SEC - Page 297

The Bank of England (BoE) has taken a significant step towards the launch of its central bank digital currency, nicknamed “Britcoin,” following the completion of a trial study called Project Rosalind.

In July 2022, the BoE and the Bank for International Settlements launched this joint experiment to investigate the implementation of application programming interfaces (APIs) in retail central bank digital currency (CBDC) transactions.

It examined the integration of CBDCs on smartphones, in retail stores, and online platforms. Furthermore, it delved into the concept of “programmability,” which involves customizing digital money to behave in specific ways based on predefined conditions.

A report released on June 16 summarized the second phase of Project Rosalind, revealing that a CBDC could make person-to-person payments cheaper and more efficient.

Additionally, it highlighted the potential for businesses to develop innovative financial products that combat fraudulent activities.

The study focused on the development of 33 API functionalities and explored over 30 use cases for retail CBDC.

During Politico’s Global Tech Day conference, Cunliffe rated the likelihood of a CBDC project proceeding at “seven out of ten.”

CBDC programmability has faced skepticism, with critics suggesting that it could be programmed to work against its users.

In summary, with the completion of Project Rosalind, the launch of the BoE’s central bank digital currency, known as ‘Britcoin,’ is drawing nearer.

Francesca Road, the head of the BIS London Innovation Hub, stated, “The Rosalind experiment has advanced central bank innovation in two key areas: by exploring how an API layer could support a retail CBDC system and how it could facilitate safe and secure CBDC payments through a range of different use cases.”

Despite the positive findings from Project Rosalind, BoE Deputy Governor Jon Cunliffe cautioned that a final decision on launching a CBDC in the country is still several years away.

Simultaneously, on the day of the Project Rosalind findings’ release, enterprise blockchain firm Quant Network announced its participation as a vendor in the study.

This announcement had a positive impact on the price of Quant’s native QNT token.

The study highlighted the potential benefits of CBDCs in facilitating cost-effective and efficient peer-to-peer payments, while also enabling the development of innovative financial products to counter fraudulent activities. However, the final decision on launching a CBDC in the UK is still expected to take several years.

However, the study concluded that a well-designed API layer could enable central banks to collaborate with the private sector and securely provide retail CBDC payments.

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BUSD plummets down stablecoin rankings

USDT suffers de-pegging concern after 3pool imbalance

According to data from CoinMarketCap, BUSD, the stablecoin created through a partnership between Binance and Paxos Trust, has experienced a significant decline in market capitalization over the past 30 days, causing it to drop to the fourth position among stablecoins.

Currently, the market cap of BUSD stands at $4.3 billion, marking a 29% decrease from $5.54 billion recorded on May 18. This downward trend for BUSD began in December 2022 when its market cap reached an impressive $23 billion.

The decline in BUSD’s market cap appears to be closely tied to the major developments surrounding Binance, which followed the dramatic collapse of FTX in November 2022.

In December 2022, news emerged suggesting that the U.S. Department of Justice would focus its attention on Binance, triggering a massive net withdrawal of $3.6 billion in just seven days. Market makers, including Jump Finance, redeemed substantial amounts of BUSD, with withdrawals exceeding $245 million.

It is worth noting that the creation of BUSD resulted from a partnership between Binance and Paxos Trust, with Paxos being the issuer and owner of the stablecoin while Binance licenses its brand.

However, this partnership has presented new challenges for Paxos. In February, reports surfaced claiming that the U.S. Securities and Exchange Commission had issued a Wells notice to Paxos, alleging that BUSD was an unregistered security.

The fall in market capitalization and subsequent decline in BUSD’s position among stablecoins highlight the challenges faced by the cryptocurrency industry as it navigates regulatory scrutiny and market volatility.

It remains to be seen how BUSD and other stablecoins will respond to these challenges and adapt to the evolving landscape of the digital asset market.

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The past week proved to be bearish for the top 100 DeFi tokens, as a majority of them experienced a decline in value. However, one event in particular triggered concerns about the stability of Tether (USDT), the popular stablecoin.

On June 15, an imbalance occurred in Curve Finance’s 3pool, leading to a potential depegging scare for USDT as its weightage in the pool surged above 70%.

This resulted in a significant amount of selling pressure. In response to the situation, Tether’s chief technology officer downplayed the fears of depegging, referring to the market conditions as stress tests for the stablecoin and dismissing the “FUD” (fear, uncertainty, and doubt) surrounding the issue.

