Crypto Adoption and AML Reports Published, NFT Market Growth Continues, Blockchain Cobalt Pilot Progresses, Crypto Exchange and DeFi Market Hacked

BakerHostetler

[co-author: Lauren Bass]

Crypto Adoption Index Published, Regulators Address Crypto Across Globe

By Joanna F. Wasick

The 2021 Chainalysis Global Crypto Adoption Index was published on Wednesday, providing an in-depth review of cryptocurrency adoption around the globe. Chainalysis ranked 154 countries according to three metrics: (1) on-chain cryptocurrency value received, (2) on-chain retail value transferred and (3) peer-to-peer exchange trade volume. The application of each metric was balanced with the country’s purchasing power parity per capita, so that the significance of cryptocurrency use was assessed in the context of a people’s individual wealth and the value of money generally in that country. Vietnam received the highest overall index ranking, followed by India and Pakistan. The United States was ranked eighth, down two places from last year. The index further indicates that global cryptocurrency adoption has grown over 2,300 percent since Q3 2019 and over 881 percent in the past year.

After significant contention over the language in the infrastructure bill’s provision on cryptocurrency tax reporting, a recent article reports that the U.S. Treasury intends to issue guidance clarifying that only cryptocurrency companies considered to be “brokers” under the tax code will be subject to reporting obligations, and not, for example, developers, stakers and miners. The prospective guidance appears to be an effort by Treasury to get the existing bill passed by the House and through to the president, without further congressional efforts to narrow the bill’s actual language, which could cause delay.

Earlier this week, Spain’s National Securities Market Commission issued 12 warnings to companies, including cryptocurrency exchanges Huobi and Bybit, for providing investment services without properly registering with authorities. Three other crypto exchanges were also targeted, as was one token issuer. Similarly, the Dutch central bank stated on Wednesday that cryptocurrency exchange Binance had not properly registered to do business and was operating illegally in the country. Also on Wednesday, the Australian Securities & Investments Commission issued a statement telling Australians to be wary of investing in crypto-asset-related financial products and services where the provider does not have proper licensing.

For more information, please refer to the following links:

Design, Data and Digital Platforms: NFT Market Domination Continues

By Lauren Bass

Earlier this week, a major Italian fashion house announced the debut of its non-fungible token (NFT) collection. According to reports, the collection, which marks the brand’s first foray into the NFT market, will feature one-of-a-kind items intended to “bridge the physical with the metaphysical.” These specially designed digital looks will be available for auction via UNXD, an Ethereum-based luxury marketplace powered by the Polygon Network.

After featuring the work of a graphic artist on the cover of its August 2021 issue dedicated to cryptocurrency, a multinational business magazine has reportedly decided to mint the viral design as a limited edition NFT series. According to reports, each NFT will sell for a fixed price of 1 ETH and be offered to the public exclusively through the OpenSea marketplace.

In other NFT news, a Chinese e-commerce platform has announced the launch of a new integrated marketplace that will allow writers, musicians, artists and game developers a means by which to sell rights to their intellectual property via the blockchain. According to reports, the NFTs will be issued through the New Copyright Blockchain, which is operated by the Sichuan Blockchain Association Copyright Committee. The digital tokens will be accessible to the public through a dedicated auction site on the e-commerce platform.

According to cryptocurrency analysts, recent summer NFT sales have “exploded” to levels beyond that of the earlier NFT boom in March. One of the largest NFT marketplaces has reportedly topped $1 billion in sales this month, representing almost 60,000 unique sales per day. According to reports, the market increase may have been fueled by recent purchases of CryptoPunks, Art Blocks, Social Media profile picture collections and other cryptoart. The report also suggests there may be a correlation between NFT sales and the price of ETH.

For more information, please refer to the following links:

Blockchain Cobalt Tracing Pilot Launches, Ethereum-Based Networks to Merge

By Keith R. Murphy

According to recent reports, a well-known electric vehicle (EV) manufacturer has reported progress in piloting a new blockchain cobalt traceability solution that is backed by several major metals and mining companies. The cobalt traceability pilot is reportedly being tested in real-world conditions, starting from the material’s sources in Africa to downstream EV production sites. The EV manufacturer plans a final pilot across its entire supply line by year-end, and the launch of the final industry solution is anticipated to occur in 2022.

According to a recent press release, the team and technology behind a zero-knowledge cryptography-based scaling project, Hermez Network, is merging into the Polygon Network ecosystem, resulting in a new network to be named Polygon Hermez. The release states that Hermez is a fully functional, decentralized rollup processing thousands of transactions and verifying them on Ethereum L1, and that the planned combination will be the first full-blown merger of one blockchain network into another.

For more information, please refer to the following links:

Bitcoin “Tumbler” Operator Pleads Guilty, Crypto AML Report Published

By Jordan R. Silversmith

This week, an Ohio man pleaded guilty to operating a money laundering scheme through Helix, a darknet-based cryptocurrency laundering service. According to court documents, the man admitted he operated Helix, a bitcoin “mixer” or “tumbler,” from 2014 to 2017. In total, Helix moved more than 350,000 bitcoin – valued at over $300 million at the time – on behalf of its customers. The man will be sentenced to a maximum of 20 years in prison and a fine of $500,000 or twice the value of the property involved in the transaction, among other penalties. As part of his plea, he has also agreed to forfeit more than 4,400 bitcoin, valued at more than $200 million today.

A prominent blockchain analytics company recently released its cryptocurrency crime and anti-money laundering report for 2021. According to the report, the $681 million stolen in major crypto thefts, hacks and frauds by the end of July 2021 is a much smaller amount than previous years’ amounts. However, the report notes an alarming quarter-over-quarter rise in decentralized finance (DeFi)-related crimes. DeFi-related hacks already account for 76 percent of major hacks in 2021, a 2.7-times increase from 2020. DeFi-related fraud accounted for 54 percent of major crypto fraud volume this year, while DeFi-related fraud only made up 3 percent of 2020’s total. The report also noted the continued growth of ransomware targeting critical national infrastructure this year.

For more information, please refer to the following links:

Cryptocurrency Exchange and DeFi Market Hacked, Crypto Malware Reported

By Kayley B. Sullivan

According to recent reports, Japan’s Liquid Gold cryptocurrency exchange has been hacked and has since suspended deposits and withdrawals. Liquid did not provide an estimate for the value of the loss, but reports indicate that it may be in excess of $90 million. In another recent hack, DeFi market maker Popsicle Finance was reportedly hacked in an attack that drained approximately $25 million in ether.

Late last week, a cybersecurity firm released a report discussing a recently uncovered cryptomining scheme. The scheme reportedly uses malicious Docker images to hijack computing resources and mine the Monero cryptocurrency. The Docker containers, a way to electronically package software, are made to look as though they are the organization’s own Docker images.

For more information, please refer to the following links:

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