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China’s Supreme Prosecutorial Authority Targets Cybercrime Surge Using Blockchain Projects

In an endeavour to address the escalating cybercrimes, the Supreme People’s Procuratorate (SPP) of China – the nation’s highest prosecutorial authority – is directing its focus towards wrongdoers utilising blockchain and metaverse projects for unlawful activities.

The SPP expresses concern over the surge in online fraud, cyber violence, and infringement of personal information.

The SPP disclosed a notable increase in cybercrimes perpetrated on blockchains and within the metaverse.

Criminal elements are increasingly resorting to cryptocurrencies for the purpose of money laundering, rendering the tracking of their illegal gains a challenging task.

Ge Xiaoyan, the deputy prosecutor-general of the SPP, affirmed that charges related to cybercrime-associated telecom fraud have escalated by 64 percent year-on-year.

Concurrently, traditional offences such as gambling, theft, pyramid schemes, and counterfeiting have also expanded their reach into cyberspace.

Xiaoyan underscored that charges linked to internet theft have soared by almost 23%, whereas charges concerning online counterfeiting and the sale of substandard goods have surged by nearly 86%.

Procuratorates brought charges against 280,000 individuals in cybercrime cases between January and November, marking a 36% year-on-year increase and constituting 19% of all criminal offences, as disclosed by Xiaoyan.

Zhang Xiaojin, the director of the Fourth Procuratorate of the SPP, cautioned both citizens and participants in digital assets regarding investment scams prevalent in the local crypto economy.

Xiaojin highlighted the emergence of novel cybercrimes involving the metaverse, blockchain, and binary options platforms, indicating that digital currencies have become focal points for such activities, thereby stressing the necessity for heightened vigilance.

China’s endeavours to clamp down on digital asset-related crimes diverge from those of Hong Kong.

The special administrative region of China has adopted a distinct approach by implementing regulations conducive to cryptocurrencies to standardise its digital asset ecosystem and safeguard investors without stifling innovation.

The People’s Bank of China (PBoC) addressed concerns pertaining to cryptocurrency regulation and decentralised finance in its most recent financial stability report.

The Chinese central bank dedicated a separate section to cryptocurrency assets in the report, emphasising the imperative for the industry to be regulated through collaborative efforts among different countries.

In 2021, the PBoC officially announced measures aimed at curbing crypto adoption in mainland China, advocating for enhanced inter-departmental coordination in combating crypto-related activities in the country.

Despite the ban encompassing virtually all crypto transactions and cryptocurrency mining, mainland China has persisted as a significant crypto-mining hub.

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SEC Considers Approval of Bitcoin ETF Options Trading Amidst Growing Interest

Bitcoin/Crypto News Today

The United States Securities and Exchange Commission (SEC) is soliciting feedback on a proposed rule alteration enabling the listing and trading of options for Bitcoin exchange-traded funds (ETFs).

As per a notice dated February 23, the NYSE has sought a rule adjustment to authorise the listing and trading of options on the Bitwise Bitcoin ETF (BITC), the Grayscale Bitcoin Trust (GBTC), and “any trust that holds Bitcoin.”

If sanctioned, the options will be traded “in the same manner as options on other ETFs (including commodities ETFs) on the Exchange,” states the notice.

This encompasses regulations such as listing criteria, expiry dates, strike prices, minimum price changes, position and exercise limits, margin requirements, and protocols for customer accounts and trading halts.

BlackRock is similarly pursuing endorsement for a comparable policy revision.

The asset manager has applied for rule amendments to list options on its Bitcoin ETF in conjunction with the Chicago Board Options Exchange (CBOE). Bloomberg ETF analyst James Seyffart foresees the SEC’s verdict arriving by September 2024 at the latest.

Options are utilised for portfolio hedging, income, or speculative purposes.

They are financial derivatives affording buyers the right, but not the obligation, to buy or sell a specified asset at a predetermined price on a specific date.

In the realm of Bitcoin ETFs, options would enable investors to hedge or speculate on the price movements of a BTC ETF rather than Bitcoin itself.

The SEC has previously greenlit other commodity ETFs held by trusts, including the SPDR Gold Trust, iShares COMEX Gold Trust, iShares Silver Trust, and ETFS Gold Trust.

Grayscale CEO Michael Sonnenshein has been publicly advocating for regulators to endorse the crypto derivatives products.

According to the executive, options are advantageous for investors as they bolster “price discovery and can help investors better navigate market conditions or achieve desired outcomes, such as generating income.”

