Autor Cointelegraph By Zhiyuan Sun

Coinsquare chief operating officer shares thoughts on being the first regulated crypto dealer exchange in Canada

It’s a story that still haunts the early generation of Canadian crypto users to this day. Four years prior, Gerald Cotten, co-founder of Canada’s then-largest cryptocurrency exchange QuadrigaCX, died under mysterious circumstances in India. But, before his passing, Cotten took virtual keys for digital wallets and moved them into cold storage, leading to the permanent loss of $190 million in user funds.The incident triggered a crisis of confidence in the country’s emerging crypto sector and made regulators deeply skeptical of blockchain technology. However, old wounds eventually heal. Fast forward to today, and Coinsquare has taken over to become one of Canada’s largest crypto exchanges, with $8 billion in cumulative trading volume since 2014.In an interview with Cointelegraph business editor Sam Bourgi, Coinsquare chief operating offic Eric Richmond explained that a regulatory framework now exists to prevent similar incidents in the future:“We’ve taken a much different approach than the U.S. Unlike firms south of the border, all crypto trading platforms here need to be registered with the Investment Industry Regulatory Organization of Canada (IIROC). There is a backlog with processing applications at the moment, while we had ours submitted from back in Nov. 2020 as we wanted to be one of the first regulated players out there.”As the regulation only came into force recently, all crypto exchanges are given a two-year exemption where they must register with the IIROC during this period. Currently, Coinsquare is the only firm in the space that is IIROCregistered. Similarly, the company has a strict set of rules in place when it comes to listing new tokens to ensure its users do not fall victim to scams:“We put it through evaluating the underlying technology, the marketing, the team behind it, analyzing potential legal issues, irregular price movements, etc. We go through his in-depth analysis across different teams, such as compliance, business, legal, and security. It’s about genuinely understanding the token. And if it passes the tests, then the listing threshold is set.”Canadian regulators have taken a harsh stance on exchanges allegedly not abiding by the new rules. In March, Binance ceased operations in the province of Ontario and admitted to the Ontario Securities Commission (OSC) that it was unregistered there. Similarly, the OSC took enforcement action against cryptocurrency exchanges KuCoin and Bybit, claiming a violation of securities laws. 

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Crypto exchange Hotbit says it froze customer funds due to alleged criminal ties of formal employee

On Thursday, cryptocurrency exchange Hotbit said it “suspended trading, deposit, withdrawal and funding functions,” with no timeframe for resumption. In explaining the decision, Hotbit stated:”A former Hotbit management employee who left in April this year was, unbeknownst to Hotbit, involved in a project in 2021 that law enforcement authorities now think is suspected of violating criminal laws. As a result, a number of Hotbit senior managers have been subpoenaed by law enforcement since the end of July and are assisting in the investigation. Furthermore, law enforcement has frozen some funds of Hotbit, which has prevented Hotbit from running normally.”The firm further claims that the remainder of its employees are not involved in the project and possess no knowledge of the alleged illicit activities. With regards to the frozen assets, Hotbit says:”The assets of all users are safe on Hotbit. Hotbit will resume normal service as soon as the assets are unfrozen. All user’s assets and data on Hotbit are secure and correct. However, we are still actively cooperating with the law enforcement authorities in their investigations and are continuously communicating with them through our lawyers and applying for the release of funds.”Hotbit is currently headquartered in Hong Kong. As a result of the trading freeze, all unfilled orders will be canceled, and all leveraged exchange-traded fund positions will be liquidated. Meanwhile, Hotbit claims that the income of users’ investment products will be distributed normally and that a “compensation plan” for users will be published when the website is resumed. In the past 24 hours, Hotbit processed $25.6 million worth of digital asset transactions.

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Optimism TVL surges nearly 300% M/M ahead of The Merge upgrade

According to data from DefiLlama, total value locked (TVL) on Optimism, a layer-2 scaling solution for the Ethereum blockchain, has surged 284% in the past month. The vast majority of TVL consists of users lending and borrowing assets on Aave through Optimism’s layer-2 chain.Investors have been bidding up digital assets related to the Ethereum ecosystem in anticipation of The Merge upgrade, which will see the blockchain transition from a proof-of-work network to that based on proof-of-stake. According to a recent Ethereum developer call, the tentative date for The Merge coming online has been scheduled for Sept. 19. As a layer-2 Ethereum blockchain, Optimism seeks to scale the ecosystem via Rollups, or off-chain computations, to speed up transactions. Transactions are recorded on Optimism and finalized on Ethereum.The project is home to 35 protocols, including derivatives exchange Synthetix, decentralized exchange Uniswap, and automated market maker Velodrome. Due to the high volume of user trade orders on exchanges (including cancellations), the Ethereum blockchain’s current capacity of 30 transactions per second is ill-equipped to handle such demand. However, some experts predict that the network could potentially scale to 100,000 transactions per second after The Merge upgrade, with layer-2 solutions further enhancing such capacity. Optimism blocks are constructed and executed on layer-2 while user transactions are batched up and submitted to the Ethereum layer-1. On layer-2, transactions are immediately accepted or rejected with no mempool, enabling a fast user experience. Correspondingly to the TVL development, the project’s namesake tokens have also rallied by 300% during the same period.Dai on Optimism From 30 million to 140 million in 5 days. pic.twitter.com/AQlNWvX6c9— Maker (@MakerDAO) August 9, 2022

