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BEGINNERS GUIDE
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VIDEO OF THE WEEK
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WEEKLY
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July 2022 | Volume 34
SHOULD YOU BUY BITCOIN?
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BTC MILLIONAIRES EVAPORATE
CELSIUS EYES BANKRUPTCY
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SCAMMERS LOVE CRYPTO BINANCE HIRES GOV AGENTS
Page 30
EL SALVADOR BUYS MORE BTC
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DECENTRALIZATION CRITICIZED
CRYPTO CUSTODIANS
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CUSTOMER TRUST
SECRETLY INSOLVENT EXCHANGES
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Page 17
THE STABLECOIN COLLAPSE Page 18
SHADE PROTOCOL BRINGS PRIVACY to DEFI Page 22
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CONTENTS $2 cryptoweeklymag.com July 2022 | Volume 34
18
14
28
Possible Issues Coming This Year for Binance Coin (BNB)
10
EU Crypto Regulation Proposed Last Week to "Clean Up" Industry
11
Explainer-Can Crypto Holders Recoup Losses in Court?
12
Crypto Lender Celsius Network Exploring Bankruptcy Options
14
Top Government Agents, Who Stopped Major Crypto Criminals, Now Lead Binance's Investigations Office
16
Blockchain's Claim of Decentralization has been Criticized Yet Again by DARPA
17
Some Crypto Exchanges Are “Secretly Insolvent” According to Expert
18
The Collapse of Stablecoins Shows Role as a Form of Money is on the Line
20
If You're Thinking Of Buying Bitcoin Again, Think Twice
22
Shade Protocol, the Future of Safety and Privacy on the Blockchain
26
Crypto Innovations must be Processed, and it Takes Time
28
75,000 Bitcoin Investors No Longer Millionaires Since the Market Crashed
30
Scammers Love Crypto
34
El Salvador's Leader Buys $1.5 Million More Bitcoin
35
What are Crypto Custodians?
36
Winning Over Crypto Consumers to Gain Trust
07
CRYPTOWEEKLY CEO | Nathan Hill
LETTER FROM
THE EDITOR
nathan@cryptoweeklymag.com Publisher | Colin Woolley colin@cryptoweeklymag.com Editor | Robert Stone
Welcome to Crypto Weekly
editor@cryptoweeklymag.com Editorial | Anthony Burton editorial@cryptoweeklymag.com Features | Thomas Stokes tom@cryptoweeklymag.com Advertising | Philip Greenwood philip@cryptoweeklymag.com Design | Dilin Divan dilin@cryptoweeklymag.com
Hello, and a warm welcome to the 34th issue of Crypto Weekly.
Crypto Weekly Magazine is published by the Crypto Marketing Company 71-75 Shelton Street, Covent Garden, London, United Kingdom, WC2H 9JQ
Crypto Weekly is the brainchild of the guys at CMC, and I am Rob Stone, Editor, and I hope to bring you an informative read on everything crypto, every week of the year. Another week has gone by and this is our 34th issue of Crypto Weekly. I have been mining the search engines for the best stories in the news, current happenings, and the ideas the world is excited about in the cryptosphere. My Facebook friends always treat me in a way that I know they wonder about me. I am mysterious to folks somehow. I'm a busy man. I like to talk sometimes so they, and you, will hear from me from time to time, and I may ask how you are doing, just because I want to hear what all of you have to say. Or maybe I have something I am excited about I am working on, so I want to share. I love my friends and the folks willing to listen, and I love to hear what all of you have to say. I hope you are prospering at being alive in the world. It gives me a sense of peace to be a part of those experiences, as a witness of the presence of you, when you express yourselves to all of us, and me, on social media, the things you feel and see from the depths of your being... This is the stuff of a good life to live in this place As usual, a lot of stuff has happened in the last week because the music never stops in the crypto sphere and the time keeps rolling on. I hope you all enjoy what we have brought together for you this week. Please let us know your thoughts, and if you would like to see something featured, please do get in touch.
editor@cryptoweeklymag.com
Follow Us Stay Connected Robert Stone Editor
cryptoweeklymag
NEWS
7
Crypto Weekly
Possible Issues Coming This Year for Binance Coin (BNB) C
oin Bureau's host speculates about what could happen to Binance Coin (BNB) after the SEC announced last week that it is investigating the crypto asset over possible securities law violations.
scenario for BNB is that it could be delisted from Binance.US this year. Guy points out that delisting in the U.S. wouldn't affect the token's price that much since most of its trading takes place abroad.
According to Guy, a pseudonymous cryptocurrency analyst with 2.07 million YouTube subscribers, the worst-case
Here is what Guy said, "BNB may be delisted from Binance.US in the worst case, but considering that most of BNB's trading
occurs on the international version of Binance and other exchanges outside of the United States, it is unlikely to have a profound effect on BNB's value. Binance may have to pay the SEC a small fine over its BNB ICO (initial coin offering), which is pennies on the dollar compared to how much it earns today. However, this settlement could come with a clause that BNB is a security and therefore cannot be listed on U.S. institutions." Due to Binance's increasing decentralization, Guy says the company may attempt to convince the SEC that BNB is no longer a security. "Alternatively, Binance could argue that although BNB was a security at one point, it has since become sufficiently decentralized, that it is no longer a security. If Binance takes this route, I don't think the SEC will approve it since it doesn't like that the Binance team holds so much BNB."Earlier this month, the Securities and Exchange Commission announced that they would investigate Binance to determine if the 2017 ICO of BNB violated securities laws.
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July 2022 | Volume 34
8
NEWS Crypto Weekly
Cardano (ADA) Moves to Last Stage of Anticipated Upgrade Y
esterday, Cardano's core development team, known as the Input-Output Global (IOG) team, issued several tweets regarding the Vasil project. As a result of technical glitches during testing, Vasil's enhancement was delayed until July. The Vasil upgrade will bring significant performance and
capability enhancements to Cardano. The network has seen consistent incremental improvements over the past couple of years – and the launch of NFT, multi-asset, and smart contract capability in 2021 – but, put simply, Vasil is the most significant network upgrade since the deployment of staking.
Due to the improved features in Vasil, Cardano developers claim it will be more functional, faster throughput, and compatible with other networks. "Vasil's upgrade program is the largest we've undertaken, and the whole community is involved. We're concerned about maintaining a safe and secure environment," states the thread on Twitter.
How Cardano Differs from Bitcoin and Ethereum Originally deployed in 2017, Cardano's proof-of-stake (PoS) consensus method relies on less energy to validate blockchain transactions, making it a better option for the environment, compared to the proofof-work (PoW) model. Ethereum, Bitcoin, and Dogecoin are among the most popular crypto blockchains that still use PoW.
Crypto Giant, Tether, Launching Sterling-Pegged Stablecoin I
n a move that comes as London plans to regulate the fast-growing type of digital currency, Tether said Wednesday it would launch a "stablecoin" pegged to the British pound next month.
in crypto markets. The British government plans to regulate some stablecoins in order to help consumers make payments more efficiently using crypto and blockchain technology.
Unlike traditional currencies or commodities such as gold, stablecoins maintain a constant value. Using digital tokens avoids the volatility that makes Bitcoin, and other digital tokens, unsuitable for most commerce. Stablecoins were spotlighted last month when the value of TerraUSD collapsed due to a complex algorithm, bringing attention to the importance of stablecoins. By market capitalization, Tether's dollar-pegged stablecoin ranks third, with some $70 billion in circulation.
In response to major stablecoin collapses, Tether's Chief Technology Officer, Paolo Ardoino, said the company would work with UK regulators to adapt existing rules.
According to him, the United Kingdom is the next frontier for innovation and the implementation of cryptocurrency in financial markets. A request for comment from the British finance ministry was not immediately returned. As well as its dollar-backed coin, Tether offers tokens pegged to the euro, offshore Chinese yuan, and Mexican peso.