Similar to other investments and financial products, options trading carries risks that may not be suitable for all investors.

The SEC authorised the trading of spot Bitcoin ETFs on Wall Street on January 10, following years of rejections.

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Coinbase Advocates for Ether ETP Approval Amid SEC Scrutiny

Crypto News Today/DeFi

United States cryptocurrency exchange Coinbase has strongly supported Grayscale in its bid to transform its Ethereum Trust into an Ether exchange-traded product (ETP), asserting that Ether is not a security.

On February 22, Coinbase’s chief legal officer, Paul Grewal, unveiled the firm’s 27-page letter presenting the legal, technical, and economic arguments for why the U.S. Securities and Exchange Commission (SEC) should endorse an Ether-based ETP.

Coinbase presented five primary arguments, highlighting that Ether is appropriately categorised as a commodity, as evidenced by the U.S. Commodity Futures Trading Commission’s endorsement of ETH futures, statements by SEC officials, and court rulings.

Furthermore, it emphasised that the SEC has not contested the CFTC’s classification of ETH as a commodity.

“Our letter sets out what anyone knows who’s paid even the slightest attention to the matter: ETH is not a security,” stated Grewal, adding, “In fact, both before and after the Merge, the SEC, the CFTC, and the market have treated ETH not as a security but as a commodity.”

The letter also argued that Ethereum’s proof-of-stake consensus displays robust governance, mitigating risks of fraud and manipulation.

Additionally, it contended that the SEC’s endorsement of spot Bitcoin exchange-traded funds (ETFs) should similarly apply to an Ethereum ETP.

Coinbase supported its arguments with market data showing widespread ETH ownership and trading activity, along with the similarity between ETH futures ETFs and spot Ethereum-based funds.

The firm also underscored Ethereum blockchain’s inherent technological and operational security mechanisms that limit susceptibility to fraud and manipulation.

Finally, Coinbase highlighted its advanced market surveillance capabilities and partnership with the Chicago Mercantile Exchange.

The letter was a response to NYSE Arca’s proposed rule change to list and trade shares of the Grayscale Ethereum Trust as an Ethereum ETP, as per SEC’s procedural requirement for public feedback.

However, just two days earlier, analysts from S&P Global expressed concerns about spot Ethereum ETFs, warning that they could introduce new concentration risk to the blockchain network, particularly those incorporating staking, which could affect the mix of validators participating in Ethereum’s consensus mechanism.

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Zircuit, New ZK-Rollup Focused on Security, Launches Staking Program

Press Releases

George Town, Grand Cayman, February 24th, 2024, Chainwire

Staking program amassed over $129M TVL in less than 24 hours

Zircuit, a security-focused zero-knowledge rollup backed by pioneering L2 research, launched Zircuit Staking, an innovative program that allows users to stake ETH, liquid staking tokens (LSTs), and liquid restaking tokens (LRTs) to earn Zircuit Points. Shortly after launch, Zircuit Staking has already accumulated over $129M on the Ethereum mainnet and continues to rise.

Zircuit’s community has gained an impressive following of over 112K Twitter followers and 125K Discord members within a short four-month time span. The exponential growth of this community has also led to the early success of Zircuit’s staking program. In comparison, Starkware started in 2018 and only has 229K Twitter followers and $134M in TVL according to DefiLlama. Zircuit is on track to surpass these numbers in terms of both community engagement and TVL.

With the rapid ascent of EigenLayer, Zircuit is leveraging a growing surge in interest around restaking protocols. Less than 24 hours since launch, the program has already accumulated over $129 million TVL, signaling significant interest and confidence in the project.

Through the staking program, users can Zircuit points on top of any staking yield or other existing points. Users that opt-in to migrate their assets to the Zircuit Mainnet when it goes live are rewarded the most. Users can withdraw at any time and keep the points and yield earned, so ETH isn’t hard-locked like in Blast or Mantle. Currently, Lido Finance, Renzo Protocol, Swell Network, Kelp DAO, and Liquid Collective are supported with more integrations to come over the coming weeks.

