Značka: government

Coinbase providing customer geolocation data to ICE: Report

A new report has indicated that crypto exchange Coinbase has provided Immigrations and Customs Enforcement (ICE) agents with a “suite of features” intended for tracking the company’s customers. According to the report, ICE has been granted access to an intelligence-gathering application, called Coinbase Tracer, that provides a variety of forensic data tracking capabilities.U.S. Immigration and Customs Enforcement is an government agency under the Department of Homeland Security. The primary purpose of ICE is to protect the country from cross-border crime and illegal immigration.Coinbase Tracer’s intent is to assist ICE with tracing malicious and fraudulent transactions on blockchains. According to The Intercept, the tool will allow ICE agents to “connect addresses to real world entities.” An additional email released by the Freedom of Information Act has shown that ICE wasn’t required to agree to an End User License Agreement with Coinbase. An End User License Agreement is used to describe what users can and cannot do with a company’s software products. Purportedly, this means ICE is free to use the data tracking tool as it wishes with minimal restrictions.When Coinbase was questioned about these developments, spokesperson Natasha LaBranche merely supplied a link to the company’s website with verbiage addressing the issue. The link on the Coinbase website states “Coinbase Tracer sources its information from public sources and does not make use of Coinbase user data.” The Coinbase spokesperson did not provide information regarding limitations on Coinbase Tracer’s use by ICE.Reports indicate that some Coinbase users are angry due to “poor” customer support. https://t.co/qBlMod8K7U— Cointelegraph (@Cointelegraph) August 25, 2021ICE’s access to Coinbase Tracer stems from a $1.36-million contract it signed with the crypto exchange in September 2021. At the time, the nature of the contract was vague and primarily consisted of Coinbase delivering “application development software as a service” to the agency. Related: Coinbase to shut down Coinbase Pro to merge trading servicesCoinbase has been in the news a lot lately and for various reasons. As Cointelegraph reported, the exchange is seeking aggressive European expansion to broaden its footprint. Meanwhile, Goldman Sachs downgraded Coinbase stock to “sell” on Monday following a more than 80% correction.

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Integrating blockchain-based digital IDs into daily life

The last 13 years have seen blockchain technology evolve into numerous use cases — finance, data, logistics and security, among others. However, the idea of using blockchain’s immutable capabilities to ID humans got new life when Changpeng “CZ” Zhao visited the island country of Palau to kick off its digital residency program. The blockchain identity management market is estimated to grow by $3.58 billion in the span of five years from 2021 to 2025. Key factors include the rising demand for digitalization and privacy-respecting identity solutions. As a result, a myriad of solutions breached the market serving this need in the form of nonfungible tokens (NFT), distributed ledger technology (DLT) and barebone blockchain technology.Considering the plethora of use cases that blockchain can serve on a day-to-day basis, numerous government organizations began experimenting with the technology — weighing heavily on central bank digital currencies (CBDC) and verifiable and immutable user identity. Problems with traditional IDsCorrectly identifying — or ID-ing — an individual has always been paramount to governments to ensure targeted delivery of services and allowances, among other requirements, which holds true to this day. However, ongoing advancements in technology empowered the general public with tools to create IDs visually identical to the original. Given blockchain’s capability to store immutable records, authorities see the technology as a fighting chance against fraud related to ID theft and fakes. With traditional paper-based IDs comes the difficulty of confirming their legitimacy across different systems. History has shown how people successfully use fake ID cards to claim unauthorized access to a myriad of benefits. However, technological advancements such as blockchain have provided authorities with the opportunity to issue verifiable certificates and IDs while ensuring scalability, speed and security of the identity management system.Efforts on this front saw the rise of a new ecosystem comprising various blockchain-based digital ID offerings. For example, Shubham Gupta, an Indian Administrative Service (IAS) officer, recently spearheaded the launch of a Polygon-based system for issuing verifiable caste certificates on behalf of the government of Maharashtra. Speaking to Cointelegraph, he said, “if identity management systems have to be rated on a scale of 0 to 1 based on decentralization and individual control, traditional centralized ID systems will be on the far left and fully self-hosted, public blockchain-based IDs on the extreme right.”Forms of blockchain-based digital IDsWhile blockchain technology can and has been used as-is for maintaining immutable records over the internet, innovations spanning over the last decade resulted in the birth of sub ecosystems around the use of blockchain technology. “The idea of blockchain-based digital IDs has been floating around for quite a while but came into the limelight with the recent NFT boom,” blockchain adviser and Bundlesbets.com CEO Brenda Gentry told Cointelegraph.An Italian electronic identity document.While NFTs were first marketed as a tool to represent real-world objects including intellectual and physical assets, the technology found itself well-suited for a variety of applications. Recently, government organizations have begun testing NFTs for ID-ing citizens as means to reduce operational costs.“Wide-scale implementation of blockchain-based digital IDs — like issuance of national identity cards such as passports and driving licenses — takes time but I strongly believe that is the destination that the world should move toward,” Gentry added. In addition to helping authenticate people, blockchain technology discourages counterfeiting, tampering or identity theft attempts. Citing the involvement of luxury brands and artists that promoted the use of NFTs to authenticate the legitimacy and ownership of a product or art, Gentry opined that “luxury items can be checked for their authenticity on-chain which completely eliminates the chance of owning a counterfeit product.”Recent: Uganda’s gold discovery: What it could mean for cryptoNeil Martis, the co-founder and project lead of LegitDoc, which is known in the space for delivering numerous blockchain-based certificates and ID solutions to the state governments of India, envisions a greater adoption of public blockchain-based ledgers over the next decade. Web3-native decentralized IDs will play an incremental role in identifying users and authenticating them to participate in different types of Web3 native transactions.Benefits of blockchain-based digital IDsWhile blockchain’s elevator pitch is heavily inclined toward immutability, the technology boasts multiple advantages over traditional software and paper-based systems. The opinions regarding the benefits of blockchain boil down to the control over personal information.Self-sovereignty stands as one of the biggest benefits of blockchain-based digital IDs, according to Martis. This means that blockchain empowers users to share partial or selective information with their service providers instead of handing over their complete identity.With blockchain-based IDs eradicating the misuse of information, experts envision the birth of a truly trustless system without the involvement of third parties. Gentry, too, reiterated verifiability, traceability and uniqueness as some of the major benefits brought about by blockchain, as she highlighted that blockchain IDs cannot be duplicated because it’s on the distributed ledger. “All the Digital ID can be verified on the blockchain and can be traced back to the owners’ account which can also be used for Know Your Customer,” she added.Limitations of blockchain-based digital IDsMainstream acceptance of blockchain-based digital IDs will ultimately have to mean overcoming the most pressing challenges that threaten to hinder its adoption. Some of the roadblocks that stand out in the current landscape include a lack of education among the masses and a supportive regulatory environment.On the education front, Gentry has noticed a fast-changing scenario brought about by mainstream discussions and widespread adoption of the technology. However, the creation of pro-crypto regulations will need greater intervention from industry players to help countries and institutions get onboarded onto the blockchain network. Martis concurred with Gentry’s thoughts on regulations as he highlighted that blockchain IDs, no matter how decentralized, will need attestation or recognition by the issuing authorities. He added: “if the issuing authorities don’t recognize the validity of the blockchain IDs, then the same cannot be used for availing a majority of public services. This in my opinion is the biggest limitation.”Blockchain of choice for ID-ing peopleGiven that a majority of real-world identity systems are under the purview of governments and sovereigns, Martis envisions greater adoption of permissioned distributed ledger networks for issuing Identities that require government services. Gentry noted that choosing the perfect blockchain for IDing people or goods will require weighing the unique advantages and limitations of the various blockchain ecosystems. While highlighting the existing concerns such as Ethereum’s gas fees or Solana’s infamous outages, the blockchain advisor suggested that Binance’s BNB Chain is the perfect choice of blockchain because of its high transactions per second and low latency and fees.Recent: Bitcoin payments make a lot of sense for SMEs but the risks still remainSpeaking from personal experience, Gupta shared that Indian state governments tend to choose a middle ground wherein instead of a single authority fully in control of citizen identities, a group of independent departments will share a common distributed ledger that hosts citizen identities, anchored periodically on a public blockchain. The Maharashtra government is currently working to deploy a scalable blockchain-based ID system for a tribal population of 1.2 million. Martis explains that the IDs created will be used by various departments to perform analytics and identify the right beneficiaries for various national schemes.Regardless of the challenges that slow down blockchain adoption across business verticals, the advantages of the technology make its dominance inevitable. Government organizations and private entities have amped up efforts in uncovering futureproof fintech solutions via blockchain innovations. Blockchain disruptions that are well-positioned to go mainstream in addition to identity management include localized CBDCs, supply chain solutions and cross-border settlements. Decentralized identities or DIDs (decentralized identifiers) have yet to see wide-scale implementation. According to Martis, they should be settled or issued by highly decentralized public blockchains that are outside state control, adding that “Bitcoin and Ethereum stand out as the obvious choices in this regard.” 

