Tidal Investments has announced a proposal for an actively-managed exchange-traded fund (ETF) that combines investments in bitcoin and gold. This fund aims to provide long-term capital appreciation while mitigating short-term market volatility through dual exposure to these asset classes. Tidal Looks for SEC Approval for a Leveraged Bitcoin and Gold ETF The STKD Bitcoin and […]
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Digital ID Startup Spins off From Polygon Labs, Aims to Mitigate AI-Generated Misinformation Risks
Privado ID, previously known as Polygon ID, has announced its spin-off from Polygon Labs on June 13, 2024. The move aims to meet the global demand for digital identity and reputation solutions that work with both onchain and online data. Privado ID’s technology leverages decentralization and private interaction to reduce cost, complexity, and counterparty risk. […]
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Prisma Finance Suffers $11.6M Hack in Liquid Staking Shockwave, Moves to Mitigate Fallout
The decentralized finance (defi) entity, Prisma Finance, has fallen prey to a security breach, with onchain detectives revealing that .6 million has been pilfered from its liquid staking protocol. Prisma Finance in Turmoil: .6M Lost to Hackers, Emergency Measures Activated On a recent Thursday, blockchain surveillance and safety squads from Peckshield and Cyvers reported the […]
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Telefonica Partners Chainlink to Mitigate SIM Swap Attacks in Web3
Telefonica, one of the world’s largest telecom companies, has partnered with Chainlink, a decentralized oracle provider, to improve security in Web3 environments. Through the use of Chainlink functions and Telefonica’s SIM Swap API implementation, Polygon apps would be able to check if the SIM of a mobile phone has changed in a given period. Telefonica […]
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Expert Calls for Full Cryptocurrency Regulation in Nigeria to Mitigate Digital Asset-Related Financial Crimes
Nigeria must fully regulate crypto activities if it wants to curb financial crimes associated with digital assets, a forensic expert has said. The co-founder of A&D Forensics also called on Nigeria to enact laws that would mandate banks to vet service providers before granting them account access. Curbing Crypto-Related Financial Crimes According to a blockchain […]
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‘Over-Collateralization Can Help Mitigate the Risk of Stablecoin Depegging’ — Pendulum CTO
Despite being touted as a game-changing innovation, the decentralized finance (defi) ecosystem is still not connected to fiat rails largely because of regulatory and compliance issues, Torsten Stuber, the CTO at Pendulum says. According to Stuber, the defi ecosystem will succeed in getting more traditional financial institutions on board once “a substantial amount of liquidity needed to facilitate efficient trading” is in place.
Defi’s Perceived Lack of Regulation a Barrier to Adoption
In addition, Stuber, whose firm uses the Polkadot blockchain to bring fiat networks to the decentralized finance ecosystem, suggested increased education and awareness as the other ways defi proponents can bring traditional financial institutions on board.
The Pendulum CTO also shared his views on central bank digital currencies (CBDCs), and their benefits and likely risks to defi. In written responses sent to Bitcoin.com News Stuber also explained why the integration of CBDCs into defi systems is something that goes against the very essence of decentralization. The CTO also explained why having more collateral could be a solution to the problem of stablecoins depegging during extreme market events.
Below are Stuber’s responses to the questions sent by Bitcoin.com News.
Bitcoin.com News (BCN): The foreign exchange market is believed to be a more than trillion market that runs on the infrastructure built by traditional financial institutions. Some have suggested that forex trading based on decentralized finance (defi) can potentially improve the efficiency of, or access to, this market. However, for this to happen, some argue that the defi space needs to be developed further. To help readers understand why defi is potentially a game changer, can you briefly define decentralized forex trading and how this could potentially benefit traditional businesses, fintechs, or even traders?
Torsten Stuber (TS): Decentralized forex trading refers to the process of conducting foreign exchange transactions on a decentralized platform, typically built on a blockchain network. By leveraging smart contracts and automated market makers (AMMs), decentralized forex trading aims to improve the efficiency, transparency, and accessibility of the traditional forex market.
