The DeFi world was rocked when Euler Finance fell victim to the biggest DeFi hack of 2023, with $197 million in funds stolen. Since then, the crypto community has been closely following the on-chain movements of the stolen funds, hoping to track down the attacker. Blockchain investigator Chainalysis recently identified that 100 ETH from the stolen funds was transferred to an address linked to North Korea.
The hacker responsible for the Euler Finance hack also transferred 3,000 ETH to Euler’s deployer account without disclosing their intent. However, no other transfers have been made at the time of writing, leaving many in the crypto community speculating whether the hacker was trolling or if they genuinely considered accepting Euler Finance’s bounty reward of $20 million.
While Chainalysis has linked the stolen funds to North Korea, it has also highlighted the possibility of misdirection by other hackers. It is unclear whether North Korea is actually involved in the hack or if the hacker was simply using the address to throw investigators off their trail.
The Euler Finance hack has raised questions about the security of DeFi platforms, as Euler Labs CEO Michael Bentley expressed disappointment in the hack, revealing that ten separate audits over two years had assured its security. The fact that the hacker was still able to access and steal the funds has highlighted the need for stronger security measures in DeFi platforms.
The use of DeFi platforms has skyrocketed in recent years, and the potential rewards have attracted many hackers seeking to exploit vulnerabilities in the system. This has led to an increase in DeFi hacks, with many experts calling for stronger security measures to protect investors’ funds. The Euler Finance hack serves as a reminder that even with multiple security audits, DeFi platforms are not immune to hacks, and investors should exercise caution when investing in these platforms.
Chainalysis, a US blockchain analysis firm, released a new research study Thursday, showing that Eastern Asia is the fourth-largest cryptocurrency market, receiving $777.5 billion worth of crypto between July 2021 and June 2022.
This figure represents just under 13% of global transaction volume during that time period.
As a result, the study identified that Eastern Asia has lost ground to other regions this year. The region saw year-over-year transaction volume growth of just 4%, making it the region with the lowest crypto activity this year, according to the research. Last year, the region was ranked as the third biggest region by crypto transaction volume at this time.
Source: Chainalysis
The biggest reason for this loss is likely due to the decline in cryptocurrency activity in China, the largest market in the region. While the study identified that China saw its crypto transaction volume drop by 31% compared to the previous year-long period, neighbors like Japan more than doubled transaction volume. This is likely due to Chinese government crackdowns on crypto activity over the last year, the study revealed.
Besides the low cryptocurrency trading activities in the region, the data indicates that Eastern Asia has surprisingly low DeFi adoption. Over the year-long time period Chainalysis conducted this study, DeFi made up just 28% of transaction volume in Eastern Asia, less than all but one other region – Eastern Europe – as shown in the figure below.
The data shows that Japan’s crypto market has grown significantly over the year-long period studied, with on-chain transaction volume increasing 113.2% over the previous 12 months, compared to 72% for the next-closest country, South Korea, and 31.1% for China.
To explain Japan’s resilient crypto activities, one of the reasons is due to the relatively high embrace of DeFi. Despite having a smaller overall crypto market, Japan’s DeFi transaction volume is almost double the size of South Korea’s at $56.7 billion and close to China’s total of $67.6 billion, as indicated in the figure below. The research shows that decentralized exchange (DEX) trading may be eating into trading on centralized services, which have not witnessed similar growth.
As the data highlighted above, China has witnessed a huge decline in cryptocurrency activity, likely due to government crackdowns imposed last year. However, despite a 31.1% drop-off in transaction volume, China remains the biggest crypto market in the region, the fourth overall in the world, and ranked tenth for grassroots adoption on Chainalysis’ global crypto adoption index.
While government crackdowns have had a clear impact, China’s cryptocurrency market remains strong, with healthy transaction volumes across both centralized and DeFi services. The figure below shows that China’s trading activity has started to pick back up in recent months, and even mining, which saw a massive fall in activity following the ban, has made a comeback in the country.
Early this month, Chainalysis released a similar study showing that emerging markets, such as the region of the Middle East and North Africa (MENA), dominated this year’s global crypto adoption index. Latin America became the second in transaction volume growth, North America was third, and Central and Southern Asia close behind.
Bank of New York (BNY) Mellon has announced that its digital assets custody service is now live as it seeks to deepen its foothold in the emerging cryptocurrency ecosystem.
Ranked amongst the oldest and most capitalized banks in the United States, BNY Mellon said the digital assets custody solution will aid its role as a major bridge between the emerging crypto world and the broader traditional financial ecosystem.