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US govt delays enforcement of crypto broker reporting requirements: Report

The provision in the U.S. infrastructure bill signed into law in November, which will require financial institutions and crypto brokers to report additional information, could reportedly be delayed.According to a Wednesday report from Bloomberg, the United States Department of the Treasury and Internal Revenue Service may not be willing to enforce crypto brokers collecting information on certain transactions starting in January 2023, citing people familiar with the matter. The potential delay could reportedly affect billions of dollars related to capital gains taxes — the Biden administration’s budget for the government for the 2023 fiscal year previously estimated modifying the crypto tax rules could reduce the deficit by roughly $11 billion.Under the current infrastructure bill, Section 6050I mandates that crypto brokers handling digital asset transactions worth more than $10,000 report them to the Internal Revenue Service with personal information likely including the sender’s name, date of birth and social security number. The requirements, aimed at reducing the size of the tax gap, were scheduled to take effect in January 2023, with companies sending reports to the IRS starting in 2024. “Delaying is smart,” said Jake Chervinsky, head of policy at the Blockchain Association, in response to the news. “We’re getting closer & closer to the effective date of the infrastructure bill’s tax provisions & we’re still waiting for guidance or rulemaking on implementation.”If true, this is good news.We’re getting closer & closer to the effective date of the infrastructure bill’s tax provisions & we’re still waiting for guidance or rulemaking on implementation. We’ve also seen legislative proposals that could make big changes. Delaying is smart. https://t.co/m7bMDiVFFU— Jake Chervinsky (@jchervinsky) June 29, 2022Related: Crypto miners exempt from IRS reporting rules, US Treasury affirmsSince the passage of the $1 trillion infrastructure bill, many industry experts and lawmakers have suggested the crypto broker reporting requirements are overly broad, placing an undue burden on individuals who may not have the necessary information on transactions. In June, crypto and blockchain advocacy group Coin Center filed a lawsuit against the Treasury Department, alleging the tax reporting requirement could “impose a mass surveillance regime on ordinary Americans.”

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US lawmaker lays out case for a digital dollar

Connecticut House of Representatives member Jim Himes has released a proposal aiming to start a dialogue on the United States potentially launching a central bank digital currency, or CBDC.In a white paper released on Wednesday, Himes urged Congress to begin exploring the rollout of a digital dollar issued by the Federal Reserve to prevent the government from falling behind in innovations in financial technology. According to the U.S. lawmaker, a CBDC “should not be thought of as replacing legacy payment systems and currencies but as an additional alternative for consumers and businesses.”The white paper laid out a proposal in which a CBDC could present concerns over transparency, security and privacy when compared with fiat currency. Himes added that any regulatory framework on CBDCs enacted by Congress should include “strong user identification processes that require intermediaries to certify the identity of wallet holders,” with the Federal Reserve and “participating commercial entities” establishing guidance. “The longer the United States government waits to embrace this innovation, the further we fall behind both foreign governments and the private sector,” said Himes. “It is time for Congress to consider and move forward with legislation that would authorize a U.S. CBDC.”Source: CBDC white paper, Representative Jim Himes.Different agencies and departments within the U.S. government have explored the possible effects of a digital dollar in the event officials decide to launch one. In May, the Fed released a report concluding that “monetary policy implementation from a retail CBDC are highly dependent on the initial conditions of the Federal Reserve’s balance sheet.” Related: Democrat division over crypto isn’t all bad news for regulationAmong lawmakers in the United States, Himes has often pushed for congressional action on cryptocurrencies — specifically in regard to the technology being used to check Russia’s potential to evade sanctions — and introduced a section of a bill that many criticized as giving the Treasury Secretary unchecked power over certain crypto transactions. Minnesota Representative Tom Emmer also introduced a bill in January aimed at preventing the Fed from acting as a retail bank in the potential issuance of a digital dollar, suggesting lawmakers have not yet reached a consensus on a U.S. CBDC.

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HM Treasury changes course on collecting data around unhosted crypto wallets

The government of the United Kingdom said it intends to modify a proposal that would have required crypto firms to collect personal data from individuals holding unhosted wallets that were the recipients of digital asset transfers.In its Amendments to the Money Laundering, Terrorist Financing and Transfer of Funds updated on Wene, HM Treasury said it will be scaling back its requirements for gathering data from both the senders and recipients of crypto sent to unhosted wallets, unless the transaction poses “an elevated risk of illicit finance.” The U.K. government added that unhosted wallets could be used for a variety of legitimate purposes, including asan additional layer of protection as is sometimes the case for cold wallets.“There is not good evidence that unhosted wallets present a disproportionate risk of being used in illicit finance,” said the HM Treasury report. “Nevertheless, the government is conscious that completely exempting unhosted wallets from the Travel Rule could create an incentive for criminals to use them to evade controls.”The U.K. government made the change in response to a consultation held between July and October 2021 with “[Anti-Money Laundering] (AML)/[Counter-Terrorism Financing] (CTF) supervisors, industry, civil society, academia and several government departments,” in which many expressed concerns about the “breadth of personal information collected” around transfers to unhosted wallets as well as the time required to enact such policy. According to the Treasury Department, the amendments will have a one-year grace period, taking effect in September 2023 if approved by Parliament. Related: Enforcement and adoption: What do UK’s recent regulatory aims for crypto mean?HM Treasury hinted it would implement the changes in accordance with the Financial Action Task Force’s Travel Rule, which sets out recommendations for regulators aimed at having cryptocurrency transactions comply with Combating the Financing of Terrorism and Anti-Money Laundering regulations. The FATF will release a report on how participating countries are implementing their travel rule at the end of June.

