicans agreed upon a tentative deal on May 27. The U.S. equities markets rallied in anticipation of the deal on May 26 and the positive sentiment has rubbed off onto the cryptocurrency sector, which is attempting a recovery.

Buying is not limited to Bitcoin (BTC) alone as select altcoins are also showing signs of a short-term up-move. However, sustaining the rally at higher levels may prove to be difficult for the bulls.

After the debt ceiling deal, traders are likely to focus their attention on the Federal Reserve’s rate hikes. The hot Personal Consumption Expenditures data on May 26 increased the likelihood of a rate hike at the Fed’s June meeting. The probability of a 25 basis point rate hike has risen from 17% a week back to 64% on May 28, according to the CME FedWatch Tool.

Along with Bitcoin, what altcoins that are looking ripe for a short-term up-move? Let’s study the charts of these top five cryptocurrencies to spot the important levels to watch out for.

Bitcoin price analysis

Bitcoin has reached the overhead resistance zone between the 20-day exponential moving average ($27,146) and the support line of the symmetrical triangle. This zone is likely to witness a solid tussle between the bulls and the bears.

If the price turns down from the overhead zone, the bears will make another attempt to yank the price to the pivotal support at $25,250. The bulls are expected to defend the zone between $25,250 and $24,000 with all their might because a break below it could intensify selling. The BTC/USDT pair could then tumble to $20,000.

On the contrary, if buyers overcome the overhead obstacle and push the price back into the triangle, it will suggest strong buying on dips. That increases the possibility of a break above the resistance line of the triangle. The pair may then soar to $31,000.

The 4-hour chart shows that the pair is trading inside a descending channel pattern and the bears are trying to defend the resistance line. If the price turns down from the current level but rebounds off the 20-EMA, it will indicate that dips are being bought.

The bulls will then again try to thrust the price above the channel. If they succeed, the pair may start an up-move to $28,400.

Contrarily, a break below the moving averages will suggest that the pair may extend its stay inside the channel for some more time.

XRP price analysis

XRP (XRP) has formed an inverse head and shoulders pattern, which will complete on a break and close above the neckline.

The 20-day EMA ($0.45) is sloping up gradually and the RSI has jumped into positive territory, indicating that the path of least resistance is to the upside. If bulls drive and sustain the price above the neckline, the XRP/USDT pair could start a rally to the overhead resistance zone between $0.54 and $0.58. The pattern target of the bullish setup is $0.55.

This positive view will be negated in the near term if the price turns down from the neckline and plummets below the 20-day EMA. The pair could then descend to the important support near $0.40.

The 4-hour chart shows that the pair is witnessing a tough battle between the bulls and the bears near the neckline. The rising 20-EMA and the RSI in the positive zone indicate a minor advantage to the buyers.

If the price rebounds off the 20-EMA, it will increase the likelihood of a break above $0.48. If that happens, the pair is likely to start its up-move. Alternatively, if the price turns down and breaks below the moving averages, it will tilt the short-term advantage in favor of the bears. The pair may then drop to $0.44.

Arbitrum price analysis

The bulls pushed Arbitrum (ARB) back above the 20-day EMA ($1.17) on May 28, indicating the start of a potential recovery.

The bears are likely to pose a strong challenge at $1.20 but if bulls pierce this level, the ARB/USDT pair could pick up momentum. There is a minor resistance at the 50-day simple moving average ($1.29) but it is likely to be crossed. The pair may then climb to $1.36 and later to $1.50.

If bulls want to prevent the rally, they will have to quickly pull the price back below the 20-day EMA. If they manage to do that, the pair may slip to $1.06 and then to $1.01. This is an important zone for the bulls to defend because if it cracks, the pair may witness a sharp fall to $0.73.

The 4-hour chart shows that the bulls have pushed the price above the resistance line of the symmetrical triangle pattern. The bears are trying to stall the up-move at $1.20 but if the bulls do not allow the price to re-enter the triangle, it will enhance the prospects of an upside breakout. The pattern target of the setup is $1.43.

