The Li Finance swap aggregator has experienced a smart contract exploit leading to the loss of around $600,000 from 29 users’ wallets.
The exploit took place at 2:51 am UTC on March 20. The attacker was able to extract varying amounts of 10 different tokens from wallets that had given “infinite approval” to the Li Finance protocol. Among the stolen tokens were USD Coin (USDC), Polygon (MATIC), Rocket Pool (RPL), Gnosis (GNO), Tether (USDT), Metaverse Index (MVI), Audius (AUDIO), AAVE (AAVE), Jarvis Reward Token (JRT), and DAI (DAI).
TLDR:
• ~$600K have been stolen from 29 wallets • User don’t have to do anything • Bug has been fixed and is already deployedhttps://t.co/fqOxJxDrZs
— LI.FI – Any-2-Any Swaps (,) (@lifiprotocol) March 21, 2022
When the team learned about the exploit 12 hours later at 2:15 pm UTC, it shut down all swapping functions on the platform in order to prevent any further losses.
By 2:50 am UTC on March 21, the team had issued a post mortem detailing the events of the exploit. The team said that the attacker swapped the stolen tokens for a total of about 205 Ether (ETH) valued at roughly $600,000. At the time of writing, the stolen ETH had yet to be moved from the attacker’s wallet. LiFi also assured users that the bug has been identified and patched.
Today’s LiFi hack happed because its internal swap() function would call out to any address using whatever message the attacker passed in. This allowed the attacker to have the contract transferFrom() out the funds from anyone who had approved the contract. pic.twitter.com/NA3xW7ReUd
Of the 29 wallets that were hit in this attack, 25 have been reimbursed from treasury funds for their losses. Those 25 wallets only accounted for $80,000, or 13% of the total value lost. The owners of the remaining four wallets that lost a combined $517,000 have been contacted and offered a deal to compensate them by honoring their losses as angel investors in the protocol.
They would receive LiFi tokens under the same terms as other angel investors in an amount equal to their losses from each wallet. This would also help to mitigate the damage to the platform’s treasury.
The hacker was also contacted and offered a bug bounty to return the funds.
The Li Finance team reached out to offer a bug bounty to a hacker.
The attack appears to have come at an unfortunate time. Li Finance CEO Philipp Zentner told Cointelegraph on March 21 that “We’re literally a week away from our audit,” adding that “we have multiple companies auditing us.”
However, even a thorough audit of the code may not have picked up this particular bug, according to a researcher “Transmissions11” at crypto investment firm Paradigm. He explained in a March 21 tweet that the error in Li Finance’s code is easy to miss and “subtle if you’re not in the right mindset.”
This latest hack in the decentralized finance (DeFi) sector demonstrates how giving infinite approvals to smart contracts opens a user’s funds to a greater amount of risk. Infinite approvals allow users to swap coins at a decentralized exchange (DEX) an unlimited amount of times without needing to approve any more transactions.
Cointelegraph is following the development of an entirely new blockchain from inception to mainnet and beyond through its series, Inside the Blockchain Developer’s Mind, written by Andrew Levine of Koinos Group.
We recently released the third and final version of the Koinos testnet, which is why I want to talk about something few projects like to talk about: Building blockchains is development hell. In this article, I’ll explain why and how other developers can avoid getting stuck in it.
At first blush, building a blockchain doesn’t sound so hard. A blockchain is just a combination of well-established cryptographic primitives, which, when properly implemented, allow for the construction of a ledger containing a verifiable history of transactions by a network. The more decentralized the network, the more trustworthy the history.
Blockchain “frameworks”
In an effort to make building new blockchains easier, other teams have released blockchain “frameworks” that, in theory, should eliminate the need for developers to worry about building the blockchain itself so that they can focus on whatever unique features they want to build into the blockchain. Cosmos, EOSIO and Polkadot’s Substrate are examples of such blockchain frameworks.
When our team stopped working on Steem (the world’s first fee-less blockchain), our original intention was to leverage an existing blockchain framework to build a blockchain designed to be as accessible as possible. We had spent four years refining Steem’s fee-less design and figured that, by porting that solution into an existing blockchain framework, we could deliver a blockchain that was far more accessible than any other blockchain in relatively little time.
But we were surprised to find that none of the existing frameworks allowed us to create the kind of truly feeless user experience we were looking to bring to the market. We didn’t just want to remove fees on a technical level, we wanted to empower developers to build applications that were free to use. They also lacked a number of other features we believed were required to deliver an acceptable developer experience.
The power of a general-purpose blockchain stems not from the features the blockchain engineers build into the blockchain but from the features that developers add to that blockchain as smart contracts. This is doubly true for a blockchain framework that should really be the mostgeneral-purpose blockchain imaginable since the whole idea is to allow people to build any kind of blockchain they can imagine. And yet, the existing frameworks failed to empower us, one of the most experienced blockchain development teams, in our attempts to build the blockchain we wanted to build in multiple ways.
