Značka: government

Singapore’s Temasek sees ‘reputational damage’ due to FTX, official says

Singapore government-owned investment firm Temasek has suffered a lot more than just financial losses due to investing in FTX, according to Deputy Prime Minister Lawrence Wong.Wong, who is also the finance minister, believes that Temasek’s $275 million investment in FTX has caused significant damage to the company’s reputation. The official addressed the growing criticism over Temasek’s FTX exposure at a parliament meeting on Nov. 27, according to a report by the South China Morning Post.The prime minister emphasized that the collapse of FTX was a result of a “very badly managed company” as well as possible fraud and misappropriation of user funds.“What happened with FTX, therefore, has caused not only financial loss to Temasek but also reputational damage,” the official said, adding that Temasek has launched an internal investment review to improve processes and draw lessons for the future.Wong stressed that investments by other major institutional investors like BlackRock and Sequoia Capital do not mitigate that reputational damage.Temasek, which is fully owned by the minister for finance but operates independently, said on Nov. 17 that it wrote down its entire $275 million FTX investment. The amount accounted for just 0.09% of Temasek’s $403 billion portfolio as of March 2022. According to Wong, FTX-related losses would not affect investors’ contribution to the net investment returns contribution, which is the amount of the government revenue coming from interest earned on its reserves.Apart from addressing concerns around FTX and Temasek, Wong also argued that Singapore had no ambitions to become a crypto hub but rather seeks to be a “responsible and innovative digital asset player.”“Some of the earlier optimism about blockchain technologies has been proven to be […] not well-placed. I think there’s a more realistic sense of what these technologies can do,” Wong stated. He also emphasized that crypto investors must be prepared to lose all their investments on crypto, adding: “No amount of regulation can remove this risk.”Related: FTX collapse put the Singapore government in a parliamentary hot seatDespite Temasek writing down its investment in FTX, the state-owned company apparently still holds investments in many other industry platforms. Despite not directly investing in crypto, Temasek is known for participating in multiple investment rounds for big crypto companies, including Binance and Amber Group.In August, Temasek also reportedly led a $110 million strategic funding round for the major metaverse and blockchain gaming company Animoca Brands.Temasek did not immediately respond to Cointelegraph’s request for comment.

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European Central Bank blasts Bitcoin —community responds

In light of the recent FTX collapse and liquidity scandal, regulators in the European Union have joined other global lawmakers in a push for more clear guidelines and regulations on cryptos.The European Central Bank (ECB) released a blog post titled “Bitcoin’s last stand” on Nov. 30, which summarized the financial career of Bitcoin (BTC) amid current price fluctuations. However, instead of outlining the entire picture, which would include both up and downs of the cryptocurrency’s lifespan thus far, it only portrayed its shortcomings.Written by Ulrich Bindseil and Jürgen Schaaf, the director general and advisor of the ECB, the piece says the digital currency is on “the road to irrelevance.” It also claimed that BTC is hardly used for legal transactions and that the regulatory attention it is currently receiving from lawmakers around the world can be “misunderstood as approval.” Additionally, it warned banks on interacting with the digital currency as it could taint their reputation. On Twitter the organization tweeted that any price stabilization BTC may incur now will be artificially induced: The apparent stabilisation of bitcoin’s value is likely to be an artificially induced last gasp before the crypto-asset embarks on a road to irrelevance. #TheECBblog looks at where bitcoin stands amid widespread volatility in the crypto markets.Read more https://t.co/Hk1LuYX2de pic.twitter.com/I3Uidks8Xo— European Central Bank (@ecb) November 30, 2022However, where there is crypto slander by traditional, centralized financial institutions, there is also the crypto community ready with responses to debunk and defend its assets.The tweet from the ECB alone received hundreds of responses, with the crypto community fact-checking the claims in the article and highlighting the background of its authors.One commenter tweeted on the background of Bindseil and pointed out a potential conflict of interest, as he has penned various articles on central bank digital currencies (CBDC) and their use cases.Author : Ulrich Bindseil I will just leave that here, so everybody knows about the conflict of interest. #Bitcoin pic.twitter.com/EKz9Mx3ndT— ₿aseload (@Endorsen) November 30, 2022

Another user said, while they tried to read it with an open mind, the paper’s claims of BTC not being used for legal transactions and rather “illicit activity” were outdated. I clicked on this article with an open mind, willing to have my mind changedBut it opens with a provable lieThe vast majority of Bitcoin usage is for legal spending, for-profit speculation, and gambling – not “illegal transactions”It’s not 2012 anymore… This is a joke. pic.twitter.com/037aehMyEN— FatMan (@FatManTerra) November 30, 2022

Others responded with the tried and true meme of “BTC is dead” while still having a rising value of the other. Some even reached back to Dec. 2021 to point out the ECB’s incorrect predictions of inflation decreases in 2022.In a similar vein, the decreased value of the Euro was also drawn as a comparison in many responses from the community. Related: FTX fiasco boosts Bitcoin ownership to new highs: Analysts weigh inMeanwhile, digital currency exchanges continue to spread across the European Union, with Bitpanda recently obtaining a crypto license in Germany and Gemini getting the greenlight in both Italy and Greece.

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National Bank of Ukraine releases draft concept for digital hryvnia