Contrarily, if the price turns down and breaks back into the triangle, it will suggest that the recent breakout may have been a bull trap. The bears will then try to sink the price back toward the support line of the triangle.

Related: Institutions seek detailed blockchain analytics for crypto adoption — Elliptic

EOS Token price analysis

Eos (EOS) has been oscillating between $0.78 and $1.34 for the past several months. Generally, in such a large range, traders buy near the support and sell close to the resistance.

The EOS/USDT pair bounced off $0.81 on May 25 and rose above the 20-day EMA ($0.89) on May 28. This is the first indication that the range remains intact. The bulls will try to push the price to the 50-day SMA ($1) where the bears are likely to mount a strong defense.

If the next dip finds support at the 20-day EMA, it will suggest that the bulls are on top. The pair could then rise to $1.11. The bears will have to tug the price below the vital support at $0.78 to indicate the start of a downtrend.

The recovery attempt is facing selling near the overhead resistance at $0.93 but the bulls have not given up much ground. The moving averages have completed a bullish crossover and the RSI is near the overbought zone, indicating that bulls have the upper hand.

If buyers drive the price above $0.93, the pair could pick up momentum and rise toward the psychological level of $1 and subsequently to $1.11. This positive view could invalidate in the near term if the price turns down and breaks below the moving averages.

Aave price analysis

Aave (AAVE) has been falling inside a descending channel pattern, which generally behaves as a bullish setup.

After struggling near the 20-day EMA ($65.50) for the past few days, the bulls pushed the price above the resistance on May 27. This suggests the start of a possible relief rally.

The AAVE/USDT pair could first rise to the 50-day SMA ($70) and thereafter attempt a rally to the resistance line. A break and close above this level may start a short-term up-move.

Contrary to this assumption, if the price turns down from the current level and breaks below the 20-day EMA, it will suggest that demand dries up at higher levels. The next support on the downside is at $62.

The 4-hour chart shows the formation of an ascending triangle pattern which will complete on a break and close above $67.40. The pair could then start an up-move toward the pattern target of $74.

Instead, if the price turns down from the current level, it will indicate that bears are fiercely protecting the $67.4 level. If the price slips below the moving averages, it will suggest that the pair may remain inside the triangle for some more time. A break below the triangle will invalidate the positive setup, tilting the advantage in favor of the bears.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin may be the answer to combat cybersecurity threats driven by artificial intelligence, such as deepfake, said Michael Saylor, executive chairman of MicroStrategy, during a recent interview with Kitco News.

Saylor illustrated his views using social media accounts created by robots as an example. According to him, billions of fake accounts are behind a digital “civil war” in today’s society, stirring up hatred among real users of digital platforms.

“The risk in cyberspace is I can spin up a billion fake people, and I can create a civil war by having the fake Republicans hate on the fake Democrats, or the real Democrats. Having the fake Democrats hate on the real Republicans,” said the tech executive when discussing how artificial intelligence and other next-generation technologies will make deepfake cheaper and harder to detect.

According to Saylor, who has over 3 million Twitter followers, he receives nearly 2,000 fake followers every day. “I literally saw in a matter of one hour, 1500 bot accounts got scrubbed off my account, and they were bots. So, we can no longer live with that status quo,” he continued. The executive believes the solution for deepfake and other digital trust issues lies in decentralized identities (DIDs).

A decentralized identity is a self-owned, independent identity that enables trusted data exchange. In other words, it is a way to verify and control an online identity and personal information.

“If someone wants to launch a billion Twitter bots, that’s going to cost them a billion transactions […]. By combining the power of cryptography with the power of a decentralized crypto network like Bitcoin, we can bring cost and consequence into cyberspace,” he explained.

Saylor’s Microstrategy is one of the companies working on encrypted signatures for social users and corporate solutions. The CEO of Open AI, Sam Altman, is also developing technology for proof of personhood with his crypto project, Worldcoin. To build decentralized identification tools, the company closed a $115 million fund round last week.