To participate in the Zircuit Staking program, users can visit https://stake.zircuit.com/

For more information on Zircuit, Users can visit: https://www.zircuit.com/

About Zircuit

Zircuit is a fully EVM-compatible, zero-knowledge rollup powered by the latest research in L2 technology. Built by a team with multiple research grants from the Ethereum Foundation and backed by Pantera Capital and Dragonfly Capital, Zircuit is leading the future of secure chains with sequencer-level security. Users can learn more by visiting zircuit.com or follow us on Twitter/X @ZircuitL2

Contact

Jessica Graber
Zircuit
jessica@zircuit.com

VanEck Fined £1.75 Million by SEC Over Undisclosed Social Media Influencer Deal

Bitcoin/Crypto News Today

VanEck has agreed to pay a £1.75 million fine to settle charges brought by the United States Securities and Exchange Commission (SEC) regarding its launch of a social media-focused exchange-traded fund (ETF) in 2021.

The SEC imposed a civil penalty on the investment adviser.

On February 16, the SEC disclosed in a statement that during the launch of the VanEck Social Sentiment ETF in March 2021, VanEck did not fully disclose the involvement of a prominent social media personality in marketing the product.

The ETF aimed to track an index using “positive insights” from social media and other data sources.

However, the SEC found that VanEck attempted to enhance the fund’s success through social media and collaborated with an influential and divisive online personality to increase its appeal.

Although the financial watchdog did not explicitly name the influencer, reports from 2021 had previously linked David Portnoy, founder of Barstool Sports, to the promotion of the VanEck ETF.

The regulator observed an undisclosed detail: the influencer’s fee was tied to the fund’s growth, ensuring higher compensation as the fund expanded.

The SEC criticised the undisclosed agreement, focusing on VanEck’s failure to inform the ETF’s board about the influencer’s intended involvement.

This undisclosed arrangement had significant implications for the management contract and fund operations, breaching the board’s duty to oversee financial aspects during advisory contract discussions.

Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, emphasised the importance of transparency from advisers.

He noted that the failure to provide accurate disclosures hampers the board’s ability to properly assess the advisory contract and understand the economic impact of licensing agreements.

VanEck accepted the SEC’s order acknowledging its violation of the Investment Company Act and Investment Advisers Act.

The company agreed to a cease and desist order, censure, and the required financial penalty without admitting or denying the findings.

The announcement comes after the company’s decision to terminate one of its ETF products, the Bitcoin Strategy ETF, a month ago following a comprehensive performance evaluation.

In an apparent effort to boost the popularity of its dedicated spot Bitcoin ETF with the ticker HODL, VanEck indicated on February 15 that it would reduce its fees from 0.25% to 0.20% starting February 21.

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US Banks Lobby SEC for Expanded Role in Crypto Custodianship Amid Bitcoin ETF Surge

Bitcoin/Crypto News Today

Major banks and financial institutions in the United States are urging the United States Securities and Exchange Commission (SEC) to revise its definition of crypto assets, potentially enabling them to assume a more significant role in the crypto sphere, such as serving as custodians for the recently sanctioned spot Bitcoin exchange-traded funds.

On 14th February, a coalition of trade groups including the Bank Policy Institute, American Bankers Association, Financial Services Forum, and Securities Industry and Financial Markets Association presented their argument in a letter to SEC Chair Gary Gensler.

The coalition highlighted the recent endorsement of spot Bitcoin (BTC) exchange-traded products in the U.S., observing the absence of American banks as custodians for the approved products.

“The Commission recently approved 11 Spot Bitcoin ETPs, allowing investors access to this asset class through a regulated product.

However, notably absent from those approved products are banking organizations serving as the asset custodian, a role they regularly play for most other ETPs.”

The letter called for the SEC to consider adjustments to Staff Accounting Bulletin 121 (SAB 121), issued in March 2022, which offers guidance on accounting for crypto asset custody obligations.

They noted that it has been two years since the issuance of the guidance, and there have been “several relevant developments” during this period, including the approval of spot Bitcoin ETFs.

The existing guidance mandates banks to include crypto assets on their balance sheet, resulting in increased costs and hindrances to offering crypto custody services on a large scale.

The coalition has now urged the SEC to refine the definition of crypto assets in SAB 121 to exclude traditional assets recorded on the blockchain.

This would prevent assets like tokenized deposits from falling under the stringent crypto guidelines.

They also seek exemptions for banks from the on-balance sheet requirements while retaining the disclosure obligations, enabling them to engage in certain crypto activities while maintaining transparency for investors.

In a post on X, Bitwise chief investment officer Matt Hougan stated that the letter indicates a change in the “tone around crypto regulation in Washington,” with others suggesting that banks are expressing interest in joining the “digital finance wave.”

“US banks, left off key bitcoin ETF roles, are pushing SEC to tweak guidance around holding digital assets,” summarised Bloomberg ETF analyst Eric Balchunas.

