Token Chronicle - Week 4 September 2024

Top cryptos

Meme of the week

Quick bites:

• Telegram will now share user data, such as IP addresses and phone numbers, with governments upon valid legal request. This decision aims to balance privacy concerns with legal compliance, addressing global legal challenges and criticisms.

• The SEC has accused TrustToken and TrueCoin of misleading investors by claiming that their stablecoin TrueUSD (TUSD) was fully backed by US dollars, while a large portion of the reserves was invested in a risky offshore fund.

• Caroline Ellison, former CEO of Alameda Research and ex-girlfriend of Sam Bankman-Fried, has been sentenced to 24 months in prison by a US federal judge for her role in the massive fraud related to FTX.

• Bithumb, South Korea's second-largest crypto exchange, is considering an IPO on the U.S. Nasdaq, as reported during a shareholders meeting. Initially aiming for a Kosdaq listing in 2025, Bithumb may shift due to regulatory challenges in South Korea.

• CleanSpark CEO Zach Bradford predicts bitcoin will peak at nearly $200K this cycle, citing macro events and the U.S. presidential election as factors. He expects bitcoin prices to rise post-election, boosting margins for efficient miners.

• Matrixport has completed its acquisition of Crypto Finance AG, a Swiss-licensed crypto asset manager. Now rebranded as Matrixport Asset Management AG, the deal received regulatory approval from FINMA. Matrixport's valuation crossed $1 billion after a $100M investment in 2021.

• Tether aided the DOJ in recovering over $6 million from a Southeast Asian crypto scam. Fraudsters mimicked legitimate platforms, but Tether froze the assets before they could be laundered. To date, Tether has frozen $1.8 billion in illicit USDT.

• After his release from prison, Changpeng Zhao (CZ) shared updates on his plans via X. While stepping away from Binance, CZ is now focused on growing his new project, Giggle Academy, and plans to invest in blockchain, AI, and biotechnology.

• Consultancy firm, Bain predicts the global AI market could hit $1 trillion by 2027, with growth driven by tech firms expanding data centers and SaaS providers integrating AI.The market, already valued at $185 billion, is forecasted to grow 40-55% annually.

Market update: We've seen a strong rebound in BTC, reaching the $65K/66K range, followed by a significant rise in altcoins as well (although Bitcoin dominance remains, so it's not alt season yet). This is due to the context of US interest rate cuts and announcements of massive stimulus plans in China. A slight pullback at the start of this week is due to the geopolitical situation: the Israeli army's entry into Lebanon and reactions from Hezbollah and Iran, a conflict that is raising uncertainties in global markets.

Main points this week:

Solana Update:

1. Developments on Solana (during Solana Breakpoint in Singapore): Société Générale — Forge, with its EURCV euro stablecoin, is coming to the network. Another major announcement involves Citi Bank, whose CIDAP platform is also arriving on Solana. In traditional finance, asset manager Franklin Templeton is preparing to launch a money market fund on Solana. Securitize, a specialist in tokenizing real-world assets (RWA), is also expanding to Solana, offering its services in cooperation with Wormhole to enable bridging between the various networks supported by the application. Additionally, Coinbase’s cbBTC will soon expand to Solana, as this wrapped version of BTC is already live on Ethereum (ETH) and Base. Finally, the oracle provider Pyth Network has introduced its upcoming update, Oracle Integrity Staking (OIS), which will prioritize PYTH staking with additional rewards to secure the network.

2. Coinbase exchange has recently introduced its "Wrapped" Bitcoin, cbBTC, and has big ambitions for the token, with plans to bring it to Solana (SOL) soon.

Regulation:

1. The largest custodian bank in the U.S., BNY Mellon, recently received a controversial SEC approval to bypass certain strict rules for digital asset accounting. This exemption allows the bank to expand its cryptocurrency custody services more easily, sparking mixed reactions in the financial industry. As the top U.S. custodian bank, BNY Mellon holds nearly $50 trillion in assets for its clients and manages over $2 trillion in assets.

