ProBit Bits — ProBit Global’s Weekly Blockchain Bits Vol. 23
In case you missed them, here are some of the top developments in the crypto space over the past week that we think would be of interest to you. Check out this week’s edition of ProBit Global (Blockchain) Bits. Happy reading!
TerraUSD’s Do Kwon denied being “on the run”
Back to the Luna/TerraUSD collapse, last week saw South Korean prosecutors claim that the founder of the stablecoin, Do Kwon, is “obviously on the run” and not cooperating with their investigations. TerraUSD (or UST) is the algorithmic stablecoin that collapsed earlier this year and saw its then-$18-billion value crumble suddenly.
Korean media say a one-year arrest warrant has been issued for Kwon as well as five others including Terraform Labs co-founder, Nicholas Platias. They reportedly violated the Capital Markets Act.
However, he claims he is not on the run. Kwon says he and other key members of Terraform Labs have been cooperating with “any government agency that has shown interest to communicate.”
TerraUSD-like stablecoins could be banned
Meanwhile, Bloomberg reports that legislation to regulate stablecoins — still being drafted in the U.S. Congress — would place a two-year ban on coins similar to TerraUSD (UST).
The bill in the making somewhat aligns with a Chainalysis expectation in a June 2022 analysis in which the blockchain firm stated that UST’s collapse is likely to “pose a threat to consumer confidence in the short term and serve as a legislative catalyst in the long term.”
Bloomberg says the latest version of the bill indicates that it would be illegal to issue or create new “endogenously collateralized stablecoins” — those presented as convertible, redeemable, or could be repurchased for a fixed amount of monetary value, and that rely solely on the value of another digital asset from the same creator to maintain their fixed price.
Vitalik argues that DAOs and their decentralization actually matter
Ethereum’s Vitalik Buterin made a case against the view that highly decentralized autonomous organizations (DAOs) do not work. According to him, since most autonomous organizations are “decentralized in nature” by gathering large amounts of capital in a single pool and using token holders’ votes to fund allocations, decentralization matters in autonomous organisations.
When decisions are concave, and a compromise is preferred, Buterin believes relying on the wisdom of the crowds can help provide better answers. DAO-like structures with large amounts of diverse input going into decision-making are better in such instances, he says. Those who see from a more concave perspective — like in judicial decisions where choosing between two independently chosen judgments over the random choice of one is probably more likely to be fair — are more likely to see the need for decentralization. Or for public goods funding and tax rates. He also believes DAOs should be providing a service that evades permanent censorship, mere instability, and disruption. DAOs require decentralization as they need to oversee themselves.
CFTC charges Ooki DAO, bZeroX for illegal commodity transactions in digital assets
Talking DAOs, the Commodity Futures Trading Commission (CFTC) last week filed a federal civil enforcement action in the U.S. District Court for the Northern District of California against the Ooki DAO. The DAO was charged with violating the same laws as bZeroX which it succeeded. CFTC had filed and settled charges against bZeroX for illegally offering leveraged and margined retail commodity transactions in digital assets. It was also alleged to have engaged in activities that were only registered for futures commission merchants (FCM) to perform and failed to adopt a customer identification program as part of a Bank Secrecy Act compliance program. The respondents — bZeroX and its founders Tom Bean and Kyle Kistner — were ordered to pay a $250,000 civil monetary penalty and to cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged.
Hong Kong open to STOs, official says
Last week, the Deputy Secretary for the Hong Kong Treasury Bureau, Chan Ho-lin, pointed out that more than a dozen potential companies are interested in Security Token Offerings (STOs).
The official noted that the Hong Kong government is committed to supporting the steady development of financial technology including STOs so that societies can access a variety of innovative financial services and enhance the development of the real economy.
An STO is similar to an Initial Coin Offering (ICO) — the fundraising mechanism in the blockchain and crypto space in which investors buy and receive a new token issued and valued by a company with little or no oversight. STOs differ as they have regulatory complexity and are backed by real-world value and not as determined by the supply of the token or the price determined by its creators.
Nasdaq may be launching a crypto custody service soon
Last week, Nasdaq, a major US multinational financial services corporation, reported that it will launch its own crypto custody service. The move is said to align with the equity exchange operator’s broader mission to be a service provider in the crypto space rather than facilitate the trading of cryptocurrencies. Ira Auerbach, the newly named head of Digital Assets says Nasdaq is uniquely positioned as a traditional financial player to take custody of clients’ digital assets over crypto-native firms because of its knowledge of institutional clients’ needs regarding using a financial product. It will initially offer custody services for Bitcoin and Ethereum to institutional investors like hedge funds.
Pointing at a growing Wall Street interest in crypto, Nasdaq’s move follows BlackRock’s team up with Coinbase to offer Bitcoin trading to its clients and JPMorgan Chase building a blockchain-based trading platform. Goldman Sachs also became the first major bank in the U.S. to make an over-the-counter crypto transaction.
Russia working to allow cryptocurrencies for cross-border settlements
Last week, Russian central bank and finance ministry officials say they have agreed to allow cross-border cryptocurrency settlements, despite related sanctions and concerns about frozen crypto assets, similar to those in the UK.
The Foreign Commonwealth and Development Office, for instance, recently updated the UK Sanctions List of Russian individuals/entities, especially when trying to evade financial sanctions, to have their crypto assets frozen.
Deputy Minister of Finance of Russia Alexei Moiseev says they now have a draft law in place which describes how to acquire cryptocurrency, what can be done with it, and how it is possible or impossible to use it in cross-border settlements.
A report suggested that Russia could start using cryptocurrencies for cross-border payments as early as 2023 to help ease sanctions as the country works on putting a taxation structure for foreign cryptocurrency transactions in place.