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Crypto's uses and misuses: Binance-Reuters quarrel raises questions

Crypto exchange Binance has courted controversy almost from its 2017 beginnings, and five years later, the dustups continue. On June 6, the United States Securities and Exchange Commission was reported to be investigating whether Binance Holdings broke U.S. securities rules in launching its digital tokens. Meanwhile, on the same day, Reuters published a scathing 4,700-word “special report” titled “How crypto giant Binance became a hub for hackers, fraudsters and drug traffickers.”Binance almost immediately retorted to Reuters with a blog post of its own, warning about “authors and pundits who cherry pick data, rely on conveniently unverifiable ‘leaks’ from regulators, and feed into the cult of crypto paranoia for fame or financial gain.” For good measure, it published “Our Email Exchange With Reuters” — an extensive list of questions that it had received from Reuters reporters Angus Berwick and Tom Wilson for their special report, along with responses from Binance spokesperson Patrick Hillman.All in all, the donnybrook between two heavyweights from different industries raised some questions not only about Binance — the crypto sector’s largest exchange — but also the global industry, including to what extent is money laundering a crypto sector problem and what does it mean if one of the industry’s top providers is in constant hot water with regulators and investigative journalists? Maybe Binance is being unfairly targeted, but if not, are all cryptocurrency and blockchain players tarred now by the actions of one renegade player? It’s worth recounting that after the report was published, other parties seized upon its findings. New York Times columnist Paul Krugman, for instance, asked in an opinion column what cryptocurrencies as a class were really good for:“OK, criminals seem to find crypto useful; a recent Reuters investigation found that over the past five years the crypto exchange Binance has laundered at least $2.35 billion in illicit funds. But where are the legitimate applications?”Does crypto have a money laundering problem?The $2.35 billion “stemming from hacks, investment frauds and illegal drug sales” from 2017 to 2021 that Reuters identified sounds like a lot of money — but is it really, at least in the context of a $1 trillion industry?Analytics firm Chainalysis looked at all crypto transactions in 2021 and found that only 0.15% involved illicit addresses “despite the raw value of illicit transaction volume reaching its highest level ever.” Moreover, the amount of money laundered globally in one year — not just in the crypto sector — is 2–5% of global GDP, somewhere between $800 billion and $2 trillion, according to the United Nations, which dwarfs cryptoverse activity.Still, maybe that’s not the point. “Let us not forget that, since the early days of Bitcoin, crypto, per se, has had the reputation of being an instrument for money laundering — and rightly so,” Markus Hammer, an attorney and principal at Hammer Execution consulting firm, told Cointelegraph. That is no longer the case. The industry has cleaned up its act remarkably well, in Hammer’s view, with Anti-Money Laundering (AML) measures arguably even more effective now than those in the traditional financial world. Nonetheless, there’s no getting around the fact that “the crypto reputation was a negative one in that sense from the beginning.”Perception matters, and in that regard, Binance hasn’t really helped on the regulatory front. The sometimes-stateless exchange was clearly not an “early adopter” in the compliance sphere, though Hammer wouldn’t go so far as to say Binance hurt the industry’s reputation in any lasting way. It attracted attention, yes, because of its misbehavior, but maybe also because of its size — regulators may have been looking for a big crypto exchange to make an example. Recent: Blockchain’s potential: How AI can change the decentralized ledgerRegarding money laundering, the crypto industry’s “numbers are not large,” Merav Ozair, fintech faculty member at Rutgers Business School, told Cointelegraph, “but we don’t want them to grow either.” Binance is the industry’s largest exchange, “and we want them to have better compliance.” It troubles her that Binance has been one of the last major crypto exchanges to embrace Know Your Customer (KYC) and AML regulations globally — as an industry leader they should be one of the first to set an example. Is Binance responsible for indirect deposits?Binance, for its part, denies it has a money-laundering problem. A pointed disagreement emerged in the published email exchange between Binance and the Reuters journalists on the actual nature of money laundering and the extent to which Binance was being blamed for indirect deposits.“Throughout the questions posed to Binance, Reuters has conflated direct and indirect exposure,” Binance complained to the Reuters journalists, offering up a hypothetical scenario that used a darknet drugs-selling website, Hydra, as an example: “A known Hydra vendor sells something on Hydra and receives 1 BTC to their wallet. They then send this BTC to someone else for any reason, not necessarily illicit. That person then transfers some of that BTC to someone else, who doesn’t know its history. This third person then deposits some of that to their Binance account. Binance now has indirect exposure to Hydra.”Binance contends that it has no KYC/AML responsibilities with regard to Hydra. It can’t control indirect deposits. “This is absolutely true,” Alireza Siadat, partner at law firm Annerton, told Cointelegraph. “The current KYC requirements require the obligated person to run a KYC and an identification when the user is opening an account.” The terms and conditions ask the user only to use the account for his own purposes and not on behalf of third persons. “But, the law is not asking to verify whether the person who opened the account is the same one using the account and doing the transaction.” Still, an exchange might do more, suggested Ozair. Illicit funds may come to an exchange indirectly, from Person A to Person B, C and D, and yes, the exchange is responsible for checking out Person D who is actually opening the new account — and not A, B and C. But, it should still keep its antennae attuned when dealing with person D. Is that person coming from a suspicious region or an IP address known to be associated with bad actors? Is a crypto mixer potentially involved? “There are ways to understand,” said Ozair. The privacy coin conundrumA sizable slice of the considerable email exchange between Binance and Reuters was devoted to a single cryptocurrency, Monero (XMR), a so-called privacy coin that Binance has supported on its exchange since 2017. It’s the view of many law enforcement agencies that the almost-total anonymity offered by Monero and other privacy coins makes them useful for money laundering, and for that reason some countries have banned them and other crypto exchanges won’t support them. Monero can’t be traded on Coinbase or Gemini, for example.Reuters, for its part, scoured darknet forums for evidence that these fears were justified and found that “over 20 users wrote about buying Monero on Binance to purchase illegal drugs,” according to its report. And, it included one user who wrote that “XMR is essential to anyone buying drugs on the Dark web.” A diagram of ring signatures used in privacy coins like Monero. Source: StackExchangeReuters asked Binance a half-dozen written questions mentioning Monero specifically. Binance chose not to answer most of these specifically, but did reply more generally that “There are many legitimate reasons why users require privacy — for example when NGOs and opposition groups in authoritarian regimes are denied safe access to funds.” It also added elsewhere that it, Binance, stood “against anyone who uses crypto, blockchain technology, or cash to buy or sell illegal drugs.”The privacy question is one that crypto exchanges continue to struggle with. According to Ozair, there’s always a fine line between maintaining privacy and enabling illicit transactions, “and the ecosystem is working hard to account for it,” while Hammer noted in passing that “the continued acceptance of Binance to accept privacy coins like Monero speaks for itself.” It should be emphasized that the Reuters’s XMR findings were anecdotal, not definitive proof of wrongdoing. Incremental improvement?Elsewhere, some see evidence that Binance is finally getting serious about compliance. “Over the past 8 months, Binance has increased its efforts to become AML compliant on a global level,” Siadat told Cointelegrph. “In France, Binance just recently successfully registered as a digital assets service provider.” This is an AML registration, also known as virtual asset service provider registration, he explained, where an applicant must demonstrate full transparency with regard to its corporate structure and thorough compliance with AML requirements. “Binance is also currently aiming to become fully regulated in Germany,” added Siadat, who believes the exchange deliberately chose jurisdictions with strong regulatory environments like France and Germany “to demonstrate to the global regulators that it is prepared to comply with FATF recommendations and global AML rules.”It has been adding staff too. In August 2021, it hired former United States Treasury criminal investigator Greg Monahan as its global money laundering reporting officer, while in May, it brought on Joshua Eaton, a former California federal prosecutor, as its first deputy general counsel. Hammer noted that the company’s problem might be more fundamental, though: Its platform and business model, as originally devised, were meant to bypass the incumbent finance industry. “They overlooked, though, that their platform was still clearly centralized, providing fiat-ramps inter alia.” These fiat ramps meant that regulatory oversight was bound to come “sooner or later.” Changing such infrastructure, business model and corporate culture in a short period of time will be very difficult to do, he said, “even with deep pockets” and the hiring of a team of experts.Where are the rightful use cases?What about economist Krugman’s larger question with regard to cryptocurrencies? “Where are the legitimate applications?” Is it fair to ask such a question a dozen or so years after Bitcoin’s appearance?“I cannot understand why some respected economists make sweeping and misleading statements about the lack of legitimate applications of cryptocurrencies,” Carol Alexander, professor of finance at the University of Sussex, told Cointelegraph. After all:“Ether is essential for the functioning of Ethereum, as DOT is to Polkadot and SOL is to Solana, etc. These layer-1 blockchains already underpin the proper functioning of our internet and without them, vast swathes of the global economy would simply collapse.”“Nonfungible tokens are also here to stay,” she added, and many will serve useful public purposes. “Recording ownership of real assets like paintings and music as smart contracts on public blockchains actually prevents fraud and allows artists to get proper royalties. Smart contracts also stop black markets for concert and sports tickets completely, and the token economy allows start-ups to have better access to crowdfunding now than ever before.”Recent: Regulations and exchange delistings put future of private cryptocurrencies in doubtCritics like Krugman “do not understand the logic behind the distributed ledger technology and blockchain,” tools that provide trust and full transparency if used correctly, said Siadat, adding: “In fact, the Financial Action Task Force recommended using DLT for digital identities and then using digital Identities for KYC purposes. Once a digital identity is verified by the blockchain, institutions may use/leverage existing KYC information without running their own KYC.”Meanwhile, Bitcoin (BTC) remains a “highly effective P2P payment system, which grants payment services to the unbanked population,” added Hammer, a sentiment that Ozair shared. “We need to go back to the roots, where it started,” said Ozair, referring to Satoshi Nakamoto’s original white paper that heralded in the crypto age. What Satoshi was proposing was just a digital payments network — “a system run by people for people.” Perhaps that should serve as a touchpoint now.