The National Bank of Ukraine (NBU) has introduced a draft concept for its central bank digital currency (CBDC) candidate digital hryvnia, or e-hryvnia.Ukraine’s central bank on Nov. 28 released a statement on the concept of e-hryvnia, which aims to perform all the functions of money by supplementing cash and non-cash forms of the hryvnia as its key purpose.The NBU said it has presented the e-hryvnia concept and continues developing the CBDC project with participants of the virtual assets market, payment firms and state bodies. According to the announcement, the central bank is currently considering and developing three possible CBDC options, depending on design and main characteristics.The first option describes the e-hryvnia for retail non-cash payments with the possible functionality of “programmed” money through smart contracts. A retail e-hryvnia would enable the implementation of targeted social payments and the reduction of government expenditures on administration, the NBU said.The second CBDC option envisions the e-hryvnia available for usage in operations related to cryptocurrency exchange, issuance and other virtual asset operations. “The e-hryvnia can become one of the key elements of quality infrastructure development for the virtual assets market in Ukraine,” the announcement notes.The third option includes the e-hryvnia to enable cross-border payments in order to provide faster, cheaper and more transparent global transactions.“The development and implementation of the e-hryvnia can be the next step in the evolution of the payment infrastructure of Ukraine,” Oleksii Shaban, director of NBU payment systems and innovative development department, said in the statement. He added that a Ukrainian CBDC could have a positive impact on ensuring economic security and strengthening the monetary sovereignty of the state, as well as e sustainable economic growth.Related: Russia aims to use CBDC for international settlements with ChinaAccording to the announcement, the Ukrainian Intellectual Property Institute registered the trademark “e-hryvnia” for the NBU in October 2022.As previously reported, the NBU has been actively studying the possibility of issuing a CBDC in recent years, hiring blockchain developers and cooperating with major industry projects like the Stellar Development Foundation.According to the regulator, the NBU launched a pilot project ​to issue the e-hryvnia for blockchain-based retail payments back in 2018.

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Tokenized government bonds free up liquidity in traditional financial systems

A handful of government-backed financial institutions have been exploring tokenization use cases to revolutionize traditional financial systems. For instance, El Salvador’s Bitcoin Volcanic bond project has been in the works for over a year and aims to raise $1 billion from investors with tokenized bonds to build a Bitcoin city. The Central Bank of Russia has also expressed interest in tokenized off-chain assets. In addition, the Israeli Ministry of Finance, together with the Tel Aviv Stock Exchange (TASE), recently announced the testing of a blockchain-backed platform for digital bond trading. Cointelegraph Research’s 2021 Security Token Report found that most securities will be tokenized by 2030. While notable, the potential behind tokenized government bonds appears to be massive, as these assets can speed up settlement time while freeing up liquidity within traditional financial systems. Brian Estes, CEO of Off the Chain Capital and a member of the Chamber of Digital Commerce, told Cointelegraph that tokenizing a bond allows for faster settlement, which leads to reduced costs. “The time of ‘capital at risk’ becomes reduced. This capital can then be freed up and used for higher productive use,” he said. Factors such as these have become especially important as inflation levels rise, impacting liquidity levels within traditional financial systems across the globe. Touching on this point, Yael Tamar, CEO and co-founder of SolidBlock — a platform enabling asset-backed tokenization — told Cointelegraph that tokenization increases liquidity by transferring the economic value of a real-world asset to tokens that can be exchanged for cash when liquidity is needed. “Because tokens communicate with financial platforms via a blockchain infrastructure, it becomes easier and cheaper to aggregate them into structured products. As a result, the whole system becomes more efficient,” she said. To put this in perspective, Orly Grinfeld, executive vice president and head of clearing at TASE, told Cointelegraph that TASE is conducting a proof-of-concept with Israel’s Ministry of Finance to demonstrate atomic settlement, or the instant exchange of assets. In order to demonstrate this, Grinfeld explained that TASE is using the VMware Blockchain for the Ethereum network as the foundation for its beta digital exchange platform. She added that TASE will use a payment token backed by the Israeli shekel at a one-to-one ratio to conduct transactions across the blockchain network. Recent: TON Telegram integration highlights synergy of blockchain communityIn addition, she noted that Israel’s Ministry of Finance will issue a real series of Israeli government bonds as tokenized assets. A live test will then be performed during the first quarter of 2023 to demonstrate atomic settlements of tokenized bonds. Grinfeld said:“Everything will look real during TASE’s test with the Israel’s Ministry of Finance. The auction will be performed through Bloomberg’s Bond Auction system and the payment token will be used to settle transactions on the VMware Blockchain for Ethereum network.”If the test goes as planned, Grinfeld expects settlement time for digital bond trading to occur the same day trades are executed. “Transactions made on day T (trade day) will settle on day T instead of T+2 (trade date plus two days), saving the need for collateral,” she said. Such a concept would therefore demonstrate the real-world value add that blockchain technology could bring to traditional financial systems. Tamar further explained that the process of listing bonds and making them available to institutions or the public is very complex and involves many intermediaries. “First the loan instruments need to be created by a financial institution working with the borrower (in this case, the government), which will be processing the loans, receiving the funds, channeling them to the borrower and paying the interest to the lender. The bond processing company is also in charge of accounting and reporting as well as risk management,” she said. Echoing Grinfeld, Tamar noted that settlement time can take days, stating that bonds are structured into large portfolios and then transferred between various banks and institutions as a part of a settlement between them.Given these complexities, Tamar believes that it’s logical to issue tokenized government bonds across a blockchain platform. In fact, findings from a study conducted by the crypto asset management platform Finoa and Cashlink show that tokenized assets, such as government bonds, could result in 35%–65% cost-savings across the entire financial system value chain. From a broader perspective, Perianne Boring, founder and CEO of the Chamber of Digital Commerce, told Cointelegraph that tokenized bonds also highlight how technology-driven innovations in financial instruments can provide investors with alternative financial products. “Generally, such bonds would come with reduced costs and more efficient issuance, and come with a level of transparency and monitoring capabilities that should appeal to investors who want greater control over their assets,” she said. Features such as these were recently demonstrated on Nov. 23, when Singapore’s DBS Bank announced it had used JPMorgan’s blockchain-based trading network Onyx to execute its first tokenized intraday repurchase transaction. Banks use repurchase agreements — also known as repos — for short-term funding by selling securities and agreeing to repurchase them later. Settlement usually takes two days, but tokenizing these assets speeds this process up. A DBS spokesperson told Cointelegraph that the immediate benefits of tokenized bonds or securities result in an improvement in operational efficiency, enabling true delivery vs. payment and streamlined processes with golden copies of records.Challenges may hamper adoption While tokenized bonds have the potential to revolutionize traditional financial systems, a number of challenges may slow adoption. For example, Grinfeld noted that while Israel’s Ministry of Finance has expressed enthusiasm in regards to tokenization, regulations remain a concern. She said: “To create new ways of trading, clearing and settlement using digital assets, a regulatory framework is needed. But regulations are behind market developments, so this must be accelerated.”A lack of regulatory clarity may indeed be the reason why there are still very few regions exploring tokenized government bonds. Varun Paul, director of central bank digital currencies (CBDCs) and financial market infrastructure at Fireblocks, told Cointelegraph that while many market infrastructure providers are exploring tokenization projects behind the scenes, they are waiting on clear regulations before publicizing their efforts and launching products into the market. Fireblocks is currently working with TASE and Israel’s Ministry of Finance to provide secure e-wallets for the proof of concept, which will enable the participating banks to receive tokenized government bonds. In addition to regulatory challenges, large financial institutions may find it difficult to grasp the technical implications of incorporating a blockchain network. Joshua Lory, senior director of Blockchain To Go Market at VMWare, told Cointelegraph that market education across all ecosystem participants will accelerate the adoption of the technology. Yet, Lory remains optimistic, noting that VMware Blockchain for Ethereum’s beta was announced in August of this year and already has over 140 customers requesting trials. While notable, Estes pointed out that blockchain service providers must also take into account other potential challenges such as back-end programming for brokerage firms to make sure they are equipped to report bonds accurately on their statements. Recent: After FTX: Defi can go mainstream if it overcomes its flawsAll things considered though, Estes believes that the tokenization of multiple assets is the future. “Not only bonds, but stocks, real estate, fine art and other stores of value,” he said. This may very well be the case, as Grinfeld shared that following the proof-of-concept, TASE plans to expand its range of tokenized asset offerings to include things such as CBDCs and stablecoins. “This POC will lead us toward a complete future digital exchange based on blockchain technology, tokenized assets, e-wallets and smart contracts,” she said. Adoption will likely take time, but Paul mentioned that Fireblocks is aware that financial market participants are interested in taking part in replicating TASE’s model in other jurisdictions: “We anticipate that we will see more of these pilots launching in 2023.” 