Meanwhile, TheBitcoin Therapist, author of a weekly Bitcoin newsletter, echoed the sentiment:

“Bankers are getting annoyed they can’t hold spot Bitcoin ETFs for their customers. The Q1 FOMO is already driving them mad.”

According to preliminary data from Farside, total aggregate inflows to the recently launched spot Bitcoin ETFs have just surpassed $4 billion despite an acceleration in outflows from Grayscale.

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Bakkt Secures Regulatory Approval to Raise $150 Million Amid Financial Concerns

Crypto News Today

Cash-strapped crypto firm Bakkt has announced it has received regulatory approval to raise up to $150 million through the sale of its securities, just a week after expressing concerns about its financial position.

On 14th February, the company stated it had obtained approval for a “shelf registration,” also referred to as a shelf offering – a procedure where a company registers a new issuance of securities with the United States Securities and Exchange Commission (SEC) that can be gradually sold over a period without requiring separate approval each time.

Bakkt stated that this approval would enable it to raise an aggregate of $150 million in capital through one or more offerings over a span of three years.

“Bakkt believes the flexibility of a shelf registration on Form S-3 will provide the Company with significant benefits when raising capital in the future,” the company said.

Bakkt, previously hailed as Bitcoin’s “saviour” during the 2018 bear market, disclosed on 7th February that it was facing a cash shortage and thus “might not be able to continue.”

At that time, Bakkt mentioned its intention to potentially raise additional capital by issuing its registered securities in the public markets to “fund our long-term vision.”

Since being publicly listed in October 2021, the firm has reported eight consecutive quarters of net losses.

According to company financials, despite the crypto market’s recovery from a challenging 2022, the firm incurred losses of $44.9 million, $50.5 million, and $51.7 million in the first three quarters of 2023.

Net losses decreased in 2023 after the firm reported significant losses of $1.59 billion and $323.9 million in the third and fourth quarters of 2022, respectively.

The firm has recorded a total of $2.26 billion in net losses since the fourth quarter of 2021.

Bakkt operates a digital asset trading platform for institutions and has established strategic partnerships with companies such as Starbucks and Amazon Web Services to facilitate digital asset transactions and services.

Founded in 2018 by Intercontinental Exchange, the U.S.-based firm that owns the New York Stock Exchange, Bakkt saw its share price rise by 7.8% to $1.03 before the news.

However, it remains more than 51% down in 2024.

Although its share price reached over $42 on 29th October 2021, it sharply declined to $3.61 the following January and has since been steadily declining.

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Republican Senators Criticize SEC’s Handling of Debt Box Lawsuit

Crypto News Today

A cohort of five Republican lawmakers from the United States Senate have lambasted the Securities and Exchange Commission (SEC) for its handling of a lawsuit against Digital Licensing, trading as Debt Box.

In a missive dated February 7 addressed to SEC Chair Gary Gensler, six Republican senators articulated their “significant concerns” regarding the commission’s conduct in the Debt Box affair, contending that the regulator behaved in an “unethical and unprofessional manner.”

The SEC, in filings with the U.S. District Court for the District of Utah, Northern Division, acknowledged in December that it had failed to be “accurate and candid” in asserting that Debt Box shuttered bank accounts and intended to relocate to the United Arab Emirates.

“Whether Commission staff deliberately misrepresented evidence or unwittingly presented false information, this case raises questions about the integrity of other enforcement actions initiated by the Commission,” asserted the senators.

“It is challenging to sustain confidence that other cases are not based on questionable evidence, obfuscations, or outright misrepresentations.”

The six senators—JD Vance, Thom Tillis, Bill Hagerty, Cynthia Lummis, and Katie Boyd Britt—seemingly refrained from prescribing a specific course of action for the SEC going forward, merely voicing their apprehensions.

They remarked that the SEC’s proposed remedy of mandatory staff training and personnel reshuffling may prove inadequate.

The SEC instigated legal proceedings against Debt Box in July 2023, alleging the company orchestrated an illicit $50 million cryptocurrency scheme.

The court, on the basis of the SEC’s assertions, sanctioned a temporary restraining order to immobilize Debt Box’s assets.

However, subsequent revelations disclosed numerous inaccuracies in the SEC’s claims, prompting the court to threaten sanctions and the commission to seek dismissal of the case.

It remains unclear whether the Republican senators aimed to cast doubt on other enforcement actions targeting cryptocurrency firms by the SEC.