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Circle plans to only support Ethereum PoS chain after Merge is complete

On Tuesday, Circle, the issuer of the USDC stablecoin, pledged its full support for the transition of Ethereum to a proof-of-stake, or PoS, blockchain after the much-anticipated Merge upgrade. The firm views The Merge as an important milestone in the scaling of the Ethereum ecosystem, writing:”USDC has become a core building block for Ethereum DeFi innovation. It has facilitated the adoption of L2 solutions and helped broaden the set of use cases that today rely on Ethereum’s vast suite of capabilities. We understand our responsibility for the Ethereum ecosystem and businesses, developers, and end users that depend on USDC, and we intend to do the right thing.”Currently, USDC is both the largest dollar-backed stablecoin issued on Ethereum and the largest ERC-20 asset overall, with over $45 billion in market capitalization residing in the ecosystem at the time of publication. Its reserves are audited and held at U.S. financial institutions such as BlackRock. Unlike others, Circle continued that it does expect any issues as the Ethereum blockchain begins its transition, stating:”We do not anticipate disruptions to USDC on-chain capabilities nor our fully automated issuance and redemption services. Circle’s testing environment is connected to the Goerli Ethereum testnet, and we will monitor closely as it merges with Prater in the coming days.”The company is following suit alongside an increasing number of firms that vouch to transition to Ethereum’s POS blockchain upon completing The Merge. The day prior, Chainlink said it would not support any proof-of-work forks after the upgrade. Due to the proximity of the upgrade, Ethereum layer-two solution Optimism has seen its token skyrocket by over 300% as per Merge speculation. 

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Anonymous user sends ETH from Tornado Cash to prominent figures following sanctions

On Tuesday, one day after the U.S. Treasury sanctioned cryptocurrency mixer Tornado Cash for its alleged role in cryptocurrency money laundering operations, intervals of 0.1 Ether (ETH) transactions began materializing from the smart contract to prominent figures such as Coinbase CEO Brian Armstrong and American television host Jimmy Fallon. It is not possible to trace the source of the transactions per Tornado Cash design, and as a result, either one individual or multiple individuals or entities could be involved in the operation.Notable individuals/companies who just received funds from a government-sanctioned entity:- Jimmy Fallon- Shaquille O’Neal- PUMA- Randi Zuckerberg- Logan Paul- Brian Armstrong- Steve Aoki- Ukraine Crypto Donation- Dave Chappelle- BeepleField day for investigators. https://t.co/9HDJmppzT2— FatMan (@FatManTerra) August 9, 2022Due to sanctions, it is illegal for any U.S. persons and entities to interact with Tornado Cash’s smart contract addresses, blockchain or business-wise. Penalties for willful noncompliance can range from fines of $50,000 to $10,000,000 and 10 to 30 years imprisonment.The consistency of the transactions indicate that the sender(s) may be starting a prank as to direct law enforcement attention to the recipient individuals. However, the Treasury sanctions require “willful” engagement with the blacklisted smart contract addresses as a precondition for possible criminal proceedings. Thus, it is unlikely that the receipt of tokens from Tornado Cash on a gratuitous basis, without any prior knowledge nor engagement, can constitute a violation of the sanctions.The same day, Web3 development platforms Alchemy and Infura.io joined stablecoin issuer Circle and programming depository vault GitHub in blacklisting the sanctioned Tornado Cash addresses and barring access to its front-end application. Months prior, Tornado Cash attempted to address ongoing concerns that its platform was being used by malicious hackers to launder stolen crypto funds by disabling illicit wallets from accessing the application. However, its co-founder, Roman Semenov said at the time that the instrument only blocks access to the decentralized application, or DApp, interface and not the underlying smart contract.Months prior, Tornado Cash attempted to address ongoing concerns that its platform was being used by malicious hackers to launder stolen crypto funds by disabling illicit wallets from accessing the application. However, its co-founder, Roman Semenov said at the time that the instrument only blocks access to the decentralized application, or DApp, interface and not the underlying smart contract.

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