“EY’s Nightfall, a five-years-in-the-making system allowing businesses to shield the content of transactions on the public Ethereum blockchain, has entered its final phase of production readiness for deployment using the Polygon network. The goal for EY and Nightfall, which teamed up with scaling specialist Polygon in September 2022, has always been to harness the power of the public Ethereum network for big business.
The latest updates to Nightfall have made its code fully decentralized, meaning it can run anywhere with no single entity being in charge, as well as adding industry standard X.509 identification certificates. These final updates herald the product going live in May of this year, said EY Global Blockchain Leader Paul Brody.
We currently have a beta client for the supply chain work that is ongoing now, and we expect to show the first production ready product that uses this network layer at our Global Summit in May.”
“Every day, about $2.2 trillion in foreign-exchange (FX) transactions carry a risk that the yet-to-be settled side of an agreement won’t meet obligations. Buta new paper from Circle Internet Financial and decentralized exchange Uniswap Labs finds that a distributed ledger could solve that problem with simultaneous settlement.
Researchers from the two digital-finance companies contend that crypto’s innovations could be an answer to this major ongoing financial-stability concern for regulators. That’s one conclusion of their 20-page paper to be released in Davos for a panel at the World Economic Forum on Thursday. The researchers also say remittances – money that people send across international borders – could see their costs cut by 80% through decentralized finance (DeFi).
On-chain FX can offer faster and more affordable transaction processes, as well as greater liquidity and stability.”
“The Block reported Genesis is in talks with creditors about a prepackaged bankruptcy plan, which would mean that the two sides would come to a restructuring agreement prior to any filing and that the deal would be then be made final in bankruptcy court.
Bloomberg reported Genesis is in confidential negotiations with various creditor groups, with the company warning it could seek bankruptcy protection if it fails to raise capital.”
“Just two hours after surging to a four-month high of about $21,550, the price of bitcoin (BTC) tumbled nearly $1,000, down 2.6% to $20,600.
Helping to spur the slump was the U.S. Department of Justice (DOJ) teasing the announcement of a major international crypto enforcement action coming at noon ET. There were also some hawkish comments from St. Louis Federal Reserve President Jim Bullard, who suggested the central bank should hike interest rates by 50 basis points at its next meeting in February versus market expectations for a 25 basis point move.
The government has charged little-known crypto platform Bitzlato with laundering funds tied to illicit Russian finance and its founder has been arrested. With the “major” perhaps somewhat overhyped, bitcoin has bounced, now trading just below $21,000.”
“Several key trading trends are pointing upward for the first time in months, suggesting the current rally will be more than just a temporary improvement.
“Whale” investors are not moving BTC onto exchanges as they often do during dramatic price surges, over-the-counter (OTC) desks have sharply increased their holdings and the Crypto Fear & Greed Index, a widely watched measure of investor sentiment, has entered neutral territory for the first time in 10 months.
Whales’ recent lack of movement indicates they do not view the recent rally as a selling opportunity. The increased OTC holdings often signal increased institutional demand.
Bitcoin was recently snugly perched above $21,000, which may become its new support threshold. Ether (ETH) was holding steady above $1,500 after weeks of hobbling below $1,200. Equity markets have risen more moderately, with the tech-heavy Nasdaq and S&P 500, which has a hefty technology component, climbing 5.8% and 2.8%, respectively.”
“HashKey Capital, the investment arm of financial-services firm HashKey Group, has closed its third fund with $500 million in committed capital. The fund will invest in crypto and blockchain initiatives around the world with a focus on emerging markets. HashKey FinTech Investment Fund III was backed by institutional investors, including sovereign-wealth funds, businesses and family offices.
Launched in 2018, HashKey Capital manages over $1 billion in assets. Portfolio companies include blockchain firm Cosmos, layer 2 network Aztec, blockchain-infrastructure firm Blockdaemon and gaming and crypto venture firm Animoca Brands. HashKey operates in Hong Kong and Singapore, with a presence in the U.S. and Japan.”
“Despite the fierce headwinds the crypto industry faced over the last year, Web3 development activity has grown at an impressive rate, according to a new report.
Per the report, the number of deployed smart contracts in Q4 2022 grew 453% quarter-to-quarter, reaching a staggering 4.6 million. Additionally, the deployment of smart contracts on Ethereum’s Goerli testnet grew 187% over the last three months of 2022—and as much as 721% year-to-year—to reach an all-time high of 2.7 million and signal that more decentralized applications (dapps) may enter the market in the future.
The Web3 developer community is proving to be extremely resilient. This report shows that they’re as focused and motivated as ever to build the future of this ecosystem.”
“In a wide-ranging discussion, a panel of blockchain industry personalities at the World Economic Forum (WEF) concluded that the economy will become increasingly tokenized in the future. Carbon credits, housing, electricity, government bonds, foreign exchange and other real-world assets will be traded on the blockchain, according to the panel’s participants.
Tokenization will be the foundation of the digital economy going forward.
The event, titled “Tokenized Economies, Coming Alive,” featured Circle CEO Jeremy Allaire, Bitkub Capital CEO Jirayut “Topp” Srupsrisopa, Finnish Minister of Transport and Communications Timo Harraka, and Yield Guild Games co-founder Beryl Li.
According to Topp, the Thai government is working on an “investment token” license, separate from the current crypto license, that will allow entrepreneurs to “tokenize all kinds of values,” including government bonds, carbon credit trading, foreign exchange, electricity units and other assets.
