Day: March 18, 2023

Binance Replaces BUSD with TUSD and USDT in SAFU Fund

by Blockchain News

Binance, one of the world’s largest cryptocurrency exchanges, announced on March 17 that it has replaced the Binance USD (BUSD) holdings in its Secure Asset Fund for Users (SAFU) with TrueUSD (TUSD) and Tether (USDT). The move comes in response to Paxos’ recent move to stop minting new BUSD, which has led to the asset’s market capitalization falling. SAFU is an emergency insurance fund established by Binance in July 2018 to protect users’ funds in case of security breaches or other unforeseen events.

Binance committed a percentage of trading fees to grow the fund, which was valued at $1 billion as of Jan. 29, 2022. SAFU’s wallets initially consisted of BNB (BNB), Bitcoin (BTC), and Binance USD, which has now been replaced by TUSD and USDT. Binance assured users that the change would not impact them, their funds would continue to be held in publicly verifiable addresses, and BUSD would continue to be supported. The exchange added that it would closely monitor the fund to ensure that it remains sufficiently capitalized and top it up periodically as necessary using its own funds.

On Feb. 13, BUSD issuer Paxos Trust Company announced it would stop issuing new BUSD effective Feb. 21 in accordance with the directions of and in coordination with the New York Department of Financial Services. Days after reports emerged that United States regulators were scrutinizing Paxos and BUSD, Binance minted nearly $50 million worth of TUSD. The transaction took place on Feb. 16, according to data from Etherscan, and came two days after Binance CEO Chanpeng Zhao mentioned in a Feb. 14 Twitter Space that Binance would look to “diversify” its stablecoin holdings away from BUSD.

With the U.S. Securities and Exchange Commission also taking action against BUSD, some crypto community members have questioned whether stablecoins are the real issue at hand or if it’s actually about Binance, as the SEC didn’t take action against Paxos’ gold-backed stablecoin, Pax Gold (PAXG).

Stablecoins, such as BUSD, TUSD, and USDT, are digital currencies designed to maintain a stable value relative to a reference asset, such as the US dollar. They have become increasingly popular in recent years as a means of facilitating transactions on cryptocurrency exchanges without having to convert to fiat currency, which can be costly and time-consuming.

However, stablecoins have also come under scrutiny from regulators due to concerns about their lack of transparency and potential for use in illicit activities. The recent actions by the SEC and the New York Department of Financial Services against BUSD and Paxos are part of a wider crackdown on stablecoins and cryptocurrency more broadly.

In response, cryptocurrency exchanges and other market participants are looking to diversify their stablecoin holdings to reduce their exposure to any one particular asset. This appears to be the motivation behind Binance’s decision to replace BUSD with TUSD and USDT in its SAFU fund.

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Moody warns of stablecoin adoption risk

by Blockchain News

In its latest report, Moody’s Investors Service has warned that the recent instability in the traditional banking sector could have a negative impact on the adoption of stablecoins. The credit rating agency has highlighted the risks that fiat-backed stablecoins like USDC face, stating that the reliance of stablecoin issuers on a small set of off-chain financial institutions limits their stability. The depegging of USDC on March 10, which was caused by the sudden collapse of Silicon Valley Bank, has highlighted this risk.

Circle Internet Financial, the issuer of USDC, had $3.3 billion in assets tied up in the bank, and over the span of three days, the company cleared roughly $3 billion in USDC redemptions as the value of its stablecoin plunged to a low of around $0.87. However, USDC quickly regained its peg after the Federal Deposit Insurance Corporation announced that it would backstop all deposits held at Silicon Valley Bank.

Moody’s analysts believe that regulators are likely to pursue more stringent oversight of the stablecoin sector moving forward, given the recent market volatility and the potential risks associated with stablecoins. The credit rating agency has also warned that if USDC had not regained its peg, it could have suffered from a run and been forced to liquidate its assets. Such a scenario could have caused more runs on banks holding Circle’s assets, which could have led to the depegging of other stablecoins.

Despite the collapse of Terra, which led to calls for the regulation of stablecoins, Moody’s believes that fiat-backed stablecoins like USDC operate differently from algorithmic tokens and are less likely to fail. Nevertheless, the credit rating agency warns that stablecoin issuers must take steps to reduce their reliance on a small set of off-chain financial institutions to improve their stability.

In conclusion, the recent instability in the traditional banking sector and the depegging of USDC have highlighted the potential risks associated with stablecoins. While Moody’s believes that fiat-backed stablecoins are less likely to fail than algorithmic tokens, the credit rating agency warns that stablecoin issuers must take steps to reduce their reliance on a small set of off-chain financial institutions. With regulators likely to pursue more stringent oversight of the stablecoin sector moving forward, stablecoin adoption could be negatively impacted.