2. Hester Peirce, a commissioner at the Securities and Exchange Commission (SEC), acknowledges that cryptocurrencies themselves are not securities, questioning the current regulation-by-enforcement approach and admitting that clarification is needed. The House Financial Services Committee recently held a hearing with all five SEC commissioners, including Chair Gary Gensler, Caroline A. Crenshaw, Hester Peirce, James Lizarraga, and Mark Uyeda. It was the first time these commissioners testified together before Congress since 2019. During this hearing, Commissioner Peirce criticized the SEC for deliberately avoiding clear guidance on the security status of cryptocurrencies, creating uncertainty in the crypto market. Peirce explained that the SEC's maintained ambiguity was intentional, meant to highlight that the security status depends on the context of issuance rather than the cryptocurrency itself.

3. Accused of fraud, Archblock, the entity behind the TrueUSD (TUSD) stablecoin, reached a settlement with the SEC. To avoid court proceedings, the group will pay a fine of several hundred thousand dollars and has agreed to comply with regulations. The regulator alleged that TrueCoin and TrustToken marketed their investment products as "safe and trustworthy," although the two companies claimed TUSD was fully backed by U.S. dollars, which was not the case in reality.

4. While planned reimbursements for former users have not yet started, a decision has been made to compensate shareholders of the FTX company. This move has stirred controversy among the company’s creditors, who point out that this is not the usual procedure during bankruptcies. Typically, during bankruptcy, affected users and other creditors are reimbursed first, not shareholders. The actions of the exchange platform’s managers are thus unusual. Moreover, this decision was made without involving former users, who had voted in August to approve the repayment plan without this amount dedicated to shareholders.

5. Japan's Financial Services Agency is set to review crypto regulations under the payments act, assessing whether they adequately protect investors. This review could lead to reclassifying crypto as a financial instrument, potentially lowering taxes on digital assets.

6. China's former finance minister, Zhu Guangyao, emphasized the need for deeper crypto study during a forum at an university. He cited concerns over crypto's risks but stressed understanding global shifts, referencing remarks by U.S. candidate Donald Trump as a call for action.

7. A U.S. federal judge has denied Tornado Cash co-founder's motion to dismiss money laundering charges, ruling that code functionality isn't protected by the First Amendment. Storm faces trial for allegedly facilitating over $1 billion in illicit crypto laundering via Tornado Cash.

8. Australian regulator ASIC has stated that a “significant number” of crypto firms will likely need licensing under current laws, as many traded assets are considered financial products. This comes ahead of a new digital asset regulatory framework, expected in 2025.

9. Singapore has finalized new investor protection measures for crypto service providers, effective June 2025. These include mandatory risk tests for retail customers, bans on referral incentives, and stricter token governance rules. The guidelines aim to enhance consumer protection.

10. Hong Kong is diving into digital currency with Project e-HKD+. HKMA is expanding its CBDC pilot with 21 financial institutions in a year-long sandbox for safe technology testing. Key features include settlement of tokenized assets, programmability, and offline payments.

International:

1. The Bank of Canada has announced a reduction in its research on central bank digital currencies (CBDCs) but remains ready to deploy a digital Canadian dollar if necessary. The Bank of Canada stated on its website that it has explored the topic sufficiently and is prepared to launch a digital Canadian dollar if the need arises.

2. After previously not addressing the cryptocurrency sector, Kamala Harris has finally clarified her position. The Democratic candidate wants to encourage innovative technologies, including cryptocurrencies, while also protecting investors through clear regulation. The United States "will remain dominant in AI, quantum computing, blockchain, and other emerging technologies," she said.

3. The People's Bank of China unveiled an ambitious stimulus plan this week, addressing concerns about the Chinese economy. The governor confirmed that the People's Bank of China (PBOC) would reduce commercial banks' reserve requirements by 50 points. Other key measures follow, many aimed at alleviating the deepening real estate crisis in China in recent months. Mortgage interest rates have been reduced by an average of 0.5 points, translating to a reduction in borrowing costs by $5.3 trillion. Rules surrounding the purchase of second homes have also been relaxed. Pan Gongsheng further stated that this would not be the last round of measures, with plans to further reduce banks' reserve requirements in the coming months. The Chinese finance minister is also expected in the coming weeks, likely with additional measures, potentially affecting the country's tax revenues.