To be more specific, I particularly want to stress the following advantages. First, decentralized forex trading will lower transaction costs by eliminating intermediaries. Second, blockchain-based platforms record all transactions on a transparent distributed ledger – this can help minimize market manipulation and fraudulent activities. Third, traditional forex markets operate within specific trading hours, depending on the region, whereas decentralized forex trading platforms function round-the-clock, allowing businesses and traders to conduct transactions anytime and anywhere; even more, they facilitate seamless cross-border transactions, bypassing geographical restrictions. Finally, the cryptographic principles underlying blockchain technology provide a more secure infrastructure for conducting forex transactions.
The integration of smart contracts enables the creation of customizable, automated financial services, such as specialized forex automated market makers (AMMs), lending protocols, and yield farming opportunities. This can unlock new revenue streams for fintechs and traditional businesses. By integrating traditional forex markets with DeFi applications, Pendulum aims to create a shared financial infrastructure that bridges the gap between centralized and decentralized finance.
(BCN): Despite boasting advantages over conventional finance, the defi ecosystem is still not as connected to fiat rails as some would have liked. What do you think are some of the reasons for this state of affairs?
TS: Connecting fiat rails to Defi presents several challenges, which have limited the widespread adoption of a decentralized forex. One of the most important challenges is regulatory and compliance issues: Defi platforms typically operate in a decentralized, permissionless manner, which can create uncertainty in terms of regulatory compliance. As traditional financial institutions are subject to strict regulations, bridging the gap between fiat and Defi ecosystems requires addressing these concerns and ensuring adherence to applicable laws and regulations, such as AML/KYC requirements.
Furthermore, there are liquidity concerns. On-chain forex requires a substantial amount of liquidity to facilitate efficient trading and reduce price slippage. However, attracting liquidity from traditional forex markets to Defi platforms remains a challenge, as many institutional investors are still hesitant to venture into the crypto space.
The complexity of Defi platforms and the lack of understanding around their potential benefits may deter traditional businesses from engaging in on-chain forex activities. Increased education and awareness are needed to promote its adoption.
To overcome these obstacles, Pendulum aims to build a blockchain platform that combines traditional finance with Defi. By addressing regulatory concerns, enhancing liquidity, improving technological capabilities, and promoting education, Pendulum can help to establish a shared financial infrastructure for on-chain forex.
BCN: It can be argued that one of the main challenges that traditional finance companies face when trying to adopt or incorporate defi is the perceived lack of regulation. In your opinion, is it possible for traditional financial institutions to be able to interact with defi platforms without finding themselves on the wrong side of regulations?
TS: Traditional financial institutions can adopt Defi while maintaining compliance with regulations by focusing on a few strategies. One of the most important activities is to proactively collaborate with regulators: engaging in open dialogue with regulatory bodies can help to better understand the evolving regulatory landscape and ensure that any interaction with Defi platforms complies with applicable laws. Proactively working with regulators can also help shape future policies that facilitate a smooth integration of Defi into the traditional financial ecosystem.
Additionally, Tradfi [traditional finance] companies should adopt strict anti-money laundering (AML) and know-your-customer (KYC) procedures when dealing with Defi platforms. Another strategy is to collaborate with established and compliant Defi providers – these partnerships can help develop compliant Defi solutions tailored to the needs of traditional finance companies.
I would also recommend that institutions invest in training programs to educate their employees about Defi, its potential benefits, and associated regulatory challenges. This knowledge can help organizations make informed decisions and navigate the regulatory landscape more effectively.
BCN: On the topic of central bank digital currencies (CBDCs), proponents of the assets have often touted such digital currencies as better alternatives to privately created or issued coins. Some of these advantages are the ability to trace funds which allows authorities to target criminals that move funds via the traditional financial system. However, the same CBDCs come with risks that are not palatable to defi users. In your opinion, what do you think are some of the biggest risks associated with CBDCs for defi users and what degree of anonymity or traceability should these central bank-issued digital currencies ideally offer?
