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Nostra CEO steps down just days after token launch

David Garai is stepping down as CEO of Nostra Finance two weeks after the launch of the NSTR token. Richard Thomas-Pryce will take over the company.

Decentralized finance (DeFi) application Nostra Finance is under new leadership following the departure of its former CEO. 

David Garai announced on June 28 that he was stepping down as CEO less than two weeks after the launch of the Nostra (NSTR) token. The token went live with an airdrop on June 13 without a vesting period.

“I have resigned as CEO of Nostra,” Garai said on social media platform X, without commenting on the reasons behind his decision. “I’m taking a lil break for the first time in 4 years and then I will be back. Stay tuned for my future plans.”

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China’s largest payments app debuts AI feature that checks if you’re balding

Eat your heart out Elon Musk and X.com, China’s Alipay is the real ‘everything app.’

If there’s one thing most of us probably didn’t think to wish for when it comes to ewallet features, it’s an artificial intelligence (AI) “mini app” for detecting baldness. Yet here we are, in a time when Alipay, China’s biggest payments application, has debuted exactly that. 

Like most ewallet/payments applications, Alipay allows users to connect their bank accounts to the app in order to streamline payments both online and at the point of purchase. But Alipay takes things much further than just payments.

Purported to be a “superapp” for locals, Alipay’s many features include ride sharing, mobile phone services, bill payments, coupon and travel services, shopping, and social media functionality.

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Binance Labs-backed Velvet Capital forced offline to prevent phishing attack

According to Vasily Nikonov, the founder of Velvet Capital, users who have confirmed any transactions on the platform since April 23 at 5:39 am UTC may be potential victims of the website hack.

Decentralized finance (DeFi) asset management protocol Velvet Capital was forced to deactivate its website temporarily to prevent a major phishing attempt. 

Crypto community members on X reported unusual activity on Velvet Capital’s trading platform on April 23. Users trying to connect to the front-end were prompted to approve their wallet access to the protocol.

Internal investigations led Velvet Capital to issue a cybersecurity alert, advising investors to deny all wallet connect requests from the application until further notice.

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Boosting blockchain adoption by keeping tech on the back end

Builders are increasingly looking to streamline their applications with more familiar interfaces to onboard new users.

Understanding the difference between the front and back end is crucial with Web3 technology. The term “front end” describes the portion of Web3 applications that consumers interact with directly. This includes the technology’s user-facing side, websites and decentralized applications (DApps). 

The back end, on the other hand, refers to the complex system that supports these Web3 applications. Everything from distributed ledgers and smart contracts to consensus protocols is included here.

However, accessibility and simplicity are important for the adoption of Web3. When the technical complexities of Web3 are too prominently featured on the front end — such as managing cryptographic keys or understanding blockchain concepts — it can alienate a significant portion of potential users. It is important to make the user experience and interactions smooth and easy to understand so that the end-user doesn’t have to worry about the technical details.

By prioritizing accessibility and simplicity, Web3 technology can be more inviting to diverse users. This approach helps bridge the gap between early adopters well-versed in blockchain technology and the broader mainstream audience.

Harrison Hines, CEO and co-founder of Fleek, a Web3 app development platform, told Cointelegraph, “Simplicity and accessibility were key to the mainstream growth of computers, smartphones, mobile apps and even very recently with AI. Concealing technical complexities on the back end follows the same logic. Developers are also end users, and they need tools/infrastructure that is easy to use and build with.”

Benefits of hiding Web3 in the back end

User experience can be improved by making blockchain-based apps easier to navigate. When users are shielded from the technical complexities associated with blockchain technology and cryptographic keys, they can engage with Web3 applications in a manner that feels similar to using traditional web applications. This streamlined experience encourages users to explore and adopt Web3 applications without being intimidated by their complexity.

Simplified onboarding for non-technical users

When the onboarding process is straightforward, individuals unfamiliar with blockchain technology can quickly get started with Web3 applications. This approach reduces the learning curve and empowers a more extensive and diverse user base to access the benefits of Web3 without needing a deep understanding of its technical aspects.

