The US Treasury publishes a framework for responsible development of the regulation of digital assets
The US Treasury Department has issued a framework for cryptocurrencies designed to help US authorities cooperate with foreign regulators.
This globally focused framework follows an executive order on digital assets created by President Joe Biden back in March, which focused on the coordination and consolidation of various government agencies under a national policy. The Ministry of Finance’s recent framework order appears to be an internationalization of the state’s efforts to ensure responsible development of digital values in accordance with the Executive Order. According to the Treasury, the framework aims to:
ensure that, with respect to the development of digital assets, the democratic core values of the United States are respected; consumers, investors and businesses are protected; appropriate global financial system connectivity and interoperability between platforms and architecture are preserved; and the security and solvency of the global financial system and the international monetary system are maintained.
The Government Department cites that due to the risk that uneven regulation poses to investors, supervision and compliance across jurisdictions, international cooperation between public authorities, the private sector and other stakeholders is critical. This can be seen as an digging into the digital currency of the highly centralized Chinese central bank.
To elaborate on the nature of the case, the report continues:
Inadequate anti-money laundering and anti-terrorist financing (AML / CFT) regulation, supervision and enforcement of other countries challenge the US’s ability to investigate illegal transaction flows with digital assets that often jump abroad, as is often the case in ransom payments and other cybercrime-related money laundering.
To promote these goals of international coordination and cooperation, the Ministry of Finance will continue to engage with international decision-makers at the G7 on current issues related to the payment of digital assets, including the implications of: new technology in the international monetary system, creation and movement of money in public and private sector and central banks’ digital currencies, it says.
In addition, the country will work with G20 members to: reduce the challenges of using digital assets for cross-border payments and financial stability due to digital assets, push for better regulation of digital assets and talk about remaining macro-financial challenges.
It remains to be seen whether the bold statement of “inadequate anti-money laundering” is proven by the data, as the usual Chainalysis Crypto Crime reports continue to show that cryptocurrencies are not used in illegal activity in a significant proportion of the total. transaction volume (and well below the levels of illegal use of cash).
The US Federal Reserve’s deputy leader is pushing for cryptocurrency regulation
Speaking at the recent Bank of England conference, Federal Reserve Deputy Chief Lael Brainard called for cryptoregulation as a necessary step to combat significant risks such as fire sales, sharing and contagion in the crypto markets, and to promote competition, efficiency and speed. .
The news comes amid a recent number of collapses in the crypto industry following the Terra / Luna meltdown, the Three Arrows liquidation and Celsius’ freeze transactions as the biggest victims of the crypto winter so far. Despite significant losses, Brainard says the cryptosystem is not yet so interconnected with traditional finance to be considered a systemic threat.
Although she did not reveal much about potential policies, Brainard confirmed that the future of crypto involves regulation:
Future financial resilience will be significantly improved if we ensure that the regulatory perimeter encompasses the cryptocurrency system and reflects the principle of the same risk, the same disclosure, the same regulatory outcome.
While praising the benefits of crypto and digital assets in general, the deputy tried to distinguish between lower costs provided by genuine innovation, or cost savings for non-compliance with existing laws. This is a strange point to make, given that crypto companies have called for clear ways of regulation that can be complied with using decentralized technology.
Crypto has led US regulatory talks in the financial sector in recent months, most recently with the Securities Exchange Commission (SEC) confirmation of bitcoin as a commodity and hint of ether is a security for regulatory purposes.
As the United States continues to cross the winter of crypto, those responsible for encouraging and adopting policies, such as Brainard, seem to believe that it is a global process rather than something to be handled by each country:
Due to the cross-sectoral and cross-border scope of cryptocurrencies, exchanges and activities, it is important that regulators cooperate nationally and internationally to maintain a stable financial system and address regulatory evasion.
This is spot on, as highly mobile crypto companies with young employees will move to jurisdictions that have a supportive regulatory framework, relying on the boundless nature of blockchain networks to deliver their innovation. This poses a significant challenge to traditional regulation of financial services, which has traditionally had a clear enforcement path and a gatekeeper model to ensure compliance. Drafting laws that must balance incentives and costs more carefully than ever before is a difficult task.
Shanghai Govt launches $ 1.5 billion Metaverse Development Fund
The Shanghai government has announced the launch of a $ 1.5 billion Metaverse Development Fund as part of measures designed to boost the post-pandemic economy.
According to Hong Kong-based media, South China Morning Post, the fund will help Shanghai promote 10 “leading” companies and 100 small businesses that can launch at least 100 “benchmarking products and services”. The head of the Shanghai Economic and Information Technology Committee, Wu Jincheng, commented that:
Metaverse will drive the transformation and upgrading of various industries in the real economy.