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Canada crypto regulation: Bitcoin ETFs, strict licensing and a digital dollar

In October, Toronto-based Coinsquare became the first crypto trading business to get dealer registration from the Investment Industry Regulatory Organization of Canada (IIROC). That means a lot as now Coinsquare investors’ funds enjoy the security of the Canadian Investment Protection Fund in the event of insolvency, while the exchange is required to report its financial standing regularly. This news reminds us about the peculiarities of Canadian regulation of crypto. While the country still holds a rather tight process of licensing the virtual asset providers, it outpaces the neighboring United States in its experiments with crypto exchange-traded funds (ETFs), pension funds’ investments and central bank digital currency (CBDC) efforts. An era of restricted dealersCoinsquare, which happens to be Canada’s longest-operating crypto asset trading platform, benefits from its new legal status as none of its competitors can currently boast the same legal footing. By publishing time, all other local players must have the status of a “restricted dealer,” signaling that they’ve made their registration bid and now await IIROC’s decision. The Guidance for Crypto-Asset Trading Platforms was introduced by IIROC and the Canadian Securities Administrators (CSA) in 2021. It requires crypto businesses dealing with security tokens or crypto contracts to register as “investment dealers” or “regulated marketplaces.” All local companies have been given a two-year transitory period, during which they should start the registration process and, in some cases, obtain the “restricted dealer” temporary registration. The list of “restricted dealers” that have been granted a two-year relief period to operate amid the ongoing registration process is rather short and includes mainly local companies, such as Coinberry, BitBuy, Netcoins, Virgo CX and others. These companies still enjoy a right to facilitate buying, selling and holding of crypto assets, but what lies ahead of them is the stringent compliance procedure necessary to continue their operations after 2023. For example, Coinsquare had to obtain an insurance policy that includes an endorsement of losses of crypto assets and fund a trust account maintained at a Canadian bank. The prosecutors have been watching closely for any non-compliance. In June 2022, the Ontario Securities Commission (OSC) issued financial penalties against Bybit and KuCoin, claiming violation of securities laws and operating unregistered crypto asset trading platforms. It obtained orders banning KuCoin from participating in the province’s capital markets and fining the exchange for more than $1.6 million.The land of experiments At the same time, there are adoption cases in Canada that sound radical to the United States. For example, there are dozens of crypto ETFs to invest in the country, while Grayscale still has to lead the court battle with the U.S. Securities and Exchange Commission (SEC) for a right to launch its first ETF. The world’s first Bitcoin (BTC) ETF for individual investors was approved by the OSC for Purpose Investments back in 2021. Purpose Bitcoin ETF accumulates around 23,434 BTC, which is actually a prominent symptom of the bear market. In May 2022, it held around 41,620 BTC. The major outflow from the Purpose Bitcoin ETF occurred in June, when about 24,510 BTC, or around 51% of its asset under management, were withdrawn by investors in a single week. Recent: FTX’s collapse could change crypto industry governance standards for goodAnother breakthrough in Canadian crypto adoption erupted when the country’s largest pension funds started to invest in digital assets. In 2021, the Caisse de Depot et Placement du Québec — one of the largest pension funds in the French-speaking province of Quebec — invested $150 million into Celsius Network.The same month, the Ontario Teachers’ Pension Plan announced its $95-million investment in FTX. Unfortunately, this news didn’t age well as both companies have since collapsed and both pension funds had to write off their investments. Perhaps, in that light, the U.S. Department of Labor’s warning to employers against using pension funds that include Bitcoin or other cryptocurrencies now seems like a prudent precaution. Due to its cold climate, cheap electric supply and light regulation, Canada is among the world’s leading destinations for crypto mining. In May 2022, it accounted for 6.5% of the global BTC hash rate. However, this fall, the firm managing electricity across the Canadian province of Quebec, Hydro-Québec, requested the government to release the company from its obligation to power crypto miners in the province. As the reasoning goes, electricity demand in Québec is expected to grow to the point that powering crypto will put pressure on the energy supplier. The development of the CBDC is another direction where Canada has been moving faster than its neighbor to the south. In March 2022, the Bank of Canada launched a 12-month research project focused on the design of the Canadian digital dollar in collaboration with the Massachusetts Institute of Technology. In October, the Bank of Canada published a research report and proposed several particular archetypes of CBDC as useful for organizing “the possible CBDC designs.” While back in March, there was “no decision made on whether to introduce a CBDC in Canada,” the country’s recent budget amendment contains a small section on “Addressing the Digitalization of Money.” In the statement, the government said consultations with stakeholders on digital currencies, stablecoins and CBDCs are being launched on Nov. 3, although exactly which stakeholders will be engaged remains unclear.The partisan divide The discussion of what could have become Canada’s formal legal framework for crypto — bill C-249 — showed a sharp partisan divide around the topic. A bill for the “encouragement of the growth of the cryptoasset sector” was introduced to the House of Commons in February 2022 by a member of the Conservative party and ex-Minister Michelle Garner. The lawmaker proposed having Canada’s Minister of Finance consult with industry experts to develop a regulatory framework aimed at boosting innovation around crypto three years after the bill’s passage. Despite the voiced support from the local crypto community, the bill didn’t meet much approval among fellow lawmakers. During the second reading on Nov. 21–23, members of other political parties, including the ruling Liberal party, blasted both the proposition and the Conservative party with accusations of promoting the “dark money system,” and Ponzi scheme and bankrupting retirees and as a result, C-249 is now officially buried. While Michelle Garner introduced the bill, Conservative party leader Pierre Poilievre took most of the heat. A former Minister of Employment and Social Development, Poilievre has been advocating for more financial freedom through tokens, smart contracts and decentralized finance. Earlier this year, he urged the Canadian public to vote for him as their leader to “make Canada the blockchain capital of the world.”The next general elections in Canada are scheduled for 2025, and given C-249’s failure and the general condition of the market, it’s not likely that Poilievre and the Conservatives will get broad support in the Parliament for their pro-crypto efforts until that time. Currently, the Conservative party holds only 16 out of 105 seats in the Senate and 119 out of 338 in the House of Commons. What’s nextFrom a trading platform perspective, there are specific challenges that the industry strives to address, Julia Baranovskaya, chief compliance officer and co-founding team member at Calgary-based NDAX, told Cointelegraph. The majority of industry stakeholders would like to see “clear guidelines and a risk-based approach.” Currently, a majority of regulatory authorities in Canada have chosen to apply existing financial industry rules and regulations designed and implemented for the traditional financial industry.However, Baranovskaya highlighted that in recent years, regulators have been engaging in a closer dialogue with the crypto industry. The Securities Commission has created a sandbox and encouraged crypto asset trading platforms and innovative types of businesses offering alternative financial instruments to join. The IIROC has also been leading a dialogue with the industry participants to understand business models better and identify how the current framework can be applied to them.Recent: Bitcoin miners look to software to help balance the Texas gridBut, the challenges of the fragmented regulatory framework and the lack of crypto asset-specific regulations are still here. Most of the existing regulations are based on the product, but with the constantly evolving crypto space, the product-based approach “would always stay a few steps behind.” In Baranovskaya’s words: “Understanding the underlying technology behind crypto assets and De-Fi products that work out a flexible but robust regulatory regime that can adjust to the ever-changing crypto asset space is essential.” 