For example, Immutable Passport simplifies the onboarding process for WAGMI Defense users by offering a straightforward and password-free sign-up experience. With just a few taps, users can create an account, eliminating the need for password management. In conjunction, Passport establishes a noncustodial wallet in the background, providing a secure repository for users’ digital assets.

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Authentication options are streamlined, allowing users to choose from well-known methods such as Google, Apple or email sign-ins.

Passport’s interoperability feature also allows for seamless logins across all games and marketplaces within the Immutable ecosystem.

This approach ensures a user-friendly experience, particularly for those not familiar with Web3 technologies. According to Web3 gaming franchise WAGMI Games, this feature enables it to onboard more players.

Immutable Passport enables social login for gaming platforms like WAGMI Games. Source: WAGMI 

Kostas Kroustaloudis, development director at WAGMI Games, told Cointelegraph, “Simplifying the onboarding process for non-technical users is pivotal to driving mainstream adoption of Web3 technology. The majority of individuals have little patience for intricate, technical interfaces.”

Kroustaloudis continued, “In fact, the likelihood of someone uninstalling an app skyrockets with each additional click or tap required to reach their goal. This is especially crucial when introducing gamers to new titles. The difference between success and failure can often hinge on the reduction of just one extra click.”

Attracting more users and developers

Keeping Web3 tech in the back end can help to bridge the gap between early adopters and mainstream users, expanding the Web3 user base beyond the tech-savvy and blockchain enthusiasts. As Web3 applications become indistinguishable from their traditional counterparts in terms of user experience, they are more likely to attract users who might have hesitated to explore the technology due to its perceived complexities.

According to some experts, making it easier to build apps that hide Web3 components in the back end can attract more developers, bringing more Web3 apps to market.

Fleek’s Hines said, “The main benefit is making it easier and more accessible for more developers to build applications using Web3 technologies in their backends.”

Hines continued, “It’s just a numbers game. The more developers you have building more Web3-powered applications, the more likely (and faster) you are to start finding those breakout success apps that bring mainstream adoption. It’s the same as we saw happen in Web2 and mobile. Users discovering new Web3 apps that they enjoy is what will encourage them to try others.”

Minimizing user errors and risks

The back-end concealment of Web3 technology has the additional benefit of minimizing user errors and risks. When users are not exposed to technical complexities, there is a reduced likelihood of making critical mistakes, such as mishandling cryptographic keys or engaging in unsafe transactions.

This is especially important in decentralized finance applications, where minor errors can lead to significant financial losses.

Minimizing user errors and risks

One notable example of a back-end Web3 implementation is the Ethereum Name Service (ENS). ENS allows users to replace lengthy, cryptic Ethereum addresses with human-readable domain names.

ENS enables human-readable names for wallets. Source: ENS

This technology can be integrated into applications, providing users with a seamless experience. Users can send cryptocurrency to “john.eth” instead of “0x4cbe58a94d991087fa2dc648b1e33f55dbb53f4f2,” making transactions less prone to errors.

Coinbase employs cb.id usernames, an ENS domain form, to streamline cryptocurrency transfers and user interaction. These usernames are associated with the ENS infrastructure, simplifying complex wallet addresses by offering a human-readable alternative.

In addition to this, cb.id usernames automatically redirect web users to the respective Web3 profiles on profile.coinbase.com.

Regarding blockchain gaming, WAGMI Games is another example. Its WAGMI Defence mobile app uses a free-to-play business model and features a familiar user experience. Players start by obtaining a free basic card set. Suppose a player wishes to participate in more challenging games with the chance of higher ranks and potential awards. In that case, they can purchase NFT characters with real money, similar to traditional apps.

While the blockchain serves as the foundation for the game’s technology, players interact with the game via a more traditional interface. This design can lessen the perceived complexity and difficulty of using blockchain and NFT features, making them more accessible to a wider audience.