Between crypto and regular cash, it is the most common method of moving funds. The company's tokens are backed by a mixture of dollars, short-term debt, and government debt. Investors lost faith in Tether after the demise of TerraUSD sparked a sell-off
July 2022 | Volume 34
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NEWS
9
Crypto Weekly
OneCoin Executive Lands on FBI's Most Wanted List T
he FBI has added “CryptoQueen” Ruja Ignatova to its list of the ten most wanted fugitives. For information leading to Ignatova's arrest, a $100,000 reward is being offered. It is alleged that Ignatova operated a massive Ponzi scheme using the cryptocurrency OneCoin, which has been on the run since 2017. In May, Europol added Ignatova to its most-wanted list.
served until October 12, 2017, when she was charged in the U.S. Southern District Court and issued an arrest warrant. OneCoin, launched in 2014, was advertised as a mineable cryptocurrency with a 120 billion coin supply. The scheme promised
to become the next Bitcoin, luring investors. OneCoin, however, did not have a blockchain, unlike BTC. To purchase OneCoin education packages, Ignatova instructed victims to send wire transfers to OneCoin. More than $4 billion is alleged to have been defrauded by OneCoin. "Investors were victimized while the defendants got rich," according to Manhattan U.S. Attorney Geoffrey S. Berman in a March 2019 charge against the leaders of OneCoin. "They promised big returns and minimal risk, but this was a pyramid scheme based on smoke and mirrors rather than zeroes and ones," he added.
Through the marketing of OneCoin, Ignatova and others are accused by the FBI of defrauding billions of dollars from investors worldwide. As OneCoin's leader, Ignatova
More Must be Done to Protect Crypto Investors, A Swiss Regulator Says I
ncreasingly, cryptocurrency trading resembles the U.S. stock market of the late 1920s, Switzerland's top market regulator said on Wednesday. It called for regulators to take more action to protect consumers from abuse. Regulators are trying to regulate the $900 billion crypto market, which is only partially regulated at the moment. In its report, the U.S. Securities and Exchange Commission warned about the possibility of regulators and policymakers manipulating cryptocurrency markets. A lot more can be done, according to Urban Angehrn, CEO of the Swiss Financial Market Supervisory Authority (FINMA). At a Zurich conference, Angehrn said, "Much of the trading in digital assets resembles what happened in 1928 on the U.S. stock market." Crypto markets have been in turmoil since several major companies went bankrupt in recent weeks. "Tech can also be used to handle large amounts of data and protect consumers from trading on abusive markets," Angehrn
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said. As a result of Celsius Network freezing the accounts of its 1.7 million customers last week, the overall crypto market has dipped to around $900 billion, down from a record $3 trillion in November. Bitcoin, the largest cryptocurrency, fell below $20,000 on June 18 for the first time since December 2020. It has plummeted around
60% this year, coming under pressure as soaring inflation and rising interest rates prompt a flight from stocks and other higher-risk assets. The troubles at Celsius are likely to increase U.S. regulatory pressure on a sector already on the defensive amid other crises this year.
July 2022 | Volume 34
10
NEWS Crypto Weekly
EU Crypto Regulation Proposed Last Week to "Clean Up" Industry
A
n agreement on reforms was hammered out by the European Commission, EU lawmakers, and member states on Thursday. A new law titled Markets in CryptoAssets (MiCA) establishes a comprehensive regulatory framework for digital assets in the region for the first time. Stefan Berger, an EU lawmaker, said the rules will “put order in an industry-recognized as the wild west.” An agreement was reached between EU officials and cryptocurrency industry representatives on Thursday. After hours of negotiations, EU lawmakers, the European Commission, and member states reached an agreement in Brussels, Belgium. The three significant institutions finalized measures to combat crypto-money laundering a day earlier. As Bitcoin experiences its worst quarter in more than a decade, the new rules come at an inopportune time for digital assets. Markets in Crypto-Assets, or MiCA, is a landmark law designed to make life more challenging for many players in the crypto market, such as exchanges and companies that issue stablecoins pegged to existing assets. If crypto platforms do not adequately protect investors, threaten market integrity, or threaten financial stability, ESMA will have the authority to step in and ban, or restrict them. In the event of mass withdrawals,
July 2022 | Volume 34
stablecoins like Tether and Circle's USDC will be required to maintain ample reserves. Transactions per day for stablecoins that become too large will also be limited to 200 million euros.
anonymity in certain crypto transactions by taking measures. The number of transfers between exchanges and "unhosted wallets" over 1,000 euros will require crypto enthusiasts to report them.
“We wish to end today's Wild West of crypto assets by setting clear rules that will provide legal certainty for crypto-asset issuers and ensure equal rights for service providers and consumers,” European Parliament member Stefan Berger explained. As part of MiCA, firms will have to disclose their energy consumption and the environmental impact of digital assets.
"Stablecoins" are not Recognised as Stable
In a previous proposal, crypto mining, which uses a lot of energy, would be scrapped. In March, lawmakers rejected the bill. The rules won't affect tokens without issuers, unlike Bitcoin. Trading platforms must warn consumers about the risks of digital token trading. The proposals did not include non-fungible tokens (NFTs) representing ownership rights in digital properties such as art. The EU Commission will decide within 18 months whether NFTs need their own regulatory regime. After Russia's ongoing invasion of Ukraine, authorities are deeply concerned about using crypto-assets for ill-gotten laundering gains and evading sanctions. Also on Wednesday, regulators agreed to reduce
TerraUSD was an "algorithmic" stablecoin that attempted to maintain a $1 value using a complex algorithm before collapsing. In the end, the crypto market lost hundreds of billions of dollars due to the debacle. “Blockchain for Europe's secretary-general, Robert Kopitsch, said that the EU generally is not happy with stablecoins. As a result of Facebook's botched attempt at launching its own token in 2019, policymakers are wary of pegged tokens backed by existing assets, such as the dollar. According to authorities, private digital tokens threatened sovereign currencies such as the euro. The world's largest stablecoin issuer, Tether, welcomed regulatory clarity, says chief technology officer Paolo Ardoino. “MICA is a progressive initiative focusing on driving crypto adoption and innovation in the European region,” said Ardoino. He said MiCA would be to crypto what GDPR was to privacy, referring to groundbreaking EU privacy legislation that set the standard for similar laws worldwide.
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NEWS
11
Crypto Weekly
Explainer-Can Crypto Holders Recoup Losses in Court? I
nvestors are trying to recover their losses in U.S. court following a downturn in cryptocurrency prices and the crash of one stablecoin. Here are some of the challenges investors may face in cryptocurrency litigation.
rigging cryptocurrency markets in a lawsuit filed in New York. In addition, Ripple, the company behind XRP, has been sued for selling unregistered securities in California. Motions to dismiss both lawsuits were denied.
What is the lawsuit about?
In response to the allegations, Ripple said it disputes them and will defend itself. A request for comment from Tether was not responded to. Investing in cryptocurrency exchanges has also been a target for investors looking to recover losses.
Individuals who promoted cryptocurrencies, as well as companies that created them, have been sued. According to Kyle Roche, who represents cryptocurrency holders in several lawsuits, U.S. claims over cryptocurrency often involve alleged violations of federal securities and commodities laws, which prohibit fraud and manipulation, and require registration of products and operators. In the latest lawsuit, Terraform Labs, the company behind Terra USD, is accused of causing the collapse of the stablecoin. On June 17, a cryptocurrency investor sued the Seoul-based company and Chief Executive, Do Kwon, alleging they failed to register Terra USD's digital assets as securities and defrauded investors through several venture capital funds. According to a Terraform Labs spokesperson, "The claims are unfounded." One of the world's largest stablecoins, Tether, is being accused of
According to investors, Binance U.S. falsely marketed TerraUSD as a safe asset before it collapsed on June 13. Coinbase was accused of selling 79 digital assets as unregistered securities in March.
The allegations have been denied by Binance and Coinbase. Celebrities who have publicly endorsed cryptocurrency are also being sued by investors. Reality TV star Kim Kardashian and boxing legend Floyd Mayweather Jr. have been accused of pumping and dumping cryptocurrency. A request for comment was not responded to by Kardashian or Mayweather.
