Hong Kong Approves Crypto ETFs; Crypto Security, Payments Products Launch
By Isabelle Corbett Sterling
According to recent reports, the Hong Kong Securities and Futures Trading Commission has conditionally approved the launch of the first spot bitcoin and ether exchange traded funds (ETFs), making it the first Asian market to allow the mainstream investment tool. There are reportedly three asset managers in China who will launch cryptocurrency spot ETFs in the near future. As Hong Kong continues to promote itself as a global digital asset hub, cryptocurrency remains banned in mainland China.
In a recent press release, Fireblocks announced two new security features to its DeFi suite for institutional firms in response to the increase in threat actors, who have drained over $500 million from wallets, dApp takeovers, and supply chain attacks already this year. According to the press release, Fireblocks’ new “dApp Protection” feature provides real-time threat detection from suspicious smart contracts, phishing websites, and compromised dApps, while its “Transaction Simulation” feature allows firms to preview estimated token balance change when interacting with a smart contract.
In another recent press release, crypto prime brokerage FalconX announced its launch of an exchange settlement solution to allow institutional investors to trade on exchange while funds remain in bankruptcy-remote regulated custody. According to the press release, the new product, called Prime Connect, mitigates counterparty risk and provides improved execution and stable credit lines with portfolio margining, thereby improving capital efficiency and risk management. The press release notes that the first integration of Prime Connect is with Deribit, a centralized cryptocurrency derivatives exchange based in Panama.
According to recent reports, Strike, a popular bitcoin payments app, has launched in Europe. The new Strike product reportedly allows users in Europe to buy, sell, and withdraw bitcoin directly with Single Euro Payments Area (SEPA) euro deposits. SEPA is the EU’s payments provider, designed to simplify bank transfers denominated in euros.
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Bitcoin Halving Takes Effect, New Data Indicates Crypto Use Increasing
By Erika Vela
On April 20, the 2024 Bitcoin halving took effect. As a result of the halving, the amount of the block rewards for Bitcoin Network miners has been reduced from 6.25 to 3.125 BTC. While the effects of the halving are yet to be determined, several recent studies indicate continued growth in the use of bitcoin and other cryptocurrencies.
In one study, the International Monetary Fund published findings on the use of bitcoin in cross-border transactions and capital flows. The study analyzed (1) datasets on global bitcoin cross-border flows and transactions, (e.g., low bitcoin inflows resulting from countries with relatively large capital inflows); (2) cryptocurrency drivers in comparison to traditional financial assets; and (3) the relationship between on-chain and off-chain flows and capital flow management. Among other things, the study found that the user bases of bitcoin cross-border transactions and traditional capital flows are becoming increasingly similar.
According to recent reports, data published by rwa.xyz indicates that the use of stablecoins is growing fast, with the number of addresses holding stablecoins having increased 15% in 2024 to above 93.6 million holding addresses, the highest on record. USDT reportedly accounted for over 80% of the total stablecoin addresses, followed by USDC and BUSD.
More new data was published by a “Big Four” public accounting firm in a survey on the use of cryptocurrencies in Canada. Among other things, the survey found (1) between 2021 and 2023, cryptocurrencies in Canada were offered 22% more by financial services organizations and appeared 26% more in investor portfolios; (2) “[h]alf of respondents in financial services said their organizations were actively offering at least one type of cryptoasset product or service to clients, up from 41 per cent in 2021”; and (3) “[a]mong institutional investors, nearly four in ten (39 per cent) reported having direct or indirect exposure to cryptoassets, up from 31 per cent in 2021.”
In a final notable statistic, according to recent reports, approximately 5,300 new tokens have been launched every day so far through early April of this year. This is reportedly part of the over 2.52 million cryptocurrencies in 2024 as of mid-April and implies that on-chain speculative activity is growing.