Actionable advice

For builders looking to create more user-friendly and seamless Web3 apps, one key consideration is the implementation of gas optimization strategies. Gas fees are an inherent part of many blockchain transactions and can be a significant barrier for users.

Builders can improve the gas fee problem by using layer-2 solutions like state channels, diverting transactions off the main chain, reducing congestion and enhancing user experience, especially for gaming DApps.

Additionally, they can choose low-fee blockchains like BNB Smart Chain, Solana or Polkadot to create budget-friendly environments, especially for microtransactions.

Kroustaloudis agreed, telling Cointelegraph, “Gas fees, particularly in the context of apps reliant on microtransactions, can be a significant hurdle. Even a $0.10 gas fee, when incurred frequently, can prove problematic. With the emergence of various new L2 chains like Coinbase’s BASE and Immutable’s L2 solution, gas fees cease to be a concern.”

“Depending on the app’s nature, choosing to build on layer 2s becomes an obvious choice for achieving mass adoption. To embark on this journey, developers should thoroughly research their target users’ needs and determine the most suitable gas optimization strategy for their project.”

Zero-knowledge (ZK) technology, specifically ZK-rollups, can reduce the load on the main chain by batching off-chain transactions into a single smart contract, offering faster confirmation times and lower fees. Builders can integrate ZK-rollups to make their applications more efficient and cost-effective while enhancing the user experience.

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Builders should also consider optimizing for mobile devices. Many users access Web3 apps on their smartphones, so ensuring an app is mobile-responsive and functions seamlessly on various screen sizes and devices is crucial for widespread adoption.

For users planning to use Web3 apps, it’s essential to maintain awareness and knowledge about the technology. Web3 and blockchain are evolving rapidly, and staying informed about the latest developments, security best practices and user guidelines can help users make informed decisions to protect their digital assets.

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TradFi gets crypto boost: Renegade joins Cointelegraph Accelerator

Cointelegraph Accelerator welcomes Web3-friendly fintech platform Renegade to its program.

As the crypto industry continues to grow, it becomes increasingly intertwined with traditional finance (TradFi) to the benefit of end users. TradFi is notoriously slow, inefficient and expensive. International wire transfers, which take days and double-digit dollar fees in most cases, are a perfect embodiment of the current state of traditional finance.

By comparison, decentralized finance (DeFi) has the potential to provide similar services, including fund transfers, payments and storage, much quicker and at lower costs. However, the majority of financial technology (fintech) applications offered by TradFi services win the users in terms of user experience and simplicity, leaving the unnecessarily complex and obscure DeFi apps with limited adoption.

Mainstream users require a friendly experience and easy-to-use applications to dip their toes in decentralized waters before becoming full-fledged crypto users. Similarly, DeFi users need a bridge to utilize their crypto funds in their everyday lives. They seek a fintech solution that is free from the complexity, logginess and expensiveness of traditional finance services.

Renegade, a Web3-ready financial services platform, aims to bridge TradFi features with crypto and DeFi by providing users with a clean, easy-to-use interface through its mobile apps developed for iOS and Android.

On top of a standard TradFi experience, which includes payment solutions, an IBAN account and personal finance management, Renegade adds Web3 functions, including a non-custodial and custodial wallet, fiat on-ramp through a Visa debit card, and crypto exchange — bringing the DeFi and TradFi spaces together.

Integration with crypto exchanges and wallets

Key crypto industry players such as crypto exchanges and wallet providers integrate with the Renegade platform to offer their solutions in a more TradFi-friendly environment. As more partners join the Renegade platform, users will be able to use a diverse range of direct, in-app conversions and enhanced liquidity options.

On the fintech side, the company is building RenegadePay and preparing a Renegade Visa debit card. Both will give users the ability to spend crypto in everyday shopping. Renegade users will also get a Swedish IBAN number thanks to a partnership with EMI Intergiro, opening up a range of traditional banking services and also a very attractive spending rewards programme.