Obstacles in the Legal System Several lawsuits brought in 2020 against exchanges, alleging they fueled an illegal boom in digital coins, failed after judges dismissed them as too late or lacking a connection to the U.S. For newer lawsuits, timing should not be an issue, but cryptocurrency holders could still face obstacles when suing overseas companies in the United States. Singaporebased exchange KuCoin won a default judgment against token holders in New York after a Singaporean court refused to require it to provide information.
An inquiry to KuCoin went unanswered. The investor will also have to show that their tokens qualify as securities or commodities under securities or commodities laws. There has been some court rulings that certain cryptocurrencies fit the bill, but the issue remains unresolved. The process of going after exchanges may pose additional obstacles for cryptocurrency holders. According to Coinbase, private litigants cannot enforce registration requirements against the exchange, since Coinbase is not a party to the transactions.
Has Anyone Ever Won? SEC settlements have reclaimed some funds for investors in a handful of digital assets, while many cryptocurrency lawsuits are still pending. Investors may still lose out even after a settlement because they face long delays. An agreement was reached last year between blockchain company Block.one and token holders, alleging that it had violated securities laws. According to court filings, more than 100 token holders filed claims worth more than $75.7 million. Final approval of the settlement has not yet been granted.
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July 2022 | Volume 34
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NEWS Crypto Weekly
Crypto Lender Celsius Network Exploring Bankruptcy Options D
espite its mid-June turmoil, crypto lending platform Celsius is exploring options to "preserve and protect assets," according to an announcement published on its blog late last week.
Celsius is Feeling the Full Force of the Crypto Market Crash
conditions," Celsius froze withdrawals and transfers on June 12. Insolvency rumors were sparked by this. Since the move went into effect, 1.7 million users have been unable to redeem their assets to avoid funds being locked indefinitely. An advisory firm, Alvarez & Marsal, was hired
by the company last week, according to the Wall Street Journal. In November 2021, Celsius had raised $750 million in its latest round of funding at a valuation of more than $3.25 billion, prior to the crash. Currently, the firm manages $12 billion in assets and has lent out more than $8 billion to clients.
In the midst of a cryptocurrency industry crash, the lender is experiencing financial difficulties. $40 billion was lost when Terraform Labs' stablecoin, TerraUSD (UST), and its native token LUNA, collapsed in May. Cryptocurrency markets became unstable as a result of this event, which resulted in hundreds of billions of dollars lost. A series of aggressive interest rate increases by the Federal Reserve contributed to the crisis by attempting to combat sky-high inflation. In response to these rate hikes, digital assets have been sold off at a more rapid pace, which has caused the crash to worsen. Due to "extreme market
July 2022 | Volume 34
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14
NEWS Crypto Weekly
Top Government Agents, Who Stopped Major Crypto Criminals, Now Lead Binance's Investigations Office
Top government law enforcement officials cracked some of the most crucial cryptocurrency investigations, from the prosecution of a child exploitation network, to the investigation and prosecution of an illicit Bitcoin tumbling service, known as Helix.
July 2022 | Volume 34
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NEWS
15
Crypto Weekly
The Crypto Environment Since regulators across the globe are closing in on crypto, many of the largest exchanges are shifting strategies to increase lobbying efforts, and secure licenses for regional hubs and operations. Binance has made several key hires this year, including hiring Gambaryan as VP of global intelligence and investigations and hiring Price as senior director of investigations. With a 150-person team, Binance is doubling down on investigations. Both Price and Gambaryan learned about crypto crime at the IRS. As a criminal investigator, Gambaryan was the agency's crypto expert, while Price worked as a special agent in the criminal investigation cybercrime unit. Price was also a CIA targeting officer. "All the people we've brought into this team are our equivalents worldwide," said Price, citing others, such as Europol's Nils Andersen-Röed. "The company took the approach," he said, "we take this seriously. Doing that will add trust to the blockchain space, since it will ensure the safety of our customers, our platform, and the
blockchain as a whole." Together, former law enforcement agents and blockchain experts are working to identify and prevent criminals from abusing the technology. "Child sexual exploitation is a good example," Price said. "I don't think anyone on earth wouldn't be willing to help with that." As well as counterterrorism and fraud, especially against vulnerable populations, like the elderly, they are also looking to end these practices. In a blog post, the two described how they developed techniques to identify and take down the worst of the worst. "We even conducted investigations targeting some of the same bad actors Binance is accused of enabling."
Ahead of the Game "I think other exchanges are starting to follow that model, no matter what challenges Binance may face," Price said. "We're not quite at the same place." "Unfortunately, for them, I believe the crypto investigative community is tiny. Most of the good people have already been grabbed." Gambaryan said a "huge exodus" had taken place from the government into the private
sector. The investigations team at Binance already works with law enforcement and educates partners in the space. According to Chainalysis, illicit transactions make up about 0.15% of total cryptocurrency transactions.
Tracking Illegal Transactions "Throughout the drug money laundering or fraud cases I worked, I had to physically sit in neighborhoods like 'The Wire' and watch people handing cash," Price said. "Now, I can sit in front of my computer and trace these transactions along the blockchain." Before this, Price and Gambaryan needed to "create their own blockchains" by recreating a flow of funds based on bank records. These transactions are now publicly recorded on the blockchain, allowing analysis tools to help investigators find the money faster. Approximately 10% of all cases involve crypto tracing. Knowing what else to do is the rest. A Binance investigation can be initiated by internal work, where agents see transactions from suspicious clusters, law enforcement requests, and finally, customer requests. "I talked this morning about a finance customer who was a victim of theft," Price explained. "We identified the money quickly, restrained them, and are working with law enforcement to return the money to our client."
Securing a Team Role Binance is hiring at a rapid pace, despite having 150 employees on its team, with over 100 positions open across its security and compliance departments. These new hires don't need to come from law enforcement backgrounds. According to Gambaryan, the best investigators in the area have been working on this for a few years. "Due to their exposure to cryptocurrency and blockchain technology, kids fresh out of college could be as well suited to the job as a 25-year veteran in financial crime," Price said. "In my opinion, work ethic and being willing to work the tedious, mundane work that all investigators have to do are the two most essential qualities for anyone in investigative work," Gambaryan said. "And intellectual curiosity is another."
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July 2022 | Volume 34
16
NEWS Crypto Weekly
Blockchain's Claim of Decentralization has been Criticized Yet Again by DARPA privileged entities could theoretically rewrite past transactions, contributing to the system's power imbalance. Additionally, Tor provides 55% of Bitcoin nodes, making it the largest network provider for the cryptocurrency. There could be cascading negative consequences if the anonymized browser is compromised. MIT's Cryptoeconomics Lab founder, Christian Catalini, views the report as useful but not particularly alarming. Despite some legitimate concerns, he points out that cryptocurrency systems are not completely autonomous. A loose association of human beings - volunteers and core developers - keeps them up-to-date and improves them constantly.
D
ARPA and Trail of Bits partnered to examine the promises made by crypto evangelists to understand better the risks associated with blockchain technology. The crypto winter is in full swing. Despite propaganda like CoinBase's "Long Live Crypto" ad, the blockchain looks more fallible than ever - especially in terms of its efficacy as a decentralized financial alternative. Defense Advanced Research Projects Agency (DARPA), in partnership with Trail of Bits, a cybersecurity research firm that consults for Facebook and Google, investigated whether blockchain technology, which underlies Bitcoin and over 10,000 other cryptocurrencies, is decentralized. Here are some highlights of the results: Bitcoin mining activity is dominated by four mining pools (collectives that consolidate mining power), and Ethereum mining activity is dominated by two mining pools. There are just three internet service
July 2022 | Volume 34
providers that handle 60% of Bitcoin traffic. A whopping 85% of Bitcoins are owned by just 4.5% of all Bitcoin owners. This report reiterates some points from an earlier study about the centralization sources within blockchain technology. Based on that analysis, conducted by a handful of Texas universities, a greater degree of power was concentrated within a smaller group of users, making the blockchain network vulnerable. Despite the massive scale of Bitcoin's blockchain network, a small subset of
Catalini says, "You could imagine some of the issues [in the report] being exploited, eventually - and I think it will possibly happen for some of them." He adds, "But over time, I think we will get better at developing the right solutions over time." As cryptocurrencies are decentralized, they do not have the oversight of governments or central banks, so their solutions will need the attention and consensus of their users. Investing in cryptocurrencies and blockchains is still a prototype stage, according to Dan Guido of Trail of Bits. Guido says that everyone needs to know what they're buying - what they're investing in. "There is a lot here you shouldn't trust. At least, not today." Last six months have seen a precipitous decline in Bitcoin's price. The idea of a selfsustaining, democratizing, digital currency was revolutionary in the early days of Bitcoin. In reality, the blockchain seems to be moving further away from a breakthrough, and closer to existing monetary exchange mediums.
