Tag: Compliance

Ethereum Founder Vitalik Buterin Co-Authors Paper on Blockchain Privacy and Compliance

by Blockchain News

Ethereum’s Vitalik Buterin, along with researchers and privacy advocates, published a paper on September 6, 2023, titled “Blockchain Privacy and Regulatory Compliance: Towards a Practical Equilibrium.” The paper introduces “Privacy Pools,” a smart contract-based protocol designed to reconcile financial privacy with regulatory compliance. The news was shared to Blockchain.News by Ameen Soleimani.

Key Details

Authors: Vitalik Buterin (Ethereum Foundation), Jacob Illum (Chainalysis), Matthias Nadler (University of Basel), Fabian Schar (Center for Innovative Finance, University of Basel), Ameen Soleimani (Privacy Pools)

Publication Date: September 6, 2023

Abstract: The paper focuses on “Privacy Pools,” a protocol that employs zero-knowledge proofs to allow users to prove the lawful or unlawful origin of their funds without revealing their entire transaction history.

Keywords: Blockchain, Privacy, Regulation, Smart Contracts, Zero-Knowledge Proofs

Full Paper: SSRN

Additional Information: Dropbox Paper

Protocol’s Objective

The paper aims to address the perceived incompatibility between privacy and regulatory compliance in blockchain transactions. It introduces “Privacy Pools,” a protocol that uses smart contracts to enhance privacy while allowing for regulatory oversight.

How It Works

The protocol enables users to publish a “zero-knowledge proof” to demonstrate that their funds do not originate from known unlawful sources. This is achieved without revealing the user’s entire transaction graph, thereby maintaining privacy.

Implications for Users

Honest Users: The protocol incentivizes honest users to prove the origin of their funds, separating them from dishonest users who cannot provide such proof.

Regulatory Compliance: The protocol can be adapted to meet various regulatory requirements, making it easier for users to comply without sacrificing privacy.

Future Outlook

The authors view this paper as a stepping stone towards a future where financial privacy and regulatory compliance can coexist. They aim to foster a constructive dialogue on this subject, shifting the conversation in a more positive direction.

For further inquiries, contact ameensole@gmail.com.

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Mastercard Launches Web3 Solution for Crypto Verification

by Blockchain News

Mastercard has launched a new Web3 solution aimed at improving the verification standards in the digital asset space. The solution, called “Mastercard Crypto Credential,” provides a unique identifier to users, enabling them to verify that an address they want to send funds to has been vetted by Mastercard and has been operating in compliance with the firm’s standards. The solution will support compliance through the exchange of metadata and help reduce the opportunities for bad actors.

As part of the solution, Mastercard has partnered with several crypto wallet providers, including Bit2Me, Lirium, Mercado Bitcoin, and Uphold. The firm has also partnered with several blockchains, including Aptos, Avalanche, Polygon, and Solana. To ensure compliance, Mastercard will tap into CipherTrace’s suite of services, including CipherTrace Traveler, to help verify addresses and support Travel Rule compliance for cross-border transactions.

The solution is designed to reduce the opportunities for bad actors and the risk of funds being lost for good. Even if bad actors slip through the cracks and obtain a unique identifier, Mastercard can quickly revoke their verification if they have engaged in nefarious activity. The firm’s long list of partners behind the solution is a testament to its commitment to enhancing the crypto sector’s standards.

Mastercard has been steadily increasing its exposure to the crypto sector over the past few years. This latest announcement comes just a few weeks after the firm launched a non-fungible token (NFT) gated musician accelerator program in collaboration with Polygon. The program offers free access to materials, unique artificial intelligence tools, and other experiences to holders of Mastercard’s Music Pass NFT.

Visa, Mastercard’s competitor, has also made a move in the crypto space by announcing a new stablecoin payments-focused project. Cuy Sheffield, the firm’s head of crypto, announced the project on Twitter and shared a job listing for the role, which notes that the company is “building the next generation of products to facilitate commerce in everyone’s digital and mobile lives.” The company is on the lookout for someone with strong experience in Web3 and blockchain tech.

In conclusion, Mastercard’s new Web3 solution, “Mastercard Crypto Credential,” is designed to enhance user verification standards and reduce the opportunities for bad actors in the digital asset space. The solution’s unique identifier will provide users with an added layer of security, allowing them to instantly verify that an address they want to send funds to has been vetted by Mastercard and has been operating in compliance with the firm’s standards. The firm’s long list of partners and its commitment to enhancing the crypto sector’s standards highlights its dedication to innovation and staying ahead of the curve.