Similarly, layer-2 protocol Polygon launched a decentralized identity solution in March. Powered by zero-knowledge proofs (ZK proofs), it uses cryptographic techniques to allow users to verify their identity online without having their sensitive information passed or potentially stored with a third party. The product came out nearly a year after announcing its development.

Magazine: Here’s how Ethereum’s ZK-rollups can become interoperable

The market dominance of stablecoins pegged to the United States dollar has undergone some changes over the past year. While most of them are in a downward trend, Tether (USDT) has climbed back to its all-time high, data from CoinGecko shows.

In the past 12 months, Circle’s USD Coin (USDC) has seen its market share decline from 34.88% to 23.05% at the time of writing. Market participation of Binance USD (BUSD) plunged from 11.68% to 4.18% in the same period, while Dai (DAI) held its participation rate at 3.66%, down from 4.05% in May 2022.

Tether’s USDT is moving in a contrasting trend. The stablecoin market dominance currently sits at 65.89% from 47.04% one year ago. Its market capitalization soared to $83.1 billion, while the USDC market cap dropped to $29 billion from its $55 billion peak.

In a recent interview with Bloomberg, Circle CEO Jeremy Allaire blamed the crypto crackdown by the United States regulators for the stablecoin’s declining market capitalization. The current environment in the United States appears to be beneficial for Tether.

The U.S. banking crisis led to USDC depegging in March as reserves worth $3.3 billion were stuck at Silicon Valley Bank, one of three crypto-friendly banks shut down by regulators. Despite Circle’s assurances, the market quickly responded to the news, causing USDC to depeg from the dollar.

With the growing connection between the crypto space and traditional finance, stablecoins have become increasingly popular. A report released recently by the European Systemic Risk Board highlighted the need for more transparency in the digital assets market, specifically for stablecoin reserves.

Tether has been heavily criticized for lacking transparency over the past years. Owned by Hong Kong-based iFinex, the crypto firm was fined $18.5 million in 2021 by the New York Attorney General’s Office for allegedly misrepresenting the fiat backing for its reserves. As part of the settlement, the stablecoin issuer was also required to provide greater financial transparency.

Tether’s leadership has fought back against the negative allegations on Twitter. Additionally, the company is seeking to reduce its exposure to the banking system following the collapse of Silicon Valley Bank. Its latest audit report shows Tether pulled over $4.5 billion out of banks in the first quarter of 2023, leading to a “substantial reduction” in counterparty risk amid the ongoing global economic uncertainty.

The company also boosted its U.S. Treasury bills to a new high of over $53 billion, or 64% of its reserves. Combined with other assets, USDT is now backed by 85% cash, cash equivalents and short-term deposits, according to the report.

A similar move has been made by Circle. The stablecoin operator reportedly adjusted its reserves to mitigate risk in the face of macroeconomic uncertainty, and no longer holds Treasuries maturing beyond early June.

Magazine: Crypto regulation — Does SEC Chair Gary Gensler have the final say?

Royalties give NFT creators a way to keep getting paid for their work, even after the original sale of the NFT.

Nonfungible tokens (NFTs) have been a key technical paradigm and a building block of the Web3 ecosystem. While the rise of NFTs was really led by the Ethereum community through 2020 and 2021, other chains like Solana and even Bitcoin have followed suit with major projects launching on these blockchains.

Creators have historically looked for different forms of income from their work. While there are laws pertaining to protecting intellectual property in the Web2 world, enforcing these laws and protecting creators’ interests has been hard to achieve.

Royalty payments are passive income that goes toward a creator on each transaction of their finished product. The product could be music, art, game utilities or any other form of digital asset. While creators earn from the primary sale of their NFTs, royalties are paid to the creator for each subsequent purchase as well. 

As more institutions explore digital assets, the need for on-chain analytics platforms has never been higher. 

Compliance experts, investigators and regulators employ these blockchain analytical tools to better understand the patterns and entities in cryptocurrency transactions.

