Day: March 27, 2023

Investors Flock to US Money Market Funds Amid Banking Crisis

by Blockchain News

As the global banking crisis continues to fuel concerns among investors, the popularity of US money market funds is surging. According to Emerging Portfolio Fund Research (EPFR) data obtained by the Financial Times, more than $286 billion has been invested in these funds so far in March. The inflows are the highest seen in a month since the emergence of the Covid-19 pandemic.

The top beneficiaries of this trend are Goldman Sachs, JPMorgan Chase, and Fidelity. The figures show that Goldman Sachs’ money funds have grown by 13%, receiving $52 billion in investment. JPMorgan’s funds have seen inflows of nearly $46 billion, while Fidelity has enjoyed nearly $37 billion in investment. These funds are offering their best yields in years, as the US Federal Reserve continues to raise interest rates in a bid to curb inflation.

Money market funds are a popular choice for investors during uncertain times because they offer high liquidity and low risk. The current crisis in the banking sector has only served to amplify these qualities. The fear of liquidity constraints and potential bank failures has caused many investors to seek out safer investments, and US money market funds are delivering the kind of stability that investors crave.

In the seven days leading up to March 22, total money market fund assets increased by $117.42 billion to $5.13 trillion, according to a report from the Investment Company Institute. Government funds increased by $131.84 billion, while prime funds decreased by $10.83 billion. Tax-exempt money market funds shrank by $3.61 billion.

The influx of cash into money market funds is driven by fears surrounding the health of the financial system. Banks in the US and Europe are facing liquidity constraints as monetary policy tightens, and investors are wary of the potential risks associated with these developments.

For example, on March 24, shares of Deutsche Bank dropped due to an increase in the cost of insuring against its potential default risk. The bank’s five-year credit default swaps (CDS) climbed 19 basis points from the previous day, closing at 222 bps, according to Reuters, citing S&P Global Market Intelligence data. Meanwhile, in the US, there is still uncertainty surrounding regional banks, as insurance on default for financial services firms Charles Schwab and Capital One soared last week. The latest data shows that credit default swaps jumped over 80% to 103 bps as of March 20.

The surge in popularity of money market funds underscores the ongoing concerns of investors in the face of a global banking crisis. With interest rates continuing to rise, and fears of liquidity constraints and bank failures mounting, it seems likely that this trend will continue in the months ahead.

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Coinbase Identifies Four Key Innovations for its Layer-2 Network

by Blockchain News

Coinbase, a leading cryptocurrency exchange, has outlined four critical innovations that should be built on its newly launched layer-2 network, Base. The exchange believes that the implementation of these innovations will help to strengthen the network and enhance user experience. The network is powered by the layer-2 network Optimism and secured by Ethereum, and the innovations include an on-chain reputation system, an on-chain limit order book exchange, tools for the decentralized finance (DeFi) ecosystem, and inflation-pegged “flatcoins.”

Coinbase is one of the largest cryptocurrency exchanges globally, and it launched its layer-2 network, Base, approximately a month ago. The network is secured by Ethereum and powered by Optimism, another layer-2 network. Coinbase is now looking to add new features to the network to enhance its functionality and user experience.

The first innovation identified by Coinbase is an on-chain reputation system. This system will allow users to build a reputation on the network based on their actions, and it will help to incentivize good behavior while deterring bad actors. With the implementation of an on-chain reputation system, users will be able to trust each other more, and this will increase the adoption of the network.

The second innovation is an on-chain limit order book (LOB) exchange. This feature will allow users to trade cryptocurrencies with a higher degree of control over their orders. By using an LOB exchange, users can set specific price targets and ensure that their orders are executed at the desired price. This innovation will help to improve the trading experience for users and increase liquidity on the network.

The third innovation is tools that will make the decentralized finance (DeFi) ecosystem safer. DeFi has gained significant popularity in recent years, but it is still a relatively new and untested market. Therefore, it is crucial to have tools in place that can mitigate risks and increase the security of the DeFi ecosystem. Coinbase’s tools will aim to enhance the security of DeFi applications and protect users from potential hacks and scams.

Finally, Coinbase has identified inflation-pegged “flatcoins” as another critical innovation that should be built on its layer-2 network. Flatcoins are stablecoins that are pegged to the inflation rate of a specific country or region. By using flatcoins, users can protect their funds from inflation while also maintaining stability. Coinbase believes that the implementation of flatcoins will increase the use case for cryptocurrencies and make them more accessible to a broader range of people.

