Terra Founder Sues SEC, Stablecoin Platform Is Burning $4B Worth of LUNA Tokens

The algorithmically-governed stablecoin platform Terra is proposing to burn 90 million LUNA, worth $4 billion at current prices and about 10% of the total supply, in the community pool to mint UST stablecoin for the network’s insurance protocol Ozone.

When the native stabilizing crypto asset of the network, LUNA, is burned to mint new Terra (UST) stablecoins, the amount of Luna burned is “seigniorage.”

Roughly every week, a portion of this seigniorage goes to fund the community pool controlled by Luna governance and reward Luna stakers.

According to the proposal called “Burn the community pool,” this proposal will burn all remaining funds in the community pool, route all future seigniorage to be burned instead of being routed to community/staking reward pools, and amortize the distribution of the existing reward pool to three years instead of the current one year.

“Next week, we will uphold Terra signal prop 44 and initiate a proposal to burn 90M Luna in the community pool to mint UST for Ozone. This will reduce Luna’s total supply by 90M and increase UST supply by roughly 3-4 billion,” said Do Kwon, founder of the project.

As of writing, TerraUSDT (UST) has a market cap of $2.75 billion. As we reported, Kwon has predicted UST’s market cap to exceed $10 billion by the end of this year.

Kwon further shared that a byproduct of this operation is that a lot of swap fees will accrue, which is expected to result in LUNA staking returns to 5x to about 15%.

“Pretty sure this is the largest burn ever,” commented Ryan Watkins of Messari, expecting this burn to increase UST’s supply to $6.7 billion overnight and put it within striking distance of DAI, which is $7.4 billion.

“This would also be the first DeFi blue chip to be flipped by a multichain competitor on its number 1 KPI. That said think there’s a place for both, and DAI continues to grow at an impressive pace, even before it’s tokeneconomic revamp.”

As a result of the news of this burn, LUNA rallied 30% to hit $45.25 on Friday. Currently trading at $42.46, LUNA is up 6,450% YTD but still down 14% all-time high of $50 earlier this month.

In other news, Terraform Labs and CEO Kwon are suing the US Securities and Exchange Commission (SEC).

Kwon confirmed this week that he was served a subpoena by the SEC at Messari’s Mainnet conference last month. According to the filing, the matter dates back a few months; it started in May when the SEC’s Enforcement Division emailed Kwon.

Terra’s decentralized finance (DeFi) platform Mirror Protocol is at the center of the lawsuit, on which synthetic stocks of major US firms are minted and traded.

The subpoena wants Kwon to provide testimony to US regulators, but as a South Korean resident, Kwon is contesting that.

“Rare case of a preemptive lawsuit against a regulator making sense,” commented Anderson Kill lawyer Stephen Palley.

The agency also told Terraform’s lawyers that they might sue the company with the suit saying,

“the SEC attorneys advised that they believe that some sort of enforcement action was warranted against TFL [Terraform Labs] and any cooperation, and implementation of remedial actions as to the Mirror Protocol, would result in a reduced financial sanction as part of any consent agreement.”

Kwon was served just five days later at the conference as he was exiting an escalator on his way to make a scheduled presentation that was not about the Mirror Protocol. At the time, Kwon had denied being served that day.

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Author: AnTy

Tether (USDT) Market Cap Surpasses $70 Billion, Majority Issued on Tron Blockchain

As the price of Bitcoin hits a new all-time high of $67,000, the market cap of the largest stablecoin, Tether (USDT), has gone to surpass $70 billion in market cap.

The majority of Tether’s 70 billion supply, 51.42%, is issued on Tron (TRX) blockchain at almost 36 billion, followed by Ether which has 33.85 billion USDT supply circulating on its blockchain.

The rest of the USDT supply is scattered on other blockchains, including Omni, Solana, Algorand, EOS, Liquid, and SLP.