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FTX debtors report over $4 billion in scheduled assets

by Blockchain News

FTX, the cryptocurrency exchange founded by Sam Bankman-Fried, filed for Chapter 11 bankruptcy protection in November 2022 following allegations of fraudulent activities. In a recent filing with the United States Bankruptcy Court for the District of Delaware, FTX debtors reported more than $4 billion in scheduled assets across various company silos as of November 2022.

The report submitted to the committee of unsecured creditors detailed the scheduled assets and claims of the company. The West Realm Shires silo, which includes FTX US and Ledger X, FTX.com, Alameda Research, and FTX Ventures, had roughly $4.8 billion in scheduled assets and $11.6 billion in scheduled claims.

According to the filing, Alameda Research held the majority of scheduled assets at approximately $2.6 billion. However, the report noted that the company had “potentially material claims that have been filed as undetermined,” suggesting that the actual value of Alameda’s assets could be even higher.

FTX.com had over $11.2 billion in scheduled claims, but claims from FTX Ventures were undetermined. The report also revealed that the data surrounding cryptocurrency holdings or transactions was limited. While the debtors reported more than 53 million FTX Tokens collateralized loans, including Bitcoin, Ether, XRP, and USD Coin, they stated that “additional tracing of wallet and blockchain activity remains an ongoing matter.”

The debtors’ report also noted that an investigation into crypto transactions as part of payments to FTX company insiders was ongoing. The former CEO of FTX, Sam Bankman-Fried, received more than $2.2 billion of the payments, according to the report.

In addition to the bankruptcy case, Bankman-Fried is facing both criminal and civil cases for his alleged involvement in fraudulent activities at the company.

The news of FTX’s bankruptcy and subsequent investigations have raised concerns about the transparency and security of the cryptocurrency industry. However, the company’s scheduled assets of over $4 billion suggest that FTX was a significant player in the crypto market, and the ongoing investigations will shed more light on the company’s operations and dealings.

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Federal Regulators Testify on Bank Failures

by Blockchain News

Representatives from the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve will provide testimony about the failure of two major banks, Silicon Valley Bank and Signature Bank, at an upcoming hearing that has just been announced by the United States House Financial Services Commission. Legislators are attempting to comprehend the factors that contributed to the failure of these institutions. The hearing is set to take place on March 29, and it will contain evidence from the head of the FDIC as well as the vice chair of supervision for the Fed.

The Silicon Valley Bank was forced to close its doors on March 10 as a result of a run on the bank by its large depositors. The majority of uninsured depositors who had more over $250,000 were covered by the government once they stepped in. On the other hand, it was claimed that Signature Bank did not have any problems with its solvency at the time of its closure on March 12. The FDIC was nonetheless given responsibility of the firm’s insurance procedure by New York’s regulatory authorities.

A report on the supervision and regulation of Silicon Valley Bank by the Federal Reserve is going to be published soon by Michael Barr of the Federal Reserve. According to recent reports, the Department of Justice and the Securities and Exchange Commission have both opened investigations into allegations that some officials at the bank sold shares in the weeks running up to the institution’s shutdown.

Some MPs have indicated that exposure to crypto businesses may have played a part in the failure of the banks, while supporters in the industry have maintained that government officials were attempting to “de-bank” crypto and blockchain enterprises. The House Committee on Financial Services has indicated that it plans to conduct additional hearings about this matter.

It is important to note that Silicon Valley Bank is not connected in any way to Silicon Valley Bank Group, also known as SVB Financial Group. SVB Financial Group is a publicly listed firm that specializes in providing financial services to enterprises in the technology and life science industries. On the other hand, Signature Bank is a commercial bank that provides an extensive range of services and is principally active in the state of New York.

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Institutional Investors Seek Tokenization Solutions

by Blockchain News

Institutional investors managing trillions of dollars worldwide are seeking solutions for tokenization, which can allow fractional ownership of an asset that previously had to be sold as a whole. This method can improve liquidity for global assets, which is expected to reach $145.4 trillion by 2025, according to Big Four firm PwC. Polygon, a blockchain scaling and infrastructure development platform, has been working with many global players in this space, including Hamilton Lane and JPMorgan.

In January, Hamilton Lane announced the first of three tokenized funds backed by Polygon, bringing part of its $824 billion in assets under management on-chain. By tokenizing its flagship Equity Opportunities Fund, Hamilton Lane was able to lower the minimum required investment from an average of $5 million to $20,000. This move enables greater accessibility for smaller investors and creates a more liquid market for the asset.

JPMorgan also explored the potential of decentralized finance (DeFi) for wholesale funding markets by executing its first cross-border DeFi transaction on the Polygon network in November. This initiative is part of a pilot program that aims to leverage the benefits of blockchain technology to improve traditional financial markets.