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NEWS
17
Crypto Weekly
Some Crypto Exchanges Are “Secretly Insolvent” According to Expert C
rypto world experts are wondering whether we've reached the market bottom. Since November, nearly $2 trillion in crypto market value has evaporated. A $40 billion crypto asset and a $16 billion stablecoin, designed to maintain parity with the U.S. dollar, Luna and TerraUSD, have both collapsed. Earlier this month, Bitcoin's price dropped below $20,000 for the first time since Dec. of 2020. There are still many fallouts to come. Three Arrows Capital (3AC) revealed earlier this month that it was nearly bankrupt after being exposed to Luna's $200 million market cap. Several crypto firms, including Voyager Digital of New Jersey and BlockFi of New York, had lent Three Arrows large sums. Following Three Arrows' default, the two digital asset exchanges turned to billionaire Sam Bankman-Fried, founder of FTX and crypto's richest person. FTX and his quantitative trading firm Alameda received credit lines of $750 million from him. A return on Bankman-Fried's investment is not guaranteed. “In order to stabilize things
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and protect customers, we're willing to do a somewhat bad deal to maintain stability,” he says. Cash infusions by Bankman-Fried are anything but altruistic. With a keen understanding that his fortune depends on the healthy recovery and growth of the crypto market, he has emerged as a smart vulture capitalist. FTX has also acquired a 7.6% stake in Robinhood, where BankmanFried might acquire the company. More crypto exchange failures are expected, but there are no active merger talks with Robinhood, according to Bankman-Fried. “Third-tier exchanges are already secretly insolvent,” says Bankman-Fried. Along with Coinbase, Kraken, and Binance, Fried's FTX is a giant among digital asset exchanges. As online stock brokerages, they have millions of customer accounts. In addition to these whales, there are more than 600 crypto exchanges operating in an unregulated environment around the world.
AAX, Billance, and Hotbit are all names you may not be familiar with because they are not as well known as other exchanges. However, like Coinbase, they trade Bitcoin, Ether, and Dogecoin, and offer generous margin loans. Many crypto exchanges have been vulnerable to scams and hacks due to a lack of meaningful regulatory oversight. During 2018, Japanese exchange Coincheck lost $530 million in crypto; Singaporean exchange KuCoin lost $275 million in 2020; and Cayman Island-based Bitmart lost $200 million in December 2021. In 2016, Bitifinex was hacked and nearly 120,000 Bitcoin, worth $2.5 billion dollars was stolen. Although Bankman-Fried has generously bailed out the industry, he is not willing to continue throwing good money after bad. “Some companies are basically too far gone for backing to be feasible for reasons such as substantial holes in their balance sheets, regulatory issues, or that there isn't much left to save,” says Bankman-Fried.
July 2022 | Volume 34
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FEATURE Crypto Weekly
The Collapse of Stablecoins Shows Role as a Form of Money is On the Line a platform called "mBridge". Central banks in Singapore, Malaysia, Australia, and South Africa are working on similar prototypes with the BIS Innovation Hub. "The ideal scenario would be to have a common platform where central-bank digital currencies can interact and transact, but we are not yet there," Tiwari said. Using their balance sheets as trusted intermediaries, central banks are better equipped to provide the core of the future monetary system.
S
tablecoins have recently lost value, and their attempt to piggyback on central bank money does not provide the stability they claim, says the Asia-Pacific head of the Bank of International Settlements (BIS). According to BIS Asian office representative Siddharth Tiwari, several stablecoins, including TerraUSD, which had a market capitalization of $18.7 billion at its peak, have imploded. "Stablecoins have failed to achieve the full network effect we would normally expect from money," according to Tiwari. "The innovation that they bring, however, could be useful for designing cbdc`s." Through SCMP Knowledge, which includes explainers, FAQs, analyses, and infographics, we provide answers to your questions about global topics and trends. Stablecoins, unlike cryptocurrencies such as Bitcoin and Ethereum, are pegged to another asset, usually a fiat currency or a commodity, thus making them less susceptible to wild price swings. It is important to note, however, that in the case of so-called algorithmic stablecoins, such as
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TerraUSD, the link to the underlying asset can be somewhat tenuous and fragile, as demonstrated by the recent collapse. By using an algorithmic link to its sister coin, Luna, which also crashed, TerraUSD (UST) theoretically tracks the American dollar, even though it is unsecured by any realworld assets. It was designed to keep a peg to the dollar by converting into Luna. Nevertheless, stablecoins backed by real assets, such as Tether and USD Coin, whose values are pegged to US dollar reserves, also suffered from the collapse of TerraUSD. According to the BIS' annual economic report released last week, Tiwari spoke with the Post from the institution's headquarters in Basel, Switzerland. Various research initiatives are underway at central banks in order to create their own sovereign digital currencies. The People's Bank of China (PBOC) has a commanding lead in terms of implementation in the AsiaPacific region. Together with the Central Banks of the UAE, Thailand, and Hong Kong, it has developed
He also commented on the challenges facing his successor, Zhang Tao, who is the first Chinese person to hold the most senior position in the region after more than three years. Tiwari left the multilateral financial institution in August after more than three years in the top post. "Zhang brings significant policy experience to the BIS. The BIS and Zhang are facing challenges such as how to deal with the current high inflation in emerging market countries in Asia, given the current stage of the financial cycle with high debt and increased vulnerability." Though he has not decided on his next career move, he said he will continue researching digital public infrastructure and governance in the context of financial architecture. Hong Kong's de facto central bank, for instance, plans to launch a commercial data exchange, enabling banks to access business data provided by sources including trade links, point-of-sale terminals, and electricity companies, to make stronger credit decisions for corporate borrowers. Companies, in turn, will be able to control the use of their data footprint. "Data has increasingly replaced frameworks on trade, capital flows, and investments," he said. "Each country needs its own data governance system."
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If You're Thinking Of Buying Bitcoin Again, Think Twice I
n recent months, Bitcoin has been in a major downtrend. Trading at $19,791, down from over $68,000 at its all-time high. The Bitcoin Fear and Greed Index stands at 19, indicating extreme fear. Several months prior to Bitcoin's latest crash, the cryptocurrency had been fluctuating between $28,000 and $32,000.
factors. Globally, crypto firms experience large-scale illiquidity. Insolvency has been experienced by Three Arrows Capital (3AC), a large cryptocurrency borrower and lender, following the recent market crash. Due to the illiquidity of the firm, investors were unable to withdraw funds globally due to the storage of thousands of Ethereum tokens.
Since Bitcoin's price has historically rallied prior to its halving, investors may consider buying it right now. The recent support from governmental bodies looking into crypto regulation is also positive for Bitcoin in the long run. Legislation supporting cryptocurrency regulation was proposed on June 7th by the bipartisan Responsible Financial Innovation Act. Bitcoin can also be bought at a good price if there is extreme fear in the market. Therefore, investors can take advantage of current levels by investing longterm. Bitcoin's price has been experiencing a downtrend due to a variety of bearish
Other firms, such as Celsius, have frozen investor funds as well. Bitcoin is therefore likely to experience a bearish reaction in the short term as a result of these potential bankruptcy proceedings and liquidity crunches across the globe.
In addition, Bitcoin is considered a risk asset by its nature. The price volatility of risky assets during recessionary market conditions is much greater than that of risk-averse assets. As a result, large amounts of capital may flow out of speculative asset classes, such as cryptocurrencies, in the event that global markets go into a recession. Bitcoin's price may further decline as a result.