After growing 41.7 billion in the first half of this year to nearly 63 billion, Tether supply had a pause until early August. After adding 8 billion in the next month, Tether supply growth has been resting yet again since early last month, only to come back into action in October as traders and investors try to chase the bulls.

USDT’s dominance, however, has been on a decline ever since June last year when it was just above 86%. In the last 17 months, Tether’s stablecoin dominance has lost 30% of its share to now sit at 56.8%. Much of this has been lost to Circle’s USDC, whose market share went from 8% to 25.7%.

Amidst this growth, short-seller Hindenburg Research has launched a $1 million “bounty” program for information on the stablecoin company.

“We feel strongly that Tether should fully and thoroughly disclose its holdings to the public.”

“In the absence of that disclosure, we are offering a $1m bounty to anyone who can provide us exclusive detail on Tether’s supposed reserves.”

Nathan Anderson Hindenburg Founder

Hindenburg also said that it did not hold any long or short positions on Tether, Bitcoin, or any other cryptocurrency.

“This stunt from Hindenburg Research is a pathetic bid for attention,” Tether responded in a statement.

“Tether abhors and denounces their actions and transparent motives.”

Days before Hindenburg’s announcement, the US commodities regulator charged Tether with a fine of $41 million over falsely representing that USDT was fully backed by fiat currency. Tether did not admit or deny the wrongdoing.

Recently, crypto lender Celsius Network also said that Tether issues new stablecoins in exchange for collateral in the form of crypto, such as bitcoin, as part of its lending program.

“If you give them enough collateral, liquid collateral, Bitcoin, Ethereum and so on . . . they will mint tether against it,” said CEO Alex Mashinsky. “New USDT is issued for such loans,” and later destroyed when the loan is paid “so it does not permanently increase USDT in circulation.”

Earlier this month, Bloomberg reported that Celsius had borrowed $1 billion worth of USDT from Tether.

Mashinsky, meanwhile, further clarified that the loans of USDT are typically at least 30% overcollateralized.

“We have a select, small group of customers that borrow USDTs in exchange for posting security. These loans are secured by collateral in Tether’s possession of well in excess of 100% of the loan proceeds and earn monthly interest,” Tether told FT, adding:

“This practice is common to other stablecoin issuers. This lending is undertaken narrowly, efficiently, securely, and profitably.”

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Author: AnTy

IMF Warns of DeFi & Stablecoin Risks, Biden Administration Taking ‘Aggressive’ Approach to Crypto

IMF Warns of DeFi and Stablecoin Risks, Biden Administration Taking ‘Aggressive’ Approach to Crypto

A senior White House official says the administration ensures a “smart and effective regulatory system” for crypto. Meanwhile, for the IMF, because DeFi is one of the main drivers of the rapid growth of stablecoins, it “warrants close attention.”

The Biden administration is ramping its regulatory scrutiny of cryptocurrency and will make a move to address a range of risks, reported the Wall Street Journal, citing a senior White House official.

Peter Harrell, senior director for international economics and competitiveness with the National Security Council at the WSJ Risk & Compliance Forum on Tuesday, said,

“You’re really seeing the administration at the beginning of what we expect will be an ongoing, quite aggressive effort to make sure we understand and address the whole range of risks that we see in the cryptocurrency space.”

At the same time, the administration seeks to position the U.S. as a leader in digital asset innovation.

According to Harrel, the agencies do think the cryptocurrency industry has “some potential benefits,” such as financial inclusion, but added, “there are clearly a whole range of risks.”

“I think you’re really seeing the administration kind of moving out on a number of different lines of work to make sure that we have a smart and effective regulatory system in place for cryptocurrency.”

A Sound Regulatory Framework

Elsewhere, the International Monetary Fund warned that the rapid growth of cryptocurrencies poses several risks to both investors and policymakers.

While the “crypto ecosystem offers an exciting new world of opportunities,” it also has its challenges in the form of risks to consumers from lack of operational or cyber resilience and anonymity and limited global standards creating data gaps for regulators, which in turn pose a threat to financial integrity, it said.