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Elusive Bitcoin ETF: Hester Peirce criticizes lack of legal clarity for crypto

The crypto sector may be maturing, but regulatory clarity around the treatment of digital assets continues to remain cumbersome. This was recently highlighted by Commissioner Hester Peirce — also known as the United States Securities and Exchange Commission’s (SEC) “crypto mom” — in remarks she made at “The Regulatory Transparency Project Conference on Regulating the New Crypto Ecosystem: Necessary Regulation or Crippling Future Innovation?”Peirce began her speech by emphasizing the importance of “regulating the new crypto ecosystem.” While this may be, Peirce also noted that the crypto industry is still in search of an actual regulator. She said: “A bipartisan bill announced last week attempts to answer that question. Some people in the crypto industry are celebrating the allocation of certain authorities to the Commodity Futures Trading Commission (CFTC) instead of the Securities and Exchange Commission. This view is likely rooted in a disappointment that the SEC has not used more proactively the authorities it already has to sensibly regulate crypto.” Everyone asks me when a spot bitcoin ETP will be approved. Here’s my answer: https://t.co/25M5kCDF1Q— Hester Peirce (@HesterPeirce) June 15, 2022After noting this, Peirce added that she is “hopeful that we can change course and use our existing and any prospective authorities wisely.” Yet, before explaining how this may be accomplished, Peirce was quick to point out that her criticisms on topics such as the denial of a Bitcoin (BTC) exchange-traded product (ETP) are targeted at the SEC Commission rather than the staff. “The staff appropriately is following the Commission’s lead, and the Commission has not been leading well,” she remarked.Regulatory matters for crypto industryWhile a number of digital asset bills have been passed this year, the first half of Peirce’s speech focused on the approval of a spot Bitcoin ETP in the United States, which she mentioned is the question she gets asked about most. While spot ETPs have successfully launched in other regions such as Europe and Canada — which saw 1 billion Canadian dollars in assets under management a month after its launch in 2022 — the SEC has continued to push back on this offering. Unfortunately, Peirce remarked that she still “has no idea” when the SEC would approve a spot Bitcoin ETP, noting that “the Commission has added crypto-specific hurdles to what used to be fairly straightforward processes for approving these pooled investment vehicles.” Moreover, while Peirce is aware that the Commission’s resistance to a spot Bitcoin product is difficult to understand, she noted that the Commission has “determined to subject anything related to Bitcoin.” Indeed, while the U.S. crypto ecosystem continues to push forward, industry experts are still left pondering whether a spot Bitcoin ETP will soon be approved. Eric Balchunas and James Seyffart, an exchange-traded fund (EFT) analyst for Bloomberg, recently said that if crypto platforms fall under the SEC’s regulatory framework, a spot ETF may occur in mid-2023. However, the bipartisan crypto bill, also known as the “Responsible Financial Innovation Act” that was introduced in the United States Senate on June 7, 2022, has yet to determine if the SEC or CFTC will be responsible for the allocation of digital assets. Regardless, the push for a spot Bitcoin ETP remains a strong-willed battle, especially for digital asset management firms like Grayscale Investments. Michael Sonnenshein, CEO of Grayscale, recently said that the firm is gearing up for a legal fight if Grayscale’s Bitcoin spot ETF is denied by the SEC. Shortly after this disclosure, Grayscale hired Donald B. Verrilli, a former U.S. Solicitor General, to join the firm to help push for a Bitcoin spot ETF. During a press conference at Consensus 2022, Verrilli went into detail about his plans to convince the SEC to convert Grayscale’s Bitcoin Trust into a spot-based ETF. According to Verrilli, the SEC’s approval of a Bitcoin futures ETF proved to be consistent with U.S. Security Laws, demonstrating that there was no significant underlying risk or fraud and manipulation. As such, Verrilli believes this created a situation where the approval of a Bitcoin spot ETF should be treated similarly to that of a futures ETF. He said:“The Administrative Procedure Act is a federal statute that regulates the conduct of all federal agencies, including the SEC. It sets out rules about what kinds of procedures agencies have to comply with. One of the most fundamental of these is that the agency not be ‘arbitrary and capricious.’ There is a common sense understanding that it’s arbitrary and capricious to treat cases that are alike in a different manner, and that is what the problem is here for not granting approval of a spot ETF.” Recent: Blockchain’s potential: How AI can change the decentralized ledgerPeirce further explained in her remarks that the SEC allowed futures-based Bitcoin ETFs to begin trading in October 2021, saying: “Enabling the change was a clear signal from Chair Gary Gensler, who pointed to the 1940 Act protections, along with the CFTC’s oversight of the futures markets, as a key basis for his comfort with such products. These funds proved popular, but demand for a spot-based product remains because futures products are more expensive to manage and may not as closely track the spot price.” Peirce elaborated on the importance of a spot ETP, noting that this type of product “could enable retail investors to gain exposure to Bitcoin through a securities product that, because of the effective ETF arbitrage mechanisms, likely would track the price of spot Bitcoin closely.” She added that it would likely be inexpensive to manage such a fund, while sitting “conveniently in an investors’ brokerage account alongside other securities.” In addition to the approval of a Bitcoin spot ETP, regulatory clarity around stablecoins is becoming more important than ever before. This has become the case mainly due to the recent collapse of the Terra ecosystem. Senator Pat Toomey, the ranking member of the Senate Banking Committee, told Cointelegraph that the Terra collapse influences legislation in the sense that it serves as a “wake-up” call to the federal government. “My own view is that algorithmic stablecoins should be treated separately from fiat-asset backed stablecoins. They are totally different creatures,” he said. However, Toomey added that there is currently no regulatory regime for asset-backed stablecoins. Yet, he believes this is important to establish, noting that stablecoins backed by traditional instruments like cash and securities plug into the conventional financial system. Given this, it’s important to point out that Toomey recently drafted a regulatory framework for stablecoins, known as the Stablecoin Transparency of Reserves and Uniform Safe Transactions Act, or TRUST Act. This framework proposes that digital assets be identified as “payment stablecoins,” or a convertible digital currency used as a medium of exchange that can be redeemed for fiat by the issuer. While the TRUST Act remains a framework, Toomey mentioned that stablecoin regulation might appear at the end of 2022. Shedding light on this, Kevin O’Leary — venture capitalist and Chairman of O’Leary Ventures — told Cointelegraph that while the bipartisan bill sponsored by senators Cynthia Lummis of Wyoming and Kirsten Gillibrand of New York addresses stablecoin regulation, he thinks that the frameworks proposed by Toomey, along with the Stablecoin transparency ACT sponsored by Senator Bill Hagerty, will likely pass first: “Both of these are the same in the sense that they only contemplate stablecoins. In terms of regulation, these suggest that stablecoins open themselves up for an audit every 30-days, and that no asset inside these tokens can be there longer than a duration of 12-months.”According to O’Leary, this is a money-market strategy. He added that Circle’s USD Coin (USDC) stablecoin hasn’t broken its U.S. dollar peg, even with recent crypto market volatility and the Terra collapse. “There is a lot more promise today from something backed 100% by the U.S. dollar than there is from something algorithmically backed.” Enforcement actions short-cut regulatory process According to Peirce, the lack of regulatory clarity within the crypto ecosystem has proven that the SEC Commission requires a more productive path to regulation. “The Commission’s reluctance to approve a spot Bitcoin ETP is of a piece with its more general reluctance to build a regulatory framework for crypto using standard regulatory processes,” she stated in her speech. As such, Peirce pointed out that the SEC has “cobbled together a regulatory framework through enforcement actions.” Peirce demonstrated this by referencing the BlockFi and SEC settlement that took place in February 2022. She noted that the SEC laid a foundation for BlockFi to register under the Securities Act, which, if successful, could likely become the standard for regulating crypto lending. While notable, Peirce explained that a better approach would have been to first identify crypto lending as implicating the securities laws and to then invite lenders and other members of the public involved with the case to discuss an appropriate path forward. Toomey also mentioned that SEC Chair Gensler has been “pushing the limits of authority,” mentioning this last week during his press conference at Consensus 2022:“I also think he has claimed that virtually all crypto assets are securities without explaining how and why that is so. This is not reasonable because it creates concern about an enforcement action without someone fully understanding what will result in enforcement action and what won’t. Regulation by enforcement is a terrible approach.” Optimism for change Given crypto’s current regulatory environment, it’s notable that Peirce concluded her speech on a high note, remarking that she is “optimistic that we can change course,” as long as both investors and the SEC take a more proactive approach. Although this “approach” remains rather vague, some examples of how this may take shape have come to fruition. For example, O’Leary explained that WonderFi Technologies, a decentralized finance (DeFi) platform, will become the first Canada-regulated digital asset exchange to be listed on the Toronto Stock Exchange (TSX). Recent: Regulations and exchange delistings put future of private cryptocurrencies in doubt“TSX has never listed a crypto exchange before, but invited WonderFi to list because they are fully compliant and there is institutional interest in the sector,” he said. O’Leary also mentioned that he believes cryptocurrencies will become the twelfth sector of the S&P 500 over the next decade because of the potential digital assets provide, such as reducing high fees and speeding up financial services in various economic sectors. All things considered, the listing of WonderFi on the TSX is important for U.S. regulators because it demonstrates how investors can work with regulators to make strides in the industry. O’Leary also mentioned that G7 country regulators talk to each other daily, noting that he thinks the SEC views advancements in Canada as potential use cases that may work in the United States:“Regulators in Ontario allowed the first Bitcoin and Ethereum ETF. If the SEC didn’t approve this, the Ontario Securities Commission never would have allowed this. The Ontario Securities Commission is proving to other jurisdictions that these products can be regulated and issued.” 

