Day: March 23, 2023

Federal Reserve Admits Blindsided Oversight of SVB Collapse

by Blockchain News

The recent collapse of Silicon Valley Bank (SVB) has prompted an internal investigation by the Federal Reserve to look into the failure of the bank and the Fed’s regulation of it. Federal Reserve Chairman Jerome Powell has admitted to being blindsided by the sudden collapse of SVB despite being under their supervision. This has raised concerns about the effectiveness of the Federal Reserve’s oversight of banks in the United States.

SVB’s collapse has been linked to the Federal Reserve’s successive interest rate hikes aimed at taming inflation, which eroded SVB’s long-term bonds purchased at near-zero rates. When SVB announced that it suffered a $1.8 billion after-tax loss and was looking to raise $2.25 billion, the market panicked, leading to a $160 billion wipeout in its market cap in 24 hours. Despite SVB CEO Greg Becker urging investors to “stay calm” and not to “panic”, depositors began to request withdrawals from SVB en masse, causing a bank run.

On March 10, the United States Federal Deposit Insurance Commission stepped in, taking possession of SVB to help depositors get access to their money. Emergency measures were put in place by the government soon after to guarantee all deposits at SVB. This has raised concerns about the stability of the banking system and the need for stronger regulatory measures to prevent such occurrences in the future.

Powell has confirmed that Vice Chairman Michael Barr will be testifying next week as part of the internal investigation. Powell’s interest is in identifying what went wrong and how it can be prevented in the future. However, some politicians, including U.S. Senator Elizabeth Warren, have expressed their frustration with Powell and his regulatory approach toward large banks in the U.S. over the last five years, which they believe has been weak.

Warren believes that Powell’s nine consecutive interest rate hikes to 5% pose a risk to the economy, potentially pushing it into a recession. She has also criticized Powell’s approach to banking regulation, stating that it is a factor to blame for the recent banking crisis. The collapse of SVB has highlighted the need for stronger regulatory measures to ensure the stability of the banking system and prevent future occurrences.

In conclusion, the collapse of Silicon Valley Bank has raised concerns about the effectiveness of the Federal Reserve’s oversight of banks in the United States. The internal investigation into the failure of the bank and the Fed’s regulation of it will hopefully identify what went wrong and how to prevent it in the future. The incident has also highlighted the need for stronger regulatory measures to ensure the stability of the banking system and prevent future occurrences.

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CFTC Receives DeFi Crash Course

by Blockchain News

The US Commodity Futures Trading Commission (CFTC) held their first Technology Advisory Committee meeting in Washington D.C. on March 22. As part of the scheduled meeting, members from the crypto space gave presentations to the CFTC, providing a DeFi crash course on key issues impacting the space. CFTC commissioner Christy Goldsmith Romero opened the meeting with remarks on the importance of understanding how DeFi works, as policy decisions related to DeFi are currently being made by regulators and lawmakers.

The panel began with an explainer on DeFi and blockchain technology, outlining the claimed benefits of blockchains, namely transparency, immutability, and privacy. Ari Redbord, head of legal and government affairs at blockchain intelligence firm TRM Labs, provided an overview of decentralization, highlighting the total value that entered DeFi in the last two years. Redbord concluded that DeFi is absolutely here to stay, and regulators should lead it in the right direction.

Carole House, executive in residence of venture firm Terranet Ventures, and Jill Gunter, chief strategy officer of blockchain infrastructure company Espresso Systems, then provided an overview of the current solutions for digital identity and noncustodial wallets, using Ethereum Name Service and MetaMask wallet as examples.

Michael Shaulov, founder of Fireblocks, and Dan Guido, founder of Trail of Bits, then presented the exploits and vulnerabilities that have taken place in the market. Throughout 2022, the top 10 exploits in crypto alone saw over $2 billion lost, with DeFi on the receiving end of 113 exploits out of the 167 carried out across the year.

The DeFi portion of the meeting ended with members unanimously voting for creating a Digital Assets and Blockchain Technology Subcommittee, which will focus on the “why of DeFi,” what problems it solves, use cases, vulnerabilities, and proposed legal and policy frameworks.