To learn more about the tools and how they fit into broader cryptocurrency adoption, Cointelegraph sat down with Tom Robinson, the co-founder and chief scientist at analytics firm Elliptic; and Eray Akartuna, a senior cryptocurrency threat analyst at Elliptic.

Cointelegraph: What are the typical use cases you see for on-chain analytics for institutional clients?

Tom Robinson: Anti-Money Laundering (AML) and sanctions compliance for crypto exchanges and other businesses handling crypto assets: Our crypto transaction and wallet screening tools help businesses remain compliant with regulations and to reduce fraud.

Due diligence on crypto businesses: Our Discovery product provides risk profiles of exchanges and other crypto services based on analysis of their blockchain transactions. This is used by crypto businesses and financial institutions to gain insights into the businesses they are transacting with.

Magazine: ‘Moral responsibility’: Can blockchain really improve trust in AI?

Investigating crypto transactions: Investigator — our blockchain investigations software — allows graphical exploration of crypto wallets and the transactions between them. Law enforcement investigators use this to “follow the money” and link criminal activity to individuals. It is also used by crypto businesses to investigate potential illicit activity by their customers.

CT: How is Anti-Money Laundering in crypto different from mainstream AML within banks for fiat?

TR: The main difference is that most crypto transactions are visible on the blockchain. This makes it much easier to identify whether funds have originated from criminal activity by tracing them using blockchain analytics tools.

CT: Do you see a role for artificial intelligence (AI) and machine learning to play within on-chain analytics? Particularly within fraud prevention and AML?

Eray Akartuna: Yes, we already use machine learning within our blockchain analytics products. However, it’s very important to ensure the accuracy of these techniques through extensive testing.

There are certain aspects of blockchain transactions where we can use machine learning to understand or identify certain patterns. Patterns seen on the Bitcoin blockchain may not necessarily be the same as patterns on the Ethereum blockchain; they work in slightly different ways. I would point out the use of heuristics.

There are certain aspects of the blockchain transactions where we have common spend that will help us know whether the addresses are owned by a single entity or not — if I want to identify illicit activities and illicit actors on a blockchain — and identify their wallet addresses.

For instance, the North Korean cyber hackers were using a programmatic way of laundering. The hack was conducted in 2018, where they used about 113 wallets to disassociate funds from the original theft in an automated fashion. We could programmatically analyze the timestamps of those individual transactions to understand exactly how this automated software works.

If we are analyzing dark web markets or terrorist entities, etc., using heuristics can help us identify if a wallet address has been associated with a certain illicit entity. We can then use those heuristics to understand what other wallet addresses may also belong to or be associated with that entity.

We’ve got a risk score which fits into predictive analysis. When we look at the incoming and outcoming transactions to a cluster of wallets, we can see ultimately where they ended up. Entities identified as belonging to an exchange, a terrorist group or a dark market can be spotted when they are transacting with particular entities that we’re focusing on.

Let’s say about 50% of that crypto has gone to a certain dark web market; we can actually use that to provide a risk score of how risky the wallet is. The risk score is then used by exchanges and banks to decide if they want to do business with these wallet holders or not.

CT: What are the most complex problems you are solving at Elliptic? Why are they complex, and why is it important to solve them?

TR: The most complex and important problem we have solved recently is how to identify proceeds of crime in crypto, even when they have been laundered cross-asset and cross-chain. Criminals now move their proceeds between assets, using decentralized exchanges; and between blockchains, using cross-chain bridges.

We developed holistic screening as a way of automatically tracing crypto funds between assets and blockchains. This unique capability is now absolutely essential; otherwise, money launderers will exploit businesses’ lack of visibility into their activity.

CT: How do you see banks adopting digital assets and with that on-chain analytics? What has the uptake been so far?

EA: We are seeing slow but steady adoption, but compliance is top of mind for banks. Blockchain analytics is seen as an essential part of the puzzle and a way to assuage the concerns of regulators.

