Fintech firms follow DeFi, CBDC initiatives; Blockchain Integrations Announced; IRS Trains Ukraine on Crypto; FATF Voices Crypto AML Concerns | Baker Hostetler
Product integrations and data indicate increased interest in DeFi
Of Amos Kim
MetaMask, a web3 Ethereum Network cryptocurrency wallet, recently announced a new integration with a major US payments and fintech firm. According to a blog post, the new integration will allow MetaMask users to use the balance in their account with the fintech firm, or the bank account or debit card linked to their account with the fintech firm, to purchase and add ETH directly to their MetaMask wallet. The integration also allows the transfer of ETH from their crypto account with the fintech firm to their MetaMask wallet. According to reports, the fintech firm recently revealed that as of March 31, 2023, it held $943 million in crypto assets on behalf of its clients.
According to a recent report from CCData, a provider of digital asset data and indices, trading volume on the largest decentralized exchange was higher than trading volume on one of the largest centralized US exchanges for four consecutive months. According to CCData, factors for the increased trading volume on the decentralized exchange include the depegging of the USDC stablecoin from the US dollar as a result of recent bank failures, and increased regulatory focus on centralized exchanges. In a related development, a recent survey conducted by the largest decentralized exchange found that “many US-based CeFi users are interested in experimenting with DeFi” but are hesitant due to complexity, lack of understanding and cost.
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Fintech firms and BIS follow CBDC initiatives
Of Robert A. Musiala Jr.
According to a recent press release, a major US fintech firm has announced the launch of its Central Bank Digital Currency (CBDC) platform, which is described as “a frictionless end-to-end solution for central banks, governments and financial institutions to issue their own digital currency for the central bank.” The same fintech firm recently bought a cryptocurrency startup for $250 million, according to reports.
In related news, Swiss fintech firm Temenos recently announced “that it has proven integration of its leading banking platform with multiple DLT-based Central Bank Digital Currency (CBDC) technology stacks, successfully executing end-to-end retail CBDC use cases for commercial banks’ contact points.” According to a press release, Tenemos R3 leveraged the Corda blockchain platform in one integration project and leveraged the Hyperledger Besu Ethereum client in another project.
As part of “Project Polaris,” the Bank for International Settlements (BIS) recently published its “Handbook for Offline Payments with CBDC.” According to a BIS press release, “[t]The handbook provides a comprehensive overview of the key aspects of offline payments with CBDC and is intended to serve as a guide for central banks considering implementing offline payment capabilities.” Through the Handbook, BIS intends to help central banks understand CBDC and available technologies and safeguards; the main threats, risks and risk management measures; privacy issues, inclusion needs and resilience options; design and architecture principles; and potential operational and change management issues.
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Blockchain applications announced for DAO voting, Oracles and data security
Of Robert A. Musiala Jr.
A major US cryptocurrency repository and infrastructure provider recently announced that it will integrate Snapshot, a token-based voting and governance tool, to allow users to participate in protocol governance proposals with tokens stored on the platform. According to reports, users will be able to vote on governance proposals using the public key associated with their escrow account without having to transfer cryptocurrency tokens from the escrow platform.
According to reports, a major American cryptocurrency exchange recently onboarded its cloud service as a node operator for the Chainlink oracle network. The move will reportedly improve the security and reliability of Chainlink’s decentralized price feeds and other Chainlink data oracles.
In a final note of note, the US Department of Defense (DOD) recently finalized a Phase III contract with blockchain startup Constellation, which provides blockchain infrastructure to support decentralized marketplaces and maintain data provenance and integrity. According to reports, Constellation recently completed a Phase II DOD contract that led to a “well-defined deliverable prototype” focused on modernizing the cybersecurity of DOD systems to provide “a secure way to efficiently and effectively transfer confidential data across [DOD] Defense Transportation System commercial airlift partners without sacrificing cost or speed.” The Phase III contract will reportedly focus on commercialization of the Phase II prototype.
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SEC Brings Crypto Fraud Charges, IRS Trains Ukraine on Crypto Investigations
Of Christopher Lamb
According to a recent release of court proceedings by the US Securities and Exchange Commission (SEC), the SEC issued a complaint against defendants who allegedly “conducted fraudulent offerings of securities, including mining pools for cryptoassets, through dozens of websites,” including GA investors. org. These sites offered “exorbitant returns—in some cases as high as 61.9% in 24 hours—for investments in securities.” According to the complaint, the GA investor website offered “guaranteed daily returns from 2% to 4.5%” and “investors were asked to purchase cryptoassets from a separate cryptoasset trading platform and transfer those cryptoassets to a GA investor’s wallet address.” When investors attempted to make withdrawals from their accounts, “the defendants froze investor accounts and misappropriated investor funds.”
In other recent news, according to a press release from the Internal Revenue Service (IRS), IRS Criminal Investigation (IRS-CI) and the private sector are providing “blockchain analysis tools and cyber training to Ukrainian law enforcement agencies in April and May.” According to the press release, these trainings and license deliveries have been made in an effort to “identify all Russian assets on the territory of Ukraine.” As part of the delivery, IRS-CI donated licenses for Chainalysis Reactor, a cryptocurrency investigation platform, and will provide advanced training for Ukrainian investigators that includes “hands-on instruction in blockchain and cryptocurrency tracking, as well as operational lead development instruction. “
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FATF chief finally urges ‘lawless cryptospace’
Of Joanna F. Wasick
The Financial Action Task Force (FATF), a global financial crime watchdog, recently released a letter, “Ending the Lawless Cryptospace,” urging G-7 members to “lead by example” in implementation of the FATF recommendations – global standards for combating money laundering, terrorist financing and proliferation financing. As the title suggests, the letter emphasizes the oversight of “crypto-assets,” which the FATF says “continues[s] to operate in a virtually lawless global environment,” thereby empowering criminals, terrorists and rogue states. In particular, the FATF is encouraging countries to implement and enforce its “travel rule” on the cryptocurrency sector, which requires virtual asset service providers (VASPs) to identify the sender and receiver of cryptocurrency transactions. “Around the world, countries have made progress in implementing most of the standards; however, progress in implementing FATF’s updated crypto-asset requirements has been relatively poor,” FATF states, adding that 73% of countries remain fully or partially non-compliant with the watchdog’s standards with respect to virtual assets and VASPs.
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