The commission currently has active lawsuits against Binance, Kraken, Ripple, and Coinbase. Cointelegraph reached out to the SEC for comment but received no response at the time of going to press.

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SEC’s New Crypto Regulations Spark Controversy and Legal Challenges

Bitcoin/Crypto News Today

The United States Securities and Exchange Commission (SEC) has implemented new regulations, effective February 6, redefining the terms “dealer” and “government securities dealer.”

Initially proposed in 2022, these regulations mandate additional crypto market participants to register, join self-regulatory organizations, and adhere to federal securities laws.

However, the crypto community, decentralized finance (DeFi) ecosystem, and pro-crypto politicians have criticized these regulations extensively.

They argue that since the regulations were first proposed, there has been a lack of clarity regarding the classification of crypto securities.

The primary point of contention lies in the definition of a dealer, potentially necessitating liquidity providers to register as securities dealers.

Consequently, any liquidity provider controlling over $50 million in capital would be obligated to register with the SEC.

SEC Commissioner Hester Pierce expressed her dissent in an official statement, citing the inconsistency of the dealer definition with the statutory framework and its adverse effects on market behavior and quality.

She emphasized that these regulations not only harm liquidity providers but also penalize liquidity provision, leading to a reduction in overall market liquidity.

Various figures within the DeFi sector and crypto domain have echoed concerns over these regulations on social media.

Gabriel Shapiro, general counsel at Delphi Labs, highlighted uncertainties surrounding the dealer registration requirements and their impact on liquidity providers.

According to Shapiro, not all liquidity providers with $50 million assets under management qualify as securities dealers.

The determination depends on whether the tokens in the pool or the trades facilitated through the pool are classified as securities.

Bill Hughes, senior counsel and director of global regulatory matters at Consensys, stressed the importance of clarity regarding the classification of crypto assets under U.S. law.

He anticipates legal challenges to the new rules, emphasizing the significant impact they have on the securities markets.

Moreover, the SEC’s reluctance to provide clear crypto regulations despite persistent demands from the community and policymakers has drawn criticism.

Ripple, Grayscale, and Coinbase have all challenged the SEC’s actions in court, indicating a broader pushback against regulatory ambiguity.

Experts suggest that the recent regulations targeting liquidity providers may also face judicial scrutiny in the future.

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South Korean Prosecutors Arrest Haru Invest Executives in $830 Million Crypto Theft Scandal

Crypto News Today/DeFi

Several top executives of the embattled cryptocurrency yield platform, Haru Invest, have been apprehended by South Korean prosecutors, marking a significant development in the ongoing investigation into the platform’s troubles.

The arrests were made by the virtual asset crime investigation unit of the Seoul Southern District Prosecutors Office, as reported by local news agency Yonhap on February 6th.

The key figures taken into custody include Haru Invest’s CEO and two other high-ranking executives.

They face serious charges of embezzling a staggering 1.1 trillion won (approximately $830 million) in cryptocurrency from around 16,000 Haru Invest customers.

Prosecutors assert that the executives systematically misappropriated the majority of funds deposited by customers over a span of three years, from March 2020 to June 2023.

During this period, they allegedly promoted Haru Invest as a stable and secure platform employing “risk-free diversified investment techniques.”

This development comes on the heels of Haru Invest’s latest cryptic announcement, dated February 4th, which reiterated the lack of concrete information regarding ongoing investigations and the overall situation following the detention of Bang Jun-ho, the major shareholder of B&S Holdings.

The company’s statement, signed by CEO Hugo Lee, reflects their continued efforts towards asset recovery.

Haru Invest initially sent shockwaves through the cryptocurrency community when it abruptly halted all withdrawal requests on June 13, 2023.

This sudden move prompted Delio, a depository and management firm that had entrusted some of its funds to Haru Invest, to follow suit and suspend withdrawals the following day.

The cryptocurrency platform claimed that these disruptions were the result of alleged fraudulent activities conducted by their consignment operator, B&S Holdings, formerly known as Aventus.

Haru Invest, established in 2019, had marketed itself as a cryptocurrency yield platform offering investors the potential to earn annual interest rates of up to 12% on their digital asset deposits.

In response to the suspension of withdrawals, Delio and other impacted investors launched a class-action lawsuit against Haru Invest in June 2023.

This legal action is part of broader efforts to seek accountability and restitution for the losses incurred by thousands of customers affected by the platform’s sudden suspension of services.

The arrests of the top Haru Invest executives mark a significant step towards achieving justice and resolving this high-profile cryptocurrency scandal in South Korea.

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