CBDC Initiatives Announced, NFTs Expand Across Markets, Token and Wallet Applications Evolve, SEC and DOJ Target Crypto Fraud, Crypto Hacks Continue


[co-author: Lauren Bass]

CBDC Initiatives Announced, Blockchain Trade Finance Platform Launches

By Robert A. Musiala Jr.

This week, the Bank for International Settlements (BIS) announced Project Dunbar, an initiative in which BIS will collaborate with the Reserve Bank of Australia, Bank Negara Malaysia, Monetary Authority of Singapore and South African Reserve Bank “to test the use of central bank digital currencies (CBDCs) for international settlements.” According to the press release, the project will seek to develop “multi-CBDC platforms” that “allow financial institutions to transact directly with each other in the digital currencies issued by participating central banks, eliminating the need for intermediaries and cutting the time and cost of transactions.”

The Central Bank of Nigeria issued a press release this week to announce that it has engaged Bitt Inc. as a technical partner for its planned CBDC, named eNaira. The press release notes that the eNaira is due to be unveiled later in the year. The Central Bank of Cuba, according to a recent report, issued a resolution establishing its authority to authorize the use of cryptocurrencies in commercial transactions and to license virtual asset service providers to conduct certain financial activities.

In the private sector, this week a major global financial institution announced that it has partnered with “a leading supply chain finance technology solution provider in China” to establish a “fully-digitised trade finance origination and distribution platform” underpinned by blockchain and artificial intelligence technology. And in a recent final report, a five-star hotel in the Swiss Alps, The Chedi Andermatt, has announced that it will begin accepting bitcoin and ether as payment from its guests.

For more information, please refer to the following links:

Baseball, Art, Politics, Commerce: NFT Market Continues to Expand

By Lauren Bass

A baseball trading card company recently announced the launch of its new NFT series. According to reports, the digital collectibles will contain motion animation, facsimile signatures, and “digital relic content” featuring rookie and veteran players. The NFTs will be offered exclusively online through an Avalanche-powered public blockchain platform.

A New York fine art auction house has begun taking bids for two Yuga Labs-designed NFTs: “101 Bored Ape Yacht Club” and “101 Bored Ape Kennel Club.” According to reports, the collections, which together are expected to draw bids close to $20 million, will be available for purchase via ether, bitcoin or USDC.

To raise funds for his gubernatorial campaign, a former Minnesota state senator is reportedly offering a series of state fair themed NFTs. The limited-edition tokens are available for a minimum campaign donation of $5. According to reports, an NFT purchase also entitles the owner to be entered into a rewards program, with prizes ranging from meet-and-greets to access to exclusive campaign events.

On the heels of its CryptoPunk purchase last week, an international payments corporation has published a white paper on NFTs. The 17-page report offers insights on the current NFT landscape and provides “actionable guidance” on how businesses can “evaluate and scale NFT opportunities” in branding and consumer engagement.

For more information, please refer to the following links:

Gaming Token Shifts Away from Ethereum, MetaMask Announces 10M Users

By Veronica Reynolds

This week, a cryptocurrency subsidiary of a large video game, entertainment and technology company announced that its interactive gaming token, ATRI, will now operate on the Fantom proof-of-stake blockchain, shifting away from the ERC-20 proof-of-work standard on which the token was originally launched. In a press release, the company cited network speed and cost as justifying factors for the move.

According to recently released data, MetaMask, provider of a popular software Ethereum wallet, has amassed over 10 million users to date. This is reportedly a 1,800% increase in user acquisition over a one-year period. The increase appears to be the result of a sharp increase in Decentralized Finance (DeFi) adoption this year, with MetaMask considered “the most widely used wallet in the DeFi world.”

For more information, please refer to the following links:

BitConnect Charged in $2B Crypto Fraud, BitConnect Promoter Pleads Guilty

By Jordan R. Silversmith and Robert A. Musiala Jr.