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ChatGPT Ban Lifted in Italy

by Blockchain News

OpenAI’s interactive AI chatbot, ChatGPT, has had its temporary ban in Italy lifted after being accused of violating GDPR. On March 31, the Italian data protection agency, Garante, issued the ban after suspecting that ChatGPT had violated the European Union’s General Data Protection Regulations. The ban was lifted on April 29, after the company complied with the regulator’s transparency demands and implemented age-gating measures.

ChatGPT was required to reveal its data processing practices and comply with other legal requirements to comply with the Italian regulator’s demands. The ban was issued in response to a data breach that occurred on March 20. The company’s compliance with local authorities is viewed positively, and the willingness to comply with transparency demands has been widely welcomed by ChatGPT’s global user base.

The ban on ChatGPT initially raised concerns about potential AI regulations. However, the swift compliance of OpenAI with local authorities indicates a positive move towards the regulation of AI. European Union legislators are working on a new bill to monitor AI developments. If this bill is signed into law, generative AI tools like ChatGPT and Midjourney will be subject to disclosure of the use of copyrighted materials in AI training.

ChatGPT is a popular interactive AI chatbot developed by OpenAI, capable of conversing with users on a wide range of topics. The chatbot uses deep learning techniques to analyze user input and generate responses. It has gained widespread popularity and is used by individuals and businesses globally.

The ban on ChatGPT in Italy highlights the importance of complying with data protection regulations. GDPR is a set of regulations designed to protect the privacy and personal data of individuals within the European Union. Companies that operate within the EU or process the personal data of EU residents are required to comply with GDPR. Failure to comply with GDPR can result in significant fines and legal penalties.

OpenAI’s swift compliance with the Italian regulator’s demands demonstrates the company’s commitment to data protection and privacy. It also highlights the need for companies to be transparent about their data processing practices and to implement measures to protect user privacy. The lifting of the ban on ChatGPT is a positive development for the AI industry and demonstrates the importance of compliance with data protection regulations.

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Bitget Registers as a Service Provider in Lithuania

by Blockchain News

The digital currency trading platform Bitget has made public the news that it has been officially registered as a service provider in Lithuania. Because the company in Seychelles has satisfied the compliance criteria set out by the local rules and regulations, it is now authorized to do business in the European nation. The digital asset market in Lithuania is only beginning to develop, and the country has quickly become a refuge for blockchain and cryptocurrency enterprises.

In late 2021, as part of Estonia’s ongoing effort to clamp down on cryptocurrency businesses inside the nation, the authorities cancelled hundreds of operational licenses. As a direct consequence of this, Lithuania has seen a boom in the registration of cryptocurrency companies, with a recent article from Bloomberg stating that this number is expected to climb by a factor of five until the year 2022. As a result, Lithuania’s status as an attractive location for businesses providing services related to cryptocurrencies has been strengthened.

The decision made by Bitget to register as a service provider in Lithuania enables the platform to meet the rising demand for services linked to cryptocurrencies in that nation. The marketplace allows users to engage in a variety of trade activities using cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. Bitget is able to extend its operations into the European market and deliver its services to a larger client base as a result of the company’s registration in Lithuania.

The Republic of Lithuania’s Central Bank issued rules for cryptocurrency market participants in 2018, demonstrating the country’s proactive approach to the development of its digital asset market. The rules provide light on the legal position of cryptocurrencies and lay out the responsibilities of market participants in a clear and concise manner. This has contributed to the creation of a regulatory framework that is advantageous for cryptocurrency firms who are interested in operating inside the nation.

The registration of Bitget in Lithuania is a good development for the cryptocurrency sector since it reflects the rising interest and demand for digital assets in the European market. This is why the registration of Bitget in Lithuania is considered to be a positive development. It is possible that other cryptocurrency firms will follow Bitget’s example and register as service providers in Lithuania as a result of the favorable legal environment and expanding digital asset industry in the nation of Lithuania.

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Trading firms identified as Binance VIP clients in CFTC lawsuit

by Blockchain News

Binance, one of the world’s largest cryptocurrency exchanges, is facing a lawsuit filed by the United States Commodities Futures Trading Commission (CFTC) for allegedly violating US law by allowing US clients to trade on its platform without complying with Know Your Customer (KYC) standards. In the lawsuit, the CFTC identified three trading firms – Jane Street Group, Tower Research Capital, and Radix Trading – as Binance’s VIP clients, who allegedly received preferential treatment from the exchange.