Moreover, “the advent of crypto assets and stablecoins in emerging markets and developing economies may accelerate dollarization risks,” said the IMF adding these markets can face “destabilizing capital flows” because cryptos are used to circumvent capital controls.

The report also mentions investor protection risks for DeFi, which it says is “gaining momentum by offering new services to users,” and inadequate reserves and limited disclosure for some stablecoins.

Decentralized finance (DeFi), according to the IMF, is actually one of the main drivers of the rapid growth of stablecoins as such “warrants close attention.”

“A sound regulatory framework for crypto assets, and decentralized finance markets more generally, must be a priority on the global policy agenda.”

When it comes to stablecoins, the IMF says regulations should correspond to the risks they pose and the economic functions they perform.

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Author: AnTy

Biden Administration Seeking to Impose Banking Regulations on Stablecoin Issuers

Biden Administration Seeking to Impose Banking Regulations on Stablecoin Issuers

Meanwhile, the top US national security advisers will gather officials from 30 countries with plans to combat cyber crime and improve law enforcement collaboration on “the illicit use of cryptocurrency.”

The Biden administration is prepared to issue a report on stablecoins by the end of the month and is looking to regulate stablecoin issuers as banks.

The President’s Working Group on Financial Markets is expected to recommend that Congress establish a special-purpose charter allowing new crypto banks to manage stablecoins as deposits, reported the Wall Street Journal, citing a senior official involved with the report.

A group led by the Treasury Department further plans to recommend to the Financial Stability Oversight Council whether stablecoin activities should be designated as systemically important, the report added.

Examining whether stablecoins pose a systemic threat would be another approach to impose bank-like rules on stablecoins.

“Circle has already been working toward becoming a full-reserve national commercial bank,” said Dante Disparte, chief strategy officer and head of global policy for Circle, the issuer of the stablecoin USDC. The CSO sees the Treasury’s intent as “encouraging” and said they intend to work with regulators on appropriate crypto policies.

A few cryptocurrency firms, including Anchorage and Protego Trust Bank, have already won conditional bank charters from the Office of the Comptroller of the Currency (OCC).

However, under the former Acting Comptroller Brian Brooks, OCC made strides regarding crypto by giving national banks permission to offer crypto custody services, work with crypto custodians, and conduct payment using stablecoins.

Recently, Acting Comptroller Michael Hsu warned that crypto could threaten the financial system.

White House Calls A Meeting On Crypto’s Illicit Use

This week, the White House also said that top US national security advisers would be meeting with officials from 30 countries this month to work on plans to combat the growing threat of ransomware and other cyber crime.

An online session will also be hosted by the White House National Security Council aimed at “improving law enforcement collaboration” on issues like “the illicit use of cryptocurrency,” says the statement by President Joe Biden.

One White House official told the media that they are particularly eager to address “the misuse of virtual currency to launder ransom payments” and intend to “investigate and prosecute ransomware criminals,” many of whom are anonymous and attack institutions in other countries.

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Author: AnTy

Significant Stablecoin Adoption Could Result in “Excessive Market Power,” says BIS Report on CBDC

Significant Stablecoin Adoption Could Result in “Excessive Market Power,” says BIS Report on CBDC

Central bank money ensures public trust in money and supports public welfare, said the global body policymaker in its latest report on central bank digital currencies (CBDCs).

With new forms of digital money issued by the private sector, such as stablecoins emerging, which has accelerated since the Covid-19 pandemic began, central banks are also ensuring they are able to respond to a digital future system, it said.

But still, private digital assets can coexist with central bank digital currencies, the Bank for International Settlements said in the report, noting CBDcs would rely on banks and other financial institutions to act as intermediaries.

However, significant stablecoin adoption could lead to fragmentation in the payments ecosystem and “excessive market power,” found the report. It further added that private initiatives would have “lower public benefits” because they won’t be interchangeable with other forms of money. According to the BIS, private currencies also lack the protections that come with national currencies.