Renegade provides users with a Visa debit card, which can be used for crypto payments. Source: Renegade

Renegade provides users with a Visa debit card, which can be used for crypto payments. Source: Renegade

Talking about the vision of the company, Renegade CEO Daniel A. Strele-Ramonis explained that the team aims to dissolve the barriers between fiat and crypto, offering everyone the tools to harness the full spectrum of financial opportunities. “As the future unfolds, we aspire to lead this fusion, ensuring that financial empowerment is accessible, intuitive, and without compromise,” he added.

Renegade joins Cointelegraph Accelerator

Renegade has joined Cointelegraph Accelerator as a participant to benefit from the media reach and marketing opportunities provided by the program. Cointelegraph Accelerator selected Renegade given the user experience the project is developing for both TradFi and DeFi users.

The platform aims to integrate with major payment services, including Apple Pay and Google Pay, by the end of the year. When its mobile app is launched, Renegade can serve the TradFi needs of DeFi users while providing access to crypto and Web3 for the fintech market, effectively bridging the two worlds.

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‘Massive’ crypto use cases to surface by 2030 — Coinbase exec

Cointelegraph talks with Coinbase protocols lead and Base creator Jesse Pollak about the company’s new blockchain, which is already a force to be reckoned with.

Coinbase launched Base, its new blockchain, in late July, and it has already become a major player among Ethereum-based layer-2 chains. 

On Sept. 21, for instance, the chain notched some 677,000 transactions, with 870,163 “new addresses seen,” according to Etherscan.

By comparison, Arbitrum, a prominent layer 2 that launched in June 2021, had 925,000 transactions and 54,233 new addresses on the same day.

Base is now hosting hundreds of decentralized projects, Jesse Pollak, head of protocols at Coinbase, told Cointelegraph at Messari’s Mainnet conference in New York City on Wednesday, Sept. 20, including decentralized inflation oracles, restaurant rewards projects, an insurance aggregator and everything in between.

A major force behind the Base project, Pollak sat down with Cointelegraph at Mainnet for a Q&A encompassing Coinbase’s vision for its new platform, the rising promise of decentralized applications (DApps) and the evolution of blockchain technology.

Cointelegraph: You’ve said Base was created with a “clear vision: bring the next million builders and billion users on-chain.” Those are big numbers. How long will they take to achieve?

Jesse Pollak: It’s less about Base specifically and more about a billion users coming on-chain — embracing the power of this new platform [i.e., blockchain] that’s transparent, open, global — and developing apps that can improve people’s lives. Base is obviously going to play a big role in that, but it’s much bigger than just us. We really see our role as helping grow that pie.

CT: And the timeline?

JP: I see it happening this decade, i.e., one million developer jobs by 2030. There’s already been massive change in the 2020s — not just in the industry but the entire world. It’s going to happen faster than people might expect.

CT: What still needs to be done before we see mainstream adoption?

JP: Three high-level things need to happen. First, we need to make it cheaper for people to use these apps that are being built. We’ve done the first few orders of magnitude of cost reduction with Base. The same app might have cost $5 or $10 to use now costs 5 to 10 cents.

But we don’t think that’s enough. We really want to lower it so far that the cost is almost imperceptible to users.

Second, we want to make it easier for people to use these apps. A lot of that is building better wallet experiences.

Third, we need to have better identity infrastructure on-chain. Today, most consumer borrowing in the United States and other developed countries is under-collateralized borrowing in the form of credit cards or buy-now-pay-later arrangements. And almost none of this is possible on-chain now because we don’t have reliable identity systems.

So, to enable that next wave of big use cases, we’ll need lower costs, better wallets and better identity.

CT: You’ve said that what most people have done with crypto until now is speculate on the crypto markets, and it’s time to move on. Has it been a mistake to focus so much on the market price of Bitcoin, say?