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Trouble in the Bahamas following FTX collapse: Report

Following the collapse of crypto exchange FTX, which was headquartered in the island nation of Bahamas, Bahamians are reportedly still trying to find a way to make sense of everything, while remaining optimistic about the future. According to a report by the WSJ, the island nation — which encouraged cryptocurrency companies to feel at home with their “copacetic regulatory touch” — has been rocked by the implosion of FTX. The Bahamas, which was also hard hit by hurricane Dorian in 2019 and the pandemic shortly afterward in 2020, was already struggling to find ways to strengthen its economy which relies heavily on tourism and offshore banking for a bulk of its GDP. It appeared that the prime minister of the Bahamas, Philip Davis, and his government believed crypto could play a critical role in the island’s economic recovery. Now, the community suggests that FTX’s sudden implosion has left a trail of unemployment on the tiny 80-square-mile island. While functioning at full capacity, FTX provided employment for locals, as it reportedly spent over “$100,000 a week on catering” and also set up a private shuttle service to transport workers around the island. FTX also hired a number of local Bahamians in areas such as logistics, events planning, and regulatory compliance, according to the WSJ. With the collapse of FTX, many high-spending foreigners who worked for the company and once boosted the local economy have reportedly fled the island, leaving Bahamanian security guards to now guard “nearly vacant buildings.”Related: SBF, FTX execs reportedly spend millions on properties in the BahamasIn the aftermath of the fall of FTX, some crypto community members have said they feel no sympathy for the effects of the collapse of FTX on the tiny island nation.A contributor on the Hacker news with the username matkoniecz commented; “Given that Bahamas help rich people and companies to evade taxes, my sympathy to negative consequences of that are limited.” Another user going by the handle Exendroinient00 shared, “Nothing wrong with inviting every scammer to do scamming on your islands,” in reference to the island’s laws, which seem to incentivize offshore banking activities on its island. On Oct. 18, Cointelegraph reported that the Bahamian securities regulator ordered the transfer of FTX’s digital assets to a wallet owned by the commission “for safekeeping.”According to a statement by the Royal Bahamas Police Force sent to Reuters on Nov 13, an investigation of possible criminal misconduct over the insolvency of FTX is underway by financial investigators and the Bahamas securities regulators. 

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Uzbekistan issues first crypto licenses to two local ‘crypto stores’

As Uzbekistan prepares to adopt a new cryptocurrency framework in 2023, the Uzbek regulators have started issuing regulatory approvals to local crypto service providers.The National Agency for Perspective Projects (NAPP), Uzbekistan’s major cryptocurrency market watchdog, has issued the nation’s first crypto licenses, according to an official announcement released on Nov. 17.The licenses officially authorize the offering of cryptocurrency-related services by two “cryptocurrency stores,” including Crypto Trade NET LLC and Crypto Market LLC.According to the information from the NAPP’s electronic license register, both Crypto Trade NET and Crypto Market are based in Tashkent. The data also refers to Kamolitdin Nuritdinov as Crypto Market’s single founder and shareholder. Behzod Achilov is also the single founder and shareholder of Crypto Trade NET.None of the platforms appear to have an operating website at the time of writing.According to the announcement, the NAPP has licensed the two companies based on the presidential decree issued in April 2022, which establishes rules for crypto assets circulation in Uzbekistan.“Crypto shops are designed to provide easier access for citizens to buy or sell crypto assets,” the statement said, adding:“The agency urges citizens to be as vigilant as possible and not to use the services of electronic platforms that have not received a license to operate on the territory of the Republic of Uzbekistan in the prescribed manner.”The news comes shortly after the government of Uzbekistan blocked a number of major global crypto exchanges due to the absence of a proper license to offer crypto trading services.Related: Russia intends to launch a ‘national crypto exchange’The block affected crypto giants like Binance and Huobi, while users were reportedly still able to access their websites with the help of VPN services. After announcing the measures in August 2022, the NAPP has since apparently deleted that statement.The latest licenses come amid Uzbekistan actively preparing to adopt a new crypto regulatory framework in a few months. Starting from Jan. 1, 2023, the government of Uzbekistan will allow the provision of crypto services to Uzbek citizens only by licensed cryptocurrency firms.