“Central banks have a responsibility to ensure that citizens have access to the safest form of money — central bank money — in the digital age,” said ECB president Christine Lagarde, who is the chair of this group of central bank governors.

While acknowledging that there were also risks associated with CBDCs, as money and payments develop rapidly, central banks’ plans for CBDC will also evolve, it said.

Currently, seven central banks, the Federal Reserve, Bank of England, European Central Bank, the Bank of Canada, Bank of Japan, Sveriges Riksbank, and Swiss National Bank, are working together with the BIS on retail CBDCs.

These central banks “have already identified that a CBDC could be an important instrument for ensuring that they can continue delivering their public policy objectives even as the financial system evolves,” the study said.

Facilitating international payments with CBDCs would require interoperability or cooperation, where BIS says the IMF would have an important role to play.

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Author: AnTy

Cross-chain Poly Network Gets Hacked for Over $600M, Networks Act to Save the Lost Funds

Cross-chain Poly Network Gets Hacked for Over $600M, Exchanges & Stablecoin Issuers Act to Save the Lost Funds

In what appears to be the largest DeFi attack to date, cross-chain protocol Poly Network has been hacked for more than half a billion dollars.

“We are sorry to announce that PolyNetwork was attacked on BinanceChain, Ethereum and Polygon,” tweeted the team on Tuesday while sharing the hacker’s address where the assets have been transferred.

“We will take legal actions, and we urge the hackers to return the assets,” it added.

Crypto assets involved in the hack include USDC, WBTC, WETH, RenBTC, BUSD, ETHB, BNB, BTCB, DAI, UNI, SHIB, and FEI, as shared by the team.

The team further said that they are calling on the miners of affected blockchain and also cryptocurrency exchanges, including Binance, Coinbase, OKEx, and Huobi, along with stablecoin issuers Tether and Circle, to blacklist tokens coming from the addresses tied to the hacker.

Already many are responding with Paolo Ardoino, CTO at Tether, saying that they have frozen $33 million USDT as part of the Poly hack.

“Address got blacklisted right as attacker tried to deposit into Curve where it would unreachable. Just 9 blocks difference between transactions. $30 million saved,” commented Banteg, a core developer at DeFi projet Yearn Finance as he commended Ardoino for his fast reaction.

OKEx and Binance have also responded with affirmation that they are onto this, with Binance CEO Changpeng Zhao saying,

“While no one controls BSC (or ETH), we are coordinating with all our security partners to proactively help. There are no guarantees. We will do as much as we can. Stay SAFU.”

Poly Network is a protocol for swapping tokens across multiple blockchains as it aims to build “the next generation internet.”

Formed by an alliance between multiple platforms; Ontology, Switcheo, and Neo, currently, it offers interoperability between Bitcoin, Ethereum, BSC, Ontology, Neo, Elrond, Zilliqa, Switcheo, and Huobi ECO Chain.

As a result of the hack, trading pool O3, which makes use of Poly Network to trade tokens, was also affected and has suspended its cross-chain functionality while “the non-cross-chain function is available and can be used normally.”

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Author: AnTy

Treasury Secretary Urges Regulators to ‘Act Quickly’ in Drafting Stablecoin Rules

Treasury Secretary Urges Regulators to ‘Act Quickly’ in Drafting Stablecoin Rules

Jeremy Allaire, co-founder & CEO of Circle, the issuer of USDC stablecoin, called this meeting an “extraordinary and positive” movement as “It’s a sign of how far we’ve come and how fast this is all happening.”

Treasury Secretary Janet Yellen met with the top US financial regulators and urged them to accelerate their consideration of new rules to regulate stablecoins.

“The secretary underscored the need to act quickly to ensure there is an appropriate U.S. regulatory framework in place,” the Treasury Department said in a statement following Yellen’s meeting with the President’s Working Group on Financial Markets on Monday.