Polygon offers a blockchain scaling solution that enables developers to build and connect decentralized applications. The platform has been working on providing institutional-grade infrastructure for tokenization, which is crucial for institutional investors who require reliable and secure systems. Colin Butler, the global head of institutional capital at Polygon, acknowledges the need for institutional-grade systems and solutions that are easy to implement, flexible, and upgradeable, which are essential for institutional investors to integrate tokenization into their existing systems.

Overall, tokenization presents a significant opportunity for institutional investors to improve liquidity and accessibility to a wider range of investors, and platforms like Polygon are working to provide the necessary infrastructure to support the growth of this market.

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Microsoft developing Web3 wallet for Edge browser

by Blockchain News

It would seem that Microsoft is working on a new Web3 wallet that will handle cryptocurrencies and NFTs. This wallet will be integrated into the Edge web browser. The wallet, the development of which has just begun, will be noncustodial, which means that Microsoft will not have access to users’ passwords or recovery keys. Also, the wallet will be incorporated inside the browser rather than functioning as an extension. It has been stated that users will be able to trade, transfer, and acquire crypto assets using the wallet. Also, the wallet will interface with Coinbase and MoonPay to make it simpler for customers to purchase cryptocurrency and deposit it into their wallets.

The software documenter Albacore was the one who released screenshots of the early user interface for the Edge wallet. Albacore also said that the decision by Microsoft to integrate a cryptocurrency wallet in its default browser was problematic. An introduction page for the wallet is shown in the user interface. This page invites users to try out the new feature and offer feedback on their experience with it. It seems that the wallet will also support NFTs, enabling users to search for their first NFTs across a variety of markets before storing and organizing their collections inside the wallet.

This move by Microsoft is a component of a larger attempt to improve the functionality of its Edge browser and play catch-up with industry rivals like Google Chrome and Apple Safari. Microsoft made the announcement in February that it will be integrating OpenAI’s ChatGPT, an AI-driven search engine and chat feature, into its Bing search engine and Edge browser. ChatGPT is a tool that allows users to have conversations powered by search results. Microsoft is sending a signal that it is committed to being competitive and relevant in an environment that is becoming more favorable toward cryptocurrencies with the release of a Web3 wallet.

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Vitalik Buterin Emphasizes Importance of Varied Guardians for Crypto Wallet Safety

by Blockchain News

In a post on Reddit’s r/ethereum community on March 16th, Ethereum co-founder Vitalik Buterin shared his approach to wallet security and emphasized the importance of having a varied set of guardians to ensure maximum safety for crypto assets held in self-custody through multisig and social recovery wallets. With an increasing number of crypto scams and hacks in recent years, and several major crypto firms going bust in 2022, self-custody and maintaining sufficient wallet safety procedures have become more critical than ever.

Multisig and social recovery wallets rely on guardians, which are external sources that can recover funds or approve transactions. Buterin noted that while the structures of these wallets differ, the guardians they rely on should be decentralized, meaning that they should be controlled by other people to minimize the concentration of power and risk of hacking, coercion, incapacitation, or death. Buterin advised that enough guardians should be controlled by other people, so if the wallet owner disappears, there are still enough other guardians left to recover their funds.

Furthermore, Buterin suggested that someone’s set of guardians should not know each other, as this reduces the risk of collusion to attack their wallets and assets. However, they should still be able to find each other in case something happens to the wallet owner. Buterin also recommended that guardians ask a security question that only they and the owner know when confirming an operation, which should only be confirmed when the correct answer is given.

For degen traders or those not making long-term hodl plays, Buterin stressed the need to use guardians that can respond quickly to suit their fast-moving needs. In such cases, guardians should be able to act quickly on short notice to pull money out if a contract becomes vulnerable, move money around if they are close to being liquidated, etc.

Finally, Buterin recommended testing each guardian at least once a year, as this will confirm that they haven’t forgotten or lost their accounts. With the increasing rate of crypto scams and hacks in recent years, maintaining sufficient wallet safety procedures has become more important than ever, and following Buterin’s advice on choosing guardians for multisig and social recovery wallets can help maximize the safety of crypto assets held in self-custody.

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Euler Finance hacker returns $5.4M

by Blockchain News

On March 16, Euler Finance, a decentralized finance (DeFi) protocol, announced that it had been the victim of a massive hack in which a total of $197 million was stolen. This was quickly dubbed the biggest DeFi hack of 2023 so far and sent shockwaves through the crypto community.

The hacker was able to drain the funds through a series of multiple transactions, and then used a multichain bridge to transfer the stolen funds from the Binance Smart Chain to Ethereum. The hacker then moved the stolen funds into the crypto mixer Tornado Cash, making it difficult to track the funds.