Harakka said that self-custody of data will be an important issue moving forward. According to him, an association in Finland was created in 2014 called “MyData.org” that intended to allow users to exercise ownership and control over their data. Allaire responded that he thought many brands desired to turn their proprietary loyalty points systems into blockchain applications, taking them from a “closed-loop system” to an “open-loop system” that could be interoperable with systems used by other brands.”
“The World Economic Forum (WEF) released a “toolkit” for decentralized autonomous organizations (DAOs) on Jan. 17. More than 100 experts contributed to the document’s attempt to provide ‘a starting point for DAOs to develop effective operational, governance and legal strategies.’ It described the toolkit as ‘a set of adaptable resources for key stakeholders to help realize the full potential of this emerging form.’
DAOs have the potential to address many of the shortcomings of the traditional firm while also realizing more equitable governance and operations.
Creating adequate policy and legal frameworks for DAOs is crucial to realizing the benefits and mitigating the risks of this novel organizational form.”
“Co-led by Pantera and Archetype, the funding round is targeted toward building out distributed validator technology (DVT) on Ethereum.
DVT is a technology primitive that allows an Ethereum Proof-of-Stake validator to be run simultaneously on more than one node or machine. The major breakthrough is the ability to split up a single validator key, making it possible for a group of people to share validation rights of an Ethereum validator.
Validators, which earn rewards for operating the network of nodes that keeps Ethereum up and running, face challenges ranging from high capital requirements (you must “stake” 32 ETH to become a validator) and technical complexity (validators can pay penalties if they screw up or go offline).
Obol says it is already working with Lido and StakeWise to use DVT to more securely and efficiently distribute user funds across operators.”
“Now investors can use the e-CNY to buy securities with the Soochow Securities mobile app, China Securities Journal reported. Last week, the country included the digital yuan in cash circulation for the first time. It also added a function to its e-CNY payment app that allows users to make payments offline.
In October, e-CNY transactions reached a milestone of 100 billion yuan ($14 billion). The Bahamas, Jamaica and Nigeria have [also] already issued a CBDC.”
“Overall, the group affirmed that a total of about $5.5 billion in liquid assets have been identified, consisting of $1.7 billion in cash, $3.5 billion of crypto assets and FTT tokens and $300 million of securities. And it confirmed that based on current estimates of the amount of digital assets associated with FTX.com and FTX US, there is a “substantial shortfall” at both exchanges.
Regarding FTX.com, the FTX debtors have identified $1.6 billion of digital assets associated with FTX.com, of which $323 million ‘was subject to unauthorized third-party transfers post-petition, $426 million of which was transferred to cold storage under the control of The Securities Commission of The Bahamas, $742 million of which is in cold storage under the control of the FTX Debtors, and $121 million of which is pending transfer to cold storage under the control of the FTX Debtors.’
With respect to FTX US, the debtors have identified roughly $181 million of digital assets, ‘$90 million of which was subject to unauthorized third-party transfers post-petition, $88 million of which is in cold storage under the control of the FTX Debtors, and $3 million of which is pending transfer to cold storage under the control of the FTX Debtors.‘
We are making important progress in our efforts to maximize recoveries, and it has taken a Herculean investigative effort from our team to uncover this preliminary information.”
“Expectations for bitcoin’s (BTC) price over the next six months have turned positive in another sign of confidence in the cryptocurrency’s latest bull revival.
Bitcoin’s 180-day call-put skew has crossed above zero for the first time since the start of 2021, indicating that bullish call options expiring in six months have become pricier than bearish put options. Both short-term and long-term call-put skews have turned positive.
This is a measure of market sentiment and flows, because it encapsulates what people are willing to pay to acquire an asymmetric payout on either the upward or downward direction of the market.
The bullish sentiment is also evident from the renewed premium in bitcoin futures listed on the Chicago Mercantile Exchange (CME). The cryptocurrency ended last week with a 21.9% gain, the biggest percentage rise since February 2021.”
“According to the Russian news agency Vedomosti, Iran is working with Russia to create a “token of the Persian Gulf region” that would serve as a payment method in foreign trade. The token is projected to be issued in the form of a stablecoin backed by gold, according to Alexander Brazhnikov, executive director of the Russian Association of Crypto Industry and Blockchain.
The stablecoin aims to enable cross-border transactions instead of fiat currencies like the United States dollar, the Russian ruble or the Iranian rial. The report notes that the potential cryptocurrency would operate in a special economic zone in Astrakhan, where Russia started to accept Iranian cargo shipments.”
“The Seoul Metropolitan Government has launched its Metaverse Seoul project, allowing residents of the South Korean capital city to access city services in a virtual environment.
According to the mayor, the online environment will be a “place of communication for citizens” of the capital city, allowing them to virtually visit many of Seoul’s attractions, access official documents, file certain complaints and receive answers to questions on filing municipal taxes.”
“Upcoming network Shibarium will soon join the ever-growing fray of Ethereum-based layer 2’s, such as Arbitrum and Optimism. Developers said Shibarium would have a focus on metaverse and gaming applications, especially as the NFT sector is expected to heat up in the coming years.
The move could further bolster the fundamentals of Shiba Inu’s three ecosystem tokens: shiba inu (SHIB), leash (LEASH) and bone (BONE), which together command over $5 billion in market capitalization. Each transaction on Shibarium will burn a certain amount of SHIB tokens, but the specific amount has not been decided yet.
