Day: March 10, 2023

US Federal Reserve to Create Cryptocurrency Team Amid Concerns Over Unregulated Stablecoins

by Blockchain News

The US Federal Reserve is taking steps to address the fast-evolving cryptocurrency industry. The central bank has announced that it is creating a specialized team of experts to monitor developments in the cryptocurrency sector, with a particular focus on stablecoins. The move comes amid concerns that unregulated stablecoins could put households, businesses, and the broader economy at risk.

Speaking at the Peterson Institute for International Economics in Washington on March 9, Vice Chair for Supervision Michael Barr acknowledged the transformative potential of cryptocurrencies but also warned that the benefits of innovation can only be realized if appropriate guardrails are in place. The new crypto team will help the Federal Reserve “learn from new developments and make sure we’re up to date on innovation in this sector.”

The Federal Reserve’s stance is not surprising, given its mandate to promote stability and public confidence in the financial system. However, the move to create a specialized crypto team marks a significant step forward in the central bank’s approach to cryptocurrencies. It highlights the growing recognition of the importance of cryptocurrencies in the financial system and the need for appropriate regulatory frameworks to manage their risks and harness their potential.

Barr emphasized that regulation needs to be a “deliberative process” to ensure that a balance is reached between over-regulation that “will stifle innovation” and under-regulation that “will allow for substantial harm to households and the financial system.” He cautioned that any widespread adoption of stablecoins that are not regulated by the Fed could put households, businesses, and the broader economy at risk.

Stablecoins are cryptocurrencies that are pegged to a stable asset, such as the US dollar. They are designed to reduce the volatility associated with traditional cryptocurrencies, making them attractive to investors and merchants. However, stablecoins are not immune to risks, and there are concerns that the assets backing many stablecoins in circulation are illiquid. This means that it can be difficult to liquidate them for cash when needed, potentially leading to a “classic bank run.”

Barr’s comments on stablecoins echo similar concerns raised by other regulators, including the Securities and Exchange Commission (SEC) and the Financial Stability Oversight Council (FSOC). In December 2020, the FSOC, which is chaired by Treasury Secretary Janet Yellen, issued a report warning that stablecoins could pose a risk to financial stability if they become widely adopted without appropriate regulatory safeguards.

The move by the Federal Reserve to create a specialized crypto team is a positive development for the cryptocurrency industry. It demonstrates that the US central bank is taking a proactive approach to managing the risks and harnessing the potential of cryptocurrencies. The crypto team will be responsible for monitoring developments in the sector, advising the Fed on appropriate regulatory frameworks, and working with other regulators to ensure a coordinated approach.

The creation of the crypto team also highlights the growing importance of cryptocurrencies in the financial system. As more individuals and businesses adopt cryptocurrencies, it is essential that regulators keep up with the pace of innovation to ensure that appropriate regulatory frameworks are in place. This will help to promote stability and public confidence in the financial system while also enabling the benefits of innovation to be realized.

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Hedera Mainnet Exploited, Leading to Theft of Liquidity Pool Tokens

by Blockchain News

Hedera Hashgraph is a distributed ledger technology that offers faster transaction times and lower fees than traditional blockchains. Its mainnet supports smart contracts and decentralized applications, and it has gained popularity among enterprise clients due to its scalability and security features.

However, on March 10, 2023, the Hedera team confirmed a smart contract exploit on its mainnet that led to the theft of several liquidity pool tokens. The attack targeted liquidity pool tokens on decentralized exchanges (DEXs) that use code derived from Uniswap v2 on Ethereum, which was ported over for use on the Hedera Token Service.

The attack vector is believed to have come from the process of converting Ethereum Virtual Machine (EVM)-compatible smart contract code onto the Hedera Token Service (HTS). As part of this process, Ethereum contract bytecode is decompiled to the HTS. The Hedera-based DEX SaucerSwap believes that this is where the attack vector came from, but Hedera has not confirmed this.

The suspicious activity was detected when the attacker attempted to move the stolen tokens across the Hashport bridge, which consists of liquidity pool tokens on SaucerSwap, Pangolin, and HeliSwap. Operators acted promptly to temporarily pause the bridge, preventing the attacker from moving the stolen tokens further.

Hedera has not confirmed the exact amount of tokens that were stolen, but the team is working on a solution to remove the vulnerability. On March 9, Hedera managed to shut down network access by turning off IP proxies, and it has since identified the “root cause” of the exploit.