However, on March 18, there was a surprising development when the hacker reportedly returned around $5.4 million in Ether to Euler Finance’s deployer address. The funds were sent in three transactions, and it is unclear why the hacker decided to return the funds.

This is not the first time that a hacker has returned stolen funds after a high-profile hack. In 2016, the hacker who stole $55 million from the DAO returned the stolen funds, citing a “bug” in the code. It is possible that the hacker behind the Euler Finance hack had a change of heart, or was pressured to return the funds after Euler Finance announced a $1 million reward for information on the hacker’s identity.

Euler Finance has demanded that the hacker return 90% of the stolen funds within 24 hours to avoid possible jail time. It remains to be seen whether the hacker will comply with this demand, or whether the rest of the stolen funds will be returned.

The Euler Finance hack highlights the ongoing security risks in the DeFi space. DeFi protocols are designed to be open and transparent, but this also makes them vulnerable to attacks. It is important for DeFi protocols to take measures to improve their security, such as performing regular audits and implementing multi-factor authentication for user accounts. Only by doing so can DeFi protocols gain the trust of users and investors alike.

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Crypto Entrepreneur Sam Bankman-Fried Faces Judge Over Use of Encrypted Messaging Apps While on Bail

by Blockchain News

The United States Department of Justice (DOJ) began looking into charges of market manipulation in August 2021 and opened an investigation against the cryptocurrency exchange FTX as well as the company’s founder Sam Bankman-Fried. Throughout the course of the inquiry, Bankman-Fried was detained and placed under custody; he faces various charges, one of which is that of aiding and abetting illicit trade. In order to stay out of prison, he agreed to pay a bail bond of $250 million, which at the time was the highest amount in the annals of United States history.

Concerns have been raised regarding whether or not Bankman-Fried would comply with the terms of his release as a result of the fact that he used encrypted chat applications while out on bail. The Department of Justice stated that his use of Signal and other apps constitutes a danger to the current investigation because it may impair the agency’s capacity to obtain possible evidence. The argument was based on the fact that the applications may prevent the government from accessing potential evidence.

In response to these concerns, the attorney for Bankman-Fried will soon be proposing a revised bail package to Judge Kaplan. This new bail package is anticipated to contain more stringent monitoring mechanisms to ensure that the defendant complies with the terms of his release. The defense attorney has contended that Bankman-usage Fried’s of encrypted messaging applications was not done with the intention of obstructing justice but rather with the intention of maintaining touch with former coworkers and employees.

The case sheds attention on the difficulties that law enforcement authorities have when attempting to investigate and prosecute crimes using cryptocurrencies, which sometimes include intricate technological hurdles and the use of encryption in order to maintain personal anonymity. It is possible that we will see further instances similar to this one in the future as the usage of cryptocurrencies continues to rise. This raises problems about how the legal system can properly govern and oversee new technologies like cryptocurrencies and blockchain.

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Binance responds to US senators’ request

by Blockchain News

Binance, one of the world’s largest cryptocurrency exchanges, has responded to a letter from US senators sent on March 2nd, which raised concerns about the exchange’s activities and requested financial data. The senators, led by Elizabeth Warren, claimed that there is evidence that Binance and its American arm attempted to evade US regulators, evade sanctions and facilitated the laundering of at least $10 billion. They requested “all Binance and Binance subsidiary balance sheets from 2017 to the present,” as well as Anti-Money Laundering and similar policies, and documents about the relationship between Binance and Binance.US.

Binance’s response, which was reportedly sent to US regulators but did not include the financial data requested by the senators, was a 14-page document that emphasized the exchange’s compliance efforts and recognized past mistakes. Binance’s chief strategy officer, Patrick Hillman, noted in the letter that the exchange has built solid Know Your Customer and Anti-Money Laundering policies in recent years and leverages both internal tools and tools from established third-party vendors to scan user transactions and profiles in real time. Hillman also stated that between August 2021 and November 2022, Binance stopped over 54,000 transactions as a result of transaction monitoring alerts.

Despite Binance’s emphasis on compliance, the exchange’s response failed to address the senators’ concerns about transparency. The senators had claimed that “what little information about Binance’s finances is available to the public suggests that the exchange is a hotbed of illegal financial activity.” Binance has previously stated that Binance and Binance.US are separate entities with independent management and operations.

The US Securities and Exchange Commission (SEC) launched a probe into Binance.US in February regarding trading firms alleged to be connected to Binance CEO Changpeng Zhao. An investigative report has suggested that Binance was behind a transfer of roughly $400 million in funds from a Binance.US account to a trading firm managed by Zhao. The exchange has also faced regulatory scrutiny in other countries, including the UK and Japan.

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