According to Bloomberg, which cited “people familiar with the matter,” Radix Trading was identified as “Trading Firm A” in the CFTC’s suit, while Jane Street was “Trading Firm B” and Tower Research was “Trading Firm C.” The firms on the CFTC’s list were examples of US clients allegedly able to access Binance, despite not complying with KYC standards.

The alleged “VIP” treatment from Binance included lower transaction fees and faster trading services, according to the CFTC’s filing. The firms provided Binance with liquidity on the exchange, and Binance gained the corresponding trading fee revenues. This was part of a strategy that “actively facilitated violations of US law” by helping US trading firms evade KYC compliance standards, among other things, the CFTC alleged.

In a report by The Wall Street Journal, Radix Trading’s co-founder Benjamin Blander stated that he believed the firm acted legally even when trading with Binance’s offshore entity. He also claimed that Binance enabled Radix to sidestep compliance controls by providing them information on accessing Binance.com through a virtual private network to obscure its IP address.

The CFTC claimed that Binance prioritized “commercial success over compliance with US law,” enabling US trading firms to violate US regulations. However, Binance’s CEO Changpeng “CZ” Zhao vehemently denied the allegations of compliance and market manipulation violations in a follow-up post on March 28.

Binance has faced several regulatory challenges in recent months, including regulatory warnings and investigations from countries such as Japan, the UK, and Canada. The exchange has also been banned in countries such as China and India. Despite these challenges, Binance remains one of the world’s largest cryptocurrency exchanges, with a daily trading volume of over $40 billion.

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Binance Responds to U.S. Senators Letter, Excludes Financial Data

by Blockchain News

Binance has been the subject of regulatory scrutiny on a global scale, with a number of nations implementing limits or completely banning its services as a result of allegations of regulatory infractions. The Securities and Exchange Commission (SEC) in the United States initiated an investigation into Binance.US in February over trading entities that are reportedly tied to Changpeng “CZ” Zhao, the CEO of Binance. An investigation report indicated that Binance was likely responsible for the transfer of around 400 million dollars in money from a Binance.US account to a trading business run by Zhao.

In their letter, the senators from the United States, lead by Elizabeth Warren, expressed their worries over the operations of Binance and asked for the firms’ balance sheets, AML rules, and documentation regarding the link between Binance and Binance.US. The senators charged that Binance and its American affiliate intended to circumvent authorities in the United States, evade sanctions, and assist the laundering of at least $10 billion in illicit funds. Previous statements made by Binance indicate that the two businesses are distinct organizations, each with its own autonomous management and activities.

Binance’s Hillman mentioned in his response to the senators’ letter that the cryptocurrency exchange uses both in-house and third-party tools to monitor user transactions and profiles in real time. As a result of alerts generated by transaction monitoring, Binance was able to halt more than 54,000 transactions between August 2021 and November 2022. Binance didn’t address the senators’ concerns about the exchange’s lack of openness, despite the fact that it had already provided the financial data that had been sought to the U.S. authorities. Instead, it omitted the information from the letter it had sent to the senators.

As a whole, it is probable that Binance’s answer is an effort to soothe worries and strengthen its relationship with U.S. authorities, who have been clamping down on cryptocurrency exchanges and other participants in the sector. Yet, Binance’s regulatory difficulties are far from being resolved, and it is possible that the exchange may be subjected to more scrutiny in the months ahead as authorities work to assure compliance with AML and other legislation.

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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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Ethereum is Getting Closed to Being Completely Censored Because of OFAC Regulations

by Blockchain News

The percentage of OFAC-compliant Ethereum blocks being created every day has increased to 73%, which heightens censorship worries in the blockchain ecosystem.

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Following Ethereum framework censorship that posits barriers to the crypto ecosystem’s goal of extremely open and accessible finance, the market has been monitoring Ethereum’s increasing adherence to guidelines set forth by OFAC. As per the development, over 73% of the blocks on the Ethereum network in the past 24 hours have been determined to enforce OFAC compliance.

Following the discovery that 51% of-Ethereum-blocks met OFAC requirements back in October 2022, top crypto media firms published an article on the growing censorship issues. But according to mevWatch data, as of November third, daily block production that complies with OFAC regulations has increased to 73%.

Meanwhile, some OFAC-mandated MEV-Boost relays would censor financial activities. Consequently, to guarantee Ethereum’s neutrality, a non-censoring MEV-Boost relay must be implemented by the network.

Additionally, by removing relays like BloXroute Max Profit, BloxRoute Ethical, Manifold, and Relayooor from their MEV-Boost configuration, Ethereum examiners can lessen their adherence to OFAC regulations.