In conclusion, Coinbase’s layer-2 network, Base, has the potential to become a significant player in the cryptocurrency market. By identifying these four critical innovations, Coinbase is positioning itself as a leading innovator in the space. As the network continues to grow, it will be exciting to see how these new features will shape the future of the cryptocurrency market.

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Titanium Blockchain CEO Sentenced to Four Years in Prison

by Blockchain News

In a cryptocurrency fraud scheme that took place in late 2017 and early 2018, investors purchased BARs, a crypto token, to participate in an initial coin offering (ICO) for Titanium Blockchain Infrastructure Services (TBIS), a company founded by Michael Stollery. The ICO raised approximately $21 million from investors in the United States and overseas. However, in 2018, the United States Securities and Exchange Commission (SEC) accused Stollery of not registering the ICO with the regulator and other allegations.

In July 2022, Stollery pleaded guilty to one count of securities fraud for his role in the fraud scheme. He admitted to falsifying aspects of TBIS’ whitepapers, planting fake client testimonials on the TBIS website, and falsely claiming business relationships with the United States Federal Reserve, which misled investors about TBIS’ legitimacy and prospects for profit. He also admitted to commingling ICO investors’ funds with his own and using a portion to pay for unrelated expenses.

Although Stollery was facing up to 20 years in prison, he will instead serve a total of four years and three months for his involvement in the cryptocurrency fraud scheme. The SEC has been increasing its actions against the cryptocurrency space in recent years, with 30 enforcement actions against digital-asset market participants in 2022, up 50% from the 20 actions in 2021. Of the 30 enforcement actions in 2022, 14 involved initial coin offerings (ICOs), with more than half of these including a fraud allegation.

According to Abe Chernin, vice president of Cornerstone Research and co-head of its FinTech practice, the SEC continues to pursue actions alleging that tokens issued in ICO-related unregistered securities offerings were investment contracts subject to SEC regulation and enforcement. Chernin also noted an increase in assistance to the SEC from outside agencies and organizations during crypto-related investigations under the Gensler administration.

Overall, the sentencing of Michael Stollery is a reminder of the SEC’s increased scrutiny of the cryptocurrency industry and its commitment to prosecuting fraudulent activities.

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First Citizens Bank to Acquire Silicon Valley Bank Deposits and Loans

by Blockchain News

First Citizens Bank, a North Carolina-based bank, is set to acquire Silicon Valley Bank’s deposits and loans following the latter’s collapse in March 2023. The Federal Deposit and Insurance Corporation (FDIC) approved the purchase and assumption agreement, which includes the acquisition of $72 billion of Silicon Valley Bridge Bank, National Association’s assets at a discount of $16.5 billion. The agreement also stipulates that 17 former branches of Silicon Valley Bank will operate as First Citizens Bank and Trust Company starting on March 27.

As part of the agreement, all Silicon Valley Bank depositors will automatically become depositors of First Citizens Bank. The FDIC will keep approximately $90 billion in securities and other assets in receivership for disposition. In addition, the FDIC will receive equity appreciation rights in First Citizens BancShares, Inc. common stock worth up to $500 million.

First Citizens Bank is now the 30th largest commercial bank in the US, with $167 billion in total assets and $119 billion in deposits as of March 10. The acquisition of Silicon Valley Bank’s deposits and loans is expected to boost the bank’s assets and expand its operations in California’s tech hub.

Silicon Valley Bank collapsed on March 10 after rumors of a severe liquidity crisis sparked a bank run. The FDIC was then appointed as the receiver of the failed bank and attempted to auction off the fallen bank’s assets. The process included two separate auctions for Silicon Valley Bank’s assets: one for its traditional deposits unit and the other for its private bank, which catered to high-net-worth individuals and was housed within its retail operations.

Several firms were reportedly planning or had submitted bids for Silicon Valley Bank. First Citizens Bank was one of them, with reports suggesting it had been planning a bid as early as March 18. Three days later, the bank reportedly submitted a bid for all of Silicon Valley Bank. A First Citizens spokesperson declined to comment on “market rumors or speculation” at the time. Valley National Bancorp was also understood to have submitted a bid for the collapsed bank.

Meanwhile, Citizens Financial Group, another US regional bank, was reportedly preparing to submit an offer for Silicon Valley Bank’s private banking arm. The bank’s collapse highlights the challenges faced by banks in the tech industry and the importance of maintaining adequate liquidity. The acquisition by First Citizens Bank underscores the bank’s confidence in the US banking system and its ability to weather crises.