The existing frameworks not only made it impossible for developers to create free-to-use applications, but they also forced developers to learn new and often difficult programming languages and dramatically restricted the rate at which both applications and the blockchain itself could improve.
We wanted to build a blockchain that would free developers to build insanely great applications that ordinary people would love to use. That allowed the developers to work in the programming languages they already knew and loved (what we call “universal language support”); that allowed their applications (and the blockchain itself) to rapidly evolve; and, most importantly, it allowed them to build applications that were free to use.
But in order to build thatblockchain we first needed a truly general-purpose blockchain frameworkthat would not only allow us to build the blockchain of our dreams but as a natural consequence of being the most general-purpose framework imaginable, should allow anyone to build the blockchain of theirdreams.
Koinos is that ultimate general-purpose blockchain framework that will serve as the foundation for the ultimate feeless layer 1: Koinos mainnet. The Koinos Blockchain Framework (KBF) is designed to be the simplestblockchain imaginable, containing only those cryptographic primitives necessary to construct a blockchain and the right “system calls” to allow for the widest range of behaviors to be added in-band (without a hard fork) through the uploading of a smart contract.
Infinite upgradeability
The benefit of this design is infinite upgradeability, but the cost is that it makes getting the system calls right all the more important. Missing a system call or designing it incorrectly would mean having to deal with an otherwise avoidable hard fork. Because hard forks are so time-consuming, political and disruptive, they are the single biggest factor limiting a blockchain’s ability to improve itself, which is ultimately felt by every single developer whose application is built on such a platform.
Now we can see how both application and blockchain developers can get trapped in development hell: working in programming languages they aren’t comfortable with, on platforms that force them to incorporate fees and that improve at a snail’s pace. Under these conditions, even minor changes have incredibly high stakes, and we haven’t even factored in those scenarios where there are millions, sometimes billions, of dollars at risk.
That is development hell. As the core development team behind the Steem blockchain that had to oversee 23 hard forks, we know this terrain better than almost anyone else, which is why we were so committed to banishing it, well … to hell.
Building the Koinos Blockchain Framework from scratch with an entirely novel microservice architecture and getting it to the point where we could launch versions 1 and 2 of the testnet were incredibly challenging. But integrating the feedback we got from those testnets, fixing the bugs they exposed, and finalizing the all-important system calls were a whole other level. But we went through that development hell with the hopes of making it so that others won’t ever have to.
Harbinger
Testnet v3 is, therefore, more than “just another” version of the testnet. It is the final version of the Koinos Blockchain Framework, which is why we will now refer to the testnet, not by a version number, but by the name: Harbinger. It is the culmination of nearly two years of working, identifying and implementing all the necessary system calls needed to give blockchain developers the ultimate level of freedom and allow their application developers to benefit from a platform that is improving at a more rapid rate than any other blockchain out there.
Of course, whenever you’re trying to solve a really important problem, some level of development hell is inevitable. You just want to make sure that you don’t adopt technologies that raise the stakes unnecessarily and that the goal you’re striving for is worth the cost.
For us, that goal is not only sparing blockchain developers (including ourselves) from countless hours spent in developer hell but also leveraging this new technology to build Koinos mainnet: the ultimate feeless layer 1 for empowering developers to build insanely great blockchain-based applications.
No more development hell
The KBF aims to eliminate development hell by allowing developers to build any blockchain they can imagine simply by writing smart contracts, which is infinitely easier than working in the blockchain code itself. And that’s exactly the position we find ourselves in now. While developing the blockchain framework was incredibly challenging, now that it’s over, all that is needed to complete Koinos mainnet is just twosmart contracts: one for our proof-of-burn consensus algorithm and the other for governance.
Not only is writing smart contracts far simpler than blockchain development, but this also means that blockchain developers now get to take advantage of the ever-expanding tools that are available to smart contract developers like the AssemblyScript SDK one of our community members built. AssemblyScript doesn’t just produce far more efficient smart contracts than those written in C++ (that was a surprise), it makes smart contract development accessible to JavaScript developers.
Since the KBF turns any smart contract developer into a potential blockchain developer, this means that developing custom blockchains will now be accessible to JavaScript developers with even more languages to come, such as Rust.
If you’re interested in running Harbinger, we’ve made it insanely easy to run a node so you can be up and running in under five minutes.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Andrew Levine is the CEO of Koinos Group, a team of industry veterans accelerating decentralization through accessible blockchain technology. Their foundational product is Koinos, a feeless and infinitely upgradeable blockchain with universal language support.
Content constitutes the essence of the internet and comes in many different forms that the current Web2 internet iteration supports — text, audio, video or a mix of all three. However, content is scarcely a free resource. It is content creators who are now becoming opinion leaders, influencers and the cornerstones of so many of the critical services businesses rely on, such as advertising, marketing and public relations management.
