News Updates August 10, 2022

1. Bitcoin Soars Towards $24K as US Inflation Slows Down to 8.5%

Bitcoin jumped by almost $1,000 in minutes, as the US announced a small decline in the Consumer Price Index metric.

The United States government just released the latest CPI data, indicating that inflation has finally begun to ease following several consecutive months with record-setting numbers.

As with previous examples, the price of bitcoin reacted almost immediately with a surge towards $24,000.

* Ever since the start of the year, the inflation numbers from the US have impacted BTC’s price since the cryptocurrency is considered a widely riskier asset.

* For several consecutive months, the US had to announce record-breaking inflation percentages, with the latest in July being at 9.1% – the highest in over 40 years.

* However, due to the declining oil prices, expectations were that the Consumer Price Index will be lower in July for the first time in a while.

* Minutes ago, the US indeed outlined a lower inflation number of 8.5% for the previous month, which was 0.2% less than what most predictions envisioned.

* As with previous examples, BTC reacted immediately and soared by almost $1,000 to just under $24,000. However, the cryptocurrency could be inclined to more volatility in the following hours, history shows.

• The price increase could be related to investors’ general approach to the asset class since the CPI numbers give a broad suggestion of what the US Federal Reserve could do in the next meeting in September.

2. EU Official Says Europe’s MiCA Bill Would Prevent ‘Schemes’ Like Terra From Happening

The European Commission’s Peter Kerstens told attendees at Seoul’s Korea Blockchain Week that MiCA would require stablecoins to be fully collateralized and redeemable upon request.

SEOUL, South Korea – A European Union official told attendees at the Korea Blockchain Week conference in Seoul on Tuesday that the Terra collapse would have been impossible under the regulatory requirements laid out in the EU’s Markets in Crypto Assets (MiCA) bill.

Peter Kerstens, a technology and cybersecurity policy advisor at the EU’s executive arm, said the bill’s proposed compliance requirements would ensure stablecoin projects are more transparent and able to redeem customer assets upon request.

We don’t want people to blow up the system or just go bust without any recourse, as we’ve seen for example recently with Terra-LUNA, which just melted away,” Kerstens said. “MiCA prevents such schemes from coming onto the market.”

The landmark legal framework, which has not yet been made into law, aims to provide regulatory clarity to the growing crypto industry in Europe. The legislation – which policymakers agreed to last month after nearly two years of debate – requires crypto issuers looking to do business in Europe to issue a white paper, register with authorities, and, in the case of stablecoins, have fully-collateralized reserves.

Regulators around the world are wrestling with how best to oversee the crypto industry – a matter that has become increasingly urgent as the industry has faced an ongoing spate of collapses, liquidations and bankruptcies.

In South Korea, the collapse of Terra has pushed regulators to speed up efforts to come up with its own comprehensive set of laws for that country’s crypto industry.

Korean regulators have said that the coming Digital Asset Basic Act will take cues from its legal counterparts in the United States and Europe, including MiCA, “to improve global consistency” in crypto regulation.

3. SEC Orders Crypto Startup to Register ICO Tokens or Face $31M Fine

SEC regulators found crypto startup Bloom promoted its tokens as investment contracts, legally qualifying them as securities

* Bloom Protocol ran an initial coin offering (ICO) at the height of 2018’s bull market

* Regulators demand Bloom register its tokens as securities within nine months

Crypto startup Bloom Protocol has been ordered by the US Securities and Exchange Commission (SEC) to register its tokens or face a $31 million fine.

The SEC issued a cease-and-desist order to the company on Tuesday, accusing it of offering unregistered securities. 

Bloom violated the Securities Act by offering and selling Bloom Tokens (BLT) in an unregistered ICO between November 2017 and January 2018, the order said.

The Gibraltar-registered firm managed to raise $30.9 million from nearly 7,400 investors around the world, including in the US, which means the SEC plans to fine Bloom for the amount of crypto raised in its ICO.

Founded in 2017, Bloom describes itself as a blockchain-powered solution for credit scoring that aims to reduce the risk of identity theft. It claims its system minimizes fraud prevention and the cost of customer onboarding.

Bloom promoted BLT as investment contracts which inherently marks them as securities, in line with the Howey Test, according to the SEC.

“A purchaser in the offering of BLT would have had a reasonable expectation of obtaining a future profit based upon Bloom’s efforts … to create an online identity attestation system that would increase the token’s value on crypto asset trading platforms,” the regulator said.