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Kokomo Finance Accused of $4M Exit Scam

by Blockchain News

Kokomo Finance, an open-source and noncustodial lending protocol on Optimism, has been accused of an exit scam worth $4 million. The protocol allegedly plucked user funds via a smart contract loophole, causing the Kokomo Finance token to plummet 95% in value in a matter of minutes. Blockchain security firm CertiK alerted its followers to the situation in a tweet on March 26.

According to CertiK, the deployer of the KOKO token attacked the smart contract code of a wrapped Bitcoin token, cBTC, by resetting the reward speed and pausing the borrow function. An address beginning with “0x5a2d..” then approved the new cBTC smart contract to spend over 7000 Sonne Wrapped Bitcoin (So-WBTC). The attacker then called another command to swap the So-WBTC to the 0x5a2d address, which produced a $4 million profit, according to the security firm.

CertiK also noted that Kokomo Finance removed all social media accounts immediately following the alleged rug pull. The protocol rose up the ranks quickly in recent days, with blockchain data platforms like CoinGecko and DefiLlama officially tracking it shortly after Kokomo Finance went live on Optimism on March 25. Recent screenshots reveal that more than $2 million was locked into Kokomo Finance prior to it falling more than 97%.

Over 72% of the total value locked in the Kokomo Finance protocol came in the form of wrapped Bitcoin, according to data from DefiLlama. While most aspects of the audit were passed, “typographical errors” were found, and the owner of the KOKO token was also found to have a one-time ability to mint 45% of the maximum supply to an arbitrary address.

Kokomo Finance is a lending protocol that enables users to trade for wBTC, Ether (ETH), Tether (USDT), USD Coin (USDC), and Dai (DAI). It operates on the Optimism layer 2 scaling solution, which allows for faster and cheaper transactions on the Ethereum network.

The exit scam allegations against Kokomo Finance have raised concerns about the security of decentralized finance (DeFi) protocols. While DeFi has enabled greater financial freedom and accessibility for users, it has also brought with it new risks and challenges. Smart contract vulnerabilities and security loopholes can be exploited by bad actors, as in the case of Kokomo Finance.

Despite this incident, the DeFi space continues to grow and evolve, with new protocols and platforms emerging all the time. As the industry matures, it is likely that greater attention will be paid to security and risk management, in order to protect users and prevent similar incidents from occurring in the future.

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Chinese Banks Support Hong Kong Crypto Firms

by Blockchain News

Hong Kong-based crypto firms preparing for the new licensing regime for crypto exchanges in June have found unexpected allies in the region. Chinese state-owned banks, including Shanghai Pudong Development Bank, the Bank of Communications Co., and Bank of China Ltd., have reportedly started offering banking services to crypto firms in Hong Kong or have made inquiries with them, according to “people with knowledge of the matter” cited in a Bloomberg report published on March 27.

The Chinese banks’ support for Hong Kong’s crypto industry is noteworthy given the Chinese government’s ongoing ban on crypto-related activities. One source even claimed that a Chinese bank sales representative visited a crypto firm’s main office to pitch banking services.

“This development is encouraging for both the industry and the broader ecosystem, as it demonstrates a maturing understanding of the crypto sector by traditional financial institutions,” said a representative from a Hong Kong-based crypto firm.

It is unclear which crypto firms have been approached by the state-owned Chinese banks, as a spokesperson for a firm declined to comment. However, this move is seen as a positive step towards legitimizing crypto-related activities in Hong Kong.

In October 2022, the Hong Kong government proposed introducing its own bill to regulate crypto-related activities in the region. The Securities and Futures Commission of Hong Kong released a proposal for a regime for cryptocurrency exchanges on February 20, which is set to take effect in June. The new licensing regime will require crypto exchanges to obtain licenses from the Securities and Futures Commission and comply with regulations on KYC (know-your-customer), AML (anti-money laundering), and other areas.

Despite China’s ban on crypto-related activities, representatives from the China Liaison Office have reportedly been attending Hong Kong crypto gatherings. This could signal a shift in China’s approach to cryptocurrencies, as the country looks to tap into the growing market for digital assets.

The move by Chinese banks to offer banking services to crypto firms in Hong Kong also reflects a growing trend among traditional financial institutions to embrace cryptocurrencies. As more countries introduce regulations for crypto-related activities, financial institutions are starting to recognize the potential of digital assets and the need to integrate them into their existing systems. This move could help bridge the gap between the crypto industry and traditional finance, paving the way for greater adoption of cryptocurrencies.