Pollak: I don’t think it’s wrong if you look at the way that technology life cycles evolve. Carlota Perez, for instance, writes that financial bubbles are almost inevitable when you have meaningful technological innovation like the internet or electricity. You have this S-curve of adoption. [See chart below.] In the beginning, a lot of innovation is fueled by speculation as people see potential in the technology. This speculation draws in capital, which basically funds the innovation and eventually leads to impacts that change the world.

Technology adoption often follows an S-curve. Blockchain may now be at a turning (inflection) point.

CT: Where are we now?

JP: We’ve reached the point where it’s time to move out of that [speculative] phase and into the phase of really bringing utility to everyday people. The infrastructure is ready.

Even two years ago, if you wanted to use an app on Ethereum, it was going to cost you $5 or $10 or $100. That’s just not something that is supportive of building everyday use cases.

CT: Speaking of Ethereum, why did Coinbase decide to build its layer 2 on the Ethereum blockchain? Did you ever consider using another mainnet?

JP: We actually looked three times at building a chain: In 2018 and 2020, and then most recently in 2023. And the first two times, we looked at building an alternative layer 1, one which would have been competitive with Ethereum. Our takeaway was we didn’t want to put ourselves on an island disconnected from the rest of the ecosystem.

The third time, we looked at all of the options: Ethereum, alternative layer 1s, layer 2s, etc. What felt natural to us about Ethereum was it is the largest crypto ecosystem by value, by activity, by developers — by order of magnitude or two — and so by building Base as an Ethereum layer 2, we could both contribute to scaling Ethereum and be a part of this ecosystem that’s larger than us.

CT: What about Ethereum’s oft-discussed scalability shortcomings, including network congestion and sometimes ballooning fees? Have those been largely solved through extensive use of layer-2 rollups like Optimism and Arbitrum (and now Base), where transactions are “batched” and added to the mainnet in a single lot?

JP: If you look at the history of Ethereum, the original vision was: We’re going to do all this at layer 1, and we’re going to scale up through sharding. But around 2020 and 2021, as layer 2s emerged, the Ethereum community and core development groups basically said: What if we changed our strategy where instead of trying to introduce all of this complexity at layer 1, we build the infrastructure to enable innovation at layer 2?

That was something that Vitalik [Buterin, Ethereum co-founder] wrote about a lot. And over the last two years, that’s what happened. Coinbase supported an initiative over the last year-and-a-half called EIP-4844, for instance, that introduced data availability for rollups, leading to reduced fees and more transaction throughput.

But do I think we’ve solved the problem? No. These things take years to solve, and I think we are now two to three years into making those investments, and we have another two to three years or more potentially to go. But I think we’ve made a lot of progress.

You can see this at L2Beat. [See chart below]. Two years ago [Sept. 21, 2021], there were eight transactions per second [on average] on layer-2 projects and 13 TPS on the Ethereum mainnet. Today, there’s 58 TPS on layer 2s and 11 TPS on the Ethereum mainnet. So we’ve gone from less than 1x to 5.7 times faster in two years.

On Sept. 20, 2023, average transactions-per-second (TPS) on “projects” was 54.63 TPS, up from 8.03 TPS in September 2021. The Ethereum TPS line, by comparison, changed little during this period.

CT: Are you surprised that a “buzzy” social media DAPP — Friend.tech — was initially Base’s biggest performer after its summer launch? Its fees surpassed $1 million in one 24-hour period. Still, maybe this wasn’t the serious use case that some critics were hoping for.

JP: Well, when the first social apps launched on the internet, some people looked at them and said, hey, these things are toys. When are we going to go do the serious stuff like bringing newspapers online? If you look at where we are today, social apps are used by billions of people every day. They will continue to be a way that people connect, and social apps will play a critical role on-chain.

What’s powerful about this next generation of on-chain social apps is that they will enable people to have sovereign ownership. They will continue to own their creativity, and they'll continue to be in control — rather than the large corporations that are controlling them now.

CT: Can you tell us about a DApp launched on Base that excites you?