The need for content and its strive for independence — embodied by thousands of bloggers and indie performers — has spawned an immense online economy that trades talent and often rakes in sales volumes many a top-level artist would salivate to earn. This economy has been dubbed the creator economy: a financial framework that allows independent individuals to earn on their self-expression by feeding audiences the type of content they are willing to pay to consume.
A rising force
The creator economy is a tremendous force: a unique, online phenomenon that overstepped the $104-billion market size threshold at the end of 2021. Given the snowballing demand for new content on popular platforms, such as TikTok, that empower independent artists and performers, experts are hesitant to make forecasts about the potential market size of the creator economy in the near future.
The reason for the lack of tangible predictions is that the creator economy is an extremely young phenomenon that started with the COVID-19 pandemic. The lockdowns evoked a wave of talent among people confined indoors, resulting in a release of creativity that others sharing confinement were eager to consume as much-needed entertainment.
Considering that micro-entrepreneur creators are closely related to influencer marketing, which spots around $13.8 billion in market size, it is possible to understand the prospects that further expansion of the phenomenon can yield. More importantly, experts believe the transition to a new technological medium will allow content creators to overwhelm markets and industries with new opportunities for product and service promotion.
Decentralizing talent
More than 50 million creators are driving their own economy of talent, attracting in excess of $800 million in venture capital. Such figures are but a shadow of what they can become later, as new venues are rapidly becoming available.
The development of blockchain technologies has resulted in a sweeping revolution across financial markets, empowering individuals instead of institutions and channeling ownership of data and funds to their holders. The qualities of the blockchain — immutability, full transparency and the trustless nature of operations — have permeated many industries, swooning the balance of business orientation from centralized corporate reliance to decentralization. This shift in the basic concepts that govern relations between participants to transactions, facilitated by smart contracts, has not gone unnoticed in the creator economy.
With the decentralized finance and GameFi sectors marshaling across their respective industries and detracting droves of users from conventional approaches to banking and gaming, it was only a matter of time before influencers and content creators decided to shift the paradigm in their operating environments. The content creation model has been altered forever with the incorporation of blockchain technologies that allow users to incentivize content creators, while creators can actually monetize their talent without having to share the proceeds with centralized, often-unfair hosting platforms.
The development of metaverses — fully digital environments powered by the blockchain on Web3 and virtual reality — will herald a new era in content creation. Never before has talent had access to such an advanced set of tools to embellish even the bravest of ideas on the threshold of the real and digital worlds.
Metaverses allow creators to visualize in stunning graphical detail anything from an opera concert in the void of space against a backdrop of nebulae to a blog stream on a deserted island. Anything creativity can fathom can be implemented in the metaverse for the benefit of all parties involved. By relying on the unlimited opportunities of the metaverse in its incorporation of virtual reality, content creators will be able to unleash their creativity and allow it to roam wild. Such promises of unseen quality of content can only be described as honeysuckle for an eager audience of viewers longing for more variety in types of content consumed — and, more importantly, new experiences.
The blockchain basis of the metaverse offers even more benefits for content creators, as it allows them to employ various mechanisms for monetizing their content through the versatile nature of internal cryptocurrencies. Users can stake their digital assets on specific creators, encouraging them to release more content of a certain type. Others can pay to access special content, while others can simply reward their favorite creators with donations. The monetization avenues are numerous, and content creators can always be sure that their talent will be paid for and no hosting platform can strip them of their earnings.
Even more lucrative are the prospects for businesses in terms of content-creator economy permeation in the metaverse. Marketing, advertising and promotion in general gain a new lease on evolution with content that can be tailored in an endless variety of ways and seamlessly integrated into the channels of select creators. The metaverse provides businesses with an entirely new frontier for deployment and audience reach, and the creators are the takeoff ramps that can showcase products and services before their followers — for a price.
In digital hindsight
The metaverse is the next iteration of the internet we know today: a fully user-centric environment serving the purpose of elevating creativity to a new level. However, audiences will not be the only sources of revenue for content creators, as businesses are eager to tap into this lucrative niche and leverage the possibilities offered by native, organic and highly versatile ad integrations in virtual reality content.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Johnny Lyu is the CEO of KuCoin, one of the largest cryptocurrency exchanges, which was launched in 2017. Before joining KuCoin, he had accumulated abundant experience in the e-commerce, auto and luxury industries.
Let’s say you want to lose your Bitcoin (BTC) totally, irretrievably and forever. Hey, it’s not our place to wonder why. Maybe it’s part of some elaborate performance art piece, like the guy who destroyed all his possessions or perhaps you’ve always been big fans of electronic music outfit The KLF, who famously burned 1 million pounds on a remote Scottish island. Or, your reason might be more mundane and you simply don’t want your soon-to-be-divorced spouse to get their share of the investment you both know you own.
