News
Blockchain Weekly Blog – July 2024 #3 | BakerHostetler
Stablecoin Demand Rises as Initiatives Announced in Germany and Hong Kong
Recent reports highlight the growing demand for stablecoins. According to one report, the market cap of the stablecoin PYUSD recently surpassed $500 million, with the total supply of PYUSD increasing by 97 percent since June 26. Reports attribute PYUSD’s expansion to its recent introduction on the Solana network, growing adoption on centralized exchanges, and integration into decentralized finance protocols.
According to another recent report, the USDT stablecoin recently showed a 24-hour trading volume of over $55 billion, which surpassed the combined total 24-hour trading volume of BTC, ETH, USDC, SOL, and FDUSD. The report noted that USDT regularly hits daily trading volumes of over $25 billion, while for comparison, BTC and ETH regularly show daily trading volumes of $4 billion to $8 billion.
In other stablecoin news, a global asset manager owned by a major German bank is reportedly planning to introduce the first euro-denominated stablecoin regulated by Germany’s financial regulator BaFin. The company is reportedly planning to launch the stablecoin by June 2025.
And in Hong Kong, the Hong Kong Monetary Authority (HKMA) recently released a press release announcing that the HKMA and the Financial Services and the Treasury Bureau (FSTB) have issued “consultation conclusions on the proposed legislation to implement a regulatory regime for fiat-backed stablecoin (FRS) issuers in Hong Kong.” According to the press release, the HKMA and FSTB will seek to introduce a stablecoin bill “as soon as possible,” and the HKMA is currently “processing applications for the stablecoin issuer sandbox, with the list of sandbox participants to be announced shortly.”
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New publications tackle technical concepts in DeFi, Staking, Block-Building
From Christopher Lamb
The Enterprise Ethereum Alliance (EEA) has launched its first version of the DeFi Risk Assessment Guidelines, a document that helps identify and mitigate DeFi protocol risks. The guidelines were drafted with input from several organizations in the cryptocurrency industry and cover a range of risks arising from governance, tokenomics, software, liquidity, regulatory compliance, and other external market factors. The guidelines aim to establish a framework as a resource for founders and developers of DeFi protocols. According to recent reports, the guidelines are already being used to help foundations apply for licenses from Abu Dhabi Global Market and UAE regulators.
In related news, Solidus Labs recently published a white paper titled “Navigating Risks in the Staking and Block-Building Ecosystem.” The white paper seeks to provide “an in-depth exploration of the current Ethereum staking and block-building landscape.” In doing so, it provides a review of the global regulatory landscape with block-building and staking, identifies potential risks from a legal and compliance perspective, and explores recent technological innovations being used to improve risk management.
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CFTC Chairman Addresses Need to ‘Bridging Regulatory Gap’ for Digital Assets
The U.S. Commodity Futures Trading Commission (CFTC) recently released CFTC Chairman Rostin Behnam’s testimony from July 10 before the U.S. Senate Committee on Agriculture, Nutrition, and Forestry hearing on digital commodities oversight. Chairman Behnam began his testimony by emphasizing the need to “close the regulatory gap.” Among other comments on the topic, the chairman stated, “This gap for non-security tokens continues to constitute the majority of the digital asset market as measured by market capitalization… Federal legislation is urgently needed to create a path for a regulatory framework that protects American investors and possibly the financial system from future risks.”
Speaking about enforcement, the Chairman noted, “In total, the CFTC has initiated over 135 digital product cases.” According to the Chairman, “[t]The increasing rate of digital asset enforcement cases since 2020 reflects the accelerated and sustained adoption of digital assets by U.S. investors.” The President also highlighted a recent decision by the U.S. District Court for the Northern District of Illinois in which the CFTC prevailed in prosecuting fraud involving “digital asset commodities,” and said, “In its decision, the court reaffirmed that both Bitcoin and Ether are commodities under the Commodity Exchange Act.”
In conclusion, the President reiterated the need to “close the regulatory gap” and provided the following “components of a framework that would ensure the CFTC has the tools to provide protections to customers and the market”: (1) a “principles-based oversight model” that strikes “an appropriate balance between clear performance-based requirements and measured flexibility to meet those results”; (2) appropriate funding in the form of a “permanent fee-for-performance model, assessed exclusively on digital asset owners and commensurate with the responsibilities outlined in a bill”; (3) “[L]legislative authority for the CFTC to require registrants to provide a comprehensive disclosure regime”; (4) “[C]comprehensive authority on anti-money laundering, know-your-customer and customer identification program”; (5) “[A] disciplined and balanced framework for the determination of tokens as commodities or securities under applicable law”; and (6) “[A] “comprehensive education and outreach program” to “enable the investing public to understand both the risks and opportunities of this technology.”
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Cryptocurrency Exchange Hacked for $235M; Illegal Miners Steal $723M in Electricity
A report by Elliptic has provided details on the recent hack of Indian exchange WazirX, which reportedly resulted in the loss of $235 million in cryptocurrency assets, including Ether, Shiba Inu, Matic, and Pepe. According to the Elliptic report, the hackers are linked to North Korea and have already used decentralized services to launder the stolen funds.
According to a recent report, illegal cryptocurrency miners in Malaysia have stolen $723 million in electricity from 2018 to 2023. Using methods to pinpoint areas with abnormally high electricity consumption, Malaysian authorities have cracked down on illegal mining, seizing more than 2,000 machines in October 2022 alone, according to the report.
A recent Chainalysis blog previewed the firm’s new Money Laundering and Cryptocurrency Report, which focuses on the intricacies of money laundering in the cryptocurrency system. According to the blog, the “comprehensive report not only shows how to track known illicit funds on the blockchain, but also introduces advanced data techniques to identify potential money laundering activity for lead generation.” The report, available now, aims to expand the firm’s money laundering analysis to include suspicious transaction patterns that may be indicative of money laundering activity related to off-chain crimes, the blog notes.
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