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US Air Force taps SIMBA Chain to develop budgeting and accounting system

For many years, the United States Military has been experimenting with blockchain in a number of settings to enhance its operations. Now, the U.S. Air Force (USAF) is adopting blockchain into its budgeting and accounting processes.According to a Thursday press release, the USAF has enlisted SIMBA Chain, a blockchain-as-a-service platform, to develop a blockchain-based system for tracking and monitoring the military’s cash flow and supply chain quality and management. The goal of the project, dubbed Digital Blockchain Budgeting Accountability and Tracking (DiBaT), is to tokenize all dollars within the USAF supply chain budget, as well as track fund movement across billing centers, purchasing teams, and suppliers.DiBaT, as per the release, uses SIMBA Blocks to track and audit funds in a secure, zero-trust, tamper-proof blockchain that allows USAF management to view where money is being utilized and how it is presently positioned within the allocation and payment system. It will also increase supply chain visibility and transparency in the materials purchased.Cointelegraph reached out to the SIMBA Chain team for additional details on the development and will update this story as soon as we hear back.Related: US Air Force files trademark application for ‘SpaceVerse’ initiativeThe United States military is made up of six branches: the Marines, Coast Guard, Army, Navy, Air Force, and Space Force. Half of these branches have previously announced major plans to utilize blockchain technology or other forms of digital assets.In 2019, the USAF selected SIMBA Chain to help secure its supply chain and also partnered with blockchain big data management startup Constellation. The U.S. Navy awarded Consensus Networks a $1.5-million contract in Nov., to create a blockchain-based logistics system called HealthNet. Last year, Space Force said that it would release NFT versions of patches and coins specifically tailored for the launch of one of its spacecraft.

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Regulations and exchange delistings put future of private cryptocurrencies in doubt