Whatever your reason, we’re not here to judge. And, while we’re usually in the business of helping people protect their coins, it’s easy enough to reverse engineer security to help you lose them in the fastest and easiest way possible.
Brag about your Bitcoin
If you’ve got it and wish to lose it, flaunt it. Want to get rid of that Rolex weighing down your wrist? Pair it with a t-shirt, flash it about in a crowded bar and then take a walk through a bad part of town after dark — you’ll soon find yourself relieved of your timepiece.
It’s the same with Bitcoin. You want the world to know you’re a Bitcoiner and, ideally, that you’ve stacked enough sats for it to be worthwhile stealing them. So tell them. Add laser eyes to your social media profiles, keep tweeting those diamond hands and don’t forget about the offline world, either. Be sure to boast about your mastery of Bitcoin to all your friends, family and, most importantly, new acquaintances. You never know who will be tempted to start probing your defenses in order to relieve you of your investment.
In the early Wild West days of Bitcoin, losing your coin was child’s play, as there was no shortage of disreputable exchanges that would help you lose your investment. If you kept your coins in a hosted wallet, it was only a matter of time before the exchange went bust like Mt. Gox, got hacked, lost coins by engaging in fractional reserve banking or the owners absconded (or died) with your keys.
The exchange market has matured significantly in recent years, with enhanced security measures such as two-factor authentication and even published proof-of-reserves and proof-of-custody. Don’t be disheartened: As long as you entrust your keys to a third party, anythingcould happen — and probably will.
Exchanges still go bust with reassuring regularity. Even more encouragingly, governments are now actively targeting Bitcoiners’ wealth. And, not just traditional authoritarians like China and Russia, the Canadian government recently instructed financial institutions — including cryptocurrency custodians — to freeze the accounts of anyone who donates even a small amount to the “trucker protests.”
Deputy PM Chrystia Freeland: “The names of both individuals and entities as well as crypto wallets have been shared by the RCMP with financial institutions and accounts have been frozen and more accounts will be frozen.” pic.twitter.com/iA69DbRJl1
Even if you have a strong password and 2FA protecting your exchange account, you never know what other vulnerability might be exploited to gain access and drain it. If you’ve got your coins on-exchange, relax: They’re in unsafe hands.
Things get a little trickier if you’ve decided to self-custody your Bitcoin offline in a secure hardware wallet. Or do they? After all, when you hold the keys yourself, the power to lose your coins is completely in your hands. Why wait for an exchange to go bust when you can start adopting security “worst practice” today?
The secret to making your wallet insecure lies in your seed phrase, the string of words you use to generate your private key. The simplest way to lose your coins is to memorize your seed phrase and then delete or destroy any record of it. A few months on, hardly anyone has a hope of recalling every word in the correct order.
But, what if you’re cursed with an eidetic memory? Easy: Write it down. Even better, do it twice in physical pen-and-paper form, ideally kept near your hardware wallet. And, for good measure, record it in a cloud-based document where anyone with a will can access it through a brute-force attack. This is particularly effective if you regularly remind people you hold wealth in Bitcoin.
Disinherit the next generation
This one is for those who like playing the long game. You know the phrase “you can’t take it with you?” Well, with Bitcoin, you can. If you haven’t considered inheritance planning, then your entire investment will likely go to the grave with you, joining the estimated 3.7 million Bitcoin (around 18% of the coins there will ever be) that has already been lost forever.
Of course, this requires you to reverse the principles above: If you really want to cheat your children out of their inheritance, you need to make it as difficult for them to gain access to your keys as any attacker. So, if that’s the way you want to go, don’t tell your heirs, don’twrite down your seed phrase, and doget a hardware wallet. Even better, cut your 24-word seed phrase into many pieces and store them in many hidden holes around the world with no recovery instructions whatsoever. Your heirs won’t thank you at all.
Whatever you do, just make sure your Bitcoin storage and security providers don’t have a specific and robust protocol for inheritance planning. You can rest easy in the knowledge that not even the Devil himself will get your wealth when you pass on.
If, for some reason, you dowant to protect your Bitcoin, just ignore everything I’ve written. Even better, do the opposite. But, all you’d be doing is securing your investment in the only censorship-resistant and inflation-proof store of value ever invented. And, why would you want to go and do something as dull as that?
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Jameson Lopp has been actively building in the Bitcoin space since 2015 and has become one of the most respected voices in the Bitcoin developer community. He was previously an engineer at BitGo, developing its high-grade multisig custody service before joining Casa, a company providing secure wallets and plug-in-play infrastructure solutions for Bitcoin.