DeFi, short for decentralized finance, is a financial system built on public blockchains that seeks to disrupt traditional financial systems by enabling peer-to-peer transactions without the need for intermediaries. DeFi platforms provide access to financial services such as lending, borrowing, trading, and investing, with a focus on openness, transparency, and decentralization. The DeFi ecosystem has grown significantly in recent years, with DeFi’s total value locked reaching around $49.1 billion, according to DefiLlama, rising from around $15 billion at the beginning of January 2021.

Blockchain technology, the underlying technology powering DeFi, is a distributed ledger technology that enables decentralized transactions, immutability, and transparency. By removing intermediaries and enabling direct peer-to-peer transactions, blockchain technology provides a more efficient, secure, and transparent way of conducting transactions.

Digital identity is another critical aspect of DeFi, as it enables individuals to participate in the DeFi ecosystem without having to disclose their personal information. Digital identity solutions such as Ethereum Name Service and MetaMask wallet provide users with noncustodial wallets, enabling them to hold their own private keys and manage their own funds.

Exploits and vulnerabilities are an ongoing concern in the DeFi ecosystem, as the space remains largely unregulated. Hacks and exploits can result in significant financial losses for users, highlighting the need for more robust security measures and protocols.

In conclusion, the CFTC’s Technology Advisory Committee meeting highlighted the importance of understanding DeFi and its key issues, including blockchain technology, decentralization, digital identity, and exploits and vulnerabilities. The meeting also emphasized the need for regulators to lead DeFi in the right direction and proposed legal and policy frameworks to address current issues and vulnerabilities.

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Coinbase CEO Compares SEC to Soccer Refs in Criticism of Lack of Clarity Around Crypto Regulation

by Blockchain News

In a recent development, Coinbase, the popular cryptocurrency exchange, has been issued a Wells notice by the United States Securities and Exchange Commission (SEC), which typically precedes an enforcement action. The news prompted Coinbase CEO, Brian Armstrong, to criticize the SEC for its lack of clarity around crypto regulation. In a series of tweets, Armstrong compared the SEC to “soccer refs” in a game of pickleball, arguing that they could not agree on the rules of the “new game” of crypto regulation.

Armstrong’s criticism comes as the crypto industry faces ongoing debates around who should be the primary body regulating crypto, with the SEC being just one of many potential regulators. There has been concern among crypto companies that regulators lack a clear understanding of the industry and that their regulatory efforts may stifle innovation and drive activity offshore.

The reference to a “call they made back in April 2021” refers to the SEC’s approval of Coinbase’s application to go public. Armstrong argued that the company’s filings “clearly explained” its asset listing process and “included 57 references to staking.” However, the recent Wells notice suggests that the SEC has reversed its earlier position and is now seeking to take enforcement action against Coinbase.

Coinbase’s chief legal officer, Paul Grewal, also criticized the SEC’s lack of clarity around crypto regulation, claiming that the agency had provided “no clear rule book” and that “efforts to engage with the SEC are met with silence or enforcement actions.” Both Armstrong and Grewal appear to welcome the chance to use the “legal process” to provide the crypto industry with regulatory clarity and to defend Coinbase against the SEC’s enforcement action.

The news of the Wells notice has been widely condemned by the crypto community, with many agreeing that the SEC has reversed its earlier position regarding Coinbase. The community also seems to be throwing their support behind Coinbase, believing that the company will be fighting on behalf of the entire U.S. crypto industry as an unclear regulatory environment drives activity offshore.

In conclusion, the recent Wells notice issued to Coinbase by the SEC has sparked a debate around the lack of clarity and understanding among regulators when it comes to crypto regulation. Coinbase’s CEO and chief legal officer have criticized the SEC’s lack of clarity and seem to be welcoming the chance to use the legal process to provide the industry with regulatory clarity. The crypto community has widely condemned the notice, with many agreeing that the SEC has reversed its earlier position regarding Coinbase.

