Crypto Exchange Receives CFTC License; Ratings Agency Scores Stablecoins
By Christopher Lamb
A recent press release announced that Bitnomial, “a US-regulated digital asset derivates exchange,” has been granted “a US clearinghouse license to clear margined digital asset futures and options trades, making it the first and only crypto-native exchange with a full set of US derivatives exchange, clearinghouse, and broker licenses.” According to the press release, “Bitnomial is the only US exchange with margined, physically delivered digital asset derivatives, meaning customers can receive actual ownership of digital assets on a leveraged basis rather than just a cash payout at settlement.”
According to another recent press release, a major U.S. credit rating agency has launched a stablecoin stability assessment that “aims to evaluate a stablecoin’s ability to maintain a stable value relative to fiat currency.” The assessment “applies its analytical approach to assess a stablecoin’s stability on a scale of 1 (very strong) to 5 (weak).” Coinciding with the launch, the credit rating agency assessed and provided scores for the following eight stablecoins: DAI (4), FDUSD (4), FRAX (5), GUSD (2), USDP (2), USDT (4), TUSD (5) and USDC (2). In related news, Circle recently announced the launch of its euro-backed stablecoin, EURC, on the Solana network. This launch makes Solana the fourth blockchain to support EURC.
According to recent reports, the Bitcoin Network hash rate has reached a record high of 512 eh/s, with a notable 9 percent increase in just a week and a peak of 562 eh/s in December. The increase is attributed to miners ramping up operations ahead of the anticipated Bitcoin halving event, with the current cycle showing a higher Bitcoin fee per block than in any previous cycle.
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New NFT Collections Launch Across Various Sectors
By Lauren Bass
In early December, a major auction house held an online sale featuring three NFTs from an unreleased collection by Shroomtoshi. According to reports, the collection, “seemingly inspired by Super Mario,” raised a collective $451,000 – five times more than had been estimated.
In similar news, an international soccer organization has reportedly teamed with a Web3 innovator to create and release an NFT collection commemorating the World Cup. According to reports, the digital collectibles were distributed via the Polygon network and on OpenSea throughout December.
And to commemorate a banner year, in mid-December a Formula One racing team reportedly dropped an exclusive NFT collection on the Sui blockchain. According to reports, fans were able to mint the NFTs, which showcased original motorsport artwork, for free.
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IOSCO Report Addresses DeFi; GAO Report Addresses Crypto Sanctions Risks
By Robert A. Musiala Jr.
On Dec. 19, the International Organization of Securities Commissions (IOSCO) published its “Final Report with Policy Recommendations for Decentralized Finance (DeFi).” According to a press release, the policy recommendations “aim to address market integrity and investor protection concerns arising from DeFi by supporting greater consistency of regulatory frameworks and oversight in member jurisdictions.” The recommendations cover six key areas: (1) understanding DeFi arrangements and structures; (2) achieving common standards of regulatory outcomes; (3) identification and management of key risks; (4) clear, accurate and comprehensive disclosures; (5) enforcement of applicable laws; and (6) cross-border cooperation.
On Dec. 13, the U.S. Government Accountability Office (GAO) published a report titled “Economic Sanctions: Agency Efforts Help Mitigate Some of the Risks Posed by Digital Assets.” According to a GAO press release, the report discusses (1) the risks that digital assets pose to U.S. agencies’ ability to implement and enforce U.S. sanctions and factors that may mitigate those risks and (2) the actions U.S. agencies have taken to address the risks that digital assets present with regard to implementing and enforcing U.S. sanctions.
On Dec. 19, a Big Four consulting firm published “Global Crypto Regulation Report 2023.” The recent final report “provides an overview of the crypto regulation landscape … offers insights into how the regulatory frameworks are developing across the world and seeks to identify how this may impact relevant industry participants and virtual service providers within the financial services sector.” Among other things, the report provides summaries of the crypto regulatory environment in the following jurisdictions: Australia, Austria, Bahamas, Canada, Denmark, Estonia, France, Germany, Gibraltar, Hong Kong, Hungary, India, Italy, Japan, Luxembourg, Mauritius, New Zealand, Singapore, South Africa, Switzerland, Taiwan, Turkey, United Arab Emirates, United Kingdom and United States.
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SEC, DOJ and Interpol Continue Crypto Enforcement Actions
By Joanna F. Wasick
On Dec. 22, the Securities and Exchange Commission (SEC) announced that BarnBridge DAO and its two founders, Tyler Ward and Troy Murray, will pay more than $1.7 million to settle charges that (1) they failed to register BarnBridge’s offer and sale of structured crypto asset securities known as SMART Yield bonds and (2) they operated BarnBridge’s SMART Yield pools as unregistered investment companies. According to an SEC press release, the respondents compared the SMART Yield bonds to asset-backed securities and marketed them broadly to the public, claiming that SMART Yield bonds would “mirror the safety and security of highly-rated debt instruments offered by traditional finance … while still providing the outsized return.” SMART Yield also allegedly pooled crypto assets deposited by the investors and used those assets to generate fixed or variable returns to pay investors.
In mid-December, the U.S. Department of Justice (DOJ) announced the unsealing of a seven-count indictment charging four individuals for their roles in a scheme to launder the proceeds of cryptocurrency investment scams and other fraudulent schemes in which victims lost more than $80 million. According to a DOJ press release, the defendants conspired to open shell companies and bank accounts to launder the proceeds of cryptocurrency investment scams known as “pig butchering,” wherein scammers meet victims through dating services, social media or unsolicited calls/messages; gain their victims’ trust and establish a relationship with them; and eventually introduce the idea of making a business investment using crypto. The DOJ charged the defendants with conspiracy to commit money laundering, concealment money laundering and international money laundering.
Also in mid-December, Operation HAECHI IV, a transcontinental police operation against online cyber-enabled scams, reportedly concluded with almost 3,500 arrests and seizures of US$300 million worth of assets – including US$101 million in virtual assets – across 34 countries. During the operation, investigators worked together to detect online fraud and freeze associated bank and virtual asset service provider accounts using Interpol’s Global Rapid Intervention of Payments, a stop-payment mechanism that helps countries work together to block criminal proceeds.
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Crypto Hacks and Scams Result in Losses of $81M, $59M and $2.7M
By Keith R. Murphy
A cross-chain platform was hacked for $81 million following exploitation of the platform’s cross-chain bridge, according to a recent report. The hacker reportedly funded a wallet using Tornado Cash, a sanctioned cryptocurrency tumbler, and then attacked the platform’s Ethereum vault. The report further notes that the stolen funds, which were sent to various Ethereum wallets, appear to be unmoved.
In another incident, swindlers utilized the wallet-draining service MS Drainer to steal $59 million of cryptocurrency in the past nine months, based on a recent report. The thefts allegedly involved the use of ads on a well-known search engine and targeted victims with fake versions of crypto sites. The report notes that a blockchain security platform investigating the scam determined that the swindlers utilized web redirects, in addition to regional targeting and page-switching tactics, to bypass ad audits on the search engine.
In a third incident, a decentralized exchange (DEX) aggregator experienced a theft of $2.7 million in cryptocurrency assets as a result of an exploit, possibly from the leak of a private key, according to a report. The report further notes that the DEX possibly was exploited by a hacker who upgraded a deprecated contract with token approvals and that the hacker is tied to other exploits.
According to a recent report discussing findings from researchers at security app De.Fi, cryptocurrency users lost approximately $2 billion to various hacks and scams in 2023. This figure reportedly represents half the amount that was lost in the year prior. The researchers reportedly attribute the reduction largely to the implementation of improved security protocols, greater community awareness and decreased market activity.
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