Consensys, R3, eCurrency, Diem & Other Banking, and Payments Giants to Help BoE with CBDC

BoE Selects Consensys, R3, eCurrency, Diem Association & Other Banking and Payments Giants to Help with its CBDC

This week, the Bank of England announced the membership of the central bank digital currency (CBDC) Engagement and Technology Forums.

The creation of the groups was first announced in April this year alongside the CBDC task force to explore the potential of a UK CBDC.

Besides gathering input on all technical aspects and engaging stakeholders, the Technology Forum will help the bank understand the challenges of designing, implementing, and operating a CBDC.

The list published by the central bank includes some notable names from the world of payments and financial technology.

Members of the Engagement Forum include executives from HSBC, Starling Bank, Morgan Stanley, Standard Chartered Bank, NatWest Group SWIFT, PayUK, Visa, Mastercard, PayPal, Google, Facebook’s Diem Association, and many others.

As for Technology Forum, the members are Monzo, Spotify, Stripe, Amazon Web Services, IBM, R3, eCurrency, Consensys, Initiative for Cryptocurrencies and Contracts (IC3), and the Project Lead of Blockchain & Digital Currency at World Economic Forum.

The Technology Forum met for the first time in late September, and the Engagement Forum will have its inaugural meeting later in the year, it said.

“The Forum will have an important role in helping the Bank and HM Treasury understand the practical challenges of designing, implementing, and operating a CBDC.”

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Author: AnTy

SEC Chair Signals Support for BTC Futures ETF, Crypto “Certainly of A Size” to Have Same Safeguards

SEC Chair Yet Again Signals Support for Bitcoin Futures ETF, But says Crypto “Certainly of A Size” to Have Same Safeguards as Banking

“A lot of people are likely to get hurt,” said Gary Gensler, asking crypto platforms that accepted funds from investors and offered returns to “consider the securities laws carefully.”

Hopes for getting a Bitcoin Futures ETF approval this year have further risen with the US Securities and Exchange Commission Chairman Gary Gensler’s latest comments on the investment product, where he reiterated his positive stance on such exchange-traded funds.

In his prepared remarks for the Financial Times’ “The Future of Management North America Conference,” Gensler repeated that there had been several filings under the Investment Company Act with regard to ETFs seeking to invest in CME-traded bitcoin futures.

According to him, the ’40 Act provides “significant investor protections” for mutual funds and ETFs.

“I look forward to staff’s review of such filings.”

Ever since Gensler first made these positive remarks towards Bitcoin Futures ETF in August, several firms, including Valkyrie Investments, VanEck, Proshares, and Invesco, have filed applications for such an ETF.

An ETF makes the product less costly, more transparent, and more tax-efficient than mutual funds for the investors.

Talk to the Agency

Besides supporting Bitcoin Futures ETF, Gensler also continued this criticism of crypto trading and lending platforms that promise returns to investors, which he says won’t avoid the SEC regulation. According to him, these products need the same safeguards against fraud and manipulation as bank depositors or purchasers of mutual funds or insurance policies. He said,

“This crypto space is now certainly of a size that without those investor protections of banking, insurance[and] securities laws [and] market oversight, I do think somebody is going to get hurt.”

“A lot of people are likely to get hurt.”

Recently, Coinbase publicly shared that SEC is threatening to come after it if it launches its Lend product which it at the time decided to postpone to October only to drop it all together later.

Earlier this week, at the Code Conference in Beverly Hills, California, Gensler had declined to comment on remarks made by Coinbase CEO on SEC engaging in “sketchy behavior,” but on Wednesday, he noted that some companies have “said things publicly about some of those conversations.”

Crypto platforms that accepted funds from investors and offered returns “should consider the securities laws carefully and talk to the agency about getting registered,” Gensler said, adding, “Many of them should [register] now — or should have even in the past.”

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Author: AnTy

NY Court Dismisses Half of Class Action Plaintiffs’ “Baseless” Claims Against Tether and Bitfinex

NY Court Dismisses Half of Class Action Plaintiffs’ “Baseless” Claims Against Tether and Bitfinex

This week, Judge Katherine Polk Failla dismissed half of the class action plaintiffs’ claims that were filed about two years back against the cryptocurrency exchange Bitfinex and the sister company Tether, a stablecoin USDT issuer.