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Independent Reserve Considers Expansion to Hong Kong

by Blockchain News

Australia’s Independent Reserve Eyes Expansion to Hong Kong Amidst Proposed Licensing Regime for Crypto Exchanges

Independent Reserve, a cryptocurrency exchange based in Australia, is looking into expanding its business in Hong Kong following the city’s recent proposal of a licensing regime for crypto exchanges. The move is in line with Hong Kong’s ambitions to become Asia’s next cryptocurrency hub.

The Hong Kong Securities and Futures Commission (SFC) announced on February 20, 2023, that it will release a proposed licensing regime for cryptocurrency exchanges set to take effect in June of the same year. Under the new regime, Hong Kong-based crypto companies must comply with various measures relating to the safe custody of assets, such as Anti-Money Laundering (AML), Know Your Customer (KYC), counter-financing of terrorism (CFT) countermeasures, and conflict of interest disclosures and audits.

Adrian Przelozny, CEO of Independent Reserve, expressed his interest in expanding the company’s business in Hong Kong, saying that “right now, it is looking very interesting” and that “the recent announcement by the regulators in Hong Kong does make Hong Kong look like a friendly jurisdiction.” He added that his team will visit Hong Kong next week to meet with banks, regulators, lawyers, and compliance experts to determine if the location suits the company.

If Independent Reserve decides to expand to Hong Kong, it will join other cryptocurrency exchanges such as Huobi and OKX. Hong Kong’s proximity to mainland China, where cryptocurrency is heavily regulated, may make it an attractive destination for crypto exchanges looking to tap into the Chinese market.

Przelozny also commented on the region’s political relationship with China, stating that he believes China is testing how a more relaxed cryptocurrency regime looks in Hong Kong. Despite concerns over the potential impact of China’s regulations on Hong Kong’s cryptocurrency industry, the city’s government has remained committed to developing the industry and positioning itself as a hub for digital assets.

Independent Reserve’s potential expansion to Hong Kong is a significant move for the company and a promising sign for Hong Kong’s burgeoning cryptocurrency industry. As the city continues to establish itself as a hub for digital assets, more and more companies are likely to follow suit.

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Scammers adapt to survive during crypto winter

by Blockchain News

In a recent crypto crime webinar, Eric Jardine from Chainalysis revealed how scammers adapt their strategies to changes in market situations. While overall crypto scam revenue dropped in 2022, Jardine noted that not all scams behaved similarly. By sub-classing scams into types, he found that scammers were adapting to market conditions and turning to other strategies, such as giveaway and romantic scams, to prey on people’s emotions.

Jardine’s data revealed that as investment scams become less effective, romance and giveaway scams become more prevalent, indicating that scammers are not simply using the same script over and over again. They can adapt and change depending on market conditions. Additionally, Jardine highlighted that a multilevel marketing scam called hyperverse took a massive chunk out of the $5.9 billion lost to scams in 2022, racking up around $1.3 billion, which accounts for roughly 22% of scam revenue in that year.

The rise of romance and giveaway scams during the crypto winter is not surprising as scammers often prey on people’s emotions during difficult times. These scams are designed to target people who are feeling vulnerable and in need of support. Giveaway scams often promise free tokens or coins in exchange for personal information, while romance scams involve scammers posing as potential partners to gain access to victims’ personal information or money.

It’s important to note that these scams are not exclusive to the crypto world and have been used by scammers for years. However, the crypto world provides scammers with a new platform to reach a wider audience and target people who are investing in digital currencies. As the market conditions change, scammers will continue to adapt and find new ways to deceive people.

Investors and consumers must remain vigilant and educate themselves on the latest scams and tactics used by scammers. Platforms and exchanges can also play a significant role in detecting and preventing scams by implementing robust security measures and educating their users. By working together, we can help to mitigate the risks posed by scammers and protect the integrity of the crypto industry.

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Kraken Halts ACH Deposits and Withdrawals via Silvergate

by Blockchain News

In a move that has disrupted the cryptocurrency industry, Kraken, one of the world’s largest cryptocurrency exchanges, has announced that it will no longer support ACH deposits and withdrawals via Silvergate, citing difficulties with the automated clearing house. According to reports, Kraken sent an email notice to its users on March 22, notifying them that ACH deposits and withdrawals would no longer be available from March 27.