The proposed European Union Regulation on Markets in Crypto Assets, or MiCA, (hereinafter the “regulation”) was put to a vote in the European Union Parliament’s Committee on Economic and Monetary Affairs on March 14, 2022, and in the end, the proposed amendment to ban or restrict proof-of-work-based crypto assets, which would have effectively resulted in a ban on Bitcoin (BTC), was rejected.
The question of how crypto assets will be assessed from an environmental regulation perspective remains, however, with the Member of the European Parliament in charge of the text indicating that crypto assets will be included, like all other financial products, in the area of the union’s taxonomy (the process of classifying economic activities that have a favorable impact on the environment), without specifying the treatment of these assets in view of this taxonomy.
The proposed regulation is part of the digital finance package that also includes a proposal for a pilot scheme for market infrastructures based on distributed ledger technology (DLT) of interest to the security token sector, adopted by the Parliament’s Economic and Monetary Affairs Committee in January this year and due to come into force by the end of 2022.
The EU Commission has been considering several options for regulating the crypto asset sector. It finally chose the option of full harmonization within the EU of the rules applicable to issuers and service providers in crypto assets, with an EU passport, over the option of an opt-in regime to obtain the EU passport with the application of national regimes. For stablecoins, the Commission has favored a tailor-made legislative regime combined with regulation under the E-Money Directive.
Let us take stock of the main provisions of the MiCA Regulation, which, after the trialogue among the Council, the Parliament and the Commission following the vote on March 14, should also enter into force before the end of the year and which pursues four objectives: legal certainty, support for innovation, consumer and investor protection and market integrity, and financial stability.
In addition to determining the competent authorities and their administrative sanctioning powers, as well as the anti-market abuse rules, the main provisions of the Regulation relate to the purpose and scope of the Regulation (I), the rules applicable to the issuance of utility crypto assets (II), asset-referenced tokens (III), electronic money crypto assets (IV), and the rules applicable to crypto asset service providers (V).
I. Purpose and scope of the regulation
The purpose of the regulation is to establish rules concerning:
Transparency and disclosure requirements for the issuance and admission to trading of crypto assets.
The authorization and supervision of crypto asset service providers, issuers of asset-based tokens and issuers of electronic money tokens.
The operation, organization and governance of asset-based token issuers, electronic money token issuers and crypto asset service providers.
Consumer protection rules for the issuance, trading, exchange and custody of crypto-assets.
Measures to prevent market abuse in order to ensure the integrity of the crypto-asset markets.
The regulation applies to persons in the EU who issue crypto assets or provide services relating to crypto assets. The Regulation does not apply to:
rypto assets that are financial instruments (equity securities issued by companies with shares, debt securities, units or shares in collective investment undertakings and financial futures contracts) or electronic money except where the latter qualifies as electronic money tokens under the Regulation.
ertain entities or persons, such as the European Central Bank and the national central banks of the member states, insurance undertakings, a liquidator or administrator acting in insolvency proceedings, persons providing crypto asset services exclusively for their parent undertaking, their subsidiaries or other subsidiaries of their parent undertaking, the European Investment Bank, the European Investment Bank and public international organizations. Authorized credit institutions and investment firms will only be subject to certain provisions of the Regulation or will have the provisions governing them adapted.
II. Rules applicable to the issuance of crypto utilities
This category, which the Regulation calls “crypto-assets other than tokens referring to assets or electronic money tokens,” corresponds to crypto assets intended to provide digital access to a good or service, available on the DLT system, and which are only accepted by the issuer of this token (“utility tokens”). These “utility tokens” have a non-financial purpose related to the operation of a digital platform and digital services and should be considered as a special type of crypto asset. These may include cryptocurrencies such as Bitcoin, Ether (ETH) or Tezos (XTZ).
The Regulation prohibits offering to the public or seeking admission to trading on a trading venue crypto assets unless the issuer is a legal entity and a white paper complying with the Regulation has been prepared, notified to the competent authority and published.
Rules in terms of fair, honest and professional conduct and communications are provided for, as well as in terms of managing conflicts of interest and compliance with protocol security standards.
The obligation to produce a white paper does not apply when crypto assets are offered free of charge (which is not the case when buyers provide personal data or when the issuer receives payment of third-party fees, commissions or other benefits); are automatically created by mining or transaction validation; when they are unique and nonfungible (nonfungible tokens are, therefore, excluded from the obligation to publish a white paper); offered to fewer than 150 persons per member state; the amount of the offer does not exceed 1 million euro over a period of 12 months; or when the offer is reserved solely for qualified investors.
It should also be noted that the issuer of crypto assets must offer a right of withdrawal to the consumer, which can be exercised over a period of 14 calendar days.
III. Rules applicable to the issuance of asset-referenced tokens
This category of crypto assets consists of tokens that aim to maintain a stable value by referring to several legal tender currencies, one or more commodities, one or more crypto assets, or a basket of these assets. By stabilizing their value, these asset-based tokens are often intended to be used by their holders as a means of payment for the acquisition of goods or services and as a store of value.