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Election tally: Does blockchain beat the ballot box?

In October, Greenland was reported to be exploring the feasibility of an online voting platform for its national elections. Among the options being considered is a blockchain-based system. That isn’t entirely surprising. Electronic voting, or e-voting, has long been viewed as a promising use case for blockchain technology. “It’s time for online voting,” wrote Alex Tapscott in a New York Times opinion piece in 2018. “Using blockchain technology, online voting could boost voter participation and help restore the public’s trust in the electoral process and democracy.”It seems especially timely now as large swaths of the world’s population are raising questions about election integrity — most notably in the United States, but in other countries as well, such as Brazil. Tim Goggin, CEO at Horizon State, for one, believes that blockchain-enabled elections represent a “significant improvement” over the way most elections are operated today. Voting machines break down, software fails and election irregularities often create uncertainty and doubt among the voting public. With a public blockchain, by comparison, “it is much easier for voters to trace their vote,” Goggin told Cointelegraph, “and audit an election themselves.” Moreover, if something untoward does occur in the voting process, it is easier to identify it on a decentralized ledger with thousands of nodes than on current tabulation systems “where counting is done behind closed doors,” says Goggin, whose company set up a public election for South Australia in 2019, the first time blockchain technology was used in the voting process for that Australian state.Still, blockchain technology’s potential vis-a-vis public elections has been highlighted off and on for some time now. No country has yet to use blockchain technology in a national election. Marta Piekarska, senior DAO strategist at ConsenSys, recalls working at Hyperledger in 2016, where blockchain voting was discussed as a promising use case. “Six years later, and we are still talking about this,” she told Cointelegraph. “We are still quite far from a situation where any kind of distributed ledger would be considered” — at least in a national election. A few countries, notably Estonia, have been experimenting with systems that allow people to vote online, she further explained. On the other hand, “Netherlands abandoned the idea of doing electronic voting due to some of the concerns around security and authenticity of the votes.” Then, there’s sparsely populated Greenland, where the vast distances make it difficult for people to vote in person. A group of researchers from Concordium Blockchain, Aarhus University, the Alexandra Institute and the IT University will soon be investigating “whether a blockchain-based system will be a more trustworthy e-election on the world’s largest island,” according to the Concordium press release.Ensuring trust is criticalAny voting system requires trust, and trust requires a number of properties — any one of which can be a challenge depending on the circumstances, Kåre Kjelstrøm, chief technology officer at Concordium, told Cointelegraph. For in-person voting, these include: whitelisting: ensuring only eligible voters take part; identification: voters need to prove their identity when casting a vote; anonymity: votes are cast in private and can’t be traced back to the voter; security: locations are secured by the government; and immutability: cast votes can’t be altered.“Any digital system that replaces a manual voting system needs to address at least those same issues to ensure trust and this has proven to be rather tricky to pull off,” Kjelstrøm explained. “But blockchain may prove to be part of a solution.”A public decentralized blockchain ensures immutability by default, after all, “in that any transaction written can never be deleted.” The system is secured by cryptography and “transactions are anonymous, but are open for inspection by anyone in the world,” said Kjelstrøm, adding: “The trick is to maintain privacy and anonymity while ensuring any eligible voter can only cast their vote once. […] This is a current research topic at top institutions.”Permissioned or public chains?“The main problems I see for public elections as opposed to say corporate governance is that there cannot be a permissionless [blockchain] system because voter information is private and we cannot trust all third parties,” Amrita Dhillon, professor of economics in the department of political economy at King’s College London, told Cointelegraph.“The second problem is that of inputting the vote at a location of the voters choice: We cannot prevent anyone coercing voters at the point at which they submit the e-vote,” she added. Recent: Is DOGE really worth the hype even after Musk’s Twitter buyout?Others say permissioned chains aren’t the answer because they are run by a single entity or a group of entities that exert complete control of the system. “Worst case this means that a private blockchain can be tampered with by those self-same guardians and elections rigged,” said Kjelstrøm. This isn’t much of a problem in Western countries, “but in large parts of the world this is not true.” On the other hand, if one can “weave self-sovereign identity (SSI) into the core protocol,” as Concordium, a layer-1 public blockchain, aspires to do, that “may be just the right technology to power public elections,” said Kjelstrøm.That said, Goggin noted that many governments will probably opt to use private blockchains in line with their own privacy/data laws, and there are many ways to set up permissioned blockchains. But, if they don’t at least offer the public an auditable trace of voting records, then they aren’t likely to boost the public’s belief in election integrity. He calls himself “a big fan” of public and distributed blockchains. The privacy question is especially knotty when it comes to public elections. “You should not be able to tell which candidate some individual voted for, or even if they voted at all,” wrote Vitalik Buterin in a blog titled “Blockchain voting is overrated among uninformed people but underrated among informed people.” On the other hand, you want to ensure — and if necessary prove — that only eligible voters have voted, so some information like addresses and citizen status may need to be collected. Buterin viewed encryption as a way to get around the privacy conundrum. Goggin suggests something similar. Horizon State might ask a client to “hash,” i.e., encrypt or scramble, eligible voter identities “before we are provided them, and we then hash those identities again.” This means that neither the client nor Horizon State can readily determine who voted or how they voted. He added: “Voters will be able to see their vote on the chain, but there is no way for voters to prove that it is their vote, given they can see other votes on the blockchain also.”Dhillon, for her part, proposes a compromise where “some parts of the process are centralized,” i.e., voters come to a booth where their identity is checked and they submit their vote, “but subsequent parts of the chain can be decentralized to make them more secure and tamper proof.”Technical limitations?In 2014, the city of Moscow’s Active Citizen e-voting platform was created to let Muscovites have a say in non-political municipal decisions, and in 2017 it used the Ethereum blockchain for a series of polls. The largest of these tapped 220,000 citizens and the voting results were publicly auditable. It revealed some scaling limitations.“The platform based on proof-of-work reached a peak of approximately 1,000 transactions per minute [16.7 transactions per second]. This meant that it would not be easy for the platform to handle the volume if a higher proportion of Moscow’s 12 million citizens participated in the voting,” according to Nir Kshetri, a professor at the Bryan School of Business and Economics at the University of North Carolina at Greensboro. From this, Kshetri and others concluded that this PoW version of the Ethereum blockchain “was not sufficient to handle national elections.” Things might be different in 2023, however, when Ethereum 2.0 implements sharding. This could boost the chain’s speed to as high as 100,000 TPS, which in turn “increases Ethereum blockchain’s attractiveness for voting,” he told Cointelegraph. But blockchains probably still need to be more secure before they are ready for public elections, though this is manageable in Kshetri’s view. “Blockchains are likely to become more secure with increasing maturity.” Buterin, too, said in 2021 that security was still an issue vis-a-vis elections. For that reason, “in the short term, any form of blockchain voting should certainly remain confined to small experiments. […] Security is at present definitely not good enough to rely on computers for everything.”Online transactions, unlike manual systems, “can occur in the blink of an eye,” added Kjelstrøm, and software-driven attacks on an e-voting system can “potentially foil or damage the system or the vote.” Therefore, “any new system would have to be introduced slowly to ensure the voting system remains intact and fully functional.” Governments might begin at a small scale and conduct proof-of-concepts for select non-critical elections first, he said. Usability is critical Technology isn’t the only obstacle that needs to be solved before blockchain voting attains wide adoption. There are political and social challenges, too.“The technology is there,” said Piekarska. “We can do it right now. I mean, decentralized autonomous organizations are governed through online voting now, and they are managing trillions of dollars.” But national elections are a different beast, she suggested, because:“On the government level, your problem is: how do you create a system that is usable by citizens?” One’s constituency is not tech-savvy members of a DAO, “but people like my mom, who is still struggling with online banking,” Piekarska added.How long will it be, then, before the first national election with blockchain voting? “Hopefully not decades, but surely we’re not there yet,” said Kjelstrøm.“It could be tomorrow or it could be in 50 or 60 years,” opined Piekarska, “because there are so many things that need to align.” In Europe, most people trust their governments and the quality of voting is not really an issue, so the push for encrypted auditable ledgers may not be so urgent. In nations with weaker governance where elections are often manipulated, conversely, why would the powers-that-be ever consent to tamper-free blockchain voting? Greenland, which struggles with participation in its general elections primarily because of the great distances that its citizens must travel to vote, might prove an exception.“Yes, some solid governments want to do the right thing but they struggle with the accessibility of in-person voting,” Piekarska acknowledged. “That’s probably where we might see the first movers because there is a very high incentive for them to do it. But these are unique situations.”Recent: Proof-of-reserves: Can reserve audits avoid another FTX-like moment?All in all, it’s critical that people have trust in their voting system, whether manual, electronic or blockchain-based, and building trust can take time. But, as more people become used to accessing public services online, electronic voting should take greater hold in different parts of the world, and once that happens, blockchain voting could catch on, given its well-documented advantages, allowing individuals to audit their own votes. Large-scale blockchain-enabled national elections are probably some years away still. Even so, Goggin has been engaging in discussions recently “about providing elections at that scale,” adding:“While it isn’t the norm yet, governments are beginning to consider the value that online blockchain voting systems can offer in efficiency, accessibility, speed, security and transparency.” 