If institutions want to get involved in the decentralized finance (DeFi) space and plan to invest clients’ funds, they need to know whether the liquidity pool that they are investing in is credible and has the right risk profile. If the liquidity pool has illicit funds going in and out of it, there is a compliance issue there. That is a key use case for institutions who are looking to get involved in DeFi.

Recent: German banks slowly adopt crypto, mostly for institutional investors

The other use case is where some challenger banks like Revolut are allowing their customers to hold and trade cryptocurrencies. These banks will need compliance and AML capabilities before offering these products to customers.

CT: Have you had any interactions with regulators that would affect how you would serve the financial services industry, and what are the key areas of interest from a regulatory perspective?

TR: We have a constant dialogue with regulators around the world, many of whom use our products. It’s important that they understand how our blockchain analytics solutions function so that they can have confidence in the compliance programs run by the exchanges and banks that use our products.

The governance token holders of Tornado Cash will soon regain control over the protocol’s operations, thanks to an unexpected proposal put forth by the individual responsible for the attack. This development allows the community to regain authority and steer the protocol toward recovery and improved security measures.

On May 26, the proposal to restore control to the original governance holders of Tornado Cash passed successfully. A total of 517,000 token votes were in favor of the proposal, with none opposing it. At the time of writing, the time remaining for the execution to take place was 2 hours 40 mins. This resolution brings a swift conclusion to a governance takeover that, fortunately, did not impact the protocol itself but did lead to the theft of certain governance tokens.

By successfully orchestrating a takeover of the protocol’s governance system, the attacker maneuvered a malicious proposal that granted them 1.2 million votes. Leveraging this significant voting power, they proceeded to pass additional proposals, ultimately seizing control over previously vested governance tokens. Their tactics allowed them to manipulate the governance structure, resulting in a transfer of authority in their favor.

In a surprising turn of events, just a few hours after the hack, the attacker unexpectedly made contact with the Tornado Cash community, presenting a new proposal that purportedly aimed to restore governance control. This unexpected gesture took many by surprise, raising curiosity and prompting further scrutiny of the attacker’s intentions and motivations.

As reported by Martin Lee, a data journalist from the crypto analytics site Nansen, the attacker managed to pilfer a significant sum of 483,000 TORN tokens. Subsequently, they conducted a series of swaps, converting the majority of the stolen tokens into 485 ETH, equivalent to approximately $890,000. This strategic maneuver left them with 39,000 TORN, valued at around $160,000. To obfuscate the origin of the funds, a portion of the ether was cleverly routed through Tornado Cash, adding an additional layer of anonymity to the transaction.

Related: Crypto hacks falling in Q1 is but a ‘temporary reprieve’ — Blockchain firm

Tornado Cash, the Ethereum blockchain-based mixing service, found itself embroiled in controversy when it was officially sanctioned by the U.S. Treasury in August 2022. The sanction stemmed from allegations that the protocol had been utilized for money laundering purposes.

Magazine: Should crypto projects ever negotiate with hackers? Probably

Adding to the existing number of protocol hacks in the crypto industry, Jimbos Protocol has not escaped the sights of the attackers as it has suffered an attack resulting in a loss of a large amount of funds.

According to PeckShield, a blockchain security unit, Jimbos Protocol, the liquidity protocol of the Arbitrum system, was hacked on the morning of May 28. The attack resulted in the loss of 4,000 ETH, equivalent to approximately $7.5 million.

Specifically, the attacker took advantage of the lack of slippage control of liquidity conversions. The protocol’s liquidity is invested in a price range that doesn’t need to be equal, creating a loophole where attackers can reverse swap orders for their own gain.

Despite being launched less than 20 days ago, the Jimbos Protocol aimed to address liquidity and volatile token prices through a new testing approach. However, it appears that the protocol’s mechanism was not adequately developed, leading to a logical vulnerability that created favorable conditions for attackers. As a consequence, the price of the underlying token, JIMBO, has plummeted by 40% and shows little sign of recovery.