TS: Central Bank Digital Currencies (CBDCs) present both opportunities and risks for DeFi users. The main difference from decentralized assets is that they are issued and controlled by central banks. For that reason, they are subject to strict regulatory oversight and may involve extensive monitoring and data collection. DeFi users may face new regulatory requirements or restrictions when using CBDCs on DeFi platforms, or they may face the potential loss of privacy compared to using cryptocurrencies. CBDCs, by nature, are centralized currencies. The integration of CBDCs into DeFi systems could introduce centralized points of control and potentially weaken the decentralized nature of these platforms, impacting the core principles of DeFi.
Regarding the degree of anonymity or traceability of CBDCs, a balance must be struck between ensuring user privacy and enabling sufficient traceability to prevent illicit activities such as money laundering and tax evasion. Central banks may choose to implement varying degrees of anonymity or pseudonymity for CBDCs, offering privacy for users up to a certain transaction limit or implementing tiered identity verification requirements based on transaction size or risk.
BCN: We recently had a few episodes of stablecoins depegging or disappearing totally and this has raised a lot of questions. As many have learned, extreme events often cause tokens that are pegged against local fiat currencies to lose their value. How would you ensure that the tokens pegged to local fiat currencies don’t depeg in extreme events?
TS: This very much depends on the pegging mechanism. We particularly support one-to-one fiat-backed tokens that can be freely on-ramped and off-ramped anytime and in a compliant manner by exchanging one unit of the fiat currency for one token and vice versa. For such tokens, the risk of de-pegging can be lowered by guaranteeing a frictionless and highly efficient off-ramping and on-ramping mechanism and creating user trust that such a mechanism will always be available (e.g., by proving that sufficient reserves are available).
For more complex stablecoin constructs, one should adopt a mix of strategies to mitigate risk. Stablecoins pegged to local fiat currencies should be adequately backed by a basket of diversified assets, such as cash or short-term government bonds. In the case of crypto-collateralized stablecoins, requiring over-collateralization can help mitigate the risk of de-pegging. By holding more collateral than the value of the issued stablecoins, the system can better absorb fluctuations in the collateral’s value and maintain the peg during extreme market conditions.
As a general principle, ensuring transparency and conducting regular audits can help build trust and credibility in the stablecoin’s backing assets and stabilization mechanisms. This transparency can help users monitor the token’s stability and make informed decisions, contributing to overall market stability.
BCN: Your firm is reported to have teamed up with Getpaid Africa to enable on and off-ramp connections between Pendulum’s defi network and East African currencies. Why did you choose the East African markets for this sort of initiative?
TS: African and particularly East African markets present a unique opportunity for such a partnership. East Africa has experienced rapid growth in mobile money services. This widespread adoption of digital financial services provides a solid foundation for introducing Defi solutions that can seamlessly integrate with existing mobile money platforms, making it easier for users to access and adopt Defi products. In addition, some East African countries have shown a relatively progressive and forward-looking approach to digital financial services and cryptocurrencies – this favourable regulatory environment can facilitate the adoption of Defi solutions.
There is high demand for innovative financial services. A significant portion of the population in East Africa remains unbanked or underbanked. By offering accessible Defi solutions, Pendulum and Getpaid.Africa can help promote financial inclusion for these underserved communities.
The East African region receives a substantial amount of remittances. Pendulum can help streamline remittance processes, reduce transaction fees, and provide faster, more secure cross-border transactions.
What are your thoughts about this story? Let us know what you think in the comments section below.
White House Publishes ‘Roadmap’ to Mitigate Cryptocurrency Risks
The White House has published a “roadmap to mitigate cryptocurrencies’ risks.” The roadmap calls for authorities to “ramp up enforcement where appropriate” and Congress “to step up its efforts” to regulate the crypto sector. It also notes that legislation should not greenlight mainstream institutions “to dive headlong into cryptocurrency markets.”