Shibarium’s validators will lock up BONE to run the Heimdall validator, software that provides an overview of transactions, and Bor block producer nodes, a program that allows the integration of Ethereum. The number of validators are limited to 100 slots. Validators are also required to stake a minimum of 10,000 BONE and all rewards will be paid in BONE.”
“Wintermute, the large crypto market maker, was quick to distance itself from a new fundraise by the co-founders of bankrupt hedge fund Three Arrows Capital (3AC), echoing similar sentiments from the community.
The co-founders of Three Arrows Capital, Su Zhu and Kyle Davies partnered with Mark Lamb and Sudhu Arumugam, co-founders of crypto exchange CoinFlex – which is going through a restructuring process – to raise $25 million for a new exchange called GTX. GTX said it plans is to create an exchange where users can trade crypto, stocks and debt claims on bankrupt companies like FTX.
Disgraced fraudsters teaming up with other disgraced fraudsters to trade claims from a collapsed fraudulent exchange.”
“The Norwegian Government has announced the development of BRØK, a cap tables platform for unlisted companies on the public Ethereum network. With BRØK, you can easily share and update your company’s shareholder information using blockchain technology, making the process faster, more efficient, and more secure.
This platform, which is natively on the Arbitrum layer 2 scaling solution, will use the ERC1400 standard to represent shares and the Ceramic network to comply with the EU’s privacy regulation GDPR.
Currently, around 380,000 private companies in Norway maintain their own registers of shareholders, known as a cap table. This information is considered public and must be made available to anyone who requests it. But BRØK isn’t just about sharing information — it’s also about establishing a single, trusted source of truth that different systems can rely on.
This is a significant step forward for public Ethereum, and we can’t wait to see what the future holds for this innovative technology.”
“Polygon takes zero-knowledge rollups to the final testnet to gauge the performance of its zkEVM ahead of eventual mainnet integration.
According to Schwartz, Polygon zkEVM includes the first complete source code available EVM-equivalent zkProver, which passes all Ethereum vector tests at over 99%. He described the completion of validity proofs for conventional user transactions as “the most challenging and rewarding effort” since his team began developing its native zkEVM.
The development of the technology, called Polygon zkEVM (Ethereum Virtual Machine), has been ongoing for over three years by the Polygon Hermez team. The team has already confirmed that zero-knowledge proofs are possible on Ethereum by generating over 12,000 zk-Proofs in a primary version of the zkEVM testnet.
Two years ago, the Polygon team estimated that developing zk-Rollups with EVM compatibility would take up to ten years. Given the strides made, the team describes zkEVM as the end game, combining advances with layer-2 scalability and fast finality. This offers a myriad of benefits to users when adding greater throughput and lower fees.
Finally, we have zkEVMs, such as Polygon zkEVM, that offer all the above in addition to the equivalence to Ethereum Virtual Machine.”
“Blockchain developers increasingly recognize that human error is an inevitability, meaning it will be difficult to push crypto into the mainstream without fail-safes and better ease of use. One of those innovations is a concept called “Account Abstraction.”
Account Abstraction (AA) aims to use smart contracts to execute crypto transactions, by creating certain validity rules. With AA, users won’t need to sign off on every transaction with one’s private keys. Ultimately, through AA, developers want to make Ethereum as usable as a traditional fiat bank account, so users can make transactions more easily, program automatic bill payments and more.
Humans are the biggest security flaw in Ethereum account management.
According to a Chainalysis report, up to 23% of all bitcoins in circulation (or around 3.79 million BTC) could be lost forever because of forgotten keys. Account Abstraction addresses the shortcomings of EOAs by merging them with CAs – allowing people to create user accounts with built-in fail-safe mechanisms and other special features for verifying transactions.
Under account abstraction, user accounts could be programmed to include social recovery systems where several people – each with a key of their own – have the ability to return an account to its owner should the owner lose access to the private key. One could also create “multisig wallets” that hand account ownership over to a group – requiring multiple different parties to sign off on transactions as a sort of extra layer of security.
Accounts under AA could also avoid some of the other hard-coded limitations of EOAs. They could, for instance, define how users pay gas fees. Currently, under EOAs on Ethereum, users have to pay gas in ether (ETH). But with AA one can choose to use a different cryptocurrency to pay gas with (like DOGE), or you can assign someone else (like a parent or friend) to pay gas fees.
Some layer 2s on Ethereum are leading the way to natively integrate AA. StarkWare, the company behind the StarkNet blockchain, is already live with Account Abstraction. Eli Ben-Sasson, the co-founder and president of StarkWare, told CoinDesk that Account Abstraction could be used in the future to ‘use your facial recognition or biometrics to basically authorize [crypto] payments. The infrastructure for doing this is now possible.’
Last month, Visa also announced its proposal to eventually use Account Abstraction to deploy automatic payments with StarkNet infrastructure.
Slowly, interest in AA is increasing as more and more developers and users become aware of the potential.”
“The addition of NFT trading for a platform like Instagram makes sense considering its huge global audience. The feature exposes users to Web3 concepts, many for the first time, in a way that doesn’t add friction to Instagram’s core business model. Users on Instagram also pay for NFTs in fiat currency, eliminating an otherwise challenging on-ramp for Web3 newcomers.
But attracting a Web3-native audience poses more challenges. Would seasoned NFT collectors be interested in purchasing assets sold on a highly centralized, Web2 platform? In addition, Instagram in-app purchases are subject to steep fees between 15% to 30% from Apple and Google, resulting in a smaller profit for sellers.