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Celsius bankruptcy victims get proof-of-claim deadline from US court

The ongoing case of the Celsius bankruptcy continues as the United States Bankruptcy Court in the southern district of New York State approved a new filing deadline.According to an official document, a deadline has been set for those filing any claims against the former digital assets lender. Any person or entity – which covers individuals, partnerships, corporations, joint ventures and trusts – who wishes to do so must submit a proof of claim by Jan. 3, 2023, 5:00 pm Eastern Time. Celsius itself made a thread on Twitter, informing its former users of the recent court deadline approval, along with step-by-step information as to how claims are filed:We created this video to help explain the claims process: https://t.co/jXmL1VQNxg— Celsius (@CelsiusNetwork) November 20, 2022The decision came shortly after the independent examiner in the Celsius case made an allegation that the company had ‘insufficient’ accounting and operational controls in its management of customer funds.Celsius’ activities have been under the watchful eye of regulators. A court ruling on Nov. 1 from the judge overseeing the case ordered a probe to investigate the possibility of Celsius as a Ponzi scheme as customers claimed that the former crypto lender used the assets of new users to cover existing yields and facilitate withdrawals.Additionally, the courts objected to a reopening of the platform for withdrawals and stablecoin sales. The next court hearing in the case is scheduled for Dec. 5 of this year.Related: Celsius users concerned over personal info revealed in bankruptcy caseDevelopments in the Celsius bankruptcy case come on the heels of yet another major crypto platform going under. The ongoing FTX liquidity crisis turned bankruptcy scandal is yet another case that has former users and investors with lost funds at the mercy of regulators.The FTX case is speculated to have over 1 million creditors involved. On Nov. 20, five days after it filed for Chapter 11 bankruptcy, the defunct exchange announced it is beginning a strategic review of its global assets to attempt to sell or reorganize.Lawyers familiar with these types of legal proceedings have speculated that getting funds recovered from FTX could be a process lasting years, possibly “decades.”Ironically, back in early October, the former CEO of FTX, Sam Bankman-Fried, outlined how he would proceed with a bid to acquire Celsius’ assets.

