News Updates November 03, 2022

1. Developers need to stop crypto hackers — or face regulation in 2023
One report indicates that more than $2.5 billion in crypto was lost to cross-chain bridge hacks over the last two years alone. 

Third-party data breaches have exploded. The problem? Companies, including cryptocurrency exchanges, don’t know how to protect against them. When exchanges sign new vendors, most just innately expect that their vendors employ the same level of scrutiny as they do. Others don’t consider it at all. In today’s age, it isn’t just a good practice to test for vulnerabilities down the supply chain — it is absolutely necessary.

Many exchanges are backed by international financiers and those new to financial technologies. Many are even new to technology altogether, instead backed by venture capitalists looking to get their feet wet in a burgeoning industry. In and of itself, that isn’t necessarily a problem. However, firms that haven’t grown up in the fintech arena often don’t fully grasp the extent of the security risks inherently involved in being a custodian of hundreds of millions of dollars in digital assets. 

We’ve seen what happens in the face of inadequate security, which goes beyond vendor management and stretches into cross-chain bridges. Just in October, Binance faced a bridge hack worth nine figures. Then there’s also the Wormhole bridge hack, another nine-figure breach. The Ronin bridge hack resulted in the loss of well over a half billion dollars in assets.

In fact, a new report indicates that over a two-year period, more than $2.5 billion in assets was stolen thanks to cross-chain bridge hacks, dwarfing the losses associated with breaches related to decentralized finance lending and decentralized exchanges combined.

Third-party breaches aren’t just a problem for the crypto industry, though, and they certainly aren’t confined to small players. Earlier this year, the New York City school system had a breach involving a third-party vendor that affected more than 800,000 people. Third-party breaches are the new frontier for bad actors.

2. More Delistings of Blockchain ETFs Could be Coming
Transaction revenue was down 44% quarter-over-quarter.

The delisting of several crypto-related ETFs in Australia could become a global trend, industry participants said, considering issuers may be forced to ditch similar investment products marketed around the market’s upswing.  

Cosmos Asset Management filed to delist the Cosmos Purpose Bitcoin Access ETF (CBTC) and Cosmos Purpose Ethereum Access ETF (CPET) from Cboe Australia.

Trading is set to be halted pending the outcome of the application.

CBTC and CPET, which launched in May, invest in crypto through Purpose Investments’ Bitcoin ETF (BTCC) and Ether ETF (ETHH) — spot funds that debuted on Canada’s Toronto Stock Exchange last year. Both Cosmos funds had less than $1 million in assets. 

CBTC has dropped about 25% since inception, while CPET has decreased 9.5%.

Cosmos CEO Dan Annan told Bloomberg in a statement that the firm strongly believes in the asset class and is “disappointed with this result.”

Annan did not immediately return a request for comment. 

3. US Accounting Standards Board Member Supports Reporting Crypto Swings as Income: Bloomberg
If adopted, the move would mean cryptocurrency gains and losses would directly impact companies’ earnings.

The U.S. Financial Accounting Standards Board (FASB) member Frederick Cannon said Thursday he supports recording companies’ crypto gains and losses as part of their net income, according to a report in Bloomberg.

This means that these gains and losses would directly hit these companies’ earnings. The other choice would be to have companies record the swings in the value of their crypto holdings in “other comprehensive income,” which wouldn’t impact earnings.

Last month, FASB signaled its support for fair value accounting for cryptocurrency over the current system of treating them as intangible assets, meaning any declines in value must be permanently recorded as non-cash impairments, while gains are only recorded when the assets have been sold. Fair value accounting means that any crypto losses or gains would be reported immediately, as they would for other traditional financial assets.
Companies that hold large amounts of bitcoin on their balance sheets such as MicroStrategy (MSTR) have been pushing FASB to adopt fair value accounting for crypto, saying it would encourage institutional adoption of digital assets.

4. Canada Announces Crypto, Stablecoin Consultation in New Budget Statement
Federal government plans to examine crypto, which it said is "transforming financial systems" around the world.