An issuer wishing to offer or apply for admission to trading on a trading venue of asset tokens is required to obtain authorization from the competent authority of its home member state unless the average amount outstanding of the asset tokens does not exceed 5 million euro over a period of 12 months, or the offer is intended only for qualified investors.
The authorization gives access to the European passport. A white paper must be prepared.
Such an issuer is subject to a number of obligations, including those relating to marketing communications, conflicts of interest and governance: 350,000 or 2% of average reserve assets, whichever is higher.
These reserve assets must be prudently and efficiently managed, segregated from the issuer’s assets and entrusted to credit institutions or crypto asset service providers. These reserve assets may only be partially invested in highly liquid and low-risk financial instruments.
Furthermore, interest payments to holders of such tokens are prohibited.
Specific rules are provided for acquisitions of issuers of tokens referring to assets, including the obligation to notify the competent authority of the proposed acquisition, which may object to the acquisition.
Finally, there are additional obligations for issuers whose tokens refer to assets that are material. The European Banking Authority shall determine what tokens are material, for example, in view of the market capitalization of the tokens (such determination may also be requested voluntarily by the issuer).
IV. Rules applicable to the issuance of crypto assets of electronic money
This third category corresponds to crypto assets intended primarily as a means of payment with the aim of stabilizing their value by reference to a single fiat currency. Like e-money, these crypto assets are electronic substitutes for coins and banknotes and are used to make payments. They differ from e-money in that holders of e-money always have a claim on the e-money institution and have the contractual right to demand repayment of the e-money held, at any time and at face value, in legal tender fiat currency, which is not necessarily the case for e-money tokens.
The main obligation for the issuer of electronic money tokens is the authorization as a credit institution or as an electronic money institution within the meaning of Directive 2009/110/EC (hereinafter “Electronic Money Directive”), which it must obtain, as well as the publication of a white paper in accordance with the Regulation.
Such authorization and publication of a white paper will not be required if the electronic money tokens can only be held by qualified investors or if the average outstanding amount of tokens over 12 months does not exceed 5 million euro (or such lower threshold as may be set by a member state).
Holders of electronic money tokens have a claim on the issuer of the tokens. Electronic money tokens that do not confer a claim on all their holders are prohibited.
By way of derogation from the Electronic Money Directive, no issuer of electronic money tokens or provider of crypto asset services shall grant interest to the holders of such tokens.
Specific rules are provided for electronic money tokens of significant importance.
V. Rules applicable to providers of crypto asset services
Crypto asset services shall only be provided by legal persons who have their registered office in a member state of the union and who have been authorized as crypto asset service providers.
Authorization as a crypto asset service provider will be valid throughout the union and must enable crypto asset service providers to provide throughout the union the services for which they have been authorized, either under the right of establishment, including through a branch or under the freedom to provide services.
Crypto asset service providers will act honestly, fairly and professionally in the best interests of their clients and potential clients and will provide their clients with fair, clear and not misleading information, in particular in their commercial communications, which must be identified as such. Crypto asset service providers must warn their customers of the risks associated with the purchase of crypto assets. They must make their pricing policy available to the public by posting it in a prominent place on their website.
A crypto asset service provider must at all times have in place prudential safeguards in an amount at least equal to the higher of the following two amounts:
(a) The amount of the minimum ongoing capital requirement applicable to it, depending on the nature of the crypto asset services it provides, either:
For the services of reception and transmission of orders on behalf of third parties, advice on crypto assets, execution of orders on crypto assets on behalf of third parties and placement of crypto-assets: 50,000 euros.
For services of custody and administration of crypto assets on behalf of third parties: 125,000 euros.
For services of operating a platform for trading crypto assets, exchanging crypto assets for fiat currency or for other crypto assets: 150,000 euros.
(b) One-quarter of the previous year’s fixed overheads, which are recalculated annually.
There are a number of specific obligations depending on the crypto asset service. An acquisition regime for crypto asset service providers is also provided.
This article was co-authored by Thibault Verbiest and Jérémy Fluxman.
The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article is for general information purposes and is not intended to be and should not be taken as legal advice.
Thibault Verbiest, an attorney in Paris and Brussels since 1993, is a partner with Metalaw, where he heads the department dedicated to fintech, digital banking and crypto finance. He is the co-author of several books, including the first book on blockchain in French. He acts as an expert with the European Blockchain Observatory and Forum and the World Bank. Thibault is also an entrepreneur, as he co-founded PayFoot. In 2020, he became the chairman of the IOUR Foundation, a public utility foundation aimed at promoting the adoption of a new internet, merging TCP/IP and blockchain.
Jérémy Fluxman has been an associate at international law firms in Paris and Luxembourg in the fields of private equity and investment funds, as well as at a Monaco law firm since 2017. He holds a Master II in international business law and is currently an associate at the Metalaw firm in Paris, France where he advises on fintech, blockchain and crypto finance.