Additionally, there are fears of a global recession due to the uncertain macroeconomic climate. On June 15, the Federal Reserve announced that interest rates would be increased by 75 basis points, indicating quantitative tightening (QT). Following the COVID-19 pandemic, excessive
Thus, Bitcoin's short-term price action looks bearish as the market remains unclear. However, Bitcoin, as the largest of all cryptocurrencies, will likely return to its climb up global markets once markets begin to recover and investor confidence slowly returns.
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paper money was printed, causing inflation rates to rise continuously. Consequently, quantitative tightening could be a bearish signal for Bitcoin, in order to preserve the economy.
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Shade Protocol, the Future of Safety and Privacy on the Blockchain Developed on Secret Network, Shade Protocol consists of a network of privacypreserving Dapps. Privately, Shade has formed partnerships with Secret labs, Composable Labs, Sienna, and more. These partners invested in Shade after the vision of Shade Protocol was revealed. Right now, Shade is sharing that vision with you, so that you can decide if you want to become a partner too. So here we go.
First. What problem does Shade solve, and why is Shade unique? If you've been around DeFi long enough you've seen a trend emerge. When a new platform gains traction, there's a core set of Dapps that follow it. Stablecoins, Synthetics Insurance Lending, DEXs, Options, and more. These core DeFi Dapps are needed for each protocol. Three years ago these apps were innovative and new. Today they're the standard. Every protocol has
July 2022 | Volume 34
them. The problem is, on many early platforms, each Dapp has its own token. You end up with fractured attention, inefficient systems, and lost opportunity from not having a cohesive and connected ecosystem of DeFi Dapps. Shade solves this problem. Shade is a set of connected privacypreserving DeFi applications on Secret Network. Each app is
innovative, self-sustaining, and contributes revenue directly to the Shade Dao. Instead of having multiple apps and multiple tokens, there is one treasury token. Shade accumulates revenue from the suite of Shade apps, while also serving as the singular universal governance token. That's what Shade is, and that's the token you're getting when you buy Shade.
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But it gets better. What's the first Dapp, and what makes it special? Well, Shade is building the first native stablecoin for Secret Network. It's called Silk. But Silk isn't a typical stablecoin. As opposed to being pegged to a sovereign currency that is susceptible to inflation, like the dollar; Silk is instead pegged to a basket of global currencies and commodities. This makes Silk the most stable currency ever created, allowing everyday people to retain their purchasing power safely. When you hold and transact with Silk, you are protected from the adverse effects of inflation and volatility. Silk has unique tokenomics. It has privacy baked in. It's fast, and it's scalable. Silk is just the beginning for Shade Protocol. New applications, other than Silk, are already being created by other teams and partnerships, that understand the vision of Shade Protocol.
In the next phase of Shade Protocol, the core dev teams will be hard at work; testing and launching staking derivatives, governance, bonds, and more. Imagine multiple teams of developers, united, with the shared values of privacy, innovation, and scalability, all building Dapps under the same Dao. Each generates revenue and value for Shade token holders. Shade Protocol is already partnering, and/or integrating, with products and protocols such as Supra Oracles, Band Protocol, Secret Swap, Sienna Swap, and more. Along with that, Shade is safe. Despite Shade's love of privacy, the team is doxxed, the code is audited, and investors are all KYC`d. We know at Shade that the earliest community and believers are what make our protocol work. Join Shade today because, with you, we're all going to make it to the finish line together.
Check out the Shade Protocol website at https://shadeprotocol.io/ and visit Shade on Twitter https://twitter.com/Shade_Protocol. Ask questions from experts on the protocol in the Shade Protocol Community Chat on Telegram
Join our community and stay connected
July 2022 | Volume 34
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FEATURE Crypto Weekly
Crypto Innovations Must Be Processed, and it Takes Time R
isk assets are taking a hit as a result of rising inflation and the Fed raising interest rates. Crypto markets have been crashing for months due to this. The new technology is just finding its legs, according to El-Erian. "Crypto is going through what most innovations do," El-Erian told the panel in a public interview last week. El-Erian is a chief economic adviser at financial services firm Allianz, and president of Queens College at Cambridge. A current state of overproduction and overconsumption characterizes crypto's development, according to El-Erian. A certain activity becomes more accessible because the barriers to entry are suddenly lowered.
the steam engine, fiber optics, and even the synchronization to 2000, it occurred. "The first round isn't good," he said.
El-Erian said he saw a lot of people entering the crypto space without understanding what it is. According to El-Erian, "They just saw prices going up and assumed they would go forever." Things are changing now. He said, "We're washing all that out. Supply and demand will be washed away. Hopefully, you can rebuild a stronger foundation, as with most innovations."
The algorithmic stablecoin TerraUSD collapsed in May, along with its sister currency Luna, and in June, crypto lender Celsius froze billions of dollars of assets. Babel Finance, another crypto lender, also halted withdrawals, and Three Arrows Capital, a crypto hedge fund, has encountered liquidity problems.
According to El-Erian, the pattern he's observing with crypto has repeated over and over again with innovations. During
As Bitcoin fell below $20,000 for the first time since December 2020, Ether, the secondlargest cryptocurrency, fell below $1,000, its
lowest price since January 2021. Bitcoin has since stabilized and risen above that mark again. Due to the downturn, Coinbase laid off 1,000 employees in June, reducing its shareholder value by $1,000. A "crypto winter" is predicted by some crypto leaders, but it's unclear how long it will last. “Our trading revenue has declined significantly in previous crypto winters,” said Coinbase CEO Brian Armstrong in a blog post on June 14, announcing layoffs at the company. “Our business operates in any environment,” El-Erian explained. “The crash may lead to more stable industries and better technologies,” according to El-Erian. In stocks and crypto, you will see, companies that were sustained by cheap, easy moneybut didn't have valid business prospectswill fail. But disruptive applications and technology released during a bear market will always find a market and succeed. According to El-Erian, crypto is now facing a reckoning that is part of a larger economic paradigm shift. “It's about time we get out of this artificial world of predictable massive liquidity injections, where everyone is used to zero interest rates, where we do foolish things like investing in markets we shouldn't be investing in, or investing in the economy in ways that don't make sense,” he said on CNBC's Squawk Box in mid-March.
July 2022 | Volume 34
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75,000 Bitcoin Investors No Longer Millionaires Since the Market Crashed Last week, the Chinese newspaper, Economic Daily, warned investors about Bitcoin heading toward zero. As a result, the number of paper millionaires has declined by 75% over the past nine months. The ongoing bloodbath wreaking havoc on the crypto market has reportedly cost more than 80,000 Bitcoin investors their millionaire badges. Just 26,284 bitcoin (BTC) addresses currently contain holdings valued at over $1 million, with Bitcoin’s price barely holding around $20,000. As reported by BitInfoCharts, 108,886 BTC addresses reported a balance greater than $1 million on November 12th, 2021, just days after Bitcoin hit a new alltime high of around $68,000. According to Cointelegraph, the number of paper millionaires has declined by more than 75% over the last nine months.
decline in the net worth of former Bitcoin millionaires. According to the report, there are now just over 860,000 wholecoiners. Based on this spike in wholecoins, retail investors continue accumulating large amounts of BTC as prices tank. During the past 20 days, more than 250,000 addresses have added more than $2,000 to their holdings, according to data from Glassnode. This adds further credibility to the retail accumulation narrative.
Crypto Market Impacts The report stated that Bitcoin and the rest of the digital asset market had been negatively impacted by several issues, including
increased regulatory scrutiny, sustained geopolitical unrest, rising inflation, and interest rate hikes. With global markets increasingly uncertain, commentators believe that risk assets like Bitcoin could continue to suffer for longer. Chinese state-run newspaper Economic Daily warned investors last week that Bitcoin was heading toward zero. "The returns of Bitcoin come primarily from buying low and selling high, as it is merely a series of numbers," the newspaper explained. "Bitcoin's value will return to its original value in the future when investors' confidence collapses, or sovereign countries declare it illegal," the report added.