This week the U.S. Securities and Exchange Commission (SEC) announced charges against BitConnect, an online crypto lending platform; its founder; and its chief U.S. promoter and his affiliated company for their role in defrauding investors of over $2 billion. According to the SEC’s complaint, from early 2017 through January 2018, the defendants operated a scheme whereby they lured investors by promising exorbitant returns using proprietary trading software. Rather than invest those funds, however, the defendants siphoned investors’ funds to digital wallets for their own personal use. The SEC’s complaint charges the defendants with violating the antifraud and registration provisions of the federal securities laws and seeks injunctive relief, disgorgement plus interest, and civil penalties.

In a related press release, the U.S. Department of Justice announced that a BitConnect director and promoter, Glenn Arcaro, has pleaded guilty for his participation in the scheme, including by fraudulently marketing BitConnect’s purported coin offering, digital currency exchange and trading bot, and by operating “a pyramid scheme known as the BitConnect Referral Program.” According to the DOJ press release, Arcaro admitted that he earned no less than $24 million from the fraud. He faces a maximum penalty of 20 years in prison, and a fine equal to $250,000 or twice the gross gain or loss from the offense, whichever is greater.

For more information, please refer to the following links:

Seychelles Investigates Crypto Fraud, Singapore Issues Warning for Exchange

By Jordan R. Silversmith

The Seychelles Police financial crime investigation unit has reportedly received documents asking for an investigation into multiple transactions involving the transfer of 230,000 bitcoin related to the OneCoin fraud scheme. The transactions reportedly included cash and property worth over $10 billion and resulted from claims filed in London, Dublin and Brussels after almost $500 million of allegedly stolen funds was discovered in a Dubai bank account. According to a press release, the Seychelles Police are currently verifying the documents before taking further steps.

This week Singapore issued an investor alert for Binance, a major crypto exchange, after the city-state’s financial watchdog reported that the company had provided payment services to and solicited business from residents of Singapore in violation of the Payment Services Act. In an emailed statement this week, Binance reportedly stated it is aware of the watchdog’s comments and is actively working with the Monetary Authority of Singapore to address these issues.

For more information, please refer to the following links:

DeFi Hacked, Exchange Hack Traced, Report Addresses Crypto Crime by Region

By Teresa Goody Guillén

A decentralized finance (DeFi) lending protocol reportedly suffered its second flash loan attack this year, losing over $25 million. Flash loan attacks take advantage of the DeFi feature of loans that do not require collateral. A representative of the DeFi protocol stated that the root cause of the incident was lending of AMP tokens, as AMP token contracts allowed for a reentrancy attack (reportedly the same type of exploit used in the 2016 Ethereum Network DAO hack).

According to a blockchain analytics firm, hackers who recently stole approximately $97 million in cryptocurrency from a crypto exchange used a noncustodial, privacy-focused desktop wallet to protect some of their gains. The desktop wallet allows users to make their bitcoin less traceable on the public ledger by arranging CoinJoin transactions, also referred to as coin mixing, whereby multiple users can commingle their bitcoin in joint transactions and maintain the same number of bitcoin while obfuscating external tracking of the payments. The wallet also routes transactions over the Tor network to conceal the user’s IP address. Over 437 bitcoin ($20 million) associated with the exchange hackers has reportedly been laundered to date using the wallets’ CoinJoin feature.

This week, a blockchain analytics firm published a preview of its 2021 Geography of Cryptocurrency report. Among other report findings, the preview noted the following:

  • Addresses based in Africa and Eastern Europe have the first- and second-highest rates of exposure to illicit cryptocurrency addresses, respectively.
  • Eastern Europe sends more cryptocurrency to darknet markets than does any other region, largely due to activity involving a darknet market that caters only to users in Russian-speaking countries throughout Eastern Europe.
  • Eastern Europe sent the most web traffic to scam websites during the time period studied.
  • Western Europe and Eastern Europe sent the most cryptocurrency to illicit addresses and received the most cryptocurrency value from scams.
  • Western Europe-based addresses and Eastern Europe-based cryptocurrency addresses have received the most significant funds from addresses associated with ransomware ($51 million and $46 million, respectively).

For more information, please refer to the following links:

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