‘The Administration’s Roadmap to Mitigate Cryptocurrencies’ Risks’
The White House published a blog post titled “The Administration’s Roadmap to Mitigate Cryptocurrencies’ Risks” Friday under the National Economic Council (NEC), an Executive Office of the President (EOP) established to advise the president on U.S. and global economic policy.
The roadmap is authored by four White House advisors: NEC Director Brian Deese, Office of Science and Technology Policy (OSTP) Director Arati Prabhakar, Council of Economic Advisers (CEA) Chair Cecilia Rouse, and National Security Advisor Jake Sullivan. The CEA is charged with providing objective economic advice on the formulation of both domestic and international economic policy while the OSTP advises the president on all matters related to science and technology.
The White House advisors detailed:
At President Biden’s direction, we have spent the past year identifying the risks of cryptocurrencies and acting to mitigate them using the authorities that the Executive Branch has.
“Experts across the administration have laid out the first-ever framework for developing digital assets in a safe, responsible way while addressing the risks they pose,” they added.
The framework identifies a number of risks, including crypto entities ignoring applicable financial regulations and basic risk controls, misleading consumers, having conflicts of interest, providing inadequate disclosures, and committing outright fraud. Moreover, the authors claimed that “there is poor cybersecurity across the industry” that has enabled North Korea to “steal over a billion dollars to fund its aggressive missile program.”
While encouraging regulators to continue “using their authorities to ramp up enforcement where appropriate and issue new guidance where needed,” the roadmap authors stressed:
The events of the past year underscore that more is needed. Agencies have redoubled their efforts to fight fraud … Enforcement agencies are devoting increased resources to combatting illicit activities involving digital assets.
“In the coming months, the Administration will also unveil priorities for digital assets research and development, which will help the technologies powering cryptocurrencies protect consumers by default,” they revealed.
Congress Needs to ‘Step up Its Efforts’ to Regulate Crypto
The roadmap also calls on Congress to “step up its efforts” in regulating the crypto sector, such as expanding regulators’ powers to prevent misuse of customer assets and mitigate conflicts of interest.
The White House advisors suggested that Congress could also strengthen transparency and disclosure requirements for cryptocurrency firms, increase penalties for violating illicit-finance rules, and subject crypto intermediaries to bans against tipping off criminals. However, they cautioned:
Legislation should not greenlight mainstream institutions, like pension funds, to dive headlong into cryptocurrency markets.
The advisors explained that the limited exposure of traditional financial institutions to crypto over the past year has prevented turmoil in the crypto market from affecting the broader financial system.
In conclusion, they emphasized:
The Administration wholeheartedly supports responsible technological innovations that make financial services cheaper, faster, safer, and more accessible.
Nonetheless, the roadmap authors noted that “to realize these benefits, new technologies need commensurate safeguards,” elaborating: “To put the right safeguards in place, we will keep driving forward the digital-assets framework we’ve developed, while working with Congress to achieve these goals.”
What do you think about the White House advisors’ roadmap to mitigate crypto risks? Let us know in the comments section below.
U.S. Government Releases Roadmap To Mitigate Crypto Risk For Investors
The U.S. government is set to tighten regulations to mitigate the growing risks associated with the crypto industry. This development comes after increased scrutiny following the collapse of FTX and Terra Luna in 2022.
In a press release on January 27, the White House put forward a comprehensive roadmap designed to protect investors and hold bad actors accountable. The roadmap highlighted several measures for more effective regulations in the crypto industry.
A Two-Pronged Approach By U.S. Government
The U.S. government revealed that it had spent the past two years identifying the risks of cryptocurrency and finding ways to mitigate them. To ensure these measures are implemented, the White House intends to utilize a two-pronged approach.
Firstly, the U.S. government has developed a framework for individuals and organizations to safely and responsibly develop digital assets. This includes addressing the risks they pose as well as highlighting poor practices within the crypto industry.