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Breaking down FTX’s bankruptcy: How it differs from other Chapter 11 cases

Collapsed crypto exchange FTX and 130 affiliates filed for bankruptcy in Delaware on Nov 11. Chaos followed as a number of FTX creditors, investors and industry experts began to question what would happen next. Laura Shin, crypto journalist, author and host of the Unchained Podcast, sent a tweet on Nov. 15 questioning whether the alleged inter-loan agreement between FTX and Alameda — the company’s venture capital arm — will affect creditors’ and customers’ ability to get back funds.Could one big venture success out of FTX Ventures be a viable path to recovery for FTX creditors & customers? @wassielawyer and @ThomasBraziel think so, although that could take up to…10 years. full episode: https://t.co/xyHyTC59sw pic.twitter.com/DpDXg1oORK— Laura Shin (@laurashin) November 15, 2022Caitlin Long, founder of Custodia Bank — a Wyoming-based bank specializing in digital assets — tweeted that this would be the most complex bankruptcy in U.S. history.I DON’T THINK IT’S AN UNDERSTATEMENT to predict that @FTX_Official Chapter 11 will be most complex bankruptcy in US history. No clear commercial law roadmap re:#crypto for the judge to follow. US bankruptcy law has “presumption against extraterritoriality.” Every creditor doxxed pic.twitter.com/RFipf062RS— Caitlin Long ⚡️ (@CaitlinLong_) November 11, 2022

According to Long, the international corporate structure of FTX will create complexities. This already appears to be the case, as Bahamian liquidators recently mentioned that their actions may impact the Chapter 11 case, according to Reuters. Moreover, on Nov. 14, FTX filed a document revealing that the exchange may have more than one million creditors involved in the bankruptcy case.How the FTX bankruptcy differsGiven the complexities involved with the FTX bankruptcy, it’s become clear that this case will likely differ from other United States bankruptcy proceedings. Joseph Moldovan, chair of business solutions, restructuring and governance practices at Morrison Cohen — a New York-based law firm — told Cointelegraph that while there have been complex bankruptcy proceedings in the United States, the FTX Chapter 11 case is unique due to the unknowns. “What’s most unusual about the FTX bankruptcy is that the debtors are complex entities with significant amounts of debt. Normally, there are months and months of preparation. Corporate bankruptcies are usually very granular, choreographed and developed processes before they are filed,” he said, adding, “This is simply not the case with the FTX bankruptcy. We (creditors and other interested parties) are still waiting for the most basic information related to the 130 various entities that have filed.” Moldovan added that while bankruptcies like Lehman Brothers and Enron have involved multiple billions of dollars in assets, debt and numerous affiliated entities, the amount of debt, assets and creditors associated with FTX remain unclear. “What you normally have in a U.S. bankruptcy case that you don’t have here are first day hearings, in which the lead counsel for debtors walks the court and the public through why the case was filed. This gives a sense of what the long-term goal is and how it may be achieved. We have not yet had a first day hearing in the FTX case,” Moldova further remarked. As a result, Moldovan noted that FTX creditors and interested parties are still questioning outcomes: “We simply don’t have adequate information to obtain answers yet.” One of the biggest questions that remains to be answered is whether FTX creditors get their money back and if so, when? Margaret Rosenfeld, a corporate securities lawyer, specializing in digital assets, told Cointelegraph that she believes it will take years before any FTX creditors receive a penny back. “This includes FTX customers and other parties FTX may have owed money to,” she said. Moldovan explained that it is not unusual for creditor recovery to take significant time. In the United States, bankruptcy cases claims of creditors have to be filed by a certain date set forth by the bankruptcy court. “Once this date is set, a claims agent will take these forms, scan them, and separate the claims by cases. Each of these claims will then be compared with the company’s books and records,” Moldovan said. Yet, due to the large number of creditors involved with FTX — potentially in excess of one million — along with no current visibility into the company’s bookkeeping practices, Moldovan believes that this process will take longer than normal: “You can’t make creditor distributions until these claims are analyzed. It’s also way too early to speculate on what kind of distribution creditors will get back. Though in mega cases, such as this, full recovery would be unusual.”In regard to creditors who took their money off FTX before the exchange collapsed, Rosenfeld explained that these funds can be clawed back, or voided, by a bankruptcy court. “U.S. bankruptcy rules state that money can be clawed back by the court, so don’t assume that money is yours. If a creditor was paid out 90 days before the bankruptcy, a trustee can ask for that money to be paid back,” she said.While it may take years for FTX creditors to get their investments back, Moldovan also pointed out that the case will be expensive, which will likely result in smaller payouts for creditors. He explained that this is because the funds used to pay for a bankruptcy case come from a bankruptcy “estate,” which consists of all debtors’ property. “The funds used to pay for all of the costs of the bankruptcy case and all of the professionals retained — lawyers, accountants, restructuring advisors, and others — come out of this estate, which therefore reduces the amount available for distribution,” he said. Given this, on Nov. 14, FTX filed what is called a “matrix” motion. Normally, Chapter 11 debtors are required to file a matrix providing a mailing list of names and addresses of creditors or parties of interest involved in a bankruptcy case. Notices and other pleadings filed in the bankruptcy proceeding are then mailed to all of the individuals listed on the matrix. Yet, Moldovan explained that in this case, the administrative costs of compliance “has to be modified in order to reduce estate costs.” Therefore, the debtors have asked the court to authorize email service and make some other accommodations. “The bankruptcy court has the flexibility and power to do this,” he added. What’s next: The restructuring of a distressed company Although a number of unknowns remain in regard to the FTX bankruptcy case, it’s important to point out that John Ray, the new CEO of FTX, will be responsible for the restructuring of the company. Moldovan explained, “Jon Ray is the new chief restructuring officer, meaning he will lead the restructuring of the distressed company and has been delegated with all corporate powers and authorities, including the ability to appoint independent directors to assist in the governance of various entities, which he has already done.” According to aforementioned court document filed on Nov. 14, Ray has identified some of these directors: former Federal district judge Joseph J. Farnan, Jr. will serve as the lead independent director, while FTX debtors have engaged Alvarez & Marsal as proposed financial advisers. The document further states, “The appointment of Mr. Ray and the independent directors ensures that the Debtors can navigate the chapter 11 process independent of any conflicts and involvement in FTX’s prepetition activities.”While details are yet to be revealed around the FTX Chapter 11 case, Moldovan further remarked that one of the benefits of the U.S. bankruptcy court system is the transparency it provides:“Unless there is a need for secrecy, everything will be said in open court in which anyone can listen. All pleadings and other documents in the case will be filed within a publicly accessible website for any member of the general public to visit.”How the U.S. Bankruptcy Court intends to handle a case involving digital assets also remains a concern, especially given the lack of regulatory clarity in the United States, along with regulators who may not be familiar with cryptocurrency. However, Moldovan has expressed optimism regarding the court’s ability to deal with the complexities of the crypto ecosystem.He said, “Everyday in the United States, bankruptcy courts analyze, value, and determine ownership of esoteric assets, crypto being one. At the heart of all this analysis is basic contract law. What do the documents that create the assets, state rights of ownership, and set forth the respective rights and relationships of the parties to the contract actually say? This analysis is fundamental to the bankruptcy process.That the courts have not made certain determinations yet, merely reflects the novelty, meaning the newness, of the particular issues raised in a crypto bankruptcy. However, this will all be sorted out.”

