European Bank Launches Stablecoin; Financial Firms Expand Crypto Products
By Robert A. Musiala Jr.
A subsidiary of a major European financial services firm recently launched EUR CoinVertible (EURCV), an Ethereum ERC20 stablecoin backed 1:1 by Euros. According to a press release, among other characteristics, EURCV will feature “(i) the complete segregation of the collateral assets held to back the value of the stablecoins from the issuer, (ii) with a direct access given to token-holders on the collateral assets, and (iii) the implementation of business continuity plan mechanisms in case of a market or technological event.” The press release also notes that the smart contract code for EURCV will be published under an open-source license and access to EURCV will be limited to persons who complete onboarding through the financial services firm’s existing anti-money-laundering procedures.
Another recent press release announced that “the world’s leading derivatives marketplace … plans to expand its suite of cryptocurrency options across its standard- and micro-sized Bitcoin and Ether contracts beginning on May 22.” The press release notes that through Q1 2023, its “Bitcoin and Ether futures and options complex has achieved a record daily average notional of more than $3 billion, signifying an increase in client demand for liquid hedging tools.”
According to a recent report, a major Japanese bank has announced that it has integrated MoneyTap, a blockchain-based money transfer app underpinned by RippleNet, into three local banks in Japan. RippleNet is a product of U.S. blockchain payments firm Ripple. And in a final recent development, the Bank for International Settlements has published a white paper with findings on Project Meridian, which explores the use of distributed ledger technology to drive innovations in real-time gross settlement systems.
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Ethereum ‘Unstaking’ Data Published; New DeFi Products Launch
By Robert A. Musiala Jr.
According to recent reports, in the wake of the Ethereum Network’s “Shanghai” upgrade, which marks the completion of Ethereum’s transition to a proof-of-stake network and enables network validators to unstake ether (ETH), approximately 5 percent of validators are seeking to unstake their ETH. The report notes that requests to unstake and withdraw ETH are taking up to 17 days to complete.
According to a recent press release, decentralized finance (DeFi) infrastructure firm Maple Finance has launched its Cash Management Pool, which according to the press release is designed to provide “Non-US DAOs [decentralized autonomous organizations], Offshore Companies, Web3 Treasuries and HNWI participants” with “the most direct access to Treasury bill yields.” The release notes that the DeFi liquidity pool is designed to allow participants to invest stablecoins and “will pass the 1-month US Treasury bill rate, less fees, to Lenders.” The press release further notes that “Room40 Capital, an institutional crypto hedge fund, has established a stand-alone SPV to be the sole borrower from the pool.” The new product is reportedly available only to non-U.S. accredited investors.
A major U.S. credit rating agency recently announced that it has partnered with technology firms Spring Labs and Quadrata “to deliver off-chain credit scoring to DeFi and Web3 applications.” According to a press release, the new service will deliver off-chain credit data to DeFi applications using a patented process that maintains the privacy of consumer identity data. According to the press release, the new service “will allow for DeFi lenders to have access to this critical information when making their lending decisions … ultimately minimizing their risk and providing borrowers more opportunity for better terms.”
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SEC Charges US Crypto Exchange with Multiple Securities Law Violations
By Lauren Bass
According to a recent press release, the U.S. Securities and Exchange Commission (SEC) has filed a complaint against the U.S.-based cryptocurrency trading platform Bittrex Inc. and its former CEO, alleging the operation of an unregistered exchange, broker-dealer and clearing agency in violation of U.S. securities laws. The SEC also charged Bittrex’s foreign affiliate, Bittrex Global GmbH, “for failing to register as a national securities exchange in connection with its operation of a single shared order book along with Bittrex.” Among other things, the complaint alleges Bittrex and its CEO advised client token issuers to remove from public channels certain “problematic statements” that might “raise questions from the SEC” as to whether the crypto tokens and assets offered on Bittrex were securities. The complaint requests injunctive relief along with disgorgement of profits and civil penalties.
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States Bring Crypto Enforcement Actions, Assess Supervisory Costs
By Robert A. Musiala Jr.
A recent press release from the California Department of Financial Protection and Innovation (DFPI) announced that DFPI has issued “desist and refrain orders against five entities to stop fraudulent investment schemes tied to artificial intelligence (AI).” According to the press release, “[t]he orders find that the named entities and individuals violated California securities laws by offering and selling unqualified securities and making material misrepresentations and omissions to investors.” The entities allegedly “solicited funds from investors by claiming to offer high yield investment programs (HYIP) that generate incredible returns by using AI to trade crypto assets” and “used multi-level marketing schemes that reward investors for recruiting new investors.”
According to a recent press release, “the New York State Department of Financial Services (DFS) has adopted a final regulation establishing how companies holding a DFS-issued Bitlicense will be assessed for costs of their supervision and examination.” The new regulation gives DFS authority “to collect supervisory costs from licensed virtual currency businesses, similar to other licensees regulated by DFS.”
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OFAC Adds New Bitcoin Public Key to SDN List
By Christopher Lamb
According to a press release issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), pursuant to Executive Order (E.O.) 14059, OFAC has designated two entities in the People’s Republic of China (PRC) and five individuals, based in PRC and Guatemala, for engaging in acts that contribute to “the international proliferation of illicit drugs or their means of production.” On April 4, 2023, a federal grand jury in the U.S. District Court for the Southern District of New York indicted some of these designated individuals on various conspiracy charges, including fentanyl importation and money laundering. As part of the action, OFAC added one individual’s Bitcoin public key that was “used to receive bitcoin payments for illicit drug transactions” to the Specially Designated Nationals List (SDN List).
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DeFi Protocol Hacked for $7.4M; Wallet Attack Drains $10.5M
By Joanna F. Wasick
On April 15, Hundred Finance, a Multichain lending protocol, announced it suffered a significant security breach on the Ethereum layer-2 blockchain Optimism, resulting in roughly $7.4 million in losses. Although the protocol didn’t reveal how the attack was executed, blockchain security firm CertiK said it was a flash loan attack, which involves a hacker borrowing a large amount of funds via a type of uncollateralized loan from a lending protocol. The hacker then uses these funds to manipulate the price of an asset on a decentralized finance (DeFi) platform. Hundred Finance stated that it had contacted the hacker and was working with various security teams on the incident.
Recent reports indicate that more than $10.5 million in cryptocurrencies and NFTs were taken in an unidentified wallet-draining exploit that had been happening since December 2022. MetaMask developer Taylor Monahan recently brought the issue to light on Twitter. While stating that no one knows yet exactly how the exploit works, some of its features include that it targets keys created from 2014 to 2022 and users who are more “crypto native,” i.e., those with multiple addresses and who work in the crypto/blockchain space. Because of this, the developer advised those with their assets connected to a single private key to migrate their funds, split up their assets or get a hardware wallet.
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