4. Cryptocurrency exchange Bybit has launched an "Islamic account" for Muslim investors, offering financial products compliant with Sharia principles. This initiative comes shortly after Bybit obtained a license in the UAE, a strategic market where Islamic finance is in high demand. Developed in partnership with ZICO Shariah, a company specializing in Sharia-compliant advisory services, Bybit’s "Islamic account" includes spot trading, a Dollar Cost Averaging (DCA) trading bot, and a Spot Grid Bot. Since not all cryptocurrencies adhere to Sharia principles, Bybit offers a selection of 19 tokens for this purpose.

5. Tools For Humanity, the company behind Worldcoin’s development, "welcomes" the South Korean regulator’s decision to fine them $850,000, considering this action the end of legal proceedings against them. Worldcoin is a controversial project founded by Sam Altman that aims to provide a decentralized digital identity (DID) based on biometric recognition, blockchain technology, and artificial intelligence (AI). Worldcoin’s methods of data retention and collection have been repeatedly criticized by various regulators worldwide. This fine follows accusations by South Korea’s PIPC against the Worldcoin foundation for alleged violations in the collection and transfer of personal data. The foundation has been accused of failing to sufficiently inform individuals about the purpose of collecting their iris-scanned data and the duration for which it would be retained. On the other hand, OpenAI is transitioning from a nonprofit to a “public benefit corporation,” aiming to balance profit and societal impact. This shift has caused internal turmoil, with key leaders departing, including the CTO. CEO Sam Altman is set to gain a 7% stake.

6. Bhutan's bitcoin mining operations are thriving, generating between 55 BTC ($3.6M) to 75 BTC ($4.9M) weekly. The government uses mining pools like AntPool, Braiins, and Foundry, as revealed by Arkham Intelligence.

Tech:

1. Presented as the "first modular blockchain network," Celestia continues to evolve, with a new $100 million funding round. This new financing comes just weeks after the network developers presented their roadmap for the coming years. Launched in beta in October 2023, Celestia is touted as the "first modular blockchain network."

2. To offer developers a confidential data-sharing tool, Ledger has introduced its Key Ring protocol. For example, Ledger Key Ring could be used for cloud storage, where files would be encrypted, preventing the host from viewing them. To access the files, authorized individuals would need to use their hardware wallet to prove they have the necessary rights, similar to signing a crypto transaction.

3. Bitcoin zero-knowledge rollup Citrea has launched its BitVM-based bridge, Clementine, on the Bitcoin testnet. Citrea, backed by $2.7M in seed funding from Galaxy, aims to position Bitcoin as the foundation for global finance.

4. Worldcoin has launched Face Auth, a new security feature for its World ID. This 1:1 face comparison ensures that only the person who verified their World ID via an orb can use it, enhancing security for transactions, sign-ins, and more.

5. Visa will pilot a project in 2025 to tokenize fiat currency on Ethereum, enabling faster, more secure transactions. Banks can issue fiat-backed tokens through the Visa Tokenized Asset Platform (VTAP), bridging digital and fiat markets

Institutions:

1. In response to concerns over Coinbase’s reserves, BlackRock has filed an amendment requiring Bitcoin withdrawals within 12 hours. This initiative aims to alleviate investor concerns and make the fund redemption process more reliable. In addition to the fact that using spot Bitcoin ETFs goes against BTC's original idea, their concentration, with Coinbase as the main custodian, poses a weakness for the ecosystem. A hack or loss of funds by the platform could lead to a significant market drop.

2. After announcing the launch of its euro stablecoin on Solana (SOL) last week, Société Générale — Forge has presented a partnership with Bitpanda for its EURCV. The asset will now be available for trading on the Austrian platform.

3. After initially focusing on individual clients for cryptocurrencies, PayPal is now expanding to business accounts. These accounts will soon be able to buy, sell, hold, and transfer cryptocurrencies. PayPal has embraced cryptocurrencies in recent years, even launching its own stablecoin, PYUSD.