Another noteworthy event involved a crypto trading bot that borrowed a substantial amount of $200 million to execute arbitrage trades but only managed to generate a meager profit of just over $3.

This highlights the risks and challenges faced by automated trading systems in the volatile cryptocurrency market.

Meanwhile, Uniswap, a prominent decentralized exchange protocol, unveiled its version 4 code on June 13, opening up possibilities for the introduction of new liquidity pools.

This development aims to enhance the functionality and user experience of the platform.

However, not all news was positive in the DeFi space. Sturdy Finance, a DeFi lending platform, suffered a loss of $800,000 through a draining incident. In an effort to recover the funds, the platform’s team offered a $100,000 bounty for their return.

They also reopened their stablecoin market on June 16. Additionally, the Hashflow protocol experienced an exploit resulting in a loss of $600,000. Nevertheless, Hashflow assured its users that they would be fully compensated for their losses.

The overall sentiment in the DeFi market remained bearish, with most of the top 100 tokens trading at their lowest levels in three months.

This downward trend reflects the prevailing market conditions and highlights the volatility and inherent risks associated with cryptocurrency investments.

In summary, the imbalance in Curve Finance’s 3pool, which caused concerns about the stability of Tether’s peg to the US dollar, was a significant event in the past week’s DeFi landscape.

Despite the challenges faced by the industry, developments like the release of Uniswap’s version 4 code continue to drive innovation in the decentralized finance space.

However, incidents of platform exploits and losses underscore the importance of robust security measures and risk management strategies in the DeFi ecosystem.

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Avraham Eisenberg, the individual accused of orchestrating a massive theft of approximately $116 million from the decentralized exchange Mango Markets, is set to face trial in the United States on December 4.

The trial date was established by Judge Richard Berman of the U.S. District Court for the Southern District of New York, as indicated by court records filed on June 14.

Eisenberg stands accused of executing a significant exploit on Mango Markets in October 2022, resulting in the pilfering of governance tokens MNGO, USD Coin (USDc), and Marinade Staked SOL (mSOL).

He has pleaded not guilty to three criminal charges, including commodities fraud, commodity manipulation, and wire fraud, all connected to the Mango Markets exploit.

In October 2022, the platform reported that Eisenberg had returned around $67 million of the funds. At the time, he claimed that his actions were legal and part of a “highly profitable trading strategy.”

Both the U.S. Attorney’s Office and Eisenberg’s defense team have until June 22 to present pretrial motions concerning the trial schedule.

Additionally, Eisenberg faces separate civil lawsuits filed in January by the Commodity Futures Trading Commission, Securities and Exchange Commission, and Mango Markets.

Since his arrest in Puerto Rico in December 2022 and subsequent transfer to Oklahoma, the alleged Mango Markets exploiter has remained largely silent on his Twitter account.

Following a hearing in February, during which he waived his right to bail, he has been primarily held in U.S. custody.

The upcoming trial will determine the outcome of the criminal charges brought against Eisenberg.

It will shed further light on the allegations surrounding the Mango Markets exploit and provide an opportunity for the legal system to assess the evidence and arguments presented by both sides.

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Binance, the world’s leading cryptocurrency exchange, is facing further legal troubles as reports suggest that its French arm has been under investigation since early 2022.

According to an article in the French daily, Le Monde, the Judicial Investigation Service of Finance has been conducting a preliminary investigation into Binance in France since February 2022.

The investigation is said to be focused on alleged “aggravated money laundering” and the illegal provision of services to French customers.

The Paris Prosecutor’s Office cited acts of illegal exercise of the function of a service provider on digital assets and participation in investment operations, concealment, and conversion as the basis for the investigation.

Binance is accused of failing to comply with Know Your Customer procedures, which are designed to prevent money laundering activities.

In addition, it has been revealed that Binance operated in France without obtaining the necessary operating license.

Since 2019, crypto exchanges have been required to obtain approval from the Financial Markets Authority (AMF) in order to operate in France.

However, Binance reportedly only received AMF approval in May 2022, despite operating in the country since 2020.

A spokesperson for Binance emphasized that the company cooperates with law enforcement globally and complies with all laws in France. They stated that user information is securely held and provided to government officials only with documented and appropriate justification.

The investigation in France comes shortly after Binance’s subsidiary in the United States, Binance.US, and CEO Changpeng Zhao were hit with 13 charges by the U.S. Securities and Exchange Commission.