According to PeckShield’s findings, the attackers managed to extract a significant amount of 4,090 ETH from the Arbitrum network. Subsequently, they utilized the bridge called Stargate and the Celer Network to transfer and collect a substantial sum of approximately 4,048 ETH from the Ethereum network.

The occurrence of hacking incidents targeting decentralized finance (DeFi) protocols is not a novel phenomenon within the cryptocurrency market. While there have been reports indicating a significant decline in the number of such attacks when compared to previous years, the community has still been exposed to numerous instances of exploitation in recent times.

Related:The Sandbox CEO’s Twitter was hacked, used to promote alleged ‘airdrop’ scam

Despite efforts to enhance security measures, the DeFi ecosystem continues to grapple with the persistent challenge of safeguarding against potential vulnerabilities and unauthorized access. An example lies in the flash loan attack the 0VIX protocol fell victim to, resulting in a substantial loss of nearly $2 million.

Another noteworthy occurrence involved the hijacking of Tornado Cash, a prominent privacy-focused protocol. Unknown attackers successfully compromised the system and extracted significant quantities of TORN tokens, leading to substantial financial losses.

Magazine: Should crypto projects ever negotiate with hackers? Probably

The cyber security unit of the Hong Kong Police Force have launched CyberDefender, a new metaverse platform designed to educate the public of the potential dangers associated with Web3 and the metaverse.

According to a May 27 statement, the Cyber Security and Technology Crime Bureau (CSTCB) of the Hong Kong Police Force unveiled a new metaverse platform, CyberDefender, in an effort to prepare its citizens for the “challenges ahead in the digital age” with a focus on technology crime prevention.

An online event was held on the same day as it launched, “Exploring the Metaverse,” spanning across three virtual venues, with the aim of discussing crime prevention strategies within the metaverse.

During the event, chief inspector of CSTCB, Mr Ip Cheuk-yu emphasized the importance of exercising caution in the metaverse, urging attendees to apply the same level of vigilance they practise while using the internet. He stated:

“All crimes in the cyberspace could also happen in the metaverse, such as investment frauds, unauthorized access to systems, theft and sexual offenses.”

He further explained that decentralization could potentially raise the risk of asset theft.

“The decentralized nature of virtual assets in Web3 may also increase the likelihood of cyber criminals targeting end point devices, virtual asset wallets and smart contracts” he noted.

The CyberDefender educational initiatives appear to be focused on “the younger generation”, with the statement noting:

Police will continue to organize public educational initiatives on different themes through the “CyberDefender Metaverse” platform, raise the awareness among teenagers regarding the latest advancements in information technology, potential pitfalls and the importance of preventing technology crimes.

According to the statement, The Hong Kong Police Force received 663 reports involving virtual assets during Q1 2023, with a total loss of $570 million – a 75% increase compared to Q1 2022.

Related: Top metaverse property investments suffer massive losses: Report

This comes after it was reported on May 22, that Nanjing, the capital city of China’s eastern Jiangsu province, launched the China Metaverse Technology and Application Innovation Platform to advance metaverse research and development across the country.

The innovaiton platform is being led by the Nanjing University of Information Science and Technology (NUIST).

Magazine: How to resurrect the ‘Metaverse dream’ in 2023

United States president Joe Biden and Republican Kevin McCarthy have reportedly reached a “tenative” agreement to raise the federal government’s $31.4 trillion debt ceiling.

According to a May 28 Reuters report, which cited two sources familiar with the negiotations, Biden and McCarthy reached ” a tenative deal” to raise the debt ceiling, in an effort to avoid a default, over a 90-minute phone call on May 27.

“The White House and negotiators for House Republicans have reached an agreement in principle to avert a debt default,” the sources stated. However one source reported that there is still some components of the deal to be finalized, stating:

“But, I’m not sure it’s completely settled. Might be one or two small things they need to finish. But close enough to move forward.”