The core principles of cryptocurrency were based on financial independence, decentralization and anonymity. With regulations being the key to mass adoption, however, the privacy aspect of the crypto market seems to be in jeopardy.In 2022, even though no particular country has come up with a universal regulatory outline that governs the whole crypto market, most countries have introduced some form of legislation to govern a few aspects of the crypto market such as trading and financial services. While different countries have set different rules and regulations in accordance with their existing financial laws, a common theme has been the strict implementation of Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. A majority of crypto exchanges operating with a license obtained from the government body or government-affiliated bodies have discouraged any form of anonymous transactions. Even in countries where there is no particular law on privacy coins, there is a ban on private transactions over a certain threshold.The governments of the United States and the United Kingdom have also demanded regulatory action against the use of coin mixing tools, a service used to obscure the origin of a transaction by mixing it with multiple other transactions. Coinjoin, a popular crypto mixing tool, recently announced they would block illicit transactions amid-regulatory heat. Related: Crypto mixers’ relevance wanes as regulators take aimThe recent delisting of Litecoin (LTC) by several crypto exchanges in South Korea owing to its recent privacy-focused MimbleWimble upgrade is another example of how the privacy aspect of the cryptocurrency is the first to fall on the road to regulatory acceptance. Apart from South Korean exchanges delisting LTC, many global exchanges including Binance and Gate.IO also refused to support transactions using the MimbleWimble upgrade.Most regulations focus on making cryptocurrencies more transparent so that consumers and businesses feel at ease with them. This may be good news for institutional and corporate investors, but it could be a blow for privacy-focused coins.At a time when regulatory oversight is at its highest, there is a special threat to privacy coins such as Monero (XMR) and ZCash (ZEC), which are already banned on several leading exchanges. However, experts believe that despite the ongoing case against privacy coins, people will continue to use them.Privacy tokens are a red flag for many regulators, who often prefer that blockchain transactions are auditable, verifiable and take place on a public chain. Under regulatory scrutiny around the worldPrivacy coins obscure the key identifiers of transactions such as the address of the sender or receiver, a feature that regulators believe could be misused by miscreants. Even some nations like Japan, which was once seen as the leading country in terms of progressive crypto regulations, decided to do away with privacy coins.Japan banned the use of privacy-focused cryptocurrencies in 2018, after which several registered crypto exchanges in the country delisted privacy coins from their platform. Similarly, South Korea has not just banned privacy coins, but any form of private transactions is prohibited on Korean crypto exchanges.In the United States, privacy coins remain legal. However, the Secret Service recommended that Congress regulate privacy-enhanced cryptocurrencies. In August 2020, Australian regulators forced many exchanges to delist privacy coins. The Financial Action Task Force (FATF) has similarly listed the use of privacy coins as a potential red flag for money laundering through virtual assets.Some cryptocurrency exchanges have also stopped offering privacy coins as a result of AML guidance. In January 2021, Bittrex, the eighth largest cryptocurrency exchange by volume, announced that it would drop Monero and Zcash from its platform. Kraken, the fourth largest exchange, delisted Monero in the United Kingdom in November 2021 following guidance from the United Kingdom’s financial markets regulator.Ankit Verma, chief investment officer at crypto investment platform Mudrex, told Cointelegraph:“While some exchanges periodically prohibit trading privacy coins, most of the largest privacy coins are currently available for trading across major exchanges in different jurisdictions. Yet, the institutional skepticism around the adoption of privacy coins persists. It is difficult to predict the usage of privacy coins on a wider scale primarily because of the strict enforcement of KYC and AML guidelines. Our belief is the absence of institutional affinity for privacy coins combined with the fact they are unregulated further dampens the possibility of widespread adoption of privacy coins.”Regulatory pressure has mounted to such a level where even privacy features of particular cryptocurrencies come under scrutiny, even if the crypto itself is not solely focused on privacy. Thus, experts believe the real winners will be those who combine the best of privacy and regulatory compliance. Fennie Wang, CEO at Humanity Cash — a community-based currency development platform — told Cointelegraph:“The winners will be protocols that balance between user privacy and regulatory compliance using a combination of cryptographic techniques and sound policy translation. Decentralized identity primitives alongside zero-knowledge Proofs, homomorphic encryption and multi-party computation will be central to this equation.”Can privacy coins survive the regulatory onslaught?Privacy coins remain a gray area in several countries where they are not banned but governments have discouraged their use.Chris Kline, chief operating officer at Bitcoin IRA — a crypto retirement plan provider — believes privacy coins can co-exist despite the current regulatory downturn. She explained:“Privacy coins can co-exist in a regulatory environment. This coexistence will take place alongside new rules and challenges as the CFTC takes the lead on standards ahead.”Many other experts believe that, while privacy coins will find it hard to get regulatory approval, regulators will become more sophisticated toward privacy coins and bring them under their regulatory purview.Nikos Kostopoulos, a blockchain adviser at European Union IT infrastructure firm NetCompany, told Cointelegraph:“While it is foreseen that privacy coins might not have a position in regulated cryptocurrency exchanges, the privacy coins will not be evaporated from the market cap, but rather will find audiences and venues where privacy is fundamental while regulators will become more sophisticated towards their approach to privacy coins — for example with imposed KYC/AML once there is a transaction with fiat currencies or cryptocurrencies.”Recent: Consensus 2022: Web3, unpacking regulations, and optimism for crypto’s futurePrivacy is still a key concern for many in the crypto community, and this concern is amplified when it comes to sensitive information such as financial transactions. This is why privacy coins are so important for preserving and securing users’ interests. They ensure that sensitive user data is not accessible to just anybody and that transactions are conducted privately. Some privacy coins such as Zcash and Dash (DASH) let users choose whether or not to encrypt their transactions, giving them complete control over their data. Multiple reports have shown that less than 1% of crypto transactions account for criminal activity and cash still remains the currency of convenience for criminals. Given all these positives of privacy coins, declaring a full ban on them might cause a threat to user privacy and, ultimately, the underlying technology.

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CAR president urges citizens to understand Bitcoin to bring long-term prosperity

Despite the cryptocurrency market’s prolonged bearish trend, some of its most ardent supporters have not been discouraged. This includes the president of the Central African Republic (CAR), who remains bullish on Bitcoin (BTC) and crypto.Understanding #Bitcoin is crucial to acknowledge its disruptive power to bring long term prosperity. Mathematics don’t account for human emotions.Future generations will look behind at these very moments to our strength & unity in choosing the right path during hard times #BTC— Faustin-Archange Touadéra (@FA_Touadera) June 14, 2022In a tweet shared on June 14, President Faustin-Archange Touadéra reaffirmed his country’s decision to make Bitcoin legal currency. He stated that “Understanding Bitcoin is crucial to acknowledge its disruptive power to bring long-term prosperity,” adding that:”Mathematics doesn’t account for human emotions. Future generations will look behind at these very moments to [celebrate] our strength & unity in choosing the right path during hard times.”Currently, the cryptocurrency market is facing one of its longest and deepest bear markets in history. BTC, the world’s largest digital currency by market capitalization, is down by almost 70% from its all-time high of $68,789 reached in November 2021 according to data from Cointelegraph Markets Pro. The term ‘hard times,’ as used by the President, refers to the recent crypto market downturn, which has harmed all digital assets and resulted in a total market capitalization loss of $370 billion over the course of a single week.The kind of ₿OM₿S we want in Africa #Bitcoin pic.twitter.com/fQY9VUakKU— CRYPTOCURRENCY KENYA (@CryptoHubKE) May 5, 2022

In late April 2022, the CAR government officially recognized Bitcoin as legal currency after passing a bill regulating digital assets in the country. The move made the central African nation the second country to recognize BTC as legal tender after El Salvador did so in Sept. 2021.Related: ‘Nothing issue’ — MicroStrategy CEO plans to hodl Bitcoin ‘through adversity’According to the World Bank, CAR is one of the poorest countries in the world, with a GDP of about $2.4 billion. The country has been beset by political instability and violence for years, making it difficult for residents to access banking services and leading many to turn to cryptocurrency as an alternative way to store value and make payments.The CAR government’s decision to make Bitcoin legal currency was met with a variety of responses. The World Bank, for example, raised its concerns about the move and stated that it will not support the new “Sango” crypto hub launched in the country.

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The crypto industry must do more to promote encryption, says Meltem Demirors