Despite this, early NFT sales on the platform have been a success, with collections selling out quickly. Instagram’s strategy of recruiting well-known NFT artists to tout the new feature has worked in two ways – it enticed NFT collectors and helped to bridge the gap between Web2 and Web3 users.
The platform’s partnership with well-known NFT artists has helped instill confidence across communities. Drifter Shoots (aka Isaac Wright), Refik Anadol, Amber Vittoria, Dave Krugman and Micah Johnson have each launched NFTs through Instagram over the past few months, selling out each time. Other popular NFT artists, such as Maliha Abidi and Bobby Hundreds, have used the platform to show off their NFT creations, praising the feature as an accessible way to reach prospective buyers.
Digital collectibles make a lot of sense when you consider where many of us do our social signaling.”
“Copyright is obsolete, we just can’t admit it yet. It lasted almost 500 years and did a lot of good, but we don’t need it anymore. Why? Because NFTs have introduced a new way of compensating authors that is far more efficient.
Copyright was always a kludge, making works of authorship artificially scarce in order to indirectly subsidize their creation, publication, and distribution. It was a reasonable compromise when publishing and distributing works was costly. But now it’s free, and copyright is just a transaction cost on consumption. Sure, copyright still encourages authors to create works, but not very efficiently or effectively. We can do better, and the NFT market is proof.
Copyright gives authors certain exclusive rights to make and distribute copies of their works, in order to encourage the creation and distribution of those works. At least in theory, copyright is supposed to benefit the public — all of those consumers hungry for content — by encouraging authors to create new works and encouraging publishers to distribute them. Without copyright, works of authorship would be “public goods,” available for anyone to use however they like.
Yes, copyright makes content more expensive. But that’s ok, because it also encourages authors and publishers to create and distribute more of the works we love to consume. It’s a bargain, if the value of those works exceeds the cost of copyright. But the bargain starts to look like a swindle, when copyright expands, even as the cost of producing and distributing works decreases.
The NFT market proves that authors don’t need copyright to make money. For better or worse, we live in a clout economy. Value depends on fame and influence. Once upon a time, it was expensive to distribute ideas. Now it’s free. When technological changes make information free, markets need to change as well. Copyright was a great policy tool in a world beset by scarcity. But it sucks, in a world of abundance.
For the first time, NFTs promise authors and other creators access to capital markets.”
“One of the guiding principles that we have built on here at EY is the idea that blockchains will do for business ecosystems what ERP did inside the enterprise.
Enterprise transactions have been slow to take off because of the lack of privacy tools, which are essential. As that problem gets solved, we can start to think about how firms can interact with each other. The story of 2023 will, I hope, be about how useful applications start to emerge for connecting enterprises with each other, under privacy and on the public Ethereum ecosystem.
The likely order of development will be a risk-averse path. Companies are going to start with things like inventory management. The next step after tracking assets is the addition of shared business logic.
Eventually, of course, we’ll get back to where we started: money. It’s most efficient and useful to close the contract out by making payment with a stablecoin. Companies will also be able to do things like factor invoices and borrow against inventory value. But those financialization components are likely to be down the road and will be the last components of the system implemented by risk-averse enterprises.”
“Applications will be available later in 2023 allowing virtual banks to act as financial services providers. The move focuses on increasing competition and boosting Thailand’s economic growth.
Regulations and supervision for virtual banks will be the same as those for traditional commercial banks under the licensing framework. There are at least 10 parties interested in granting permissions, the report states.”
Unlocking a door Using ‘Sign in with Ethereum’ (SIWE)
“Just in time for Ethereum’s consequential Shanghai update, ConsenSys, the company behind MetaMask, said on Friday it is adding a staking feature to MetaMask Portfolio – its newly launched one-stop shop for users to view their crypto holdings and send (or “bridge”) them between different blockchains.
MetaMask’s new staking feature will allow users to stake via Lido or Rocket Pool, the two leading community-led validator services.
By allowing staking through the MetaMask Portfolio dapp, we are providing MetaMask users with a convenient way to interact with staking providers.”
“Bitcoin’s (BTC) recent double-digit rally has sparked a positive sentiment shift among crypto options traders. The leading cryptocurrency by market value has gained 13% this month, topping the $19,000 mark for the first time since Nov. 8. Tumbling U.S. inflation, weaker U.S. dollar, and expectations for slower Federal Reserve rate hikes have helped the cryptocurrency look past the lingering fallout from FTX’s collapse.
BTC’s short-dated OTM calls have seen an increase in implied volatility compared to OTM puts. It indicates that BTC’s derivatives market is now not only pricing for a drop in bearish sentiment but is reflecting an increase in demand for exposure to upwards movements.
The bullish shift perhaps reflects confidence among sophisticated market participants that bitcoin’s rally to two-month highs may be only the first milestone in its upward trajectory.“
“Proto-danksharding (aka EIP-4844) is a planned change to the Ethereum protocol which introduces ephemeral data storage. Rollups (Layer 2s) can use this storage to post transaction data or proofs back to Layer 1 (mainnet). The benefits are lower transaction fees on the L2, greater scalability and more accessibility.
Proto-danksharding requires a new cryptographic scheme: KZG Commitments. This ceremony will generate a structured reference string (SRS) which is needed for the commitments to work. It’s a multi-party ceremony: each contributor creates a secret and runs a computation to mix it with previous contributions. Then, the output is made public and passed to the next contributor.