It has also affected the number of whales with a Bitcoin wallet worth over $10 million due to the dramatic decline in Bitcoin's price. In November last year, 10,587 addresses had a minimum cash value of $10 million, but yesterday, only 4,342 held that stature - a 58% drop. Over 13,000 new "wholecoiners,” or wallets containing one or more Bitcoins, have been added to the market despite the
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FEATURE Crypto Weekly
Scammers Love Crypto Robert Stone July 2022 | Volume 34
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A
New York artist bought BitConnect in November 2017 with $100 - a substantial sum for him at the time - to earn some travel money. Almost too good to be true–the new cryptocurrency offered returns of up to 10%–it was. In the hope of turning his $100 investment into $500 or $1,000, Zelder invested $100. According to data from YCharts, BitConnect coin's price plummeted to $11.30 on Jan. 25, 2018, after peaking at $445 on Dec. 28, 2017. According to the Justice Department's indictment of BitConnect's founder, Satish Kumbhani, Zelder was victimized by "a fraudulent scheme that robbed investors of billions of dollars," as United States Attorney Randy Grossman put it in a press release. New investors were urged to invest in BitConnect's lending program due to the expected high returns. However, prosecutors allege that Kumbhani and his co-conspirators were operating a Ponzi scheme around the world. BitConnect's founders and international promoters hyped up the company's lending program without disclosing their financial relationship with investors in exchange for a share of the invested funds. Crypto scams are attracting the attention of regulators. Thousands of Americans have lost $1.18 billion to crypto fraud between 2018 and 2022, according to the Federal Trade Commission. Through a Freedom of Information Act request, Grid obtained 23,960 complaints filed with the FTC about alleged crypto scams. Investors of all sizes and types have been duped over and over again by seemingly legitimate firms using obfuscatory financial instruments to promise high returns. Investing in crypto is generally risky, prone to massive swings, and often characterized by dramatic hype. Even those who have successfully invested in crypto in the past will have trouble sniffing out a scam. “I was just so confused back in 2017 since I didn't have the knowledge I have now,” Zelder said. "Many of these scams are becoming more elaborate now, so it's harder to detect them." Due to Wall Street's recent bear market, traders began selling their crypto investments, forcing Crypto.com, Coinbase,
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and Gemeni to lay off employees. The promise of life-changing returns remains the biggest lure of crypto. And it is the same with scams. In recent years, federal regulatory agencies, such as the Securities and Exchange Commission and Departments of Labor and Treasury, have begun to assess the risks of cryptocurrency, issue guidance, and enforce applicable laws. Reports of cryptocurrency scams can be filed with agencies like the SEC and the FTC, or victims can sue the perpetrators. It can take years sometimes for lawsuits to be resolved, and they cost a lot of money. Regulators, courts, and lawmakers are developing frameworks for holding cryptocurrency scammers accountable as cryptocurrency scams proliferate. The patchwork of existing regulations and case precedents in the crypto industry make that a difficult task.
Scammers and Crypto Go Together Like Peanut Butter and Jelly Scams are not unique to crypto - they have long existed in traditional financial systems as well. In 2013, for example, the movie "The Wolf of Wall Street" was inspired by the true story of financial firm Stratton Oakmont, inflating penny stock prices through pumpand-dump schemes. Crypto enthusiasts often urge newcomers to do their own research, but that doesn't mean they're ready to spot scams. He admitted that he didn't have great money management skills and didn't fully research BitConnect when he lost money in the
BitConnect collapse. Money was all he needed. “There's no one getting into crypto for the technology; it's mostly about the money," Zelder said, adding that he wasn't ready to assess the company's claims. Cryptocurrencies are attractive to scammers because they lack a middleman. As a result, two people will be able to transact directly with each other, instead of sending money between accounts via the banks. In blockchain technology, the transaction is recorded on a digital ledger rather than by a centralized entity like a bank, and it is verified by a network of computers. Blockchain transactions, however, are irreversible, but there are different variations. A transaction on the blockchain cannot be reversed once it has been completed. Cryptocurrency enthusiasts and newcomers can be sucked into scams because they mistakenly believe they are investing in a reputable new asset class. Like Zelder in 2017, many do not investigate further to see where exactly their money goes. Scammers can exploit any number of factors, including the pseudonymous nature of crypto - many people don't go by their real names - and the fact that wallets, which hold crypto, have no names, addresses, or social security numbers associated with them. Michael Rosmer, CEO and founder of DeFiYield, a digital asset management company, noted that U.S. cryptocurrency scams are typically founded by pseudonymous teams, are unaudited, and promise fantastic returns. Additionally, DeFiYield monitors scams, hacks, and exploits involving cryptocurrency projects that let cryptocurrency holders lend and
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transact using code instead of traditional banking procedures. As wealth inequality rises and real wages decline, crypto is more appealing as a means for ordinary people to accumulate life-changing wealth. This also makes it more susceptible to scams. “Probably, in some way, the numbers are too good to be true,” Rosmer said.
Politicians, Regulators, and Courts Pay Attention A lot of lawmakers have taken notice of crypto's explosive growth. Some see it as speculative, others as dangerous. Multiple state and federal agencies have engaged in a "turf war" over which elements of the crypto space fall under their jurisdiction, according to Columbia Business School adjunct professor Omid Malekan. This year, a bipartisan group of representatives sent a letter to the Securities and Exchange Commission questioning the agency's investigations of cryptocurrency companies. Besides hoping to attract donations from the cryptosphere, lawmakers might also wish to appease the industry as a job-growth opportunity and a tax revenue generator. Some lawmakers, like Rep. Ritchie Torres (D-N.Y.), have found cryptocurrency arguments compelling. The cryptocurrency industry has been sharply criticized by others, including Sen. Elizabeth Warren (D-Mass.) and Rep. Brad Sherman (D-Calif.) Sherman grilled cryptocurrency executives at a House Financial Services Committee meeting in December. "The cryptocurrency industry remains an unregulated market where scammers, cheats, and terrorists mix with ordinary consumers," according to Warren. The bill she introduced in March aimed at curbing cryptocurrency use to evade Russian sanctions. SEC, FINRA, and Secret Service agencies hire more investigators and litigators and devote more resources to investigating the crypto industry. However, a spokesperson for the FTC pointed to the agency's previous efforts to recover lost funds from victims of cryptocurrency scams in a statement to Grid. Despite lawmakers and federal agencies' efforts to crack down
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on crypto scammers, the industry is seeing an increase in hacks and thefts, as well as socially engineered phishing attacks on Twitter, Discord, Facebook, and other social media platforms.
of step with crypto's anti-government roots. Zelder is somewhat optimistic about finding a resolution to the Department of Justice's case against BitConnect, ongoing since last year.
Can Victims Get Any Justice?
His rights regarding the BitConnect case were explained to him in a letter from the DOJ approximately a month after he spoke with Grid, noting that many criminal cases are settled through plea agreements.