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FTX acquisition no more: Canadian exchange Bitvo backs off the deal

The Canadian cryptocurrency exchange Bitvo has terminated its expected acquisition agreement with FTX to continue operating independently.Bitvo’s shareholder, Pateno Payments, has discontinued the acquisition deal with FTX Canada and FTX Trading in accordance with the agreement terms, Bitvo announced on Nov. 15.The firm emphasized that its operations have not been affected as Bitvo has no material exposure to FTX or any of its affiliated entities. Bitvo trading operations, including withdrawals and deposits, are intact.Bitvo also stressed that it’s not party to the bankruptcy proceedings entered into by FTX and its affiliated entities. Bitvo has also never owned, listed or traded the FTX Token (FTT) or “any similar token,” the announcement notes.“Since inception, Bitvo has operated as an independent, Canadian crypto asset trading platform,” the company stated, adding that the platform has not been offering lending or borrowing services:“Bitvo operates on a full reserve basis, meaning it does not lend customer funds. Bitvo has always chosen to operate in this fashion, and it is a requirement of Bitvo’s regulatory status as a Restricted Dealer registered with the Canadian Securities Administrators […].”As previously reported by Cointelegraph, the troubled cryptocurrency exchange FTX entered into an agreement to purchase Bitvo in June 2022 as part of the company’s expansion plans in Canada. But the plan went wrong as FTX became subject of a massive industry scandal, with the exchange misappropriating user funds for trading on its sister firm Alameda.On Nov. 14, Bitvo officially announced that its acquisition by FTX was still a pending transaction that wasn’t closed. “Digital assets are held with independent third-parties BitGo Inc. and BitGo Trust Company, with over 80% of assets held in cold storage,” the company said.“We are happy the acquisition didn’t close, it would have been devastating to our staff, and just as importantly our customers,” Bitvo CEO Pamela Draper told Cointelegraph. The process between the announcement of the deal in June involved working to satisfy the closing conditions, the most significant of which was regulatory approval, she added.“The Alberta Securities Commission is our principal regulator and Bitvo and FTX were working with them to obtain the required approvals,” Draper said.While Bitvo appears to have managed to back off the deal, there are some crypto companies that have been affected by the FTX crisis due to being acquired by the crypto mogul.The FTX-owned crypto exchange Liquid suspended its fiat and crypto withdrawals on its Liquid Global platform in connection with FTX’s issues, according to an official statement released on Nov. 15. FTX acquired the Japanese exchange and its affiliates in February 2022.Related: Bahamian liquidators reject validity of FTX’s US bankruptcy filingBankrupt crypto lender Voyager Digital took to Twitter on Nov. 16 to update its clients on reorganization efforts following the Chapter 11 filing by FTX and FTX US, stating that customer vote will be canceled and the proposed sale will not move forward. Voyager went bankrupt in July 2022, with FTX US acquiring its assets in September.FTX US Derivatives, another subsidiary of FTX US formerly known as LedgerX, continued to offer fully-collateralized swaps, futures and options on crypto, CEO Zach Dexter said on Nov. 14. He also pointed out that LedgerX is not included in this bankruptcy filing by FTX. “Customer funds remain safe on the LedgerX LLC derivatives platform, which remains available 24/7,” Dexter noted in another tweet on Monday. As previously reported, FTX US acquired LedgerX in an undisclosed deal in August 2021.

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FDIC acting chair says no crypto firms or tokens are backed by agency

Federal Deposit Insurance Corporation acting chair Martin Gruenberg said the agency does not back any crypto firms in the United States, nor does its insurance cover losses from tokens.In a Nov. 15 hearing of the Senate Banking Committee on the oversight of financial regulators, New Jersey Senator Bob Menendez said lawmakers needed to “take a serious look at crypto exchanges and lending platforms” over risky behavior. Gruenberg responded to Menendez’s questions confirming there were “no cryptocurrency firms backed by the FDIC” and “FDIC insurance does not cover cryptocurrency of any kind.”FDIC acting chair Martin Gruenberg addressing the Senate Banking Committee on Nov. 15FDIC insurance normally protects deposits at financial institutions in the United States in the event of bank failure or under other special circumstances. Menendez cited the FDIC issuing cease-and-desist letters in August to companies for allegedly making false representations about deposit insurance related to cryptocurrencies and questioned how the agency, under Gruenberg, would address risks from crypto companies.“This has been a key priority for us,” said Gruenberg. “When we identify some companies in the crypto space and others engaging in misrepresentation, we acted very forcefully, sending letters demanding that they cease and desist and indicating that if they did not comply, we have enforcement authorities available to us under the law that we can bring to bear.”Related: Crypto adoption: How FDIC insurance could bring Bitcoin to the massesGruenberg has been serving as FDIC acting chair since February following the resignation of former chair Jelena McWilliams. On Nov. 14, U.S. President Joe Biden announced he would be nominating Gruenberg for a five-year term as the next FDIC chair. The acting chair will also testify before the House Financial Services Committee on Nov. 16.

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