“Touching more than 20% of the world’s investable assets, BNY Mellon has the scale to reimagine financial markets through blockchain technology and digital assets,” said Robin Vince, Chief Executive Officer and President at BNY Mellon. “We are excited to help drive the financial industry forward as we begin the next chapter in our innovation journey.”
The bank said it launched the crypto custody service by integrating the technologies of both Fireblocks and Chainalysis, noting that these firms will help it maintain the adequate security and compliance necessary to stay relevant in the highly competitive industry now and in the future.
Arguably, BNY Mellon is positioning itself for a future that digital currencies may soon dominate. The banking giant said it commissioned a survey in which 91% of respondents who are institutional investors said they would be interested in injecting funds into tokenized products. As many as 41% of these respondents are currently holding crypto on their balance sheet, and 15% plan to acquire these assets in the near future.
With this realization, the bank said it is looking to float new products and solutions that can help it converge the needs of its traditional clients as well as those who consider crypto to be the future.
“As the world’s largest custodian, BNY Mellon is the natural provider to create a safe and secure Digital Asset Custody Platform for institutional clients,” said Caroline Butler, CEO of Custody Services at BNY Mellon. “We will continue to innovate, embrace new technology and work closely with clients to address their evolving needs.”
US blockchain analysis firm Chainalysis released its latest report Wednesday, indicating that the region of the Middle East & North Africa (MENA) enjoys the fastest growing tendency in terms of cryptocurrency adoption despite it is viewed as one of the smaller crypto markets in the global adoption index.
According to the report, users in the MENA region obtained $566 billion in cryptocurrency from July 2021 to June 2022 – an increase of 48% from what they received the year before.
The report further identified MENA as the home to three of the top thirty countries in this year’s index: Turkey (12), Egypt (14), and Morocco (24). The research identified the key drivers of such adoption in these nations include savings preservation, remittance payments, and increasingly permissive crypto regulations.
In Turkey and Egypt, rapid fiat currency devaluations have strengthened the appeal of cryptocurrency for savings preservation among users. As of August, Turkish inflation hit 80.5%, while the Egyptian Pound weakened by 13.5%.
Between July 2021 and June 2022, the report showed that the crypto transaction volume in Egypt tripled compared to the previous year. Turkey remains the largest crypto market in the region, with its users receiving $192 billion during the same period, per the document.
The report further identified that Morocco’s inflation rates have reached a more manageable level of 5.3%. However, the North African country’s significant levels of crypto adoption appear to be tied to the government’s newly permissive crypto stance. In 2017, the central bank of Morocco declared penalties and fines for users found transacting cryptocurrencies within the country. But earlier this year, the central bank formed a partnership deal with the IMF and the World Bank to create crypto regulations that emphasize innovation and consumer protection.
The report further acknowledged that while the member states of the Gulf Cooperation Council (GCC) – Saudi Arabia, Kuwait, the United Arab Emirates (UAE), Qatar, Bahrain, and Oman – rarely make it to the top of the crypto adoption index, their role in the crypto ecosystem can never be underestimated.
The Chainalysis report identified Saudi Arabia as the third-largest crypto market in all of MENA, and UAE is the fifth. These Arab states have deep ties to the global crypto markets. For instance, Dubai has become a hub for crypto firms that serve customers all across Asia and Africa, not just in the Middle East.
According to the report, Afghanistan, one of the former MENA leaders in grassroots crypto adoption, is currently experiencing a major downturn. In Chainalysis’ 2021 crypto adoption index, Afghanistan was number 20 on the list. But since the Taliban’s takeover of the regime last August, the country has fallen to the bottom of this year’s list. Under the Taliban’s rule, cryptocurrency is equated to gambling and declared haram. And so far, several crypto dealers have been arrested in the country.
Last month, Chainalysis published a similar report showing that despite the global cryptocurrency adoption slowing down due to the impacts of the crypto winter, emerging nations continued dominating the adoption index this year as they did the year before.
Emerging markets have appeared to be on top in terms of adoption as they surpass high-income nations. According to the report, the top ten nations with the highest crypto adoption across the world are (1) Vietnam, (2) the Philippines, (3) Ukraine, (4) India, (5) the United States, (6) Pakistan, (7) Brazil, (8) Thailand, (9) Russia, and (10) China. As can be seen in the list, the US is the only representative of high-income countries within the index. China, Russia, and Brazil are upper-middle-income countries.
Crypto usage in Sub-Saharan Africa is becoming mainstream rather than speculation, according to a report by blockchain analytic firm Chainalysis.