Bitcoin (BTC) saw brisk upwards action during the Wall Street trading session on March 18, conforming to predictions that higher levels would see a retest.
Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it advanced $1,650 from daily lows to nearly matching the $41,700 high from March 16.
The move buoyed traders, who began to reinforce their short-term view of levels near the top of Bitcoin’s 2022 trading range being challenged.
For popular trader Pentoshi, however, such a result would not mean that BTC/USD had broken its downtrend definitively.
“Macro headwinds still too strong but midterm, I think we rally bc seller exhaustion before any shot at new lows or prev lows. So lean towards up then down imo late Q2,” he told Twitter followers on the day.
Cold feet over macro conditions, as Cointelegraph reported, became a major issue this week, with multiple predictions of a major drawdown across major assets including BTC coming this year.
Analyst Matthew Hyland meanwhile noted that in any case, previous resistance around $40,000 was now increasingly looking flipped to support.
Looks like #Bitcoin has been using previous resistance ($40.3k) as new support the past few days
Earlier, Crypto Ed had delivered a near-term forecast of $43,000 for BTC/USD before a potential fresh consolidation period, only then followed by an exit up or down.
In a subsequent update, he showed the pair breaking out of a “bull flag” formation in place over recent days.
Ether (ETH), however, was a more interesting focus on the day.
The moves reignited talk of “altseason” appearing, with various commentators arguing for a new golden era for altcoins in the coming months.
Popular Twitter account BTCFuel offered the Summer as a potential peak for prices.
2/ To assess when the next #altseason peak will happen, I’ll be looking at charts of #Bitcoin, #Ethereum and the dominance of #altcoins of the different past altseasons. By aligning them “correctly” structure-wise, I found this provisional target zone when the peak should happen pic.twitter.com/8H1MyPONiF
The Australian Competition and Consumer Commission (ACCC) is taking Meta Platforms, Inc. (formerly Facebook) to the Federal Court, alleging that the firm and its Irish branch engaged in “false, misleading or deceptive conduct” by publishing scam celebrity crypto ads.
Some users have lost hundreds of thousands of dollars to the sophisticated and long running scams tied to the ad.
The spotlight on Meta has heated up in Australia since the start of February, with Cointelegraph previously reporting that the ACCC was investigating the firm over allegedly fraudulent crypto ads. Aussie mining billionaire Andrew Forrest also took legal action against the company for hosting ads that allegedly used his name to defraud victims.
In an announcement posted earlier today, the ACCC asserted that Meta “aided and abetted or was knowingly concerned in false or misleading conduct and representations by the advertisers.”
The ACCC highlighted unapproved or endorsed “scam” ads featuring prominent Australian figures such as entrepreneur Dick Smith, TV host David Koch and former NSW premier Mike Baird.
The regulator stated that the ads contained dubious links which directed users off Facebook to a fake media article that featured quotes attributed to the public figure supposedly endorsing a “cryptocurrency or money-making scheme.”
“Users were then invited to sign up and were subsequently contacted by scammers who used high-pressure tactics, such as repeated phone calls, to convince users to deposit funds into the fake schemes,” the announcement read.
ACCC Chair Rod Sims didn’t mince his words as he asserted that, “Meta is responsible for these ads that it publishes on its platform” and that company the stood to gain financially by failing to remove them:
“It is a key part of Meta’s business to enable advertisers to target users who are most likely to click on the link in an ad to visit the ad’s landing page, using Facebook algorithms. Those visits to landing pages from ads generate substantial revenue for Facebook.”
“In one shocking instance, we are aware of a consumer who lost more than $650,000 due to one of these scams being falsely advertised as an investment opportunity on Facebook. This is disgraceful,” he added.
The ACCC is arguing that the firm’s conduct has breached the Australian Consumer Law (ACL) or the Australian Securities and Investments Commission Act (ASIC Act), and is seeking “declarations, injunctions, penalties, costs and other orders.”
As pointed out by Caroline Malcolm, head of international policy at Chainalysis, the transparent nature of blockchain technology makes it relatively easy for crypto intelligence companies to track funds related to sanctioned entities.
“We’re in quite a unique position because of the transparency and the permanency and the immutability of that public record,” explained Malcolm in an exclusive Cointelegraph interview.
Governments around the world have expressed concerns that Russia could use crypto to evade sanctions imposed as a response to its military offensive against Ukraine.
Addressing those concerns, Malcolm pointed out that in the last few years there has been substantial improvement in the crypto industry’s Anti-Money Laundering and counter-terrorism framework.
That means that, depending on their jurisdictions, crypto exchanges are still required to enforce the same sanctions as those imposed on banks and other traditional financial intermediaries.