To guard against attempts to corrupt the ceremony, participants need an Ethereum address or GitHub account with an established history to participate. The final output of the Ceremony will be included in a future upgrade to help scale the Ethereum network.”
“The congressman went on to say that the watchdog’s actions protect “no one,” and that the SEC’s approach of political ‘regulation through enforcement hurts everyday Americans.’
Emmer accused the SEC of ‘leaving the industry to interpret the rules of the road‘ due to their “after-the-fact enforcement actions” and asked when “proactive guidance” could be expected from the watchdog.”
“In a new court filing, digital asset management company Grayscale blasted the U.S. securities regulator for its “illogical” and “fundamentally unreasonable” argument against approving a spot bitcoin exchange-traded fund (ETF). Grayscale also accused the SEC of exceeding its statutory authority, saying the agency ‘is not permitted to decide for investors whether certain investments have merit.’
A successful manipulation of prices in the spot bitcoin market would necessarily affect the price of bitcoin futures as well.
Final briefs on the case are due Feb. 3, after which three judges will be selected and the court will share a schedule for the lawsuit’s oral arguments. A final decision on the case could come by the fall.”
“FTX can put four key units including derivatives arm LedgerX and stock-clearing platform Embed up for sale, a Delaware bankruptcy judge ruled Thursday. Investment bank Perella Weinberg is now allowed to start the sale process, which also includes the crypto exchange’s European and Japanese units, and which have already attracted as many as 117 expressions of interest.
The estate, now run by restructuring expert John Ray, hopes to generate more value for creditors by speedily selling off the more solvent and easy-to-separate arms of the business.”
“With an advance during the early afternoon Eastern time, bitcoin (BTC) briefly rose above $19,000, up more than 7% for the day and at its highest level since it was gapping down in early November as crypto exchange FTX imploded. Bitcoin is now up about 14% this year after falling 63% in 2022.
Meanwhile, shares of crypto exchange Coinbase (COIN) were up 4% in recent trading. They have risen 35% year to date. The moves in the stocks of bitcoin miners are even more dramatic: Marathon Digital (MARA) is up 16% Thursday and 83% year to date, and rivals Riot Platforms (RIOT) and Hut 8 Mining (HUT) have notched similar gains. Grayscale Bitcoin Trust (GBTC) – whose discount to net asset value (NAV) widened to nearly 50% toward the end of 2022 – is up 12% for the session, and has now narrowed its discount to NAV to 36.4%.
The Consumer Price Index rose 6.5% in December from a year earlier, inline with expectations and down from a 7.1% increase in November. The slower pace of inflation will likely pave the way for the Federal Reserve to ratchet down its pace of rate hikes to 25 basis points per meeting.”
“U.S. House Republicans plan to set up a crypto committee in a move that signals the GOP wants to make crypto oversight and legislation a priority. McHenry told Politico the panel will be responsible for providing clear rules for federal regulators, as well as creating policies that allow financial technology to reach underserved communities.
We’ve got to respond for oversight and policymaking on a new asset class.
The new subcommittee on digital assets, financial technology and inclusion will be chaired by Rep. French Hill (R-Ark.), who has investigated the viability of a central bank digital currency. The vice chair of the subcommittee will be Rep. Warren Davidson (R-Ohio), who has also been active on crypto issues.”
“Digital Currency Group might sell assets from its venture portfolio to come up with funds to help Genesis, its wholly-owned subsidiary, cover a $3 billion shortfall, according to a report on Thursday from the Financial Times. The portfolio is worth about $500 million.
That means DCG’s stakes in more than 200 crypto projects—including data firm Dune Analytics, Ethereum block explorer Etherscan, crypto exchange Coinbase, and USD Coin issuer Circle—could soon be up for sale.”
“The investment regulator took aim at Gemini Earn, the troubled yield-bearing product that hundreds of thousands of U.S. investors entrusted with their crypto. Gemini generated yield on billions of dollars in crypto by loaning deposits to Genesis, which loaned them out again.
Defendants offered and sold the Gemini Earn Agreements through the Gemini Earn Program without registering with securities regulators. As a result, investors lacked material information about the Gemini Earn program that would have been relevant to their investment decisions.
The lawsuit is the latest twist in a high-stakes CEO battle pitting the Winklevoss twins of Gemini against Barry Silbert, head of DCG.”
“Sam Bankman-Fried, the disgraced former chief of FTX, denied stealing funds and claimed FTX and sister company Alameda Research collapsed because of the crypto market meltdown and inadequate hedging on Alameda’s part. In three instances in his note, Bankman-Fried called an announcement by crypto exchange Binance to withdraw funds from Alameda in early November that set off a run on the FTX exchange a “targeted attack.”
While casting the blame of FTX’s downfall on Alameda’s poor hedging, Bankman-Fried notably didn’t address the $65 billion line of credit he opened from the exchange to the trading arm, as revealed in a court hearing on Wednesday. At the hearing, a lawyer representing FTX in its Chapter 11 bankruptcy proceedings said the credit line has led to a “shortfall in value” in repaying customers and creditors.
He also said he plans to use nearly all his personal assets to help customers who lost money and says he has “offered to contribute nearly all” of his personal Robinhood Markets (HOOD) shares to customers. Meanwhile, court filings show Bankman-Fried seeking to retain control of the roughly 56 million Robinhood shares (worth around $450 million) to pay his legal fees. The disputed shares have since been seized by the Justice Department.”