The Judge of the US District Court for the Southern District of New York issued a 127-page opinion regarding the dismissal of the complaint that included RICO claims as well, stated both Bitfenix and Tether on Wednesday.

As for the remaining claims, the court has raised substantial issues, making them “meritless.”

Bitfinex said,

“With half their case now dismissed, their primary expert debunked, and their lead law firm embroiled in its own internecine war – with its partners and former partners trading allegations of fraud and ethics violations – this case is doomed.”

It further said that they would not be settling the remaining of the “baseless” claims either as the litigation exposes the case to be a “clumsy attempt at a money grab, which recklessly harms the whole cryptocurrency ecosystem.”

In other news, on Thursday, the exchange halted trading for over two hours with its status page reading, “investigating issues with the platform.” The incident is now resolved after the company’s intervention.

Handling more than $715 million trading volume in the last 24 hours makes Bitfinex the world’s ninth-largest spot crypto exchange, as per CoinGecko.

The Fee Fiasco

Earlier this week, Bitfinex mistakenly paid $23.7 million in fees for sending $100,000. The transaction was made using a hardware wallet from DeversiFi, a non-custodial exchange that spun out of Bitfinex about two years back.

While, as we reported, the miner has given back $22.1 million, DeversiFi noted in its post mortem that it was due to underlying issues in the EthereumJS library coinciding with gas fee changes associated with the EIP-1559 upgrade in some transactions.

Combined with the fact that Ledger hardware wallet displayed fees in an unreadable manner,

“Only wallets with very large quantity of funds would be impacted, all other users would see a failed transaction.”

DeversiFi offered the miner to keep 50 ETH as a return fee. As for ensuring that it doesn’t happen again, the platform is working with the Ethereum community and Ledger to patch issues that may have contributed to this occurrence.

“On our platform we’ll be implementing stronger defensive measures when interfacing with external libraries, reviewing how we treat failed transactions and also enforcing a ceiling value for any max transaction fees as additional protection.”

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Author: AnTy

Visa Deploys First Smart Contract on Ethereum for its “Universal Payment Channels” Platform

Visa Deploys First Smart Contract on Ethereum for its “Universal Payment Channels” Platform for CBDCs and Stablecoins

Payment giant Visa revealed its “Universal Payment Channels” (UPC) platform for central bank digital currencies (CBDCs) on Thursday.

In its paper, Visa noted that with a “significant growth” in digital tokens in the form of crypto, stablecoins, and CBDCs, as the number of distributed ledger technology (DLT) networks increases, transacting parties are getting scattered.

Here, the company envisions a future payment network built on top of DLT networks. This is where Visa’s interoperability platform for digital currencies UPC comes into play.

UPC is a scalable, interoperable platform for digital currencies which operates in a hub-and-spoke model, where clients register with a UPC hub to route their transactions to other clients.

Visa ticks cross-border payments for CBDCs and a marketplace for digital currencies as UPC’s use cases. It aims to become a bridge between independent CBDC networks and to connect regulated stablecoins with CBDCs.

“We envision that the development of this technology will significantly expand the utility of digital currencies as means of making digital payment across a network of businesses, consumers, and developers.”

Visa has also deployed its first sample smart contract on Ethereum’s Ropsten testnet. This payment channel accepts both Ether (ETH) and stablecoin USDC. Visa said,

“UPC’s specialized payment channels would be established off the blockchain and leverage smart contracts to communicate back with the various blockchain networks, delivering high transaction throughput securely and reliably and improving speeds overall.”

Visa sees privacy, concurrent transactions, UPC-as-a-Service, and liquidity management on layer 2 in the future of its Universal Payment Channels.

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Author: AnTy

1Inch Network Restricts Access to US Users, imToken Blocks Chinese Users from using its DEX and DApps

Decentralized platforms might not be as decentralized as they claim to be.

This can be seen with the decentralized exchange aggregator 1inch, which has started geofencing US IP addresses.

“It looks like you are trying to use the linch dApp from a restricted territory or are using a VPN that shows your location as a restricted territory,” reads the pop-notification on the platform when used by the people in the restricted regions.

“We respect your privacy, but, please, change your VPN settings to correspond with your real location.”

The Terms of Use of the platform also talk about the interface not being available to those residing in the United States of America.