Even though sanctioned entities could potentially move funds on private wallets, those movements can be easily tracked with blockchain intelligence tools such as those developed by Chainalysis. In most cases, these entities would have to rely on a centralized exit point to cash out.
“We [are] still not living in a world where one can stay in the crypto economy and buy all the goods and services that one might like to buy,” explains Malcolm.
At that point, an exchange equipped with Chainalyisis technology would receive an alert flagging the sanctioned funds, which, in turn, would allow the platform to freeze those funds.
According to Malcolm, these blockchain intelligence techniques make crypto less of a suitable means to avoid sanctions than traditional financial tools.
“The blockchain crypto environment is much more streamlined […] than any tools capable of disrupting Russia’s use of a network of traditional bank wires or frankly, even physical cash to evade sanctions,” said Malcolm.
Concerns remain that sanctioned entities could still rely on permissionless and decentralized protocols that don’t require AML/Know Your Customer procedures.
“We’re also working at the moment on developing new, more lightweight tools to provide an easy way for decentralized protocols and platforms to conduct basic sanctions checks to help manage reputational and sanctions enforcement risks,” Malcolm added.
The blockchain ecosystem is well prepared against Russia’s potential attempts to evade sanctions through cryptocurrency.
The Bank of Canada has partnered with the Massachusetts Institute of Technology (MIT) to work on a 12 month research project focused on the design of a Central Bank Digital Currency.
According to a March 16 announcement, the bank will work alongside the MIT Media Labs’ Digital Currency Initiative (DCI) team to examine how “advanced technologies could affect the potential design of a CBDC.”
The Bank of Canada stated that the project is part of a broader development agenda on digital currencies, fintech and how CBDCs could work in a Canadian context.
It cautions that “no decision has been made on whether to introduce a CBDC in Canada,” but said it would provide an update once the research project has been completed.
This is not the MIT DCI’s first partnership with a bank for CBDC research, with Cointelegraph reporting earlier at the start of February that it had published research on the topic in collaboration with The Federal Reserve Bank of Boston.
Dubbed “Project Hamilton,” it tested a “hypothetical general purpose CBDC” using two potential models, including distributed ledger technology (DLT) and processing transactions in parallel on multiple computers, rather than relying on a single ordering server to prevent double-spending.
In terms of the U.S. President Joe Biden’s Executive Order on Ensuring Responsible Development of Digital Assets outlines that his administration will place “the highest urgency on research and development efforts into the potential design and deployment options” of U.S.-based CBDC.
The Executive Order also directs the Secretary of the Treasury and other relevant officials to produce a research report on a local CBDC, while the attorney general has also been tasked with leading an effort to “to assess any necessary legislative changes” required for a CBDC and to promptly develop a legislative proposal afterward.
Volodymyr Zelenskyy, the president of Ukraine currently based in Kyiv, has signed a law establishing a legal framework for the country to operate a regulated crypto market.
In a Wednesday announcement, Ukraine’s Ministry of Digital Transformation said Zelenskyy signed a bill named “On Virtual Assets,” first adopted by the country’s legislature, the Verkhovna Rada, in February. Crypto exchanges and firms handling digital assets will be required to register with the government to operate legally in Ukraine, and banks will be allowed to open accounts for crypto firms.
The law endows Ukraine’s National Securities and Stock Market Commission with the power to determine the country’s policies on digital assets, issue licenses to businesses dealing with crypto and act as a financial watchdog. The government agency added that Ukraine’s Ministry of Finance was also working towards amending the country’s tax and civil codes to accommodate the legal framework for digital assets.
“The signing of this law by the president is another important step towards bringing the crypto sector out of the shadows and launching a legal market for virtual assets in Ukraine,” said the Ministry of Digital Transformation.
Ukraine has legalized the crypto sector — @ZelenskyyUa signed a law. From now on foreign and Ukrainian cryptocurrencies exchanges will operate legally and banks will open accounts for crypto companies. It is an important step towards the development of the VA market in Ukraine. pic.twitter.com/lqqO1J9r1k
— Міністерство цифрової трансформації України (@mintsyfra) March 16, 2022
Cryptocurrency has become a major issue in the country’s current fight against Russia following the invasion on Feb. 24, with many donating directly to Ukraine for humanitarian causes and funding the military. At that time, the National Bank of Ukraine said that it had limited cash withdrawals at banks, fixed the foreign exchange rate of the country’s hryvnia currency and suspended the issuance of electronic money.
On Monday, Kuna, Ukraine’s largest crypto exchange, helped launch a donation platform with FTX and Kuna, staking platform Everstake, and the Ministry of Digital Transformation to allow users to send several cryptocurrencies “to support people in their fight for freedom.” According to the website, users have sent more than $54 million in crypto at the time of publication, roughly 27% of the platform’s $200 million goal.
Cointelegraph reached out to Kuna, but did not receive a response at the time of publication.