The report dubbed “How Cryptocurrency Meets Residents’ Economic Needs in Sub-Saharan Africa,” disclosed that the number of small retail transfers has surged, despite the bear market occurring in May. On the other hand, transfers of different sizes have dropped.
Per the study:
“If many of the people carrying out small retail transactions are trading cryptocurrency out of economic necessity — especially in countries where the values of local fiat currencies are dropping, as we’ve seen in Nigeria and Kenya, for example — then those people may be more willing to continue trading despite price drops.”
Source: Chainalysis
The report pointed out that many young people in the region were taking the cryptocurrency route to build and preserve wealth despite low economic opportunities.
Based on an interview with Chainalysis, Adedeji Owonibi, the founder of Nigeria-based blockchain consultancy Convexity, noted:
“We see a lot of daily traders who are trading to make ends meet.”
He added:
“We don’t have big, institutional-level traders in Sub-Saharan Africa. The people driving the market here are retail. Nigeria has a ton of highly educated young graduates with high unemployment rates, no jobs available — crypto to them is a rescue. It’s a way to feed their family and solve their daily financial needs.”
Chainalysis found out that the uniqueness of Sub-Saharan Africa was pegged on the high usage of peer-to-peer (P2P) platforms and the retail market based on the transaction volume witnessed. Per the report:
“Retail transfers make up 95% of all transfers, and if we drill down to just small retail transfers under $1,000, the share becomes 80%, more than any other region.”
Source: Chainalysis
With P2P exchanges clocking 6% of the entire crypto transaction volume in Sub-Saharan Africa, they are a fundamental part of the ecosystem. This is double that of the Central & Southern Asia and Oceania region, which comes second.
Source: Chainalysis
Creativity played an instrumental role in enabling leading P2P platforms like Paxful set foot on African soil. For instance, connecting Chinese and Nigerian gamers with gift cards.
Ray Youssef, the Paxful CEO, added:
“We had to get Bitcoin into Africa, which was difficult because it’s so hard to get money out of Africa. We needed a clever hack to make that happen. That hack ended up being gift cards.That got Bitcoin into Nigeria, and then the rest of Western Africa.”
Meanwhile, crypto exchange Binance recently launched a crypto education tour in five French-speaking countries to propel blockchain adoption and financial accessibility, Blockchain.News reported.
Countries in the Central & Southern Asia and Oceania (CSAO) region received more than $900 billion in crypto value from July 2021 to June 2022, according to Chainalysis released on Wednesday.
The report about cryptocurrency growth and adoption made CSAO region the third largest cryptocurrency market in the world.
The report further identified CSAO as the home to seven of the top twenty countries in this year’s index analysis: Vietnam (1), the Philippines (2), India (4), Pakistan (6), Thailand (8), Nepal (16), and Indonesia (20). The report further identified India, Thailand, and Vietnam as the countries that are leading the CSAO region in cryptocurrency value received in the last year.
India received $172 billion in cryptocurrency value from July 2021 through June of this year. Thailand, Vietnam, Australia, and Singapore follow close behind, with each receiving more than $100 billion. However, less engaged with cryptocurrencies are Central Asian countries like Uzbekistan and Oceanian island nations like the Maldives.
According to the report, non-fungible tokens (NFTs) and play-to-earn games make up a significant portion of crypto holdings and web traffic in the CSAO region. 58% of web traffic from CSAO IP addresses to crypto services in Q2 2022 was NFT-related, and another 21% was to the websites of play-to-earn blockchain games.
Thailand, Vietnam, and the Philippines are some of the countries with high web traffic to NFT marketplaces. A large portion of that NFT-related traffic appears coming from players of blockchain games. While NFT-related websites account for a majority share of web traffic in almost every CSAO country, most of these countries have witnessed huge amounts of the share going to blockchain games and entertainment.
This clearly explains why CSAO is a hub for innovation in blockchain-based entertainment. For example, game-centric blockchain developers Polygon and Immutable X are headquartered in India and Australia. And Axie Infinity and STEPN, the two largest play-to-earn games, are operated in Vietnam and Australia, respectively.
Key Drivers for Crypto Adoption
Chainalysis further identified factors such as play-to-earn (P2E) games, remittance payments, regulatory concerns, and bear markets as the key drivers that influence the level of cryptocurrency adoption in these countries.
High penetration of play-to-earn (P2E) games in the CSAO in countries leads to high crypto activities in the region. An estimated 25% of Filipinos and 23% of Vietnamese citizens have played a play-to-earn game, and at one point, players based in the Philippines made up 40% of Axie Infinity’s playerbase.