It was reported that the deal would prevent an “economically destabalizing default,” if it succeeds in getting it passed in Congress before the Treasury “runs short of money” – which it was recently warned would occur on June 5 if the debt ceiling is not raised.

This is a developing story, and further information will be added as it becomes available.

Top Stories This Week

Binance suspends deposits for bridged tokens, seeks clarity from Multichain team

Crypto exchange Binance suspended deposits for 10 bridged tokens following days of uncertainty surrounding the Multichain protocol. Transactions on the cross-chain protocol have been delayed over multiple bridges in the past few days, with little information from Multichain’s team about the ongoing issues. In a tweet from May 24, Multichain said that some cross-chain routes were unavailable “due to force majeure,” noting that the time for service restoration was unclear. Binance was not the only company to take steps amid the unexplained downtime — the Fantom Foundation removed 449,740 MULTI ($2.4 million) from liquidity on SushiSwap. The MULTI token plunged during the week. On Twitter, rumors circulated that Multichain’s team had been arrested by the Chinese police, with $1.5 billion of smart contract funds under authorities’ control.

FTX 2.0 launching soon? Court filing shows a reboot plan in the works

Bankrupt crypto exchange FTX’s revival plans could soon become reality. According to court filing documents, FTX’s new management had a series of meetings with creditors and debtors in the past month, reviewing plans for restarting the exchange and finalizing the material required for its rebooting as FTX 2.0. The documents also suggest FTX could soon enter into a bidding process. Previous reports pointed out that a reboot could come as early as 2024, as the exchange has already recovered over $7 billion in assets.

Sam Altman’s Worldcoin secures $115M for decentralized ID

The bear market didn’t stop Worldcoin from raising $115 million this week in a Series C round led by Blockchain Capital. Funds will be used to support its decentralized World ID and recently released gas-free crypto wallet, World App. The project was co-founded by OpenAI CEO Sam Altman and built by Tools for Humanity developers to address issues emerging from the exponential complexity of artificial intelligence, such as proving personhood. Worldcoin’s token, WLD, is not available in the United States and some other countries.

Fahrenheit wins bid to acquire assets of crypto lender Celsius

Crypto consortium Fahrenheit won the bidding war for insolvent crypto lender Celsius Network. The bid incorporates Celsius assets previously valued at nearly $2 billion, including institutional loan portfolio, staked cryptocurrencies, mining unit, alternative assets, and over $450 million in liquid cryptocurrency. Behind the consortium are the venture capital firm Arrington Capital and crypto miner US Bitcoin Corp. While Celsius and its creditors have accepted the bid, regulatory approval is still required to complete the acquisition. Celsius filed for bankruptcy protection in July 2022, contributing to a prolonged “crypto winter” in the industry.

Earlier this week, the crypto community celebrated the 13th anniversary of the first Bitcoin transaction when developer Laszlo Hanyecz made the first documented purchase of a good with BTC. The exchange involved 10,000 BTC — worth $41 at the time — and two pizzas from a local restaurant in Florida. The milestone turned into an annual celebration for the crypto space, with community members reminiscing on how far the industry has come since the transaction. Over a decade on, the pioneer cryptocurrency network faces a new wave of disruption thanks to the advent of Ordinals, highlighting the need for developers and capital to build layer-2 solutions.

Winners and Losers

At the end of the week, Bitcoin (BTC) is at $26,737, Ether (ETH) at $1,831 and XRP at $0.46. The total market cap is at $1.12 trillion, according to CoinMarketCap.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Render Token (RNDR) at 16.86%, Kava (KAVA) at 10.71% and Huobi Token (HT) at 9.44%. 

The top three altcoin losers of the week are GMX (GMX) at -13.35%, Sui (SUI) at -12.38% and Fantom (FTM) -11.00%.

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

Most Memorable Quotations

“I don’t think many people understand the concept of other people owning their data, so I think blockchain will be a big deal in the future.”

Gary Vaynerchuck, crypto entrepreneur

“Don’t overload Ethereum’s consensus.”