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Terra co-founder sought for arrest

by Blockchain News

South Korean authorities are intensifying their efforts to track down and arrest Shin Hyun-Seong, also known as Daniel Shin, co-founder of cryptocurrency platform Terra. This follows the recent arrest of his fellow co-founder, Do Kwon, who was detained in Montenegro while attempting to board a plane using fake travel documents.

The authorities have suspected the involvement of numerous Terra colleagues in promoting unstable investment opportunities with Terra (LUNA) and TerraUSD (UST) tokens since November 2022. However, with Kwon’s arrest on March 23, 2023, they are now making a fresh attempt at Shin’s arrest, according to a Bloomberg report. The prosecutors are reportedly undertaking a renewed push to detain Shin, but no official announcement has been made public in this regard.

Authorities have previously alleged that Shin earned roughly $105 million in profits from illegal sales of LUNA tokens before Terra’s collapse. However, Shin claims to have had no involvement in Terra after January 2020, as evidenced by his LinkedIn profile. Nonetheless, arrest warrants have been sought for Shin, along with three investors and four engineers, on charges of fraud, breach of duty, violation of capital markets law, and illegal fundraising.

Meanwhile, Kwon remains detained in Montenegro after being caught with fake travel documents. While his legal representative claims that there was no intended use of fake documents, the Montenegrin court approved the extension of Kwon’s detention by 30 days upon request by the authorities. Kwon’s identity was not clearly identified, and he is considered a foreign national.

Terra, founded in 2018, is a blockchain-based platform that enables users to transact with stablecoins backed by fiat currencies. The platform’s main token, LUNA, has seen significant growth in recent years, with a market capitalization of over $20 billion as of March 2023. However, the platform has also been the subject of controversy, with allegations of insider trading and market manipulation.

The case against Terra’s co-founders and colleagues underscores the risks and challenges associated with investing in cryptocurrencies and other digital assets. As the market continues to evolve and attract greater scrutiny from regulators and law enforcement agencies, investors must exercise caution and due diligence to protect their interests.

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European Crypto Startups See Record VC Investment in 2022

by Blockchain News

The year 2022 was a tumultuous one for the cryptocurrency industry, with an ongoing bear market and the high-profile collapses of some of its most prominent players, such as Terra and FTX. However, despite these setbacks, venture capital (VC) investors remained steadfast in their support for crypto startups, with a new study released by European investment firm RockawayX revealing that VC investment in European crypto startups reached an all-time high of $5.7 billion in 2022.

This marks a significant increase from the previous year’s investment of $2.2 billion, indicating a strong appetite for innovation and growth in the European crypto space. Notably, decentralized finance startups saw a 120% increase in investments, reaching a total of $1.2 billion in 2022.

Viktor Fischer, the CEO of RockawayX, emphasized that the crypto market is cyclical and that startup funding activity can hold steady even during a market downturn. He pointed to the 2018 winter, when “the total digital asset market cap fell by 80%, but startup funding activity held steady.” Investments made during such periods can lead to tech and usage traction alongside “bull market” price recoveries.

Europe is home to the highest number of crypto startups globally, with 3,977 startups based in the region, according to headquarters location. However, it lags behind the United States in the number of unicorns and startups with over $1 million in funding.

Top global investors in European startups include Animoca Brands, Coinbase, Blockchain Capital, and the Digital Currency Group. In Europe, investment in startups that provide financial services made up more than half (52%) of all investments, with infrastructure and Web3 making up 32% and 16%, respectively.

Compared to 2021, investment in financial service-based startups declined by 19%, while investment in infrastructure grew by 24%. This shift in investment focus reflects a growing interest in the underlying technology and infrastructure of the crypto industry.

Europe’s rising prominence as a crypto-friendly region comes as lawmakers in the European Union (EU) finalize the Markets in Crypto-Assets (MiCA) regulations. These regulations have been delayed twice due to translation issues, as laws passed in the EU must be translated into all 24 official languages of the member states.

If passed, MiCA will provide a regulatory framework for crypto-assets, including stablecoins, and establish requirements for issuers and service providers. The final vote on the regulations is set for April 2023, and their adoption is expected to provide greater clarity and stability for the European crypto industry.