Massive remittance markets have been seen in various CSAO countries. For instance, in Vietnam and the Philippines, remittance inflows account for 5% and 9.6% of their respective country-wide gross domestic products. Pakistan, India, and Bangladesh each have $20+ billion in remittance markets, and blockchain-based payment providers are beginning to disrupt traditional intermediaries.
Crypto regulatory concerns might have dampened crypto activities in Indian and Pakistani, but not the pace of innovation in the countries. Recent regulatory developments may help explain why Indian and Pakistani fell from the second and third highest adopters of cryptocurrency globally, respectively in 2021, to the fourth and sixth highest adopters in 2022.
Lastly, the bear market is considered to have been responsible for the decline of traffic to websites related to subjects like decentralized exchange contracts in recent quarters.
Emerging Markets Leading Global Adoption
Chainalysis, which recently helped US regulators recover $30 million in funds stolen from the Ronin Bridge, last week released a global crypto adoption index report that confirmed the above analysis. Last week’s Chainalysis report showed that while global adoption slowed down due to the impacts of the crypto winter, emerging markets have appeared to be on fire in terms of adoption as they surpass high-income nations.
Emerging markets are in the forefront. Chainalysis data showed that lower-middle-income countries such as Vietnam, Philippines, Ukraine, India, Pakistan, Nigeria, Morocco, Nepal, Kenya, and Indonesia hold positions in the top 20 countries in terms of global crypto adoption, with Vietnam holding position one.
Upper-middle-income countries like Brazil, Thailand, Russia, China, Turkey, Argentina, Colombia and Ecuador have also appeared on the list. The US and the UK are the only representatives of high-income countries within the index.
Blockchain analytics and security service provider, Chainalysis has helped in the recovery of $30 million in funds stolen from the Ronin Bridge by the elite North Korean hacking outfit Lazarus Group.
The Chainalysis’s update is yet another attempt to frustrate the laundering activities of the Lazarus Group following the $600 million drain of the Ronin Bridge back in March.
With diligence and advanced tracking tools, Chainalysis could monitor the flow of funds from the intermediate wallets into which the initial funds were siphoned.
“With the help of law enforcement and leading organizations in the cryptocurrency industry, more than $30 million worth of cryptocurrency stolen by North Korean-linked hackers has been seized. This marks the first time ever that cryptocurrency stolen by a North Korean hacking group has been seized, and we’re confident it won’t be the last,” Chainalysis’s Erin Plante said in a Blog Post on Thursday.
The $30 million funds recovery was made despite the laundering complications associated with the Lazarus Group. The recovered cash is a testament to the openness of blockchain technology compared to traditional financial systems.
Power of Collaboration
Chainalysis said it drafted help from a number of industry stakeholders and government agencies to help track and recover the funds.
The sanctions placed by the United States Treasury Department’s Office of Foreign Assets Control (OFAC) on the two most prominent crypto mixing services, Blender.io and Tornado Cash, left the Lazarus hackers with a limited option to launder their proceeds.
Chainalysis described the recovery of the $30 million as the first of the many confiscations to come as it works to make the crypto ecosystem a safe place for all.
While the Ronin Network has reopened its bridge following the hack, this cash recovery brings the total recovered funds to $35.8 million on behalf of Ronin Network. Binance exchange had earlier helped in the recovery of $5.8 million a few weeks after the hack event.
American blockchain analysis firm, Chainalysis, has released a detailed report on how over $2 million in cryptocurrency donations have been used to fund the Russian-wing of the war in Ukraine
It was discovered that a handful of pro-Russian groups have been bypassing sanctions placed on Russia by several organizations and utilizing crypto donations for financing terrorism.
The war in Ukraine broke out about five months ago and forced the closure of several enterprises in both countries. It caused the disconnection of both Ukraine and Russia from global activities. The crypto ecosystem also did not spare the concerned parties. The manufacturer of hardware wallet Trevor, Satoshi Labs suspended the distribution of its wallet to Ukraine and Russia.
The plan was to force the sitting president of Russia, Vladimir Putin to put an end to the war. Binance, the world’s largest cryptocurrency exchange was also forced to limit its offerings to Russia standing together with the European Union’s sanction on the country.
Financial service providers, Mastercard and Visa also withdrew their services from Russia, limiting strategies for the nation to fulfill key monetary obligations. Although there were concerns that Russia will still employ the use of crypto to evade all sanctions. With this report by Chainalysis, it appears to be that the suspicions were right all along.
About 54 pro-Russia organizations were discovered to have benefited from the crypto donations made by unidentified entities. Cryptocurrencies worth about $2.2 million were traced down to the pro-Russian militias and volunteer groups. A huge percentage of the crypto was Bitcoin (BTC) worth over $1.45 million, next was Ethereum (ETH) of $590,000.