The group discussed the rapid growth of stablecoins, whose total market cap has surpassed $110 billion, with Tether (USDT) dominating with 57.13% market share followed by USDC at 23.57%, and BUSD at 10.22%.

“The demand for stablecoins comes from the ability to use dollars in new ways,” Robert Leshner, CEO of DeFi lending protocol, Compound Finance, tweeted to the Treasury Secretary.

“Stablecoins are unlocking a wave of innovation with the potential to change every facet of finance; to make markets cheaper, faster, fairer, and more transparent.”

US regulators also discussed their potential uses as well as risks to the financial system.

The group “expects to issue recommendations in the coming months,” according to the statement.

Jeremy Allaire, co-founder & CEO of Circle, called this meeting an “extraordinary and positive” movement as “It’s a sign of how far we’ve come and how fast this is all happening.”

“Crypto, public chains, DeFi, stablecoins and other digital currency models pose many complex questions, and requires significant engagement with policy makers if we hope to achieve global mainstream scale and adoption.”

According to him, stablecoins should achieve mainstream scale far ahead of any CBDC project. And it’s critical that national governments take a view on this, but they shouldn’t “try and fit a square peg in a round hole.”

He said this engagement offers an enormous opportunity for the US government and the global digital currency industry.

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Author: AnTy

BoE Seeks Same Regulatory Oversight For Stablecoin As Fiat In Latest Discussion Paper

BoE Seeks Same Regulatory Oversight For Stablecoin As Fiat In Latest Discussion Paper

Discourse surrounding crypto assets and digital currencies are heating up, and the latest to air its view is the UK’s Bank of England.

Digital Money Fostering ‘Pertinent Questions’

In a discussion paper published on June 7, the Bank of England (BoE) gave its two cents about what it termed new forms of digital money, covering both private and public versions.

Making a case for these digital versions of payment settlements, the BoE noted in the document posted on its website, that these new forms of money could enable a faster, cheaper, and more efficient payments system. They could also help to foster better financial inclusion for the vast majority of the unbanked.

But despite the potential benefits they bring, they carry risks with their use.

Following the prospects of these digital forms of money coming with risks, the BoE governor Andrew Bailey has called for regulation for private forms of digital money. According to a report by Reuters, Bailey said private digital currencies like stablecoins would have to undergo the same regulatory oversight payments by banks are handled if there is any prospect of them enjoying widespread use.

Casting more doubt on the Brexit nation’s plans for a state-backed digital pound, Bailey said that the bank has not yet decided if it will proceed with a central bank digital currency design.

Adding further, “it is essential that we ask the difficult and pertinent questions when it comes to the future of these new forms of digital money.”

The difficult and pertinent questions have seen the BoE paper consider stablecoins – digital assets meant to track real-life currency movement in real-time – and its implication on the economy. According to the BoE paper, it is not easy to gauge the potential impact of these private digital currencies, given that they are not widely used as their fiat counterpart.

However, it pointed out that several reasons could see stablecoins preferred to bank payments given their relative ease. Following this analysis, the BoE pointed out that stablecoin issuers would be subjected to capital requirements, liquidity requirements, and a backstop to compensate depositors in the event of failure to fulfill their payment obligations.

CBDCs As Store Of Value

The BoE paper argues that a potential digital pound must ensure the broadest range of financial inclusion for users while protecting their privacy.

It is also looking into aspects like CBDCs becoming a store of value and, in that event, considering whether digital pounds should yield interests for its users. To further its goal of a CBDC adoption, the BoE said zero or negative interest rate could help incentivize the use of CBDCs for payments as it seeks wide adoption.

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Author: Jimmy Aki

Facebook-Led Stablecoin Project, Diem, Planning A ‘Small-Scale Pilot’ in 2021

Facebook-Led Stablecoin Project, Diem, Planning A ‘Small-Scale Pilot’ in 2021

The pilot will be available to individual customers and merchants. Formerly known as Libra, the project has faced constant regulatory pressure in the past.