This means America has been now added to the restricted territories, which include Belarus, Burundi, Crimea and Sevastopol, Cuba, Democratic Republic of Congo, Iran, Iraq, Libya, North Korea, Somalia, Sudan, Syria, Venezuela, Zimbabwe, or any other country to which the US, the UK or the European Union embargoes goods or imposes similar sanctions.

“Use of a virtual private network (e.g., a VPN) or other means by restricted persons to access or use the Interface is prohibited.”

Reportedly the terms were changed in April, but the notification was just recently added. The platform has been planning to launch a new product in the US to comply with the regulatory requirements.

1Inch Network is also in the process of collecting the Series B funding round that has grown to $175 million from the previously planned $70 million, Sergey Maslennikov, chief communications officer of the 1inch Network, told The Block.

Decentralized finance (DeFi), along with the broad crypto market, has been seeing increasing regulatory scrutiny in the US throughout this year. Popular DEX Uniswap also delisted several tokens earlier this summer as the SEC turned its attention to the sector.

Besides the US, as China strengthened its stance against crypto, imToken announced that it would restrict users in China from accessing and using its DEX, staking services including stake mining and liquidity mining, and DeFi applications such as lending and derivatives to match the regulatory policies.

As we reported, the heightened ban and the resultant shutdown of centralized crypto services in China have users turning to decentralized applications, but if they continue to ban users, they might be decentralized only in the name and claim.

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Author: AnTy

“Stablecoins Must Be 100% Backed By Cash” And “Only Be Issued By Depository Institutions”

“Stablecoins Must Be 100% Backed By Cash” And “Only Be Issued By Depository Institutions,” Says Sen. Cynthia Lummis

A crypto supporter, Wyoming Senator, has concerns about stablecoins not being fully backed “in a transparent manner.” Meanwhile, the Fed chair acknowledges they shouldn’t wait too long on CBDC as “there is a sense of urgency” in terms of digital currencies.

Philadelphia Federal Reserve Bank President Patrick Harker said on Wednesday that he supports the beginning of tapering of the central banks’ asset purchases before the year is over.

“I would be supportive of moving that as soon as November, that we would start that process, but that is up to the full committee,” Harker said at a virtual event, adding that he would like to finish the tapering by the middle of 2022 and then the potential rate increases would be subject to where the economy is.

During his speech, Harker also said that some stablecoins and central bank digital currencies (CBDC) could be used for payments in the future but added that cryptocurrencies are speculative investments.

On the topic of stablecoins, an ardent crypto supporter Senator Cynthia Lummis said they should be backed by cash and may need to be issued by banks. Her concern is that stablecoins might not be not fully backed “in a transparent manner.”

Lummis, in a speech Wednesday on the Senate floor, said,

“Stablecoins must be 100% backed by cash and cash equivalents, and this should be audited regularly.”

“It may be the case that stablecoins should only be issued by depository institutions or through money-market funds or similar vehicles.”

“There Is A Sense Of Urgency”

This week, US Fed Chair Jerome Powell, meanwhile, yet again talked about the digital dollar but didn’t say anything new.

Powell said the central bank is still evaluating whether it should issue its own CBDC and, if so, in what form. He reiterated that it is more important to make “well-informed” decisions than to be fast with a digital dollar. He did acknowledge that the Fed should not wait too long as “there is a sense of urgency” in terms of digital currencies.

Speaking virtually at the ECB Forum on Central Banking, Powell said it is important to determine that such an asset would “serve the public well.”

The Fed is currently working on a paper on which it seeks comments from elected representatives, Powell added.

A Boston Fed official also said on Wednesday that the first phase of a multi-year research project they have been doing with the MIT on the technology that could be used for a digital dollar is nearly done and could be released in the coming months.

This research, dubbed “Project Hamilton,” is separate from the paper Powell has been talking about though both will be released over the summer.

During a virtual panel focused on payments, Boston Fed senior vice president Jim Cunha said the initial findings from the research would include open-sourced code that could serve as a potential model for a digital dollar and will also focus on the system’s ability to handle a high volume of transactions.

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Author: AnTy

Permissioned Aave Arc Is “Simply A Gateway Into Permissionless DeFi,” Says Aave Founder

Permissioned Aave Arc Is “Simply A Gateway Into Permissionless DeFi,” Says Aave Founder On Adding Fireblocks As A Whitelister

While the Aave community is clear on onboarding institutions, with 89.67% votes in Fireblocks favor, others find it a “bad precedent.”