These charges further contribute to the legal challenges faced by the global cryptocurrency exchange.

As the investigation unfolds in France, Binance’s compliance with regulatory requirements and its handling of user data will be closely scrutinized.

The outcome of the investigation could have significant implications for Binance’s operations in France and its global reputation.

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Tether, the stablecoin issuer, has responded to the controversy surrounding the deactivation of accounts belonging to major cryptocurrency firms, including MoonPay. The New York Attorney General (NYAG) released documents stating that Tether deactivated approximately 29 accounts of prominent players in the crypto industry in 2021.

While the specific reasons for the terminations were not disclosed, Tether has stated that it will not comment on individual relationships. The company emphasized that all individuals had undergone thorough compliance checks during onboarding and continuous monitoring as part of Tether’s compliance policies.

Among the deactivated accounts were those of MoonPay, BlockFi, CMS Holdings, and Galois Capital. The NYAG investigation, which began earlier in 2021, revealed that certain documents related to the probe extended until around June of the same year. User codes within these documents have been redacted.

The investigation into Tether and its sister company Bitfinex was initiated by the NYAG, alleging misappropriation of $850 million in funds. During the investigation, iFinex, the parent company of both entities, requested a 30-day extension to produce critical financial documents.

Eventually, the parties involved reached a settlement, with Tether agreeing to pay an $18.5 million penalty and cease trading activities in New York.

Following the settlement, media outlets and Coinbase requested access to Tether’s initial quarterly report under the Freedom of Information Act. Tether, however, objected to the request, citing the need to protect customers’ confidential information from potential exploitation by malicious actors.

Despite Tether’s objection, the NYAG allowed media outlets access to the documents, revealing the deactivation of numerous company accounts. Tether’s response to the controversy highlights its commitment to compliance checks and emphasizes the rigorous processes involved in onboarding and ongoing monitoring. By addressing the concerns surrounding the account deactivations, Tether aims to maintain transparency while safeguarding the confidentiality of its customers’ information.

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The price of the Arbitrum governance token (ARB) could experience a reversal due to positive developments in the Ethereum network and an increase in active users on the Arbitrum platform.

Despite a consistent downturn since the airdrop in late March, the Arbitrum ecosystem has shown signs of healthy growth.

According to a recent report by Nansen, activity on Arbitrum improved after the airdrop and has stabilized at a higher level compared to before the airdrop.

Daily active users, gas fees, and transaction counts have consistently remained higher since April 2023. The number of active users on Arbitrum has also been closing in on Ethereum, surpassing Optimism.

The trading volume on decentralized exchanges (DEXs) based on Arbitrum has seen a noticeable increase after the airdrop, further indicating the platform’s growth.

Additionally, the report reveals that the ARB airdrop recipients accounted for only about 5% of the blockchain’s activity, and Arbitrum has attracted a significant number of new users post-airdrop.

There are several potential catalysts that could drive ARB’s price upward. One such catalyst is the upcoming Ethereum update called Cancun-Deneb (Dencun) scheduled for the second half of 2023.

This update will include EIP-4844 (proto-Danksharding), which aims to reduce transaction fees on Arbitrum, thereby increasing the value proposition of the platform.

Furthermore, the Arbitrum Foundation has decided to pass on the earnings from its sequencer, a component of the layer-2 fees, to the Arbitrum DAO.

The DAO will manage the 3,352 Ether (ETH), equivalent to $5.4 million, earned from the sequencer. This revenue source could potentially generate yields for ARB holders if the community votes to direct the rewards to them.

Nansen’s data suggests that “smart money” and funds that accumulated ARB after the airdrop have not sold their holdings, which is an encouraging sign.

Funding rates for ARB perpetual swap contracts have turned negative, similar to the rest of the crypto market, following lawsuits against major exchanges like Binance and Coinbase by the Securities and Exchange Commission (SEC).

While the ARB/USD pair has been on a downward trend since its launch, there is a possibility of a positive breakout indicated by a descending wedge pattern.

However, if ARB breaks below the support line of the wedge pattern around $0.90, a significant downward move could occur.

Ultimately, the price action of ARB will depend on the upcoming Dencun update on Ethereum and the decisions made by the Arbitrum Foundation regarding revenue distribution.

It is important for readers to conduct their own research and exercise caution when making investment or trading decisions, as this article does not provide investment advice or recommendations.

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