Secondly, agencies have been mandated to increase enforcement and develop new regulations where needed. While there’s an increase in public awareness programs designed to help consumers understand the risks of buying cryptocurrencies.
Related Reading: US Federal Regulators Warn About Crypto Activities
The White House also pointed out that Congress had a major role in expanding regulators’ powers and passing transparency laws for cryptocurrency companies. It also warned about passing legislation that would reverse the current gains and tie cryptocurrency with the U.S. financial system.
In addition, the government intends to commit significant resources toward digital assets research and development, and this would help technologies power digital currencies and protect investors by default.
Crypto Industry Still Reeling From FTX Collapse
The crypto industry is still recovering from the bearish markets resulting from several CeFi platforms’ high-profile collapses. 3AC, Voyager, BlockFi, and FTX were among the top platforms to file for bankruptcy, with the quartet holding more than 0 billion in assets.
The nature of FTX collapse brought about increased scrutiny of the crypto industry. Congress testimonials exposed the risk-averse nature of crypto companies’ executives as details emerged that Sam Bankman-Fried misused clients’ funds through his trading firm Alameda Research.
The ripple effect was massive as several individuals and firms exposed to the platform suffered huge losses, with some companies forced to shut down. These events caused concerns and reactions from within and outside the crypto space. It is, therefore, unsurprising that the U.S. government is looking to tighten its grip on regulations.
Related Reading: Crypto-Friendly Bank Silvergate Suspends Dividend Payouts
Months after the FTX crash, there’s still increased skepticism about the crypto industry. There’s an increase in the amount of bitcoin withdrawn from exchanges, and earlier this month crypto bank, Silvergate revealed that clients withdrew almost billion of their crypto deposits.
Featured image from Pixabay, chart from TradingView.com
How The VeChain Based E-HCert App Will Mitigate Covid-19 In Cyprus
A solution based on VeChain will help people in Cyprus to combat Covid-19. The Digital Transformation Consultant at Mediterranean Hospital of Cyprus, Chris Pana, announced the launch of the new E-HCert App.
Built as part of a partnership with i-Dante, a company specialized in pharmaceutical and healthcare solutions, the app will operate as an “electronic test” enabling a user to validate lab results that corroborate that he is Covid-19 free.
The information collected by the app will be guaranteed by blockchain VeChainThor and be transmitted from and to the Mediterranean Hospital in Cyprus. Therefore, the E-HCert App has been implemented as digital proof. Pana said:
I am proud to announce that the new E-HCert App is live in the Mediterranean Hospital of Cyprus. During the last two weeks, more than 500 people have received their lab tests and Covid-19 results on their App!
Data from the VeChain Foundation indicates that 100 people were vaccinated at the Hospital. The E-HCert App will store their information on the VeChain platform. Here, it will remain accessible for all users at any time. The VeChain Foundation added:
The first 100 COVID-19 vaccination records for medical personnel at The Mediterranean Hospital of Cyprus are now securely stored on the VeChain public blockchain. With this tech, govs and individuals are assured of the quality and validity of results.
VeChain And Its One Of A Kind Solution
In an interview with portal InBusiness News Ecosystem Manager at VeChain, Dimitris Neocleous called the E-HCert app one of the world’s first solutions that leverages a public blockchain to combat Covid-19. In addition, the app is General Data Protection Regulation (GDPR) compliant.
This is VeChain and i-Dante’s 4th solution in the deployment phase, according to InBusiness. E-HCert was developed in less than a year with the helped of a dedicated staff of engineers and “a healthy supply of resources”. E-HCert operates on top of an E-NHL, an app designed to hold medical institution records. Neocleous added the following while talking about the app:
You see the blockchain transaction ID here and the timestamp here; when these two pieces of information are aligned, then it is verified. We are also working with the companies that are providing standars and, on top of that, the solution is audited before being delivered to our clients.
At the time of writing VET trades at ,19 with 3.5 losses in the daily chart. In the weekly chart, the corrections sit at 23.4% with important gains in the 30-day chart with a 119.3% profit.
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