“The market panic that ensued after the collapse of Sam Bankman-Fried’s FTX exchange in early November seems to be abating.
The three-month bitcoin (BTC) futures listed on the Chicago Mercantile Exchange (CME), widely considered a proxy for institutional activity, are drawing a premium over the the cryptocurrency’s going spot market price for the first time since FTX went bust. The renewed premium indicates that institutional activity is no longer concentrated on the short side.
While CME’s basis has recovered, the term structure remains in backwardation as institutional investors maintain a cautious view on bitcoin and less liquid further dated expiry dates.”
“Decentralized finance (DeFi) platform Ondo Finance has launched three products designed to allow stablecoin holders globally to invest directly in bonds and U.S. Treasurys. Ondo estimated the regulated products could attract more than $100 billion in stablecoins that currently may not be earning yields for their holders.
The OUSG fund invests in short-term government Treasurys, earning 4.2% per annum; the OSTB invests in short-term bonds, earning 5.45% per annum; and OYHG invests in high-yield corporate bonds, paying out 8% per annum to depositors. Fees for these funds are currently listed at 0.15%.
The funds deposited on Ondo will further be invested in relevant exchange-traded funds offered by BlackRock and Pimco. Coinbase Custody will custody any stablecoins the fund holds, while Coinbase Prime will handle conversions between stablecoins and fiat.
Large stablecoin holders, including start-ups and [decentralized autonomous organizations], are faced with a choice between having their purchasing power eroded away by inflation or taking too much risk with the current set of on-chain yield offerings.
Ondo’s new offering also highlights a growing trend of bringing traditional, so-called real-world assets (RWA) such as bonds, real estate and consumer credit to the blockchain.”
“Crypto exchange FTX has recovered more than $5 billion in different assets, not including another $425 million in crypto held by the Securities Commission of the Bahamas, a bankruptcy attorney said during a hearing Wednesday.
The announcement substantially raises the total FTX claims it holds, after the company’s new leadership said it could only find just over $1 billion on Dec. 20, 2022. The total amount FTX owes its creditors is still unclear. In initial bankruptcy filings, the company’s management checked off the box indicating a figure between $1 billion and $10 billion.
We know what Alameda did with the money. It bought planes, houses, threw parties, made political donations. It made personal loans to its founders. It sponsored the FTX Arena in Miami, a Formula One team, the League of Legends, Coachella and many other businesses, events and personalities.
He added that this has led to a “shortfall in value” to repay customers and creditors.
The amount of the shortfall is not yet clear. It will depend on the size of the claims pool and our recovery efforts. But every week we come closer to completing the work necessary to estimate recoveries for the purposes of a plan of reorganization.”
“Known for its popular hardware wallets, Ledger is now adding its first blockchain game to the Ledger Live software app. Should Ledger Live someday turn into a thriving destination for Web3 games, it would give creators another option to reach players amid Apple’s strict new policy on NFTs and Steam’s total rejection of NFTs.
Cometh Battle is a free-to-play sci-fi digital card game that released its open beta version on Ethereum scaling network Polygon back in May 2022. Its in-game assets are NFTs that can be bought, sold, or rented. It’s also PVP, meaning each player is pitted against another.
This partnership with Ledger not only increases the security of our ecosystem but also aims to onboard more gamers safely into Web3. We want to provide an environment where players can enjoy the game without constantly being on alert anytime they sign a transaction.”
“Congressman Tom Emmer wrote a letter to the Department of the Treasury five months ago asking a number of questions surrounding its Tornado Cash ban, noting that ‘technology is neutral, and the expectation of privacy is normal.’
‘Because Tornado Cash remains the subject of active litigation, it would not be appropriate for Treasury to comment further on the entity’s designation at this time,’ Assistant Secretary for Legislative Affairs at the Treasury Jonathan Davidson said in a Monday letter to Emmer.
Coinbase, the biggest digital asset exchange in the U.S., is funding a lawsuit against the Treasury Department for the move, claiming the ban is ‘punishing people who did nothing wrong and results in people having less privacy and security.'”
“Hong Kong’s Securities and Futures Commission (SFC) will allow retail trading in a select group of cryptocurrencies as it attempts to introduce regularity clarity to crypto.
The watchdog plans to propose a subset of tokens that will be approved. Leung said only “highly liquid” assets will be on the list. Signals out of Hong Kong on the territory’s aspirations for its crypto regime have been mixed in recent months.”
“The deal, which will be the subject of another confirmation hearing in March, also needs approval from a majority of Voyager’s creditors. During the hearing, Kirkland & Ellis partner Christine Okike, also speaking on behalf of Voyager, said lawyers had “resolved for the purposes of today” objections made by the SEC and the state of New Jersey.
We do not want to delay getting crypto back into our customers hands. Importantly … we also took a very hard look at a standalone self-liquidation … the self liquidation auction is not an option that is going to put the most money in our customers pockets.
Voyager initially agreed to sell itself to FTX, but reopened the bidding process after Sam Bankman-Fried’s exchange collapsed in November. Binance.US swooped in with the winning offer in December.”
“Chainalysis explained that while sanctions applied to Tornado Cash saw its ‘front-end website taken down, its smart contracts can run indefinitely, meaning anyone can still technically use it at any time.’