In conclusion, despite the challenges faced by the crypto industry in 2022, European crypto startups continued to attract significant VC investment. As the industry continues to evolve and mature, investment focus is shifting towards infrastructure and Web3, reflecting a growing interest in the underlying technology of the crypto ecosystem. 

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Binance expands with blockchain hub in Georgia

by Blockchain News

Binance, one of the world’s largest cryptocurrency exchanges, is expanding its global reach with the opening of a new blockchain hub in Georgia. The move is aimed at promoting further adoption of cryptocurrencies in the country, creating more job opportunities, and attracting talent to the Georgian blockchain sector.

Binance referred to the hub as a “Web3 outpost,” and it intends to use it to promote industry education and innovation, as well as to organize educational and hackathon events. The hub is expected to create dozens of new jobs by the end of 2023, in addition to the 25 people already employed by Binance’s Georgia division.

Georgia has become a hub for cryptocurrency and blockchain companies due to its favorable regulatory environment and low electricity costs. In recent years, the country has attracted a growing number of blockchain startups and has become known for its progressive approach to crypto regulation.

Binance’s expansion into Georgia is part of the company’s broader strategy to expand its global reach and promote the adoption of cryptocurrencies around the world. The company has been actively seeking out new markets and partnerships, and has launched a number of new initiatives aimed at increasing awareness and adoption of cryptocurrencies.

In addition to its blockchain hub in Georgia, Binance has also launched a number of other initiatives aimed at promoting the adoption of cryptocurrencies. These include Binance Academy, an educational platform that provides free online courses on blockchain and cryptocurrency, and Binance Launchpad, a platform that helps blockchain startups raise funds through initial coin offerings (ICOs).

Binance’s expansion into Georgia is a positive sign for the global crypto industry, which has faced regulatory challenges in many countries. By opening a new blockchain hub in a crypto-friendly country like Georgia, Binance is helping to further legitimize the use of cryptocurrencies and blockchain technology, and is paving the way for greater adoption and innovation in the industry.

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MicroStrategy Acquires More Bitcoin Amid Market Recovery

by Blockchain News

Business intelligence firm and major Bitcoin investor, MicroStrategy, has announced that it is acquiring more Bitcoin amid the recent cryptocurrency market recovery. According to a recent form 8-K filing with the United States Securities and Exchange Commission, MicroStrategy repaid its $205 million loan to Silvergate at a 22% discount and acquired 6,455 Bitcoin for $150 million. The latest purchase brings the total amount of BTC held by the company to 138,955, which was bought for $4.1 billion at an average price of $29,817 per coin.

The company acquired its latest batch of Bitcoin between Feb. 16, 2023 and March 23, 2023. The purchase marks MicroStrategy’s first Bitcoin acquisition of 2023, with the previous purchase taking place in late December 2022, when the company bought 2,395 BTC for $42.8 million at an average price of $17,181 per coin during the period from Nov. 1 to Dec. 21.

In addition to the BTC purchase, MicroStrategy sold class A common stock worth $500 million. According to the latest updates, the company issued and sold an aggregate of 1,348,855 shares under the sales agreement for aggregate net proceeds of approximately $339 million.

As previously announced, MicroStrategy’s subsidiary, MacroStrategy, received a $205 million term loan from Silvergate Bank in March 2022 under its Silvergate Exchange Network Leverage program. The loan was collateralized by certain Bitcoin owned by MacroStrategy and had a scheduled maturity date of March 23, 2025. Under the terms of the credit agreement, MacroStrategy was required to maintain a loan to collateral value ratio of less than 50%.

On March 24, 2023, MacroStrategy and Silvergate entered into a prepayment, waiver, and payoff to credit and security agreement, with MacroStrategy voluntarily prepaying Silvergate around $161 million in full repayment. According to the filing, “Upon Silvergate’s receipt of the payoff amount, the credit agreement was terminated, and Silvergate released its security interest in all of MacroStrategy’s assets collateralizing the loan, including the Bitcoin that was serving as collateral.”

MicroStrategy’s co-founder and former CEO, Michael Saylor, took to Twitter to announce the loan repayment and Bitcoin acquisition. The company’s ongoing acquisition of Bitcoin has made it one of the largest institutional holders of the cryptocurrency.

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Bitcoin (BTC) $ 26,070.99 1.97%
Ethereum (ETH) $ 1,574.47 1.23%
Litecoin (LTC) $ 64.29 0.80%
Bitcoin Cash (BCH) $ 206.94 1.00%