“I like to call myself a future, or aspiring, cult leader,” Meltem Demirors, chief strategy officer of CoinShares — a publicly listed investment firm managing around $5 billion in assets — told Cointelegraph. Demirors, who first entered the Bitcoin (BTC) space in late 2012, further mentioned that it has been “fun to see how big the crypto sector has become,” noting that people from all walks of life are now interested in the cryptocurrency space. As such, Demirors explained that “crypto cults” are bringing people together in a positive manner, especially since it gives people a sense of purpose and belonging. When it comes to regulations — one of the most important topics facing the crypto industry today — Demirors expressed skepticism. “Having been in this industry professionally for eight years, I’m tired of talking about regulations, particularly in the United States,” she said. While U.S. regulators continue to pass frameworks around the treatment of digital assets, Demirors pointed out that there has been “too much talk and not enough cogent action.” Moreover, Demirors remarked that a number of crypto bills are attempting to minimize consumer use of encryption, which she believes to be the backbone of the internet. Demirors elaborated on this topic, along with the development of decentralized autonomous organizations (DAOs) during an interview with Cointelegraph at Consensus 2022. Cointelegraph: What are your thoughts on recent regulatory frameworks in the United States? Meltem Demirors: I do think that the Lummis-Gillibrand bill and the Token Taxonomy Act of 2021 have been good attempts at categorizing and classifying digital assets. But, the challenge I have with so many of the crypto bills and regulations is that all are all focused on financial services and taxation. They are focused on where and how we govern, tax and extract value for the government. Therefore, the biggest issues I’m excited about are those centered around consumer privacy, self-sovereignty and freedom of speech, which are not being addressed in these bills.Unlike so many bills that focus purely on the side of the financial services, the industry needs to focus on crypto infrastructures like data centers, connectivity, computations, semiconductors and the actual plumbing that makes any technology function. We also need to make sure that the U.S. is a friendly jurisdiction for people to develop not only software but also hardware that can be deployed at scale. Today, we have seen no cohesive action on this. The industry has seen a piecemeal approach with the State of New York taking a very draconian approach, while states like Texas and Wyoming want to become homes for crypto mining. Moreover, the right to consumer and financial privacy are also not being addressed. In fact, most of these bills want more financial surveillance. As an industry, it’s important for us to continue to push back on this, particularly in a world where central bank digital currencies (CBDCs) are being explored. CT: Any suggestions on what the crypto industry can do to preserve privacy and financial freedom? MD: I think the biggest movement we’ve seen has been the crypto wars — and I’m talking about cryptography. In the early 90s, there was a massive debate around encryptions and the use of encryption for a variety of consumer-focused applications. Encryption is truly the backbone of the internet and we are seeing a number of bills now attempting to minimize consumer use of encryption and to create back doors. Yet, once backdoors to encryption are created, they won’t just be used to surveillance consumers but rather will be used against our government. This is now a matter of national security. Therefore, I think the war of encryption is still alive and well. I also think there is more that we can do as an industry to preserve and promote encryption instead of using taxpayer dollars to run challenges that try to crack encryption algorithms, like SHA-256, which is the backbone of Bitcoin. I also think that preserving code and speech is important. For example, open-source code is a big part of the crypto community, along with anonymous developers. Unfortunately, there are a number of efforts underway to hold open-source developers criminally liable for how their software is leveraged, which is antithetical to the entire open-source movement. In addition, we need to consider the treatment of virtual asset service providers, or VASPs. For example, if someone is running a node or if two people are transacting peer-to-peer on an open blockchain protocol, classifying them as VASPs and forcing them to comply with regulation is concerning. There is a bill now that makes people report their social security numbers to anyone sending crypto over an amount of $10,000. This is preposterous and we don’t have that same rule for cash. These are all factors around privacy that make it easier for the government to target individuals that are in the crypto space, so it’s important that the industry pushes back. CT: You mentioned DAOs during your talk at Consensus, can you share your thoughts on this area, please?MD: Yes, DAOs have been interesting because a lot of what I do at CoinShares is focused on strategy, which means investing, but also looking at what’s happening in the crypto industry and how it’s relevant to the world of investing. So, I experiment with things happening in crypto. For example, I joined a few DAOs recently. I joined Friends With Benefits last year, which was my first DAO experience. I also started two DAOs with friends. One is Hashes DAO, which is an art collecting-focused DAO. The second is a DAO called DAO Jones, which is a funny play, but it’s an investment DAO that uses Syndicate, a platform that allows users to create investment clubs as DAOs that fit into a legal framework. I’ve learned a lot about DAO tooling, infrastructure and the exciting opportunities around DAOs, along with the inherent limitations. The biggest thing I’ve learned though, is that all communities need leadership. In particular, communities need strong principled leadership to uphold and reinforce community values but to also push the community forward. We have seen so many communities in crypto begin with strong leaders, but then those leaders leave and challenges are created that splinter the community. We saw this with Bitcoin — we saw a struggle for power five years after Satoshi left the Bitcoin community. Overall, I think DAOs are an exciting area of experimentation, but from an investing perspective, I think DAOs are still very early. There are many people building DAO tooling right now without understanding what emergent behaviors we need to focus on. Governance is not a technology or crypto problem but rather a very human problem that has existed since the early days of civilization. While I’m excited about the future of DAOs, I think there is still a lot of work to do before DAOs get to scale and become implemented in ways that allow for good governance. CT: What are you most excited about in terms of the crypto space moving forward? MD: I’m really excited about community-owned infrastructure, or physical infrastructure. Today, crypto is so dependent on centralized service providers like AWS being used for utilities. But, there are a number of efforts underway to build peer-to-peer networks that will enable us to perform computations, have better telecommunications, better broadband connectivity and decentralize and make the energy grid more resilient. I’m excited about taking crypto and combining it with energy computations and connectivity in new ways. This will also make our global systems more resilient, which typically comes with decentralization.I’m also excited about more developer tools and infrastructure. Right now, the surface area of crypto is so large, so it’s been difficult for people to enter the space to build. Standardization, modulation and convergence around core consensus algorithms are really important. Experimentation has been fun, but we are now learning what does and doesn’t work. Also, thinking about decentralized identifiers and verifiable credentials, along with using Bitcoin as a communication protocol excites me.

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Consensus 2022: Web3, unpacking regulations, and optimism for crypto’s future