Taking action against scammers can be time-consuming and costly, and there is no guarantee of success. Regulation and legislation can restrict scammers' ability to flourish, but fraudulence can only be curtailed to a certain extent. Attorneys and other professionals cannot usually assist scam victims with their investigations. “In my opinion, there are more plaintiff's attorneys defending victims than smart attorneys covering up bad behavior,” said John Jasnoch, a partner at Scott & Scott, and plaintiff in the Ethereum Max case. Several celebrities and entrepreneurs have been sued in recent years for their involvement in cryptocurrency schemes, including Elon Musk, Kim Kardashian, Paul Pierce, Floyd Mayweather, Khaled "DJ Khaled" Khaled, and Clifford "T.I." Harris Jr. In order to make a difference, plaintiffs' counsel will have to step up its game. "Some of these entities have made a lot of money," Jasnoch said. In Zelder's view, cryptocurrency trade organizations should offer more support for victims of crypto scams; having the government assist crypto scams feels out
Your state financial services regulator, your congressmen, and the Federal Trade Commission are all good places to report cryptocurrency scams if you don't know where to turn. To explain what happened, all the evidence should be compiled chronologically. It can be challenging to bring charges against cryptocurrency scammers even with evidence of cryptocurrency fraud due to the anonymity of the scammers, the complexity of the scam, and the limitations of U.S. laws and regulations. Stark said that Crypto scammers may operate anonymously online, making it harder for government agencies to track them down. He pointed out that cryptocurrency scammers must solicit their schemes to find potential takers since pitching investment opportunities in secret is hard. "Nevertheless, they are not always who they claim to be online," he added. "Government
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agencies are beginning to understand how cryptocurrency transactions are obfuscated and laundered," Eversheds Sutherland's Sarah Paul says. To this end, the federal government has contracts worth millions of dollars with Chainalysis, a blockchain analytics company. Financial institutions are often required to open their books to see whether they are violating regulations by regulators in the traditional financial services sector, making it difficult to detect violations immediately. "As crypto transactions are publicly listed on the blockchain, spotting violations could, in theory, be possible. However, regulating the industry requires government agencies to understand how blockchain technologies work, and some agencies are learning about it," he said. However, Congress has passed few laws related to cryptocurrency, and there are few court precedents on the topic, so bringing cases to court can be challenging. A new bill has been introduced by state and federal legislators to clarify the regulatory confusion. Last year, President Biden signed into law the Infrastructure Investment and Jobs Act, which stipulated that digital assets must be reported to the IRS.
According to Forbes, more than 30 cryptocurrency bills were proposed in Congress last year, according to the National Conference of State Legislatures. Biden has also signed an executive order calling for regulatory agencies to assess the cryptocurrency industry. As part of the Responsible Financial Innovation Act, Sens. Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.) introduced legislation to create a regulatory framework for cryptocurrencies.
"To hold alleged cryptocurrency fraudsters accountable both in the U.S. and abroad, prosecutors and regulators must be resourceful and collaborate with regulatory agencies and other countries while more comprehensive legislation is being enacted," said Claire Nolasco Braaten, an associate professor in criminology and criminal justice at Texas A&M University. "The SEC could prosecute cryptocurrency companies that operate an unlicensed money transmitting business or exchange and make false statements on their websites," she said. Without addressing cryptocurrency fraud, the criminal justice system and regulators will put people inside and outside the cryptocurrency space at risk. "I sympathize with victims regardless of their sophistication," Stark said. "Everyone can be duped. These are professional salespeople. Maybe you're struggling to feed your family, or maybe you lost your job, or maybe you're struck by the pandemic. That's the kind of person these investment companies cater to." Cryptocurrency remains a bullish investment for Zelder, despite his losses. Several cryptocurrencies have plummeted in price in recent weeks, but Zelder sees the dips as an opportunity to buy more cryptocurrency. "Cryptocurrency scams are hard to identify," Zelder said. "Everything is fair game until someone really puts a law in place, which is so opposite of what crypto is supposed to be."
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El Salvador's Leader Buys $1.5 Million More Bitcoin D
espite a brutal selloff in the market over the past months, El Salvador's President Nayib Bukele is doubling down on cryptocurrencies. President Bukele posted the purchase on Twitter, writing: "Bitcoin is the future!" Thank you for selling cheap." Bukele said his government purchased 80 Bitcoins for $19,000 each. For its previous $105.6 million stake, the government paid less than half the average price.
According to El Salvador's Finance Minister, Alejandro Zelaya, the controversial Bitcoin investment has not resulted in financial losses.
Since September, El Salvador has paid almost $46,000 per coin on average, representing a loss of 56%, or $59.5 million, according to the tracking site nayibtracker.com.
By making cryptocurrency legal tender in May, Bukele became the world's first leader to boast of "buying the dip" in the currency. Since then, the coin has fallen even further. El Salvador has not really lost anything due to the fact that it has not sold any of its Bitcoins, according to Finance Minister Alejandro Zelaya.
"I see some people are concerned about the Bitcoin market price." "My advice: don't focus on the graph. If you invested in Bitcoin, your investment will grow immensely after the bear market."
Even if the distressed asset isn't sold, most companies and governments write down what accountants call "unrealized losses." Despite El Salvador's cryptocurrency investment, Zelaya has said that it doesn't even represent 0.5% of the country's budget.
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This might prove difficult in a country where one-fifth of the population lives below a $5.50 a day income. Bitcoin was rejected as legal tender by El Salvador in January following a recommendation from the International Monetary Fund. When El Salvador made cryptocurrency legal tender, the IMF recommended that it dissolve the $150 million trust fund it created and return any leftover funds to the treasury. Cryptocurrencies' volatility and their potential for use by criminals are among the concerns raised by the IMF in its report. As a result of Bitcoin, billions of previously unbanked individuals are now able to participate in the financial system, according to Bukele. Additionally, he has discussed a parallel tourism promotion targeted at Bitcoin enthusiasts. In addition to the U.S. dollar, Buckele pushed for Bitcoin to be adopted as legal tender. El Salvador’s Legislative Assembly made the country the first to do so in June 2021.
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What are Crypto Custodians? I
t is important for investors to think about how they would like to store and use their cryptocurrency prior to purchasing or investing. Cryptocurrency owners may either keep their cryptocurrency in self-custody or entrust a third party with its custody. Users of bank accounts rely on core models to store and protect their money from theft when withdrawing, depositing, and accessing it. The role of crypto custodians is similar. You can use them as a bank to store your coins, manage their liquidity, and prevent them from being harmed.
What makes a good crypto custodian? Any crypto-curious person should consider accessibility and theft protection as two of their primary requirements. There are some crypto custodians that offer internetconnected digital wallets ("hot wallets"). These may be suitable if you intend to be an active trader. They offer faster transaction speeds. Custodial services have developed cold storage services as ownership of cryptocurrencies has expanded, including Bitcoin (BTC-USD), Ethereum (ETH-USD),
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and altcoins. Crypto holders can store their coins and tokens offline on hard drives, like money under the mattress. To date, Coinbase (COIN), BitGo, and Gemini are some of the largest crypto custodians.
If a Crypto Custodian is Hacked, What Happens? Deposits in a bank account are typically protected from theft, fraud, and other risks by the Federal Deposit Insurance Corporation. Since cryptocurrencies are not yet regulated by the government, crypto custodians take other precautionary measures to protect their customers, often through additional insurance policies. Consider confirming that a hot wallet or private key custody service is insured for losses resulting from a cybersecurity breach if you're considering such services. Larger exchanges are more likely to have this type of policy. Gemini has a $200 million policy, while BitGo has a $700 million policy. You should also ensure that the custodian service you select covers your holdings to the full extent of their value. In the event of theft caused by a hack, you will be fully reimbursed.
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FEATURE Crypto Weekly
Winning Over Crypto Consumers to Gain Trust Robert Stone
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value is pegged to a government-backed currency like the dollar. According to Andrew Frank, vice president, and distinguished analyst at Gartner Advertisements, "Consumer trust is the most important thing for the crypto industry's survival right now."
Opportunities to Build Trust In addition to cryptocurrency's significant market capitalization and increasing popularity, there is a solid movement to integrate cryptocurrency into payments, investments, and banking services. Providing cryptocurrency access to many consumers is an exciting opportunity for financial institutions. Accessible digital currency identities can be developed by financial institutions through existing core platforms and digital channels, mitigating security concerns and reducing barriers to entry. Two areas in which consumers have taken an interest in, cryptocurrency as an asset and as a payment option.
Cryptocurrency as an Asset For consumers to be able to buy, hold, and sell cryptocurrency, and see their digital holdings alongside traditional bank accounts, cryptocurrency platforms, core platforms, and financial institutions will need to work together.