The solution is expected to be ready soon, and once it is, Hedera Council members will sign transactions to approve the deployment of updated code on the mainnet to remove the vulnerability. After the deployment, the mainnet proxies will be turned back on, allowing normal activity to resume.

In the meantime, Hedera has suggested that tokenholders check the balances on their account ID and Ethereum Virtual Machine (EVM) address on hashscan.io for their own “comfort.” The price of the network’s token, Hedera (HBAR), has fallen 7% since the incident, in line with the broader market fall over the last 24 hours.

The incident highlights the risks of smart contract exploits on blockchain networks and the importance of security measures to prevent such attacks. Hedera’s response to the exploit has been swift and proactive, and it is working to restore the network’s security and functionality as soon as possible.

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DOJ Appeals Against Approval of Voyager-Binance.US Asset Sale

by Blockchain News

The ongoing legal battle between Voyager Digital and U.S. regulators has taken another turn. The U.S. Department of Justice (DOJ) has filed an appeal against the latest decision in the case, which pertains to the sale of assets between Voyager Digital and Binance.US.

On March 8, the U.S. Trustee for Region 2 made the appeal to the U.S. District Court for the Southern District of New York against the approval of Voyager Digital’s Chapter 11 bankruptcy plan. The plan was confirmed only a day prior by U.S. bankruptcy judge Michael Wiles, despite objections from the SEC and other regulators.

The Chapter 11 plan would have allowed Voyager Digital to sell billions of dollars in assets to Binance.US in an effort to regain liquidity to pay back customers. In court filings, Voyager claimed that this deal would allow the company to recover an estimated 73% of customer funds.

However, the SEC and other regulators have been outspokenly against this deal, citing concerns over securities law. In a court filing from Feb. 24, the Texas State Securities Board and the Department of Banking objected to the deal with Binance.US.

Despite these objections, Judge Wiles approved the Chapter 11 plan, stating that he could not put the case into an “indeterminate deep freeze while regulators figure out whether they believe there are problems with the transaction and plan.“ He also noted that 97% of Voyager customers favored the Binance.US deal, according to a poll released in a court filing on Feb. 28.

If U.S. regulators successfully block this deal, Voyager may have to liquidate. The initial bankruptcy was filed on July 5, 2022, as the brokers attempted to restructure and “return value” to more than 100,000 customers.

This legal battle highlights the challenges that cryptocurrency companies face in navigating the regulatory landscape. While the industry is still largely unregulated, U.S. authorities have begun to take a more aggressive stance in recent years. As a result, many companies are struggling to comply with existing regulations and stay on the right side of the law.

For Voyager Digital, the outcome of this legal battle will have significant implications. If the Chapter 11 plan is ultimately approved, the company will be able to sell assets to Binance.US and recover a significant portion of customer funds. However, if regulators block the deal, the company may be forced to liquidate, leaving customers without recourse.

In the meantime, the case serves as a reminder of the importance of regulatory compliance in the cryptocurrency industry. As authorities continue to crack down on illicit activities and push for greater transparency, companies that fail to comply may face severe consequences.

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SEC Revokes License of ParagonCoin Crypto Startup

by Blockchain News

ParagonCoin Limited, a crypto startup focusing on the marijuana industry, has had its registration revoked by the United States Securities and Exchange Commission (SEC) for violating securities laws after failing to file periodic reports. The SEC started proceedings against the firm in February 2022 and pointed out that its last filing was from March 2019, which states that it lost over $10 million in 2018.

The SEC confirmed its allegations against ParagonCoin and found that the firm is in default. The crypto company ignored a delinquency letter sent by an SEC division about the periodic reports. In addition, the SEC also pointed out that the startup did not respond to its order initiating proceedings in February 2022, and did not answer five months later to provide reasons why it should not be found in default.

ParagonCoin had held a $70 million initial coin offering (ICO) in 2017, with backing from American rapper Jayceon Terrell Taylor, better known as “The Game.” However, in 2021, Taylor and the crypto startup’s executives were found to be jointly liable for more than $12 million in a class-action lawsuit. The lawsuit alleged that the startup violated securities law when it held its ICO.

While ParagonCoin has been facing legal challenges, other rappers are entering the Web3 space with new startups and NFTs. The Game’s fellow rapper Snoop Dogg and Eminem recently featured their Bored Ape Yacht Club NFTs in a music video for their song “From The D 2 The LBC” in June 2022. The video occasionally showed both rappers as their animated Bored-Ape-style characters.