Litecoin, a Tron-based USDT stablecoin, Tether, and Dogecoin (DOGE) were the other cryptos that made up the donated funds. Based on Chainalysis research, the Russians make use of cryptocurrency mixers to block the source of the funds. Therefore, the authorities may not be able to nab the perpetrators of this act as there is no clear path directing the crimes to them.
So far, 5 organizations have received over $100,000, 17 others received over $10,000 and the larger part of the involved organizations collected about $1,000 all in cryptocurrencies.
Blockchain analysis firm, Chainalysis has released a report on the doubled use of crypto mixers this year with illicit addresses responsible for about 10% of the total usage.
Based on the report, even with the daily value fluctuations encountered by the mixers, the 30-day moving average attained an all-time high (ATH) of $51.8 million worth of cryptocurrency.
This was already the case in April this year. The incoming volume of crypto doubled when compared to the value in 2021. While mixers are not illegal, their skyrocketing use may make the strategy obsolete soon as Chainalysis said it is developing a tool to track funds entering into mixers.
Crypto mixers are powerful cryptocurrency tools used to provide privacy for crypto operations. They redirect the source of funds in a bid to confuse those tracking the flow. The primary design of crypto mixers is not necessarily for criminal reasons but for investors’ protection. Misuse has made it a tool for scammers and other cyber criminals to trick investigators.
Mixers create a disconnection between the funds deposited by investors and the fund withdrawn at the end of the day.
This makes it difficult to follow the flow and the source of the funds. Funds from several users are gathered together in a pool and mixed in a way that the users receive a jumbled set of funds. Meanwhile, the purpose of making use of a mixer could be defeated if a single user put huge funds into the mix. It works better when several users put a considerable amount of funds as a single large transaction would render the tool ineffective.
Cyber Criminals Utilize Crypto Mixers
Criminal use of the mixers is partly because the tool hardly requests for know-your-customers (KYC) data.
Hence, Chainalysis’ quest to demix many of these transactions and locate the direct source of funds is often complicated and somewhat unsuccessful. Regulators and security agencies are also looking into the use of crypto mixers and how to regulate its operations to comply with anti-money laundering schemes.
The United States Treasury Department sanctioned Blender.io, a North Korean mixer confirmed to be part of several hacking crimes. Recall the Lazarus Group attack on Axie Infinity Ronin Bridge that led to a loss of about $625 million worth of crypto, Blender.io was discovered to be the platform through which about $20.5 million of the stolen funds was laundered through.
Blender.io over the years has been responsible for the transfer of over $500 million of Bitcoin
The rising use of mixers in the crypto space draws public attention. Criminals and their illicit activities are being accused of involving in this situation, according to Chainalysis.
The blockchain analytic firm stated:
“Nearly 10% of all funds sent from illicit addresses are sent to mixers — no other service type cracked a 0.3% mixer sending share.”
Source: Chainalysis
Since mixers render enhanced privacy in crypto transactions, cybercriminals, such as hackers can abuse them when obfuscating the source of funds.
A study researched by Chainalysis pointed out that the demand for mixers hit an all-time high in 2022 based on their aspect of creating a disconnection between the crypto funds deposited and those withdrawn. Therefore, this makes the traceability of the flow of funds difficult because they are pooled together and mixed randomly.
The analytic firm pointed out:
“While value received by mixers fluctuates significantly day-to-day, the 30-day moving average reached an all-time high of $51.8 million worth of cryptocurrency on April 19, 2022, roughly doubling incoming volumes at the same point in 2021.”
Source: Chainalysis
The types of mixers include centralized, CoinJoin (with built-in capabilities), and smart contracts that are legitimately used to boost financial privacy.
Therefore, mixer usage has remained close to historic highs in 2022 based on soaring demand from DeFi protocols, centralized exchanges, and addresses linked to illicit activities such as scams, ransomware, the darknet market, and terrorism financing.
Source: Chainalysis
Chainalysis explained:
“The increase in illicit cryptocurrency moving to mixers is more interesting, though. Illicit addresses account for 23% of funds sent to mixers so far in 2022, up from 12% in 2021.”
Source: Chainalysis
In 2020, the Financial Crimes Enforcement Network (FinCEN) charged a Bitcoin-mixing operator with a $60 million civil money penalty for violating anti-money laundering regulations.
Larry Dean Harmon was arrested and charged with providing unregistered money services to businesses from 2014 to 2020. He laundered over $300 million in Bitcoin and enabled the trafficking of drugs, guns, and child pornography.