Cryptocurrency as a Payment Option
E
ven though sentiment for the asset class has plummeted recently, many crypto companies have cut their marketing spending. Crypto companies are spending much less on marketing right now than they did earlier this year, when they spent millions on Super Bowl and Winter Olympics advertising, with celebrities like LeBron James and Matt Damon. In recent months, the crypto market has suffered, partly due to waning consumer support amid volatility. About $2 trillion in value has been lost since the collapse of stablecoins like Luna and TerraUSD, whose
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Various payment vehicles are already incorporating cryptocurrency payment capabilities. In addition to large technology companies, retailers, like Walmart, are also exploring cryptocurrency payment options. The potential of cryptocurrency also extends to disrupting cross-border payments, which are hampered by technology limitations. Although the demographics of early adopters
show younger generations' enthusiasm for cryptocurrency, this new, innovative payment option is gaining popularity among all age groups. The experts agree that crypto companies will have to continue marketing, while federal agencies are cracking down on false advertising materials, and warning the public about companies that use celebrity endorsements. Consumers Will Buy Without Knowing a Company is Reputable Cryptocurrency trust among the general public is negative. Among those who are aware of the term, more are not trusting of cryptocurrency, than are. This decrease in trust is not surprising. Cryptocurrencies, such as Bitcoin, have continued to fluctuate in price, and since the beginning of 2022, hackers have stolen near-record amounts of crypto from exchanges. Despite this, a quarter of adults plan to purchase cryptocurrency in the next month, a decrease of just two percentage points from January.
Crypto is Working as Intended Even though trust in cryptocurrencies is declining, cryptocurrency ownership remains steady. In the words of blockchain and cryptocurrency evangelists, blockchain technology and cryptocurrency have the purpose of creating a trustworthy network not in the traditional sense of the word, but a trustworthy network because consumers can verify ownership and transactions on their own.Traditional financial services providers that have built their reputations based on trust may view the lack of trustlessness as a direct threat. Despite this, legacy institutions don't need to worry: Trustlessness isn't an inherent threat to trust, as the most recent surveys have shown.
Cryptocurrency Owners Do Trust Financial institutions In the eyes of cryptocurrency owners, trustworthy and trustless financial services are not mutually exclusive. Among U.S. adults, two-thirds (67%) say they trust banks, and 64% of cryptocurrency users agree. Adding the above discussed financial products should help with the reputation of crypto companies.
July 2022 | Volume 34
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HIDDEN GEMS Crypto Weekly
PROJECT 1
shadeprotocol
Shade Protocol (SHD) SILK
ShadeProtocol
Developed on Secret Network, Shade Protocol consists of a network of privacy-preserving Dapps. Due to the high speed of the Secret Network, Shade has not only created a product that is privacy-friendly, scalable, and interoperable, but is also very easy to use. Despite their inherent security, traditional stablecoins, such as those pegged to gold or fiat, have a major weakness; they lack privacy. Using a stablecoin means that the merchant knows far more about you than with a credit card or debit card, allowing them to discriminate against you. Based on the Secret Network and SNIP20 private and fungible token standard, SILK gives holders the option to make their
PROJECT 2
cryptopolisgame
transactions private or public. With advanced flexibility and auditable privacy, SILK is a 4th generation stablecoin. Since inflation remains a growing concern globally, Shade Protocol offers a stablecoin that doesn't adhere to a single fiat currency or asset, but can react to global trends as they change. With Shade Protocol, everything will be under one umbrella, including a decentralized exchange. As governments consider how to interact and use cryptocurrencies, and more nations adopt cryptocurrencies as a hedge against inflation, at the same time the world's population becomes more familiar with cryptocurrency, stablecoins will remain a major topic of discussion. The answer to the question of what a stablecoin should be, can be found in SILK.
Cryptopolis ($CPO)
CryptopolisGame
A social game where you can collect, earn, win, and display your NFTs while playing and socializing with your friends. The vision of Cryptopolis is to make managing digital assets fun. Cryptopolis strongly believes in the future of crypto gaming. Being able to have fun and make money at the same time is not a utopian dream anymore. It is here. And Cryptopolis wants to make it the most fun for any adult to do so. Play-to-earn is the approach we chose because Cryptopolis believes anyone should be able to acquire Cryptopolis NFT’s. Cryptopolis merges the Sims-like mechanics with room decorating and social interaction. In Cryptopolis your NFT collection and in-game experience get you to the top of the tower. Make real money with the $CPO
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CryptopolisGame
tokens by winning wager matches throughout the Tower, buying and selling NFT’s, and winning tournaments. The future of NFT gaming is here. Cryptopolis is free-to-play & play-to-earn. An online social platform with a blockchain back end and an associated cryptocurrency ($CPO) - Cryptopolis has a progression system based on acquiring resources, items (as NFTs), and prestige - Where players connect with each other and perform activities together. But they also compete with each other for in-game standing (prestige) and $CPO in various minigames. Cryptopolis is the first gamified social platform whose users can earn real money by playing and trading NFTs.
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BEGINNERS GUIDE Crypto Weekly
Is This Crypto Real? The cryptocurrency market remains somewhat of a Wild West regarding investing. The largest and oldest cryptos, such as Bitcoin and Ethereum, are notoriously volatile. The price of Bitcoin, for instance, has fallen 70% since November 2021, when it reached its all-time high. July 2022 | Volume 34
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into overdrive, advertising the price gains to attract more investors. Unwitting investors are left holding the bag when the crypto tanks after scammers dump their coins on the open market, after the crypto jumps by a significant amount. Make Sure You Don't Fall for Fake Websites Fake websites are one-way scammers trick unsuspecting crypto investors. A crypto that has made the news, but isn't well known, is best for this method. To entice buyers to make a purchase, scammers create websites that appear legitimate. Cryptocurrency development pages are sometimes used in scams, while legitimate cryptocurrency exchanges are also used. Use only secure websites with "https" in their name and the padlock icon in their address bar to avoid scams.
Excessively Hyped Crypto Projects The overhyping of a coin with no realistic chance of becoming a mainstream currency is also a common scam. Marketers will claim that a coin is the "next xyz," or "the Bitcoin killer," or some other grandiose claim. As with pump-and-dump schemes, these coins exist only to make scammers rich. As soon as enough investors buy in, the hypesters will sell their positions and collect their profits, leaving the in-the-dark investors with a worthless cryptocurrency.
ICO Scams Taking a closer look at the cryptos that are frequently quoted in the financial press, however, reveals even more wild stories. CNBC reports that more than 19,000 cryptocurrencies exist, many of which are unknown to most people. In this environment, how can we determine which cryptos are legit and which are scams?
The boldness of some scams makes them almost impossible to believe. The principles of pump-and-dump schemes and overhyped cryptocurrencies are borrowed
from fraudulent initial coin offerings. Still, they take these ideas one step further by selling non-registered cryptocurrencies directly to the public. Despite their fraudulent nature, these coins are rarely useful or valuable. Occasionally, however, general investors sell coins that don't exist. As a result, these fraudulent "IPOs" result in money being pocketed by fraudsters. Non-registered, fraudulent coin offerings have begun to be targeted by the SEC, but that doesn't mean they're not still around. Cryptocurrencies should be backed by reputable companies and sold by legitimate investors before investing your hardearned funds.
Taking the Long View Investors are sure to follow hype or money, wherever money is to be made. Cryptocurrency is one of the most volatile, unregulated investment options in the entire world, making it ripe for fraud. For beginners, stick to the most liquid, wellknown cryptocurrencies that have actual utility and can be tracked accurately. An excellent example is Bitcoin. Some legitimate businesses accept it, even your local coffee shop, even though it does not yet have the widespread acceptance its supporters believe it will achieve. Trading Bitcoin on a fair exchange reduces your chances of fraud. Investing in unregulated cryptocurrencies places your investment at risk of fraud the deeper you go.
Pump and Dumps are Raging Scammers load up on a no-name cryptocurrency - one that flies below the radar - in a pump-and-dump scheme. Social media posts, blog entries, and financial "press" are combined to promote the cryptocurrency. You should be cautious if a no-name crypto suddenly pumps in value. As more buyers notice it and drive up the price, scammers go
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July 2022 | Volume 33
July 2022 | Volume 34
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Crypto Weekly
of the
week
NFT
Have Bitcoin and Stocks Bottomed? James Sides will tell you how it is. I have known James for over a decade. He is not only one of the hardest working men I know, but what he teaches with his trading groups is beyond top-notch.
July 2022 | Volume 34
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