Meanwhile, The Game has not been successful in the crypto world, but he has announced partnerships within the Web3 space and has recently been revealed as the co-founder of a Web3-powered live-streaming platform called Shiller. The platform aims to give artists more control over their content and income, with features such as pay-per-view and subscription models.

In conclusion, ParagonCoin’s license revocation by the SEC highlights the need for crypto startups to comply with securities laws and regulations. On the other hand, the entry of rappers like Snoop Dogg, Eminem, and The Game into the Web3 space shows the growing interest of the music industry in crypto and NFTs.

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Thailand SEC Considers Ban on Crypto Staking and Lending

by Blockchain News

The Thai SEC’s potential ban on crypto staking and lending activities is part of the country’s broader efforts to regulate its rapidly growing digital asset industry. The SEC has been actively working to establish clear guidelines for crypto businesses operating within Thailand’s borders.

In a statement released on March 8, the SEC announced that it is seeking public comments on a draft regulation that would prohibit VASPs from offering any type of staking or lending services. This move follows the regulator’s decision to postpone its implementation of a new licensing rule for VASPs until June 2021.

The proposed regulation would require VASPs to obtain permission from the SEC before offering any new services or expanding their existing offerings. This would give the SEC greater control over the types of services offered by VASPs operating within Thailand’s borders, ensuring that they comply with the country’s legal and regulatory framework.

The Thai SEC’s proposed ban on staking and lending services has sparked concern among some members of the country’s digital asset industry. Some industry experts believe that the ban could stifle innovation and growth in the industry, making it more difficult for VASPs to compete with their international counterparts.

Others, however, argue that the ban is necessary to protect investors from the risks associated with these types of services. Staking and lending involve the use of complex financial instruments that can be difficult for novice investors to understand, increasing the potential for fraud and other forms of misconduct.

Regardless of the outcome of the SEC’s public hearing, it is clear that Thailand’s regulators are taking a proactive approach to regulating the country’s digital asset industry. As the industry continues to evolve and grow, it is likely that we will see more regulatory measures put in place to protect investors and ensure the long-term stability of the market.

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Meta to Launch Text-Based Content App Supporting Decentralized Social Networking

by Blockchain News

Meta, formerly known as Facebook, is reportedly working on a new app that will support the decentralized social networking protocol ActivityPub. The new text-based content app, codenamed P92, will be Instagram-branded and allow users to log in with their existing Instagram credentials, according to a report by TechCrunch. The P92 team plans to follow the “fork” approach in the initial product version, with users’ profiles populated with their Instagram account details, such as name, username, bio, profile photo, and followers.

The move comes as technology companies and startups are looking to take advantage of the growing trend of Twitter users seeking alternative platforms. In recent months, several rival platforms such as Mastodon, Post.news, and T2 have either launched or gained traction in their efforts to attract these users. The new app by Meta is expected to compete with these platforms and provide an alternative for users who are looking for a decentralized social networking experience.

The current plan for the minimum viable product (MVP) is to enable users to broadcast posts to people on other servers. However, it is still undecided whether users can follow and view people’s content on other servers. The app’s initial version will include tappable links in posts with previews, user bios, usernames, verification badges, images, and videos that can be shared. It will also have functionalities such as followers and likes, but it is uncertain whether commenting and messaging features will be included in the product’s first version.

The development team is also discussing the possibility of allowing content to be reshared like Twitter, but only for business and creator accounts. The MVP will integrate a rights manager for first-party content from the beginning but not third-party content from other apps and servers. The app will adhere to the company’s current privacy policy, but it will also have a supplementary privacy policy and terms of service that specifically address cross-app data sharing.

The move by Meta to support ActivityPub is a significant development in the decentralized social networking space. ActivityPub is an open standard that allows users to share content across different platforms, creating a more decentralized and interoperable social networking experience. Mastodon, a decentralized social networking platform, is one of the most popular platforms that use ActivityPub.

The new app by Meta is expected to provide users with a decentralized social networking experience while leveraging the existing user base of Instagram. The app will enable users to broadcast their posts to people on other servers, creating a more interconnected and interoperable social networking experience. The app’s initial version will include basic functionalities such as followers and likes, but it remains to be seen whether more advanced features such as commenting and messaging will be included in future versions.

Overall, Meta’s move to support ActivityPub is a significant development in the decentralized social networking space. The new app, codenamed P92, will provide users with a decentralized social networking experience while leveraging the existing user base of Instagram. With the growing trend of users seeking alternative platforms, the new app is expected to compete with other decentralized social networking platforms and provide users with an alternative social networking experience.