Kraken has assured its users that no other services would be affected by this change, including ACH instant purchases via Online Banking. The exchange has also advised its users to use alternative funding options, such as MVB Bank for Fedwire deposits and withdrawals, and other instant purchase options, to ensure an uninterrupted funding experience.

Kraken has joined the growing list of cryptocurrency exchanges that have halted their ACH deposits and withdrawals via Silvergate. The Winklevoss brothers-founded exchange, Gemini, also stopped accepting customer deposits and processing withdrawals through Silvergate ACH and wire transfers on March 2.

Silvergate is one of the crypto-friendly U.S. banks that collapsed in early March, alongside other lenders like Silicon Valley Bank, posing major challenges for the cryptocurrency industry. Many cryptocurrency firms hold significant exposure to these banks, which has led to disruptions in the cryptocurrency market.

Kraken joined the Silvergate Exchange Network in 2019, which allowed the exchange to offer deposits and withdrawals in U.S. dollars from Silvergate accounts. Kraken has assured its users that its team is working to make ACH funding available again as soon as possible.

Kraken is a cryptocurrency exchange founded in 2011 by Jesse Powell, who is currently the CEO. The exchange is based in San Francisco, California, and is one of the largest cryptocurrency exchanges in the world, trading over $1 billion daily, according to data from CoinGecko.

Silvergate is a U.S.-based bank that is known for its cryptocurrency-friendly policies. The bank is based in La Jolla, California, and was founded in 1988. In 2019, Silvergate launched the Silvergate Exchange Network, which allows cryptocurrency exchanges to offer deposits and withdrawals in U.S. dollars from Silvergate accounts.

Automated clearing house (ACH) is an electronic funds transfer system that allows businesses and consumers to send and receive payments electronically. ACH transfers are commonly used for direct deposit, payroll, and bill payments. ACH transfers are typically slower than wire transfers but are more cost-effective.

The cryptocurrency industry has faced significant challenges in recent years due to the lack of regulatory clarity and the volatile nature of cryptocurrencies. The industry has also faced challenges with banking relationships, as many traditional banks are hesitant to work with cryptocurrency firms due to concerns over money laundering and fraud. As a result, many cryptocurrency firms have turned to banks like Silvergate, which have more favorable policies towards cryptocurrencies.

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Ethics of Web3 Discussed at Paris Blockchain Week

by Blockchain News

Web3 technology is becoming increasingly pervasive in mainstream industries, raising important questions about the ethics needed to operate in the space. During the second day of Paris Blockchain Week 2023, a panel of professionals from the Web3 ecosystem took to the Venus de Milo stage to discuss the “Ethics of Web3.”

The panel was moderated by Moojan Ashghari, co-founder of Thousand Faces Web3 investment club. Ashghari opened the discussion by stating that the ethical framework or standard of technology will always lag behind the introduction of the technology. He emphasized that the biggest challenge of ethics is determining the right questions to ask in order to ensure that the technology does not harm us in the near or far future.

The panelists unanimously agreed that innovation typically comes before any ethical standard is implemented. Margaux Frisque, co-founder of and legal adviser to the Women in Web3 Association, highlighted the upcoming Markets in Crypto-Assets (MiCA) framework in the European Union as an example of turning ethics into law to protect people and innovation.

Frisque explained that the MiCA framework was inspired by feedback from past operations and will soon oblige businesses to segregate the funds of their clients from other bank accounts. She praised this as an example of good behavior that has been turned into hard law to protect people and innovation.

Paris Blockchain Week also hosted an entire panel discussion on the upcoming MiCA regulations, during which industry experts and regulators discussed the implications of European lawmakers’ proposals. While the proposal has faced several delays, it is set for a final vote in April 2023.