“Everything is bigger in Texas” proved to be true during Consensus 2022. The crypto conference took place June 9–12 in Austin, Texas, this year, attracting 17,000 people from across the globe, despite the 100-degree plus weather. According to the event sponsors, Consensus 2018, which was held at the Hilton Hotel in New York, had previously drawn in almost 9,000 attendees. Caitlin Long, CEO of Custodia — the Wyoming-based digital asset bank — told Cointelegraph that the event this year speaks volumes. “New York has sent a lot of this industry fleeing to places like Austin, Wyoming and Miami. It will be interesting to see if New York makes a comeback.”Aside from its new location, current market conditions were another defining factor of the event. However, attendees remained optimistic about the crypto ecosystem as a whole. In general, new projects and the rise of Web3 were the main discussion points rather than cryptocurrency prices. Ray Youssef, founder and CEO of Paxful — a peer-to-peer cryptocurrency marketplace — told Cointelegraph that crypto winters allow for building phases to start, which he fully supports. “We are now seeing projects build platforms that are real and empowering.”Building the crypto ecosystem in a bear marketTo Youssef’s point, Web3 and new tools to advance crypto ecosystems were hot topics of discussion. For example, Meltem Demirors, chief strategy officer of CoinShares — a digital asset investment firm — told Cointelegraph that despite the bear market, she has seen an increase in people interested in different facets of the crypto industry:“There are different niches and pockets of crypto I’m now seeing, some of which I haven’t even heard of. For example, the STEPN group is here, which is a whole move-to-earn movement. The music NFT and fashion NFT scene is also big here. These are newer communities I’ve read about and have engaged with, but seeing them congregate and host their own events has been really fun.”Demirors gave a keynote at the event on cults and how the crypto community is currently creating shared identity, belief systems and lifestyle rituals around emerging projects. “Cults usually have a negative connotation, but there is a massive crisis of meaning in our world today. People no longer focus on their occupation, religion or nationality. Crypto is filling this interesting role, bringing together people through memes, capitalism and community values,” she explained. As such, Demirors noted that she believes “crypto cults” are attracting many people because it provides a sense of purpose, along with capital. “There is an interesting convergence happening,” she said.While the crypto space continues to attract more participants, Staci Warden, CEO of the Algorand Foundation, told Cointelegraph that Alogrand views this crypto winter as an opportunity for building. “We think that there will be some shakeout in the industry and we are ready to innovate,” she remarked. Specifically, Warden explained that one area the Algorand community is focused on is what Web3 means for financial inclusion. “With Web2, everything went back to huge platforms, but with Web3, creators and contributors receive incentives and benefits for their participation.” With the rise of Web3 on the horizon, Warden shared that Algorand is “laser focused on real world use cases of financial inclusion and the monetization of creators for the work they do.”Web3 is also impacting a number of mainstream industries such as fashion and the creator economy. Shedding light on this, Justin Banon, co-founder of the Boson Protocol — a decentralized network for commerce — told Cointelegraph that last year, the crypto sector witnessed the nonfungible token (NFT) craze, which has prompted the fashion industry’s participation. “Physical fashion isn’t going away, but digital is arriving. It’s become obvious that the two will combine and become facets of the same thing,” he said. Banon also mentioned that a majority of the world’s population will undoubtedly spend more time in the digital world, which is why he believes there will be a need for digital fashion. “This will allow us to identify and differentiate ourselves,” he said. Regarding the creator economy, Solo Ceesay, co-founder of Calaxy — an open social marketplace for creators — told Cointelegraph that Calaxy recently raised $26 million in strategic funding to expand its operations and development efforts.Cointelegraph interviewing Solo Ceesay (left) and Spencer Dinwiddie (right) of Calaxy at Consensus 2022. Source: Rachel WolfsonWhile the emergence and growth of Web3-focused projects are notable, it’s also important to point out that current market conditions have been challenging for other key players. Peter Wall, CEO of Argo Blockchain — a cryptocurrency mining company — told Cointelegraph that many Bitcoin miners raised equity in 2021, but this has become difficult for some, given the bear market. “There are only two ways for miners to raise capital now, which is either through debt or by selling Bitcoin,” he said. Although this may be, Wall elaborated that only miners with a reputable track record will receive loans. “They need to be able to execute with clear plans, while not being over committed to machine purchases and bills they can’t pay.”Crypto’s regulatory landscape in the United StatesRegulations were also heavily discussed at the conference. This shouldn’t come as a surprise, as a number of key regulatory events took place leading up to the event. For example, the bipartisan crypto bill, also known as the “Responsible Financial Innovation Act,” was introduced in the United States Senate on June 7, 2022. According to a statement, the bipartisan bill sponsored by senators Cynthia Lummis of Wyoming and Kirsten Gillibrand of New York, “addresses CFTC and SEC jurisdiction, stablecoin regulation, banking, tax treatment of digital assets, and interagency coordination.”Senator Pat Toomey, the ranking member of the Senate Banking Committee, told Cointelegraph that he thinks the bipartisan bill is “terrific,” further noting that the bill contains modest differences in how stablecoins are treated compared with his stablecoin approach, which was drafted in April this year. Toomey added that while he has not released a bill yet, there are “bridgeable differences” between his draft and the legislation from Lummis and Gillibrand:“Kirsten Gillibrand said on our panel that we can bridge those differences on some of the things I said, but it’s also very constructive to have a Democrat and Republican senator introducing a pretty comprehensive bill that sensibly creates a regulatory framework that is meant to allow this space to thrive. From that point of view, I think it’s very constructive.”Echoing Toomey, Long mentioned that the bipartisan bill is an important advancement for the crypto sector, stating, “This is the bill to watch in Washington. There are now 50 different crypto bills that have been introduced in Congress and there is only one that is bipartisan sponsored by the powerful senator from New York State, along with the powerful senator on senate banking from Wyoming, which is the state leading digital assets. That is quite a combination.”Long added that stablecoin regulations and central bank digital currencies (CBDCs) will be major topics of discussion this year. For instance, although President Biden released an executive order in March 2022 calling for the research and development of a potential U.S. central bank digital currency, Long remarked that she does not believe the U.S. will issue a CBDC. “The Federal Reserve will put out the FedNow Service by the end of this year, which is only six months away. However, no rules have been revealed yet, so we don’t know what this will look like.”Moreover, Long predicts that stablecoins will be a main focus for regulators, pointing out that Wyoming’s special purpose depository regime falls into this category, alongside The New York State Department of Financial Services (DFS) regulatory guidance for U.S. dollar-backed stablecoins issued by DFS-regulated entities. Yet, Long explained that “it will be a couple of years before we realistically see what happens in terms of a law that actually passes” regarding stablecoins. She further remarked that regulators have had the opportunity to create regulations around stablecoins but have yet to act. She said:“Regulators have sat on legitimate applications of parties that have sought permission, while the scams have proliferated in this industry. It’s tough, but I firmly believe the regulators could have acted sooner. A lot of people wouldn’t have been hurt if they had done so.”Cointelegraph meeting with Senator Pat Toomey at Consensus 2022. Source: Rachel WolfsonTo Long’s point, Toomey said that he thinks there is now pressure and momentum to pass stablecoin legislation. “U.S Secretary of the Treasury Janet Yellen said in front of the banking committee that we should do it this year and I think that is realistic,” said Toomey. He added that the pressure has become greater due to the recent collapse of the Terra ecosystem.“I think it influences legislation in the sense that it has drawn attention to the crypto space, and it’s a wake up call to the federal government. My own view is that algorithmic stablecoins should be treated separately from fiat/asset backed stablecoins,” he said, adding, “But let’s be clear: Terra was very large, and when something that large can collapse, the natural inclination of a regulator is to look out across the field to see what other similar instruments and products are there, and the dangers that may arise.”Optimism reignsGiven the current state of cryptocurrency markets, it’s notable that many ecosystem participants remained optimistic about the future. In particular, Austin’s cryptocurrency community appears to be thriving, as it has become a hot spot for crypto mining companies and a number of Web3 projects.Patrick Stanley, core contributor to City Coins — thecryptocurrency project that has been implemented in New York State and Miami — told Cointelegraph that AustinCoin (ATX) can be activated at any time, noting that there is a group currently working on a proposal for getting new CityCoins up and running. “We want to be more deliberate about launching AustinCoin. We already have people on the ground in Austin, we have the capital, and there is clear commitment. We just want to ensure all of this before activating AustinCoin.” Stanley added that Austin Mayor Steve Adler is a “cryptocurrency progressive,” noting that he understands that CityCoins leaves less of a footprint than having big tech companies move to Austin. “CityCoins is like getting the tax revenue of a large company without the footprint and real estate going up. This has been very compelling to Mayor Adler,” he shared.Demirors also pointed out that she is excited about the advancement of crypto infrastructures, such as new data centers, semiconductors and the overall “plumbing” that makes cryptocurrency and any technology function properly. “We need to make sure the U.S. is a friendly jurisdiction for people to develop not only software, but also hardware to deploy at scale,” she said. While Demirors recognizes that most legislation currently isn’t being drafted around this aspect, she is hopeful that Texas and other states continue to take a welcoming approach to initiatives such as mining. Demirors also noted that the right to consumer and financial privacy isn’t being considered in crypto regulations, remarking that most of these bills want more financial surveillance. “I think as an industry, it’s important for us to push back on that, particularly in a world where CBDCs are being explored.”Finally, it’s important to point out that the crypto industry is continuing to bring on key players to help with advancements. For example, Grayscale Investments recently hired Donald B. Verrilli, a former U.S. Solicitor General, to join the firm to help push for a spot Bitcoin exchange-traded fund (ETF). Verrilli mentioned during a press conference at Consensus last week that he is trying to take public policy and move it in a constructive direction.As such, Verrilli aims to convince the U.S. Securities and Exchange Commission (SEC) to convert Grayscale’s Bitcoin Trust (GBTC) into a spot-based ETF. In order to accomplish this, Verrilli explained that it’s “arbitrary and capricious” to treat cases that are alike in a different manner, in which he referenced the SEC’s approval of a Bitcoin futures ETF, but not a Bitcoin-spot ETF. “It seems like this is a common sense point. I am new to this, but looking at it so far, it’s very hard to see what argument there could be for treating these things differently.”

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