JP: Check out Blackbird, a customer engagement platform for restaurants. You walk into any participating restaurant, you tap your phone, and it instantly knows who you are. They customize the experience for you. Repeat visitors can earn rewards. It’s in 10 or 15 restaurants now in New York City but is soon expanding into California. A lot of people are talking about it on Twitter.

CT: Where will blockchain finally find its “killer app” — to do for the cryptoverse what email did for the internet? Or has it already emerged in your view?

JP: There won’t be one killer app. There will be many killer apps. We’re starting to see some of those emerge. The one with the most real-world adoption is stablecoins. If you look at the total volume of stablecoin transactions over the last year, it’s a massive number. It will be a big driver of economic freedom in the decade ahead. It gives people in places like Argentina or Turkey access to a stable currency like the U.S. dollar.

But stablecoins won’t be alone. We will see many on-chain applications that will change people’s lives for the better.

Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.

Charles Schwab plans to offer spot crypto trading as US rules evolve under Trump

Manta Network’s L2 hits mainnet to drive ZK-enabled DApp development

Manta Network has launched its zero-knowledge proof layer 2 scaling network which promises lower fees and higher throughput for developers looking to deploy decentralized applications.

The ecosystem of layer 2 blockchain solutions powered by zero-knowledge proofs welcomes a new player as Manta Network takes its ZK-as-a-service platform live.

Manta Pacific is a modular L2 aimed at powering EVM-native decentralized applications (DApps) using ZK-proof technology. The platform offers a software development kit and ZK library that is touted to provide plug-and-play functionality for developers.

Being EVM-native means that apps deployed on Ethereum can be deployed on Manta Pacific and vice versa, while being ZK-enabled provides low gas fees and scalability. Users can also bridge Ethereum to Manta to begin exploring its development environment.

Related: Manta Network developer raises $25M in Series A, launches layer 2 for ZK apps

With industry peers including the likes of Consensys’ Linea zkEVM, Polygon zkEVM, Starknet, Coinbase’s Base and zkSync Era, there are a number of ZK-proof L2 solution options available to Web3 developers.

Speaking to Cointelegraph following the mainnet launch, Manta Network core contributor Kenny Li said that the different ZK-rollip L2s offer different value propositions that aim to solve significant problems being faced by developers.

“We think that in the mid to long term, the market will converge to a small number of available solutions that are focused on making it as easy as possible for developers to build and deploy ZK-enabled applications.”

Li added that the Web2 world of technology followed a similar evolution with the success of software-as-a-service models where a plug-and-play approach was taken:

“This is crucial when zero knowledge is involved whereby developers do not have to worry about the infrastructure as the complexity of cryptography can be abstracted away.”

According to the Manta Network core contributor, Manta Pacific has been in development for nine months while its testnet launch in July 2023 has seen the creation of 150,000 wallets and over 3.5 million transactions.

Manta raised $25 million from investors in July 2023 aimed at scaling the project’s network and use cases with an eye on driving adoption in the Asian market.

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Charles Schwab plans to offer spot crypto trading as US rules evolve under Trump

World Mobile launches on Google Play for customers in Australia, Canada, UK and US

The company also announced a partnership with artificial intelligence company SingularityNET.

Decentralized wireless (DeWi) network operator World Mobile announced the launch of its app on Google Play for users in the United States, the United Kingdom, Australia, Canada and Tanzania on Aug. 22. 

The launch comes on the heels of a series of beta tests conducted in numerous markets typically considered underserved when it comes to mobile connectivity and availability, including Kenya, Mozambique and Nigeria. The World Mobile app is also currently available in Zanzibar.

According to World Mobile, its DeWi services are meant to bridge the gap between major telecoms and those in underserved markets. It does so by providing some connectivity services and through the promotion of a blockchain-based sharing system it supports through a proprietary token, World Mobile Token (WMT), and the inclusion of other Cardano-based tokens.