Loic Brotons, CEO of Galeon, echoed the sentiment that behavior influences ethics. He pointed out that “mixing innovation and ethics is a bit complicated” and that innovation typically comes first. He used the FTX scandal as an example, where the lack of verification led to problems. He stated that exchanges are now providing proof-of-reserves so that people can follow the money and verify their trust.

In conclusion, the Ethics of Web3 panel at Paris Blockchain Week highlighted the importance of implementing ethical frameworks in the Web3 ecosystem to protect people and innovation. The MiCA framework in the European Union was cited as an example of turning ethics into law to achieve this goal. As the Web3 ecosystem continues to grow and evolve, it is crucial to consider the ethical implications of new technologies to ensure their responsible and sustainable use.

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UAE’s Central Bank Nears Launch of Digital Dirham

by Blockchain News

The Central Bank of the United Arab Emirates (CBUAE) is taking significant steps towards the full launch of its central bank digital currency (CBDC) known as the digital dirham. As announced on March 23, the CBUAE has signed an agreement with Abu Dhabi-based G42 Cloud and digital finance services provider R3 to be the infrastructure and technology providers for the CBDC implementation. This is a crucial milestone in the development of the digital dirham and is expected to address the challenges of domestic and cross-border payments, while also promoting financial inclusion and supporting the country’s goal of becoming a cashless society.

The first phase of the CBDC strategy involves the soft launch of “mBridge,” a platform that facilitates CBDC transactions for international trade. The CBUAE is also working on proof-of-concept projects for bilateral CBDC bridges with India, as well as domestic CBDC issuance for both wholesale and retail use. These initiatives are expected to be completed within the next 12 to 15 months, according to the CBUAE’s announcement.

The digital dirham has been in development since 2019, with the CBUAE conducting extensive research and analysis to ensure the successful implementation of the CBDC. The CBUAE has also engaged with various stakeholders, including financial institutions, merchants, and other entities, to gather insights on the requirements and potential benefits of a CBDC.

The digital dirham is expected to bring numerous benefits to the UAE’s economy and financial system. One key advantage is the increased efficiency and speed of domestic and cross-border payments, which will enhance the country’s competitiveness in the global marketplace. The digital dirham is also expected to boost financial inclusion by providing greater access to financial services for underserved populations, such as low-income individuals and small businesses.

Moreover, the digital dirham is expected to reduce the cost and complexity of financial transactions, thereby promoting innovation and entrepreneurship in the UAE. The digital dirham’s transparency and security features will also help combat financial crime and money laundering, which are key priorities for the UAE’s government and financial regulators.

The CBUAE’s partnership with G42 Cloud and R3 is a significant step forward in the development of the digital dirham. G42 Cloud is a leading provider of cloud and artificial intelligence (AI) services in the UAE, while R3 is a global blockchain software firm. The collaboration between the three entities is expected to leverage their respective expertise and technologies to ensure the successful implementation of the digital dirham.

In conclusion, the UAE’s central bank is making significant progress towards the launch of its digital dirham CBDC. The implementation of the digital dirham is expected to bring numerous benefits to the UAE’s economy and financial system, including increased efficiency, financial inclusion, and innovation. The CBUAE’s partnership with G42 Cloud and R3 is expected to be a key driver of the digital dirham’s success, and the future looks promising for the UAE’s digital currency.

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Banking crisis could push cryptocurrency regulation into gray area

by Blockchain News

The world has been facing a banking crisis that has caused a great deal of uncertainty and market anxiety. According to Circle CEO Jeremy Allaire, this could lead to increased regulatory ambiguity in the cryptocurrency market. Allaire expressed his concerns in a Twitter thread on March 23, discussing the aftermath of the collapse of the Silicon Valley Bank (SVB) and the general exposure of the financial system in the United States.

Allaire’s concerns are not unfounded, as the US banking system has faced several challenges in recent years, including the 2008 financial crisis and the COVID-19 pandemic. The collapse of SVB, a bank that primarily serves the technology sector, has only added to the worries about the stability of the financial system in the country.

As a result of the ongoing banking crisis, investors and businesses are becoming increasingly interested in cryptocurrencies as an alternative to traditional banking. However, the lack of clear regulation in the cryptocurrency market can lead to further uncertainty and risk.