Vitalik Buterin, co-founder of Ethereum

“You have every right to do Bitcoin. The only reason these people in Washington don’t like it, is because they don’t control it.”

Ron DeSantis, governor of Florida

“This experience [with Ledger Recover] has been very humbling. […] We understand the community’s direction and apologize for the miscommunication.”

Pascal Gauthier, CEO of Ledger

“[Bitcoin is] so decent. There is no marketing department, there is no foundation, there’s no incentive. That’s why it is grassroots decentralized and most decentralized driven.”

Muneeb Ali, CEO of Trust Machines

“By embracing AI responsibly, we can transform policies to better serve our societies.”

Sabin Dima, CEO of Humans.ai

Prediction of the Week 

Bitcoin holds $20K realized price as analyst eyes ‘big moves coming’

Bitcoin is at 10-week lows, but one longtime analyst is telling investors to ignore the “panic.”

In a Twitter update on May 25, Philip Swift, creator of data resource LookIntoBitcoin and co-founder of trading suite DecenTrader, eyed a BTC price breakout still in progress. “A lot of panic in the market today,” Swift summarized.

BTC/USD is currently testing the mettle of key moving averages against a backdrop of traders’ downside targets extending to $25,000 and below, Cointelegraph reported. Even Swift believes that Bitcoin could still return to as low as $20,000 in the coming months, despite remaining bullish on higher timeframes.

“Zooming out, bitcoin is actually performing well and as expected for this stage of cycle. A clear BTC breakout above Realized Price,” he added, referring to the aggregate price at which the BTC supply last moved. It currently sits at just above $20,000, according to LookIntoBitcoin.

FUD of the Week 

DeFi protocol WDZD Swap exploited for $1.1M: CertiK

DeFi protocol WDZD Swap was recently exploited for $1.1 million worth of Binance-Pegged Ether. According to a report from blockchain security firm CertiK, a known exploiter labeled “Fake_Phishing750” by BSCScan created the contract that later drained the tokens from the protocol. Once the malicious contract was created, the attacker used it to perform nine transactions that drained the funds from the Swap LP contract where the ETH had been deposited. Fake_Phishing750 was responsible for an attack on another protocol called “Swap X,” CertiK stated.

ETH can be both a security and a commodity, former CFTC commissioner says

Ethereum’s native token, Ether, may be both a commodity and a security, the former commissioner of the United States Commodities Futures Trading Commission, Dan Berkovitz, has claimed. The CFTC regulates futures and swaps on commodities, while the SEC solely regulates securities. However, if something is a commodity in the eyes of the CFTC as well as a security under the SEC’s definition, it’s entirely possible for both regulatory bodies to have jurisdiction over it.

Binance denies fund mismanagement allegations, calls it ‘conspiracy theory’

Binance denied allegations of mismanagement of customers’ funds, in response to a Reuters report claiming the crypto exchange commingled customer’s funds with company revenue. As per Reuters’s sources, Binance allegedly blended billions of dollars of corporate revenue and customer funds between 2020 and 2021, with the majority of commingling taking place on accounts held at now-bankrupt Silvergate Bank. On Twitter, Binance chief of communication Patrick Hillmann called the report “1000 words of conspiracy theories.”

Best Cointelegraph Features

Getting a home loan using crypto collateral: Insane or just risky?

Crypto investors are often wealthy on paper but can’t get a home loan from a bank. But putting your Bitcoin up as collateral for a mortgage is super risky.

Ethereum is ‘woefully undervalued’ but growing more powerful: DeFi Dad, Hall of Flame

DeFi Dad has dabbled in everything from selling cameras to delivering food, but it was his crypto insights that amassed him a whopping 152,100 followers on Twitter.

Crypto City: Guide to Osaka, Japan’s second-biggest city

Decentralized ledger technology is arguably everything that AI is not: transparent, traceable, trustworthy and tamper-free. Could it offset the opaqueness of AI’s black-box solutions?