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IRS Previews Digital Assets Form; Sweden Demands Taxes from Crypto Miners
By Maya E. Rivera
Last week, the U.S. Internal Revenue Service (IRS) released draft Form 1099-DA, a preview of a new form brokers must use to disclose their digital asset sales to the IRS beginning in 2026. According to reports, the draft form will apply to those considered digital asset brokers under the IRS’s recently proposed digital asset sales rules, including trading platforms, payment processors, wallet providers, individuals redeeming assets they create or issue, and more. The form will reportedly require filers to indicate what type of broker they are, and will seek information such as proceeds from digital asset sales, accrued market discounts, wash sales losses disallowed, sales transaction identification, federal income tax withheld, whether the digital asset at issue is a noncovered security, and more. The IRS has yet to finalize either the recently proposed digital asset sales rules or the draft form, and is currently welcoming comments on the latter.
According to recent reports, a recent Swedish Tax Agency investigation revealed that Swedish crypto miners owe over $90 million in taxes. The Agency reportedly investigated 21 different crypto-mining firms between 2020 and 2023 and found that 18 firms filed “misleading or incomplete” information to avoid paying certain taxes. About $85 million owed reportedly stems from firms providing misleading business descriptions to avoid paying value-added tax on taxable operations. The remaining $5 million owed reportedly results from firms avoiding certain tax surcharges such as import taxes on mining equipment or income taxes on mining revenue.
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Multiple Cryptocurrency Schemers Arrested, Facing Prison Time
By Keith R. Murphy
A recent press release by the U.S. Department of Justice (DOJ) announced that the cofounders and CEO of Samourai Wallet have been arrested and charged with conspiracy to commit money laundering and conspiracy to operate an unlicensed money transmitting business. According to the press release, the defendants allegedly developed, marketed and operated a cryptocurrency mixer responsible for more than $2 billion in unlawful transactions as well as the facilitation of more than $100 million in money laundering transactions from dark web markets including Silk Road and Hydra. The press release notes that the company’s web servers were seized and its mobile application is no longer available to be downloaded.
According to another DOJ press release, a social media influencer known as “Jay Mazzini” was sentenced to 84 months in prison for multiple overlapping crypto fraud schemes. The “crypto con man” defendant reportedly targeted his own Muslim community by soliciting money for investments in stock, electronics and other goods, which he instead funneled to his personal expenses and gambling. To fund purported returns on the investments, the defendant allegedly conducted a second scheme utilizing social media posts claiming that he would pay above-market prices for cryptocurrencies. He reportedly sent evidence of false wire transfer confirmations to victims suggesting he sent them the purchase money for their cryptocurrency, when in reality he simply stole the crypto.
A final recent report notes the arrest of William Morro relating to the OneCoin cryptocurrency scheme. Morro reportedly is an associate of Gilbert Armenta, the boyfriend of OneCoin founder Ruja Ignatova. According to the report, Morro was responsible for moving $35 million in funds relating to OneCoin from bank accounts in China to a bank account in Hong Kong in 2016, and in a superseding DOJ indictment he was charged with moving $6 million from the Hong Kong account to a U.S. account he controlled as part of a scheme to defraud.
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DeFi Protocol Hacked, FBI Publishes Ransomware Advisory
By Christopher Lamb
According to recent reports, Hedgey Finance, a token infrastructure platform, has been exploited for a total of $42.8 million worth of Arbitrum (ARB) tokens. Shortly after the exploits, scam accounts reportedly began impersonating the protocol and posting potentially malicious links enticing users to seek refunds and revoke smart contract approvals.
According to a cybersecurity advisory recently published by the Federal Bureau of Investigation (FBI) and foreign law enforcement agencies, Akira, a year-old ransomware group, has been targeting businesses and critical infrastructure entities in North America, Europe, and Australia since March of 2023. According to the advisory, Akira has breached more than 250 organizations for around $42 million in ransomware proceeds in the past year. The FBI’s investigation found that the ransomware is capable of targeting both Windows and Linux systems through a pre-installed virtual private network (VPN) that lacks multifactor authentication. After the exploitation, Akira demands bitcoin from the victim organizations to restore access to their systems.
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