4. Robbie Mitchnick, BlackRock’s head of digital assets, claims that Bitcoin is not a risky asset. He explains that its fundamental characteristics, similar to gold, make it a financial safe haven, supporting its growing adoption by large institutional players. Earlier this week, Robbie Mitchnick, head of digital assets at the asset management giant, shared his view on the characteristics of Bitcoin and its currency, BTC, describing it as a "risk-off" asset, meaning it offers protection against market panics or failures in the traditional financial system. Mitchnick concluded by emphasizing that despite its volatility, which gives it the appearance of a risky asset, its fundamental characteristics allow it to serve as a safe haven against monetary system failures.

5. Ethena, a protocol specializing in decentralized stablecoins, plans to launch a new stablecoin called "UStb" through BlackRock and Securitize. This stablecoin will be backed by BlackRock’s tokenized BUIDL fund, which consists primarily of U.S. Treasury bonds and repurchase agreements. Launched in March 2023, BlackRock’s BUIDL fund, tokenized by Securitize, has quickly become the largest tokenized U.S. government securities fund, with over $522 million in assets under management. The UStb will exist as a completely independent product from Ethena’s other stablecoin, USDe, which launched last February. USDe takes a different approach from UStb, using derivatives-based hedging strategies rather than direct backing by fiat reserves or assets.

6. JP Morgan's Onyx Blockchain is now powering Siemens' digital commercial paper settlement, marking a key advancement in blockchain for traditional finance. Partnering with SWIAT, they’re driving digital asset issuance for commercial banks.

7. The SEC has approved options trading for BlackRock's Bitcoin spot ETF on Nasdaq.Options allow traders to buy/sell an asset at a specific price by a set date,providing potential gains. Other ETF options could be approved soon, pending decisions from the OCC and CFTC.

Rewind: 

Worldcoin freshly released a new feature "Face Auth", a new security measure for World ID: According to the team, "Face Auth is a private 1:1 face comparison that ensures only the person who verified their World ID at an orb can use it. It provides increased security for your World ID during actions like online purchases, financial transactions, secure sign-in applications and much more."

Let's rewind about this project with this nice article from Sun Zu Lab: WorldCoin: Crypto’s holy path to mass adoption or a dystopian nightmare? (sunzulab.com)

Key takeaways here (in simple words):
- Worldcoin project purpose is to create a decentralized ID that would provide, in the near future, a proof of humanity (which will be essential with the rise of AI ; that in the meantime the founder contributes to with OpenAI) for transactions and others
- It relies on 3 pillars: a World ID (obtained from scanning its iris), a token (WLD, utility and governance) and a World App (to do payments/transfers)

The project faced a lot of concerns/critics on privacy (the team has not always been clear about the use of the data collected, and iris scanning might not be flawless), centralization (regarding its orb device that could be used to arbitrarily create fake human identities), security and their market approach (targeting emerging countries, exchanging sensitive data against tokens, "exploiting people") or even their token distribution.

Vitalik Buterin, Ethereum’s co-founder, recently highlighted those risks and what could go wrong with biometric proof-of-personhood solutions. He also acknowledged, however, "that the efforts of teams tackling the problem, such as WorldCoin, could be humanity’s best chance against AI."

Let’s talk about: The projects and research pushed by the Bank of International Settlements (BIS):

- Project mBridge to deploy a common CBDC platform for instant cross-border payments (tackling key inefficiencies in current cross-border payments)
https://lnkd.in/gEt5REbx

- Project Agora on the use of tokenization and smart contracts to enhance the functioning of the monetary system
https://lnkd.in/gkjR2hy4

- Project Mandala that focuses on the automation and harmonization of compliance procedures and monitoring of transactions across jurisdictions
https://lnkd.in/ga72-G6g

- Project Dunbar that designed prototypes for multi-CBDC platform shared by different central banks
https://lnkd.in/gaXjtH3z

- Project Pyxtrial that developed a solution to monitor and assess the backing of stablecoins (improving risk-monitoring)
https://lnkd.in/gszz7xJf

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Disclaimer: The information disclosed here does not constitute an investment advice ; it is for informational purposes only and does not constitute investment advice. You should do your own research while investing in crypto and only invest money you are ready to lose.