 *Bloom’s crypto tanks even more after SEC order*

BLT opened trade in late January 2018 at around $1.38, still its record high, at the height of the previous bull market, per CoinGecko. BLT went on to collapse up to 80% over the next few months — an incredibly volatile time for cryptocurrencies, especially so for small and illiquid ones like BLT.

After a brief spike above $1 in May 2018, BLT’s price has been firmly squashed ever since. Bloom’s token now trades for a fraction of a cent, after dumping 70% on news of the SEC’s action.

At its peak, BLT’s market capitalization reached nearly $60 million, however that figure is now less than $500,000.

Bloom allegedly told prospective investors its limited presale was “oversubscribed” and that it raised a “hard cap of $50m total.” The average investment during the pre-sale was $340,000 and the average during the public sale was $2,000, regulators found, which when calculated don’t add up to the advertised cap.

Bloom is expected to register BLT as a class of securities within 270 days and inform investors about potential claims to recover their money within 60 days. It has been ordered to fulfill all payments to investors within three months of the claim form’s submission deadline.

4. US SEC and CFTC Require Hedge Funds To Disclose Their Bitcoin and Crypto Holdings.

According to the Wall Street Journal, regulators may require hedge funds to disclose their bitcoin and cryptocurrency holdings.

According to a story published by the Wall Street Journal (WSJ), a joint proposal that is scheduled to be announced on Wednesday by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) would mandate hedge funds with more than $500 million in net assets to reveal their exposure to cryptocurrencies, including portfolio holdings and borrowing arrangements, via a private file known as Form PF.

Gary Gensler, the chairman of the Securities and Exchange Commission, said in a statement that collecting information of this kind will assist the Commission and financial-stability authorities in better observing how major hedge funds interact with the massive cryptocurrency sector.

“Gathering such information would help the Commissions and [financial-stability regulators] better to observe how large hedge funds interconnect with the broader financial services industry.”

5. Crypto Payments Implicated in Alleged Bolton Assassination Plot, US DOJ Says
A member of Iran's Islamic Revolutionary Guard planned retribution against the former National Security Advisor, according to court documents.

An alleged Iranian plot to murder former U.S. National Security Advisor John Bolton involved the promise of as much as $1.3 million in crypto payments, the Department of Justice said in a statement Wednesday.
Court documents unsealed Aug. 10 allege that Shahram Poursafi, a Tehran-based member of Iran's Islamic Revolutionary Guard offered as much as $300,000 to assassinate Bolton, and $1 million for a further, unspecified job, with the transfer apparently set to be made via digital currency.
 
According to those documents, Poursafi in late 2021 and early 2022 made contact with a U.S. intermediary via encrypted messaging and instructed the would-be assassin to open a crypto wallet, to which small payments were then made as proof of concept.
The move comes as authorities attempt to clamp down on the use of crypto to launder the proceeds of crime, using a controversial means of identifying payers known as the travel rule. Indeed, the U.S. Treasury Department earlier this week blocked access to Tornado Cash, arguing that the privacy-focused mixing service was linked to sanctions-busting and North Korean hackers.
 
Poursafi, who remains at large abroad, faces up to 25 years in jail and $500,000 in fines if convicted. A spokesperson for Poursafi could not be reached for comment.

6. California regulator orders Celsius to stop selling securities in the state

The Department of Financial Protection and Innovation of California (DFPI) continues to bring actions against crypto interest account providers, failing to comply with the local law. After commanding BlockFi and Voyager to stop their offerings in the state, the DFPI issued a desist and refrain order to crypto lending firm Celsius. 

The order simply means that the crypto lending platform, which is undergoing the bankruptcy procedure, should stop all of its further operations on the sale and marketing of securities in the state of California. 

The order had been published on Aug. 8 and claims that Celsius Network and its CEO, Alex Mashinsky, made material misrepresentations and omissions in the offer of crypto interest accounts, particularly in understating the risks of depositing digital assets.

According to the Department, the unmentioned risks include the risk that third-party custody services might lose access to digital assets; the risk that lenders would be unable to return Celsius’ collateral on time; the risk that in the event of a sudden request for withdrawals Celsius wouldn’t possess adequate assets to meet customer withdrawal demands.

 *Crypto lending platform Hodlnaut suspends services due to liquidity crisis*

The platform is also being accused of non-qualifying the deposited digital assets as securities in compliance with California legislation, a Corporations Code Section 25110. To sell these kinds of securities in the state, a company must obtain a permit from the DFPI.