Because Tornado Cash is a smart-contract-based decentralized platform, no person or organization can ‘pull the plug’ as easily on Tornado Cash as they could with a centralized service.
In 2022, users deposited a total of 1,233,129 ETH to it and withdrew 1,283,186 ETH from it.”
“Decentralized-finance (DeFi) project Yearn Finance will allow users to create their own vaults to accrue yield and deposit proceeds to earn even more token rewards. Yearn will charge 10% as performance fees for providing such a facility. The permissionless vaults are part of a broader V3 plan, which aims to make Yearn wholly decentralized in the future in terms of products and services offered to users.
So far, users have been limited to vaults created by Yearn’s contributors and developers. With the introduction of the “permissionless vault factory,” anyone can create their own strategies and offer them on Yearn, where other interested users can deposit their own tokens and earn yields.
More than 24 vaults are already active on the Yearn platform, offering yields ranging from 1.3% to as much as 17% annualized. Yearn had over $360 million in total value locked as of Tuesday.”
“In his letter Tuesday, Silbert said DCG has borrowed from Genesis Capital, but ‘these loans were always structured on an arm’s length basis and were priced at prevailing market interest rates.’
Silbert said DCG has a $1.1 billion promissory note maturing in 2032 with Genesis Capital, which arose from DCG assuming its subsidiary’s bankruptcy claim against crypto hedge fund Three Arrows Capital. DCG, according to the letter, also owes the subsidiary $447.5 million (of actual U.S. dollars, not crypto) borrowed between January and May 2022 at interest rates of 10% to 12%, plus 4,550 bitcoin (BTC), worth about $78 million.
As for DCG’s role in Genesis Capital attempting to restructure, Silbert said: ‘Because of the outstanding loans and the promissory note that DCG owes to Genesis Capital, DCG executives, including those on the Genesis board, have no decision-making authority related to any restructuring of Genesis Capital.’
Gemini raised the temperature in the fight this week, calling for Silbert to step down as CEO of DCG and officially canceling the Gemini Earn program. Gemini has raised questions about the movement of money between Genesis and DCG.”
“Twitter is continuing to develop a new feature that will allow users to give each other “Awards” using “Coins” that can be purchased with fiat currency. Twitter is currently developing a purchase interface and menu item button for Coins, and will use Stripe to process payments in fiat.
While it’s unlikely that these Coins will exist on the blockchain, it’s possible crypto could be added as a payment method through Stripe, allowing users to buy Twitter Coins with crypto in the future. Stripe leaned into supporting crypto payments last year, and Twitter tested USDC payouts through Stripe for creators monetizing their content through its social media site last year as well.
Twitter’s Awards will include reactions such as “Mind Blown,” “Bravo,” “Bullseye,” “Gem,” and “Crown,” to name a few. Such reactions—which will require Coins to give to a user’s tweet—are similar to Reddit Gold.”
“The U.K. government is “fully behind” a stablecoin for wholesale settlements that occur between banks, Andrew Griffith, the economic secretary, said in a meeting in Parliament on Tuesday. The stablecoin – a digital asset backed by fiat currency – wouldn’t be issued by the government, but instead by a third-party provider, Griffith told the Treasury Committee.
I want to see us establish a regime, and this is within the FSMB (Financial Services and Markets Bill) for the wholesale use for payment purposes of stablecoins.
Despite the FTX debacle, the U.K. government still wants to establish the country as a crypto hub, said Griffith, and wants to allow space for this ‘potentially disruptive game-changing technology that can challenge but also turbocharge all of those (financial) industries.’
The U.K. Treasury is launching a consultation on what issuing a central bank digital currency (CBDC) for wholesale and retail payments will look like, but Griffith said he believes that the stablecoin will get there first.”
“It purchases a series of culturally significant artifacts. Now crypto investment collectivePleasrDAO is pivoting to host virtual live auctions with the creation of PleasrHouse. Its inaugural sale this Thursday will feature a non-fungible token (NFT) created in collaboration with whistleblower Edward Snowden, political activist Daniel Ellsberg and The Freedom of the Press Foundation, which was teased in a tweet by PleasrDAO saying, “The revolutionaries will be televised.”
The premier NFT on sale is titled, “Wouldn’t You Go To Prison To End This War?”, the words Ellsberg said just after he surrendered to officials for leaking the “Pentagon Papers” in 1971. The token features the video of the interview with the Pentagon Papers superimposed on it. Proceeds of the sale will be donated to the Freedom of the Press Foundation and the Daniel Ellsberg Initiative for Peace and Democracy.”
“Nishad Singh, FTX’s former director of engineering and a housemate of Bankman-Fried, is said to have met with prosecutors in a “proffer session.” Such meetings often include an offer of “limited immunity” to encourage the interviewee to speak freely. Singh has not been accused of wrongdoing.
Central to Singh’s deal is information on FTX’s and Bankman-Fried’s large donations to various political campaigns, according to Bloomberg, citing people familiar with the matter.
Singh personally has donated more than $9.3 million to Democratic Party-aligned initiatives since 2020. In April 2021, the political action committee Mind The Gap, founded by Bankman-Fried’s mother, received a $1 million donation from Singh. According to court documents from November, Singh received $543 million in loans from Alameda Research. The former FTX affiliate is recorded as granting $4.1 billion in loans to related parties.”
Former Alameda Research CEO Caroline Ellison and former FTX CTO Gary Wang have both pleaded guilty to fraud charges.”