Facebook-led digital currency project, Diem is set to launch a small-scale pilot project of its first stablecoin later this year, a source familiar with the matter told CNBC. According to the report, Diem Association, a Switzerland-based firm building the project, plans to launch a dollar-backed stablecoin largely focused on payments between individual clients.

The pilot stablecoin will also be used across merchant shops allowing users to buy goods and services, too, the anonymous source further stated.

Diem is currently in talks with the Swiss regulators to obtain a payment license, CNBC’s report further reads. This follows a difficult period dealing with regulators in the U.S. and constant backlash from global financial authorities who have stated the dangers of the stablecoin on the global monetary system and money laundering.

Launched as Libra in 2019 and rebranded to Diem last December, the project has backtracked its steps in creating a Libra stablecoin backed by several fiat currencies such as the dollar and euro multiple “stablecoins” backed by a range of assets. Speaking to CNBC, Ran Goldi, CEO of First Digital Assets Group, stated the vision and goals of Diem have “changed dramatically over the past year and a half from a naive blockchain to a very sophisticated blockchain” to be in line with financial regulators across the globe.

Ironically, the launch of the Facebook-led project was the match that set a fire to central banks looking into CBDCs in a push to challenge Diem.

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Author: Lujan Odera

Largest Stablecoin, Tether (USDT), is Now Live on Ethereum Scalability Solution, Hermez Network

Largest Stablecoin, Tether (USDT), is Now Live on Ethereum Scalability Solution, Hermez Network

  • The solution will lower the rising gas and transaction fees on Ethereum.
  • Competition for Tether is on the rise.

Tether’s stablecoin, USDT, is now live on Hermez, a scaling solution on Ethereum based on the ZK-rollup solution. Announced on Monday, the move to Ethereum Layer 2 is set to reduce the hiking gas fees, which have been rising as the DeFi and NFT space grew on the blockchain.

Hermez zk-rollup solution launched earlier this year to ease the load on Ethereum. Rollups provide a solution by batching up many transactions into one transaction, reducing the blockchain fees and data storage costs. The key to rollups is the concept of having a small fraction of data on the L2 chain (Hermez) represent all important data on Ethereum.

In this case, every Tether transaction completed, balance, and user accounts on the Hermez rollup will be available on the Ethereum network despite only a fraction of the information being broadcasted on the second-largest blockchain. Hermez leverages the zk-SNARK rollup solution that allows bundling transactions into one single transaction.

Speaking on the move to a nascent layer 2 solution, Paolo Ardoino, Tether’s CTO, said the solution would “solve the issues of scalability and high transactions on the Ethereum network.” Tether became the first stablecoin to launch on Hermez. He added,

“Tether takes its pivotal role in the digital token ecosystem seriously. We’re committed to overcoming technical hurdles while doing our utmost to make manifest the many great projects that developers are working on in our space.”

Tether’s move to Hermez will help free up storage on the blockchain, effectively reducing ETH fees. Data from Ycharts shows that the average fee for a single transaction on ETH is $22, as of writing, locking out users with small amounts of funds from using the platform. Hermez promises over 90% reduction of the average tx fee, which would lower the transaction fee to less than $2.

Tether’s move to Hermez follows the integration of Tether on Polkadot blockchain and Kusama networks earlier this month.

Competition for Tether

The rising gas fees on Ethereum are causing many exchanges and users to move to better solutions and cheaper blockchains. Tron, the 18th largest blockchain, has grown to become the leading competitor to Ethereum on the value of USDT transferred across networks.

Data from Coinmetrics confirms USDT transferred on Tron has reached parity with Ethereum raising concerns for the largest smart contract network.

Tether, which represents about 70% of the total stablecoin market, has significantly grown to a $48 billion market cap placing itself sixth on Coingecko rankings.

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Author: Lujan Odera