In July 2022, the DFPI issued two cease and desist orders to BlockFi and Voyager, respectively. Voyager, a crypto exchange affiliated with the failed hedge fund Three Arrows Capital (3AC), filed for bankruptcy under Chapter 11 on July 6.

Celsius paused rewards and withdrawals for all users on June 13 and have since paused margin calls, liquidations and issuing new loans. During the first bankruptcy hearing, platform lawyers claimed that Celsius is free to “use, sell, pledge, and rehypothecate those coins” as users transferred the title of their coins to the firm as per its terms of service (ToS).

7. Former FBI intelligence analyst warns North Korean crypto hacking ‘to get worse’

Crypto hacks in North Korea are getting out of hand as state-sponsored hackers continue to target blockchain companies, a cybersecurity expert warns.  

Nick Carlsen, a blockchain analyst at TRM Labs and a former FBI analyst, warned that cybertheft is “going to get worse” during a panel discussion on cyber-enabled crimes for the Center for a New American Security (CNAS) which took place on August 9, 2022. 

Carlsen stated that the threat landscape is at its peak with financial fraud and that: 

In particular, the discussion between the US and South Korea was part of a strategy for enhancing cooperation on combating cyber-enabled financial crime, with a focus on cryptocurrency and blockchain technology, and the rise of cyber activity in North Korea.

 *US and South Korea to strengthen cyber-working group*

In 2021, the United States and South Korea committed to strengthening their alliance through a joint cyber-working group with an emphasis on cybercrime and creating strategies for combating ransomware.

One noteworthy outcome of the group’s work would be the promotion of information sharing on North Korean cyber activity with the South Korean government, stated So Jeong Kim, a senior researcher at the Institute for National Security of South Korea.

In May 2022, the United States and South Korea came together again at the US-ROK Summit between US president Joe Biden and ROK president Yoon Suk-yeol to reanimate the idea of the previously planned joint cyber-working group.

However, no notable progress on US-ROK cyber-working groups has been seen since, with both Washington and Seoul staying silent on the subject.

8. Why Crypto Miners Flock to Dubai Despite the Hot Weather

Dubai has quickly established itself as a digital hub
Conditions can be challenging with daily temperatures rising to 42°C in the summer.

Dubai has quickly become one of the world's crypto-hubs following the introduction of efficient digital asset-friendly regulation.

In this column, we will explore how the emirate, with daily temperatures rising to 42°C in the summer, features optimal conditions for crypto mining businesses.

 *Dubai: The New Crypto Hub*

With high temperatures and humidity, it's safe to say that Dubai's climate is not the most optimal for operating delicate electronics, like the equipment needed for crypto mining.

However, many entrepreneurs – myself included – are building their mining centers in the emirate, and not without reason.

Furthermore, while the UAE plans to introduce a 9% federal corporate tax on business profits from June 2023 on taxable income above 375,000 AED ($102,000) outside free zones, this rate is much lower than what most nations charge, and it is well below the worldwide average of 23.54%.

In addition to low taxes, Dubai features one of the best labor forces globally, which comes in especially handy when you are building a technology company.

In terms of crypto mining, the UAE had the 13th cheapest cost of electricity out of 190 countries analyzed by the World Bank in 2019.

9. Curve Finance exploit: Experts dissect what went wrong
Attackers who hijacked Curve Finance’s landing page moved quickly to convert stolen funds to various tokens through different exchanges, wallets and mixers.

Decentralized finance protocols continue to be targeted by hackers, with Curve Finance becoming the latest platform to be compromised after a domain name system (DNS) hijacking incident.

The automated market maker warned users not to use the front end of its website on Tuesday after the incident was flagged online by a number of members of the wider cryptocurrency community.

While the exact attack mechanism is still under investigation, the consensus is that attackers managed to clone the Curve Finance website and rerouted the DNS server to the fake page. Users who attempted to make use of the platform then had their funds drained to a pool operated by the attackers.

Curve Finance managed to remedy the situation in a timely fashion, but attackers still managed to siphon what was originally estimated to be $537,000 worth of USD Coin (USDC) in the time it took to revert the hijacked domain. The platform believes its DNS server provider Iwantmyname was hacked, which allowed the subsequent events to unfold.

Cointelegraph reached out to blockchain analytics firm Elliptic to dissect how attackers managed to dupe unsuspecting Curve users. The team confirmed that a hacker had compromised Curve’s DNS, which led to malicious transactions being signed.