Canada's federal government announced it was launching a consultation on "cryptocurrencies, stablecoins and central bank digital currencies," in a fiscal update published Thursday.
The Fall Economic Statement, a mini-budget released by Deputy Prime Minister Chrystia Freeland, is the government's fiscal road map over the coming months. Among provisions on taxes, recovering from COVID-19 and hurricanes, and budget projections was a section on the "digitalization of money," which highlighted cryptocurrencies and digital assets and their use worldwide.

Cryptocurrencies are "transforming financial systems" both in Canada and elsewhere, the document said, adding that Canada's financial regulatory frameworks have to "keep pace."
"The digitalization of money poses a challenge to democratic institutions around the world. In the last several months, digital assets and cryptocurrencies have been used to avoid global sanctions and fund illegal activities, both in Canada and around the world," the document said in part of the document titled "effective government."

To address this, the government launched a consultation on digital currencies on Thursday, the document said. This includes a legislative review addressing financial stability and security, as well as other digitalization, according to the document.
Canada made headlines earlier this year when Prime Minister Justin Trudeau invoked the country's "Emergencies Act" in response to a weeks-long protest by truckers that blocked the U.S.-Canada border, ordering banks to freeze and suspend accounts tied to the protestors, including bitcoin donated.
Much of the $24 million raised, including some of the crypto funds, remain frozen as of this week, according to canada.com, a news organization operated by Postmedia Network.

5. Singapore's MAS Starts Wholesale CBDC Project Ubin+ for Cross-Border Payments
The project comes a day after the central bank announced new projects aimed at trade finance and wealth management.

The Monetary Authority of Singapore (MAS) started a new initiative called Ubin+ aimed at exploring the use of central bank digital currency (CBDC) for cross-border currency transactions.
Ubin+ will look at testing the use of CBDCs for foreign exchange and liquidity management as well as the connectivity between CBDC and other digital asset networks. Under the project, the bank will also explore how systems based on distributed ledger technology (DLT) could interact with non-ledger payment systems.
 
While central banks around the world are looking into digital iterations of local sovereign currencies for use by citizens in daily transactions, progress on wholesale CBDCs – that can be built on technologies similar to DLT that underlie crypto and be used exclusively between financial institutions to conduct speedy settlements – has been moving faster, propelled by support from the Bank for International Settlements (BIS), which includes the world's central banks.
Project Mariana, the measure aimed at foreign exchange and liquidity management, involves MAS, the central banks of Switzerland and France, along with BIS Innovation Hub centers. The project will explore foreign exchange transactions with the Swiss franc, euro and Singapore dollar.

6. Bitcoin Holders Continue to Shrug Off Macro Data
The cost basis for bitcoin has fallen and bitcoin holders appear to be feeling less pain.       
Hawkish monetary policy and macroeconomic uncertainty rage on.
But crypto investors ultimately have little else on their mind than cost basis. On a quiet trading day that saw bitcoin and ether sink slightly, and the Bank of England deliver the latest, global interest rate body blow – its highest increase in 33 years – investors continued to focus almost exclusively on how much they paid for an asset.
To be sure, macro data remains important as cryptocurrencies react increasingly to the same stimuli that have affected other assets for decades. Jobs and productivity reports, energy prices and Russia’s unprovoked invasion of Ukraine, for example, have all jarred markets over the past year.
 
However, crypto investors have grown increasingly adept at pricing in such events and others, and are less likely to be caught off guard, which accounts for bitcoin’s lack of major movement in recent months.
On Thursday, bitcoin was trading at almost exactly the same mark it held in mid-June, undisturbed by the Federal Reserve’s fourth consecutive jumbo rate increase, weeks of hawkishness from central bankers, GDP declines, hawkish remarks from Chair Jerome Powell and socio-political turmoil.
Through four consecutive 75 basis point rate increases, the largest cryptocurrency by market capitalization has formed a base that, depending on the week, has hovered over $19,000 or $20,000 since mid-June. This broad threshold will likely serve as support moving forward.