US Government Agency Enforces Sanctions on Crypto Outlets

Based on the adherence to OFAC, the United States Government agency can apply economic and trade sanctions on crypto outlets. Meanwhile, Tornado Cash and several Ethereum addresses had already been sanctioned by the agency. Furthermore, as of the time of writing this report, 45% of all Ethereum blocks are in full adherence to the OFAC regulations. 

Following the launch of crypto exchanges by UnionBank, one of the biggest multinational banking institutions in the Philippines, in collaboration with the Swiss crypto company Metaco, the adoption of Bitcoin BTC tickers fell by $21,265 while Ethereum accelerated.

This suggests that despite the alleged censorship of the protocol, it is still widely used today.

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Binance Exchange Inaugurates Global Advisory Board under Compliance Drive

by Blockchain News

Binance Exchange, through its Chief Executive Officer, Changpeng Zhao has announced the establishment of its Global Advisory Board (GAB) as it looks to deepen its regulatory compliance in the region where it operates.

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The total number of experts in the GAB is 12, including ‘CZ’ himself, as Zhao is popularly called on Social Media. According to CZ, the establishment of the Binance Global Advisory Board is highly needed as the experts will contribute deep insights that can help Binance navigate current economic, political, and social concerns bordering on the exchange’s core business pursuit.

Changpeng Zhao said Binance shares the vision to make money accessible to everyone, and that it is committed to doing this by embracing the right regulations.

“We embrace the responsibility to lead the industry from the front and support regulators as they seek to establish a global regulatory and compliance framework for the industry. The right regulations will foster continued technological innovation,” Changpeng Zhao said, adding that: 

“They will preserve crypto’s fundamental value propositions of freedom and empowerment while ensuring the right guardrails are in place that provides consumer protection. The Binance GAB will help us continue to demonstrate to the world exactly what our organization is capable of and set a shining example for the blockchain industry.”

The advisory board members will help chart the way forward for the exchange in light of its vision to be in tandem with the right regulations in its key market.

Composition of the Binance Global Advisory Board

The Binance GAB is composed of members from different parts of the world and is as diversified as possible.

The members include Max Bacus, Former U.S. Ambassador to the People’s Republic of China; Former U.S. Senator Montana; Former Chairman of the Senate Committee on Finance, Bruno Bezard from France, Managing Partner of Cathay Capital; Former Economic Advisor to the French Prime Minister; Former Head of the French Treasury; Former CEO of the French Government Shareholding Agency.

One major highlight of the board is the inclusion of Ibukun Awosika from Nigeria. Awosika served as the first female Chairman of the First Bank of Nigeria, Founder and Member G7 International Task Force for impact investing.

With the establishment of the GAB, Binance hopes to play a more frontline role in pushing for regulatory clarity in the broader digital currency ecosystem.

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Crypto Miner HIVE Requested for Resubmission of Form 40-F

by Blockchain News

Hive Blockchain Technologies Ltd, a Vancouver-based cryptocurrency mining company headquartered in Canada, said it received a letter from Nasdaq requesting the company to renew its annual report on Form 40-F (“Form 40-F”).

The letter reads, “due to delays in filing submit plans to meet exchange listing compliance”. Form 40-F includes audited financial statements, the chief executive officer and chief financial officer certification, management discussions, and analysis.

HIVE went public in 2017 and is currently listed on the Toronto exchange, Nasdaq, and Frankfurt stock exchange. The company expects to submit the relevant documents on July 15.

The delay in its annual report on Form 40-F, the company said, will face a shorter deadline for non-VC issuers in Canada due to its listing on U.S. exchanges.

HIVE did not attribute these factors to the recent cold winter in the cryptocurrency market and said it would hire more relevant employees to meet the reporting work that will be foreseen in the future.

The Nasdaq transaction noted that Hive Blockchain Technologies Ltd failed to comply with Nasdaq Listing Rule 5250(c)(1) of its timely filing of a 40-F.

The company is required to resubmit a planned report on pre-compliance with Rule 5250(c)(1) within 60 calendar days. If accepted, Nasdaq may grant the cryptocurrency miner up to 180 calendar days from the due date of its Form 40-F to regain compliance.

The crypto mining firm generates a daily income of $550,000 from its Bitcoin and Ethereum mining operations, which translates to approximately $200 million in annual revenue.

HIVE reported more than $68 million in revenue and more than $64 million in net profit in the third quarter of last year.

Currently, HIVE has a total Bitcoin operating hash rate of 925 PH/s. HIVE expects its hash rate to reach one exahash per second (EH/s) by August with the additional acquisition of mining machines.

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