Aave’s institutional-focused product, the permissioned DeFi lending platform Aave Arc is inching closer to its release.

As a significant step towards this, a new proposal to “Add Fireblocks as a whitelister on Aave Arc” has been made to the Aave’s governance forum.

With more than 600 customers and over $1.25 trillion in digital assets, Fireblocks says it is on a mission to bring more institutional participants into DeFi. Fireblocks R&D, compliance, and legal teams have already developed a new whitelister framework for permissioned DeFi.

Fireblocks LLC is a registered “money services business” licensed to offer money transmission services in the United States.

According to the proposal, the institutional custody firm wanted to become a “whitelister” that would allow it to onboard institutions to the platform. The “permissioned” version of Aave protocol actually adds a smart contract layer to only allow “whitelisted” or “permissioned” users to engage with Aave Arc.

“Each Aave Arc deployment will launch with one or more whitelister,” says the proposal. As a whitelister, the regulated entity will conduct KYC/KYB checks in accordance with FATF guidelines on the user, onboard users with appropriate disclosures, terms, and conditions, and grant permissions to borrow, supply, and liquidity to the Ethereum wallet address(es) provided by the user.

Through this proposal, the Aave community is being asked to evaluate and vote on whether Fireblocks should be approved as a whitelister and begin the process of whitelisting users of an Aave Arc deployment.

While Aave believes Fireblocks “satisfies all the qualification requirements to be a whitelister,” not everyone in the crypto community is happy with this move, and Yearn Finance core developer Banteg is one of them.

As Jake Chervinsky, general counsel at Compound, believes, “this will just be a stepping stone for risk-averse institutions to ease their way into real DeFi,” Banteg also sees this to be the “optimal outcome” but said this would then be applied to other projects which will be asked to add KYC contracts as it has done by one DeFi protocol.

Chervinsky also agrees with this being a “bad precedent,” saying while there is institutional demand for these products, “I’d rather we work on convincing them to use DeFi.”

“Let someone else build walled gardens, or at least don’t call it “permissioned DeFi,” an oxymoron if I’ve ever heard one.”

According to Stani Kulechov, “It’s a private pool for institutions that are still practicing before aping into DeFi,” and on Wednesday this week, he tried to assuage some concerns.

“Aave Protocol is permissionless anyways, I don’t think there is a way to rely on permissioned DeFi long term – anything permissioned build on top is simply a gateway into permissionless DeFi sooner or later.”

Aave community, however, is leaning towards making Fireblocks a “whiteliser,” with 89.67% votes in its favor. The voting for the proposal ends on Oct. 2.

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Author: AnTy

Canada’s First Multi-Crypto ETF Allows Investors to Hold Both Bitcoin and Ether

Evolve Funds Group has launched Canada’s first multi-crypto exchange-traded fund (ETF), which allows investors to hold both Bitcoin and Ether. The ETF now trades on the Toronto Stock Exchange (TSX) under the ticker ETC.

The Evolve Cryptocurrencies ETF (ETC), a market-cap weighted crypto fund, currently has about 68% of its holdings in BTC and 32% in ETH.

Raj Lala, Evolve’s President, and CEO said in an interview,

“A lot of investors want to invest in cryptocurrencies. They’re not exactly sure which one to pick, or they may also want to get exposure to the cryptocurrencies that are growing.”

“They’re looking for more of a turnkey solution to participate in the cryptocurrency market.”

The ETF provides exposure to Bitcoin and Ether by holding its Evolve Bitcoin ETF (EBIT) and the Evolve Ether ETF (ETHR).

This new ETF will be rebalanced monthly but doesn’t use leverage and won’t pay distributions. While no management fee is imposed on the ETF, the underlying ETFs held in the fund charge a 0.75% management fee.

Being an ETF allows the product to be less costly, more transparent, and more tax-efficient than mutual funds.

On its first day of trades, the Evolve Cryptocurrencies ETF managed to amass only about $2.1 million in assets, according to the firm’s website. The other two crypto funds, Bitcoin and Ether ETFs, have about $181 million in combined assets under management.

In its most recent study that polled 208 advisors conducted from August 26 to September 10, Evolve found that 40% have invested in cryptocurrency ETFs, while 31% said client interest was their biggest driver. Of the 60% who weren’t investing in cryptocurrency ETFs, 40% cited the asset class as too volatile.