The Shanghai government also supports investments in low-carbon energy projects and small-terminal technology. Jincheng added that there was “enormous market value” in the three sectors, which is estimated to be worth about $ 224 billion by 2025. The Shanghai government has also identified the meta-verse as one of its four “limits of exploration” during its five years. plan published in December 2021.
Shanghai’s announcement follows a turbulent period for Web3 technologies in China. In September 2021, the central government launched a breakdown of trading in cryptocurrencies and Bitcoin mining. In recent times, state media and regulators, such as the China Banking and Insurance Regulatory Commission, have issued several warnings regarding illegal fundraising schemes related to the metaverse and various cryptocurrencies.
Despite these developments, a consortium of Chinese companies with links to the government has reportedly built a Blockchain-based service network (BSN) aimed at companies offering data infrastructure services. China is also pushing further with the development of its CBDC, eCNY, and has re-emerged as a leading Bitcoin mining center only after the United States.
As a reflection of its approach to the early days of the Internet, China’s apparent strategy is to seek to secure the economic and technological benefits of blockchain and Web3 technologies while maintaining control over markets and data. It remains to be seen how this will play out in the Web3 era with a focus on the benefits of decentralization and unlicensed systems.
Celsius filed for bankruptcy, under investigation
Campaign crypto lender, Celsius Network (Celsius), has filed for bankruptcy in New York. The filing follows a statement issued by the US State Department of Vermont (DFR) earlier this week labeled the company “deeply insolvent”.
According to Reuters, Celsius estimated his assets and liabilities at between $ 1 billion and $ 10 billion and has $ 167 million in cash. It has more than 100,000 creditors.
In its statement on Tuesday, the DFR stated that Celsius:
deployed customer assets in a number of risky and illiquid investments, trading and lending activities. Celsius reinforced these risks by using customer assets as collateral for additional loans to follow investment strategies with mortgaging. In addition, some of the assets held by Celsius are illiquid …
In June, Celsius suspended withdrawals, cut the workforce and hired restructuring experts following the downturn in the crypto markets.
On Wednesday, it was reported that Celsius had paid off its debt on the DeFi protocol, Aave, which released US $ 26 million in tokens in its restructuring strategy. Celsius also moved $ 418 million in fenced ether (stETH) to an unknown wallet. Last week, Celsius repaid a loan on Maker, another DeFi protocol, and released $ 440 million in collateral. The payouts triggered controversy in some circles that Celsius apparently paid off third-party loans while customer withdrawals remained suspended. However, the payments were probably intended to release more funds from over-mortgaged loans to repay creditors.
Meanwhile, Celsius is reportedly under investigation in a number of US states along with other failed crypto borrowers. In its statement, DFR claimed that Celsius engaged in unregistered securities bids by offering cryptocurrency interest accounts to retail investors. DFR also noted that Celsius lacked a money transmitter license, which means that Celsius operated largely independently of regulatory supervision.
Celsius is currently also the subject of a lawsuit in the New York State Supreme Court brought by KeyFi for breach of contract and fraudulent misrepresentation. The procedure started by KeyFi claims that Celsius had been:
exploiting Celsius’ customer deposits to manipulate cryptocurrencies markets, had failed to impose basic accounting controls that threatened the same deposits, and had failed to implement promises that led the plaintiff to implement different trading strategies.
The lawsuit also alleges gross misconduct by Celsius and that Celsius will become a Ponzi scheme after suffering heavy losses in early 2021.
Despite today’s filing, the consequences of Celsius’ collapse are likely to resonate for some time to come.
NFTs stolen in phishing attacks on Uniswap v3
A group of hackers have carried out a major phishing scam on a Uniswap v3 liquidity pool, and got away with NFTs worth approximately USD 3.56 million in ETH. The hackers imitated Uniswap’s website and tricked liquidity providers into signing malicious transactions.
Positions in Uniswap v3 liquidity pools are represented as NFTs that liquidity providers can use as collateral for loans disbursed in stack coins and other assets.
Chain data linked to the fraudster’s account reveals that all but 70 ETH of the stolen amount have already been transferred through a cryptocurrency mixing service, Tornado Cash, in an attempt to hide the destination of the stolen digital assets.
The hack does not follow long after a much broader attack on Uniswap users. According to MetaMask security analyst Harry Denleya malicious actor targeted over 73,000 wallet addresses by sending them a token under the guise of a UNI airdop, hoping to steal the credentials of those who logged on to inspect the free token.
Following the latest incident, Hayden Adams, founder of the Uniswap Protocol, confirmed in a tweet that the loss of NFTs was the result of a phishing attack that was:
completely separate from the protocol (and) a good reminder to protect yourself from phishing and not click on malicious links.
These incidents demonstrate the growing sophistication of phishing scams in which malicious actors try to deceive users by mimicking well-known websites and offering seemingly plausible incentives to gain access to users’ accounts.