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Judge Considers Dismissing Shaquille ONeal and Naomi Osaka from FTX Lawsuit

by Blockchain News

In recent news, a federal judge in Florida, United States, is considering dismissing former NBA superstar Shaquille O’Neal and tennis athlete Naomi Osaka from the FTX lawsuit. The judge pointed out that it is unclear whether the two sports stars have been served, and instructed the plaintiffs to provide cause as to why O’Neal and Osaka should not be dismissed from the suit. The judge gave the FTX customers until December to show cause.

In another order issued on March 9, U.S. District Judge Kevin Moore reprimanded other celebrity defendants, including Tom Brady, Gisele Bündchen, Kevin O’Leary, David Ortiz, and Trevor Lawrence, for not following proper procedure in requesting a time extension for a scheduled conference. The judge clarified that the request should have come from the plaintiff’s side, and instructed the conference to proceed as scheduled, or for the plaintiff to move for an extension of time to hold the conference.

As cases against FTX continue to pile up, some plaintiffs have requested the consolidation of lawsuits against the bankrupt exchange. However, on March 8, U.S. District Judge Jacqueline Corley denied the consolidation request, highlighting that the defendants have not yet been allowed to respond. This means that the lawsuits will proceed separately for now.

On the same day, lawyers representing former FTX CEO Sam Bankman-Fried noted that it might be necessary to push back the criminal trial scheduled to start in October 2023. While the lawyers did not formally request a date change, they pointed out that it may be needed because they are still waiting for evidence to be turned over, and Bankman-Fried accumulated more charges in February.

The FTX lawsuit was filed by customers who claimed that the cryptocurrency exchange had been involved in illegal market manipulation and trading practices that caused them financial harm. FTX has denied the allegations and filed a motion to dismiss the lawsuit. The case is still ongoing, with multiple parties involved in the proceedings.

Overall, the FTX lawsuit continues to be a complex and evolving legal matter, with various parties involved in the proceedings. The recent developments highlight the need for proper procedure and adherence to court orders, as well as the potential for further delays in the criminal trial involving former FTX CEO Sam Bankman-Fried. It remains to be seen how the case will unfold in the coming months.

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ARK Invest Buys Record Amount of Coinbase Stock, Despite Market Volatility

by Blockchain News

ARK Invest, led by tech-focused investor Cathie Wood, has made a record purchase of Coinbase stock amidst a volatile market. Despite Coinbase tumbling by 8% on March 10, ARK Invest bought the largest amount of the stock since the start of the year, comprising around 30% of all Coinbase purchases in 2023. This exceeds their total Coinbase stock buys of around $13 million in January and $42 million in February.

In addition to Coinbase, ARK Invest has also been actively purchasing Robinhood stock. On March 9, the company bought 265,566 Robinhood shares for its ARKK fund, following similar purchases of 268,086 and 219,883 shares on March 8 and 6, respectively.

Despite the recent market turbulence, ARK Invest remains optimistic about the cryptocurrency industry and Bitcoin in particular. Cathie Wood is one of the biggest crypto bulls in the world, predicting that Bitcoin will reach $1 million in the not-too-distant future. She sees the cryptocurrency as a promising risk-on asset, along with other technological innovations like self-driving cars and genomics.

However, ARK Invest has not been immune to the market downturn. Reports suggest that the firm has earned more than 70% of its $310 million fees since the price of its ARKK fund plummeted by 76% from its all-time high in February 2021. Despite this setback, ARK Invest has earned an average of roughly $230,000 in fees daily in 2023, as the fund’s value has slightly recovered from around $30 in early January to $37.3 in mid-March.

The latest bullish investments by ARK Invest come amid renewed market volatility, with Bitcoin dipping below $20,000 for the first time since early January. The market has been rocked by the news that Silvergate crypto bank is planning to wind down operations and liquidate the bank.

Despite the challenges facing the cryptocurrency industry, ARK Invest remains committed to its bullish outlook. The firm sees continued growth and innovation in the sector, with Bitcoin and other cryptocurrencies playing a key role in the future of finance. With the backing of investors like Cathie Wood, the industry is sure to attract continued interest and investment in the years to come.

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Nigerian President-elect’s Manifesto Includes Blockchain and Crypto Regulations

by Blockchain News

Nigeria is one of the countries where cryptocurrency adoption is on the rise. In recent years, the country has seen a surge in crypto trading and the use of cryptocurrencies for cross-border payments, remittances, and e-commerce. However, the lack of clear regulations and guidelines for the use of cryptocurrencies has been a hindrance to the growth of the sector.