“Staked ETH withdrawals, scalability and more cool events are on the horizon for Ethereum. Staked ether withdrawals will be the most pressing issue that Ethereum developers will tackle.
Withdrawals are as good as done. All that is left to do is to test the code that enables withdrawals, which should be mostly done by February/March.
Another item that Ethereum developers are hoping to address is “proto-danksharding”. Danksharding takes this same principle of splitting a network into shards, but instead of providing more space for transactions, it provides more space for “blobs” of data, allowing Ethereum to process more data. Developers agreed to push proto-danksharding to an upgrade scheduled for the fall.
Proto-danksharding has the potential to onboard millions of users and truly provide scalability to Ethereum.”
“The exchange’s market share was just 45% at the start of last year, but the elimination of trading fees in June, not to mention the collapse of rival FTX in November, served to push users to Binance.
No matter how you look at it in terms of trading activity, Binance is the crypto market. After lifting trading fees for its BTC spot pairs this summer, Binance completely overtook all market share in the spot market.
While Binance has been by far the biggest crypto exchange by trading volume for several years, these and other numbers suggest monopoly-like dominance. A report from CryptoCompare showed Binance’s overall year-end crypto market share was 66.7%. Coinbase (COIN) came in second with a relatively tiny 8.2%. A market share this high could become problematic for the industry if Binance were to encounter any issues, whether regulatory or mistrust from users.
It is not healthy to have so much of the trading volume concentrated with any one exchange.
Binance is currently under investigation by the U.S. Justice Department over compliance with anti-money laundering laws and sanctions. The exchange also recently lost its auditor, Mazars Group, which announced a pause in its work with crypto exchanges looking to produce proof-of-reserves.”
“A total of $3.85 billion was shifted from February through October from local to international crypto exchanges. The Esya Centre report found that domestic exchanges lost 81% of their trading volumes in four months after the imposition of the much debated 1% TDS rule.
The report provides the first monetary estimate of the impact of India’s controversial crypto tax policy on domestic exchanges. Prime Minister Narendra Modi’s government announced a 30% tax on crypto profits and a 1% tax deducted at source (TDS) on all transactions on Feb. 1, 2022.
The report said that India’s virtual digital-asset (VDA) industry is “crippled under the current tax architecture” and that the “baseline scenario” under the current structure is that “almost all” Indian centralized VDA users will move to a foreign exchange. Esya predicted that “centralized exchange businesses would become unviable” in India if the current trend continues.
We anticipate a commensurately large negative impact on tax revenues, as well as a decrease in transaction traceability – which defeats the two central goals of the extant policy architecture. The current tax architecture may lead to a loss of approximately $1.2 trillion of local exchange trade volume in the next four years.”
“The allegations of criminal violations of campaign finance laws were new and unexpected. Interestingly, these allegations go far beyond the basic fact that SBF used stolen customer funds to make these contributions.
Damian Williams, the United States Attorney in Manhattan, provided some fascinating details about the campaign finance count in his press conference, including that SBF made illegal campaign contributions totaling in the “tens of millions of dollars.” He further explained these enormous illegal contributions were disguised to look as if they were coming from, what Williams called, SBF’s “wealthy co-conspirators.” In other words, SBF used “straw donors” to conceal the source of some of his campaign contributions to evade federal contribution limits. That’s illegal.
If these bombshell allegations are proven, what would be the implications?
First, the federal campaign finance laws make clear that straw donors could themselves be criminally liable as well. This should send a shiver down the spines of these as-yet unnamed wealthy co-conspirators.
Second, if the allegations are proven, it would mean that all published reports of how much SBF contributed to political campaigns in 2020, and in the 2022 midterms, are significantly understated. If the “tens of millions of dollars” is true, this case would go down as one of the largest straw donor campaign finance fraud cases of all time.
Third, the obvious question an inquiring journalist should be asking is: Did the Biden 2020 campaign also receive illegal campaign contributions through SBF’s network of “wealthy co-conspirators?”
Finally, if the allegations in the indictment are true, it would be logical to scrutinize SBF’s politically active mother – Barbara Fried. Barbara Fried was the co-founder of a secretive super PAC called Mind the Gap that directed substantial contributions to Democratic candidates in this time period. Could Barbara Fried’s PAC have been a recipient of some of her son’s illegal campaign cash?“
“In its filing, the SEC questioned the adequacy of the information in Binance.US’s disclosure statement, specifically details on the ability of the crypto exchange to “consummate a transaction of this magnitude,” as well as how Binance.US intends to secure customer assets and details on how Binance.US would rebalance its cryptocurrency portfolio.
The SEC said it has communicated its concerns to Binance.US’s counsel, and has been told that a revised disclosure statement will be filed prior to the next hearing on the motions. Voyager plans to seek the approval of the bankruptcy court for the sales of its assets at a hearing on Jan. 5.
Separately, the Texas State Securities Board and the Texas Department of Banking filed an objection to the sale because they claim Voyager and Binance.US are ‘not in compliance with Texas law and are not authorized to conduct business in Texas.'”
“A modification was made to FTX founder Sam Bankman-Fried’s bond agreement on Tuesday, prohibiting him from accessing or transferring funds related to FTX or Alameda Research as a new condition of his bail.
The amendment follows activity involving Alameda-linked wallets that took place last week. Just days after Bankman-Fried was released on bail, around $1.7 million worth of cryptocurrencies linked to Alameda was transferred to coin mixers.”
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The Disrupt 