Allaire believes that the current market dynamics could push the cryptocurrency market into a gray area in terms of regulation, as governments and financial regulators struggle to keep up with the rapid growth of cryptocurrencies. This could potentially lead to greater regulatory ambiguity and more risk for investors and businesses.

Circle is a cryptocurrency company that issues the USD Coin (USDC), a stablecoin that is pegged to the US dollar. The company has been actively advocating for more regulatory clarity in the cryptocurrency market to help promote growth and adoption.

In conclusion, the ongoing global banking crisis could have a significant impact on the regulation of cryptocurrencies. The lack of clear regulatory guidelines could create more uncertainty and risk for investors and businesses, making it essential for governments and financial regulators to act quickly to provide clarity and stability to the market.

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Web3 Revolutionizes Startup and Investor Landscape

by Blockchain News

At Paris Blockchain Week 2023, a panel of experts in Web3 gathered to discuss the ways in which this new paradigm is transforming the startup and investor landscape. The panel discussion titled “Crypto, Culture, and Capital: How Web3 is Changing the Game for Startups and Investors” focused on the opportunities and challenges that come with the emergence of Web3.

Web3 represents a fundamental shift from the traditional Web2 paradigm, with new opportunities for startups and investors. The panelists discussed how Web3 startups are different from Web2 startups, with different cultures shaping and affecting the various ecosystems.

Laurenz Apiarius, founder and managing partner of Blockwall Digital and Blockwall Capital, noted that there are positive and negative effects of the Web3 revolution. While there have been awesome milestones achieved by Web3 entrepreneurs, there are also negative effects resulting from entrepreneurs who take advantage of the Web3 narrative. Some entrepreneurs overestimate their valuation, failing to deliver on their promises, which harms investors who lose money in the process.

Amos Meiri, founding partner of Node Capital, emphasized the need for investors to understand the technical, legal, and marketing aspects of the projects being built. Meiri stated that it is crucial for investors to support entrepreneurs in the right way, helping them navigate the challenges of the Web3 landscape.

Igneus Terrenus, head of partner relations of BitDAO, spoke about the decentralized autonomous organization (DAO) model of Web3 startup governance. DAOs are organizations that operate through rules encoded as computer programs, with decisions made through a consensus mechanism. Terrenus noted that while the DAO is not a perfect model, it offers exciting opportunities for startups and investors. DAOs can help to reduce the need for intermediaries, increasing efficiency and reducing costs.

However, the success of DAOs depends on incentivization and education of stakeholders. DAO stakeholders need to be incentivized to participate in the decision-making process, and educated about the rules and processes involved.

The panelists also discussed the challenges that entrepreneurs face in navigating the Web3 landscape. Web3 startups require a deep understanding of technology and legal frameworks, which can be daunting for many entrepreneurs. In addition, the lack of clear regulatory frameworks for Web3 startups can make it difficult for entrepreneurs to operate in a compliant manner.

Despite these challenges, the panelists were optimistic about the potential of Web3 to transform the business landscape. With its disruptive potential and new opportunities for startups and investors, Web3 represents a major shift in the way we think about business and innovation.

The emergence of Web3 has also led to a renewed focus on building community resilience to crises through mutual aid. The Web3 paradigm emphasizes decentralized, peer-to-peer networks that enable individuals and organizations to collaborate and support each other. This can be seen in the rise of decentralized finance (DeFi) platforms that allow individuals to lend, borrow, and invest in a decentralized manner, without the need for intermediaries.

Overall, the panel discussion highlighted the exciting opportunities and challenges that come with the Web3 revolution. With its potential to disrupt traditional business models and provide new opportunities for startups and investors, Web3 is set to transform the way we think about innovation and entrepreneurship.

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Bitcoin (BTC) $ 27,401.34 1.44%
Ethereum (ETH) $ 1,657.07 0.16%
Litecoin (LTC) $ 65.77 0.13%
Bitcoin Cash (BCH) $ 231.90 6.89%