To address this issue, Bola Tinubu, the Nigerian President-elect, has released a manifesto that includes proposals for the use of blockchain technology and cryptocurrencies in Nigeria’s banking and finance sector. The manifesto proposes a review of the existing Nigerian Security Exchange Commission regulations on digital assets to make them more business-friendly.

The proposed reforms would require digital asset companies to register with the SEC and comply with SEC regulations. The manifesto also proposes the establishment of an advisory committee to review the SEC regulations on digital assets to create a more efficient and business-friendly regulatory framework. The proposed regulations would enable the use of cryptocurrencies and other digital tokens in Nigeria’s banking and finance sector, as well as in identity management, revenue collection, and other areas.

The government hopes that the proposed reforms to the SEC regulations will help attract more investors in the digital and economic sectors and stimulate economic growth. The manifesto also aligns with the Central Bank of Nigeria’s eNaira, the country’s central bank digital currency. The government plans to expand the adoption of the eNaira, which has not lived up to expectations since its launch.

However, some cryptocurrency enthusiasts have criticized the existing regulations for lacking provisions that allow crypto users to transact with their local banks. The proposed reforms to the SEC regulations would address this issue and provide a framework for regulating digital assets like cryptocurrencies and other digital tokens in Nigeria.

The release of the manifesto coincides with the increasing adoption of cryptocurrencies in Nigeria, which is among the highest in the world. According to a report by Chainalysis, Nigeria ranks second in the world in terms of cryptocurrency adoption, after Ukraine. The report notes that Nigeria’s high adoption of cryptocurrencies is driven by a variety of factors, including high remittance fees, currency volatility, and a large young population with a high level of technology adoption.

The Nigerian government’s interest in cryptocurrencies is also reflected in the Central Bank of Nigeria’s milder position towards stablecoins. The bank recently published a research report titled “Nigeria’s Payment System Vision 2025,” which explores the creation of a new framework to introduce a stablecoin in Nigeria.

In conclusion, Bola Tinubu’s manifesto includes proposals for the use of blockchain technology and cryptocurrencies in Nigeria’s banking and finance sector. The proposed reforms to the SEC regulations would enable the use of cryptocurrencies and other digital tokens in Nigeria’s banking and finance sector, as well as in identity management, revenue collection, and other areas. The government hopes that the proposed reforms will help attract more investors in the digital and economic sectors and stimulate economic growth.

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Degen Zoo NFT Game Draws Huge Interest After Logan Paul’s Crypto Zoo Scandal

by Blockchain News

The recent surge of interest in Degen Zoo highlights the growing popularity of nonfungible token (NFT) games, which have become a significant trend in the blockchain industry. NFTs are unique digital assets that allow creators to verify ownership and authenticity, making them ideal for creating rare and collectible items such as artwork, music, and in-game items.

However, the rise of NFTs has also attracted scammers and fraudsters seeking to exploit the hype and make a quick profit. Logan Paul’s Crypto Zoo project is a prime example of this, with many investors claiming to have lost hundreds of thousands of dollars in the alleged scam.

In contrast, Degen Zoo aims to use NFTs for a noble cause, raising awareness of the devastating effects of human greed on wildlife. The game simulates the impact of capitalism on animal extinction, with players motivated to “kill” their NFTs, driving the collection to extinction and raising awareness of the issue.

The game’s creator, Christoph Zaknun, has pledged to donate all profits from Degen Zoo to charity, making it a socially responsible NFT game that aligns with the growing trend of impact investing and philanthropy in the blockchain industry.

However, the success of Degen Zoo has also been marred by controversy, with Logan Paul accusing Zaknun of dictating the required development timeline. This comes after Paul faced backlash for his own Crypto Zoo project, which reportedly raised over $3 million in NFT sales and tens of millions in zoo tokens but failed to deliver as promised, leaving investors feeling scammed.

The scandal surrounding Logan Paul’s Crypto Zoo project has also led to a class-action lawsuit filed against Paul and Crypto Zoo executives, accusing them of stealing millions of dollars worth of cryptocurrency from purchasers through a fraudulent scheme.

Despite the controversy, the popularity of NFT games like Degen Zoo is set to continue growing, with many blockchain enthusiasts and investors looking to capitalize on the trend. However, it’s essential to remain vigilant and conduct thorough due diligence to avoid falling victim to scams and frauds in the ever-evolving world of blockchain and NFTs.

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