Interestingly, 80% of respondents believe Bitcoin will continue to be the largest cryptocurrency at the end of 2022, while 85% expect Ether to have the most market growth in the coming year.

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Author: AnTy

Bug in DeFi Protocol Compound Mistakenly Sends $82 Million In COMP Rewards to Users

Bug in DeFi Protocol Compound Mistakenly Sends $82 Million In COMP Rewards to Users

Robert Leshner, the founder of the DeFi project, which has the fifth-largest TVL at $9.63 billion, says the mistaken claims have been at worst 280k COMP tokens worth about $82 million.

Decentralized finance protocol (DeFi) Compound encountered a bug in its code that resulted in erroneously giving an unusual amount of COMP tokens worth millions of dollars in liquidity mining rewards.

“Unusual activity has been reported regarding the distribution of COMP following the execution of Proposal 062,” tweeted the team late on Wednesday.

But the team assured that no supplied or borrowed funds are at risk, and the team is investigating discrepancies in the COMP distribution.

Proposal 62, which went into effect on Wednesday, intended to have two different COMP distribution rates for each market, borrow-side and supply-side rates, instead of the previous 50/50 share model.

But the updated Comptroller Contract contained a new bug that allowed some users to claim thousands of COMP tokens. According to Robert Leshner, founder of Compound Labs, the mistaken claims have been at worst 280k COMP tokens worth about $82 million.

“Exploiters were people that had borrowed some time ago, borrowing now and trying to exploit doesn’t work,” said 0xngmi of DeFiLlama.

In a series of tweets, Leshner shared that the new Comptroller contract ended up distributing far too many COMP tokens to users of the protocol. The proposal and the contract, he further shared, were written by a community member.

“All supplied assets, borrowed assets, and positions are completely unaffected. Users don’t have to worry about their funds; the only risk is that you (or another user) receives an unfairly large quantity of COMP.”

Leshner went on to explain that there are no tools or admin controls to disable this COMP distribution. Moreover, any changes to the protocol require a 7-day governance process to make their way into production.

Compound Labs and community members are now “evaluating potential steps to patch the COMP distribution.”

Compound Finance is the fifth largest DeFi project with $9.63 billion in total value locked (TVL), down from almost $13 billion ATH earlier this month.

The project token has a market cap of $1.73 billion and is down 12% in the past 24 hours to trade at $293.69, down 68% from the mid-May peak of $910.5.

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Author: AnTy

Swiss-based SEBA Bank Becomes The First Firm To Receive A Digital Asset Custodian License From Regulators

Swiss-based SEBA Bank Becomes The First Firm To Receive A Digital Asset Custodian License From Regulators

Switzerland-based SEBA Bank became the first Swiss-licensed financial institution to receive a license from regulators to offer digital assets to mutual funds in the country. The cryptocurrency-focused bank will act as a custodian to the firm enabling mutual funds to get exposure to cryptocurrencies.

In an announcement on Wednesday, the Swiss Financial Market Supervisory Authority, or FINMA, announced they have granted a license, a first of its kind, to SEBA Bank, one of the leading banks dealing with digital assets in Switzerland, to offer mutual funds investments in digital currencies such as Bitcoin and Ethereum. The bank will act as the custodian of the funds from institutional clients enabling them to add to their alternative investments basket.

In a phone interview, SEBA Bank CEO Guido Buehler confirmed the product would first be launched to institutional clients with retail clients in plans.

“This collective investment scheme license allows institutional clients, and then later retail clients, to invest into crypto assets on a liquid basis through fund structures.”

”It means there is now the opportunity for institutions to establish their fund structures for crypto as a liquid asset, so people can subscribe today and can sell tomorrow.”

The fintech firm launched in mid-2018 promising to offer clients the “best services in digital banking” and has since introduced digital assets and cryptocurrencies in line with the company’s vision. Having received its digital asset banking license in late 2019, the bank raised $95 million (100 million CHF) in mid-2020 in a bid to enhance its services in preparation for institutional investors.

Unlike the US and China, which are setting up strict regulations on cryptocurrency, Switzerland is leading the way in offering digital asset licenses to Swiss companies. Such ease in regulations is seeing growing interest in traditional firms hoping on to the crypto train. Recently, Swiss-bank UBS was reported exploring various alternatives to offer its wealthy clients exposure to cryptocurrencies such as Bitcoin.

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Author: Lujan Odera