As Cointelegraph recently reported, World Mobile uses a combination of existing infrastructure and alternative technology solutions to serve users. The company says in some areas, for example, it’s tapped into “TV white space” to send and receive data via unused television broadcast spectrums. In others, it adapted SpaceX’s Starlink satellite internet service for mobile customer use.

According to World Mobile, the Google Play launch will feature the most updated version of the app. However, due to geographical restrictions, some features may not be available:

“It's important to note that while this release introduces an array of exciting features, not all functions will be universally available due to the varying regulatory frameworks in different countries.”

In related news, World Mobile also announced a partnership with artificial intelligence (AI) and robotics company SingularityNET.

Per a World Mobile blog post, the two companies will work together to develop and manage customer service solutions for the World Mobile platform.

The post also mentions that the partnership will explore an AI and blockchain-based lending and credit approval service that “adapts to the users’ payment history and reputation.”

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Fujitsu interested in crypto trading services, trademark application reveals

The brand wants to offer financial services, including accepting deposits, financing loans, financial management and the exchange of crypto assets.

Japanese tech giant Fujitsu filed a trademark application with the United States Patent and Trademark Office (USPTO), revealing its intent to offer brokerage services for cryptocurrency trading, among other crypto and non-crypto financial facilities.

Fujitsu’s trademark application aims to register a new mark which “consists of the stylized word FUJITSU with a sideways s-shaped swirl over the J and I,” according to the official document filed on March 16. The branding is dedicated to offering financial services, including accepting deposits, financing loans, financial management and the exchange of crypto assets.

Fujitsu trademark application filed for the above logo. Source: tsdr.uspto.gov

The image above represents the updated logo Fujitsu intends to trademark for the services. In addition, the snippet below provides an overview of the services Fujitsu disclosed with the USPTO, along with the trademark request.

Fujitsu’s trademark application for crypto services. Source: tsdr.uspto.gov

Fujitsu’s growing interest in Web3 became evident when it launched a Web3 acceleration platform for startups and partner companies in February. The platform aims to support the creation of a diverse ecosystem of Web3 applications across a range of use cases, such as digital content rights management, business transactions, contracts and processes.

Related: Japanese prime minister says DAOs and NFTs help support government’s ‘Cool Japan’ strategy

At the beginning of 2023, financial regulators in Japan urged global regulators to introduce stricter banking rules for the crypto sector.

Deputy director general of the Financial Services Agency’s Strategy Development and Management Bureau, Mamoru Yanase, acknowledged that the problem wasn’t with crypto. “What’s brought about the latest scandal isn’t crypto technology itself,” he said, adding that the blame lay with “loose governance, lax internal controls, and the absence of regulation and supervision.”

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Hindenburg Research reports Block short position, claiming fraud facilitation and inflated metrics

"Block has wildly overstated its genuine user counts and has understated its customer acquisition costs," said the report.

A report following a two-year investigation from Hindenburg Research claimed digital payments company Block had “systematically taken advantage of the demographics it claims to be helping,” alleging the firm inflated its user metrics and facilitated fraud.

According to the March 23 report, Hindenburg Research said Block’s practices allowed users to set up fraudulent accounts, catering to many criminals who used the platform to steal funds. The report suggested that Block insiders, including co-founders Jack Dorsey and James McKelvey, chief financial officer Amrita Ahuja, and Cash App manager Brian Grassadonia, had sold more than $1 billion of the firm’s stock, whose price rose “on the back of its facilitation of fraud.”

“The ‘magic’ behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics,” said Hindenburg. “Even when users were caught engaging in fraud or other prohibited activity, Block blacklisted the account without banning the user.”

The report cited a shift in Block’s business starting during the early days of the pandemic in 2020, when many people activated Cash App accounts to receive stimulus and unemployment payments from the United States government. Interviews with former employees by Hindenburg suggested that roughly 40% to 75% of reviewed accounts were fake, involved in fraud, or tied to a single individual.

Related: Jack Dorsey’s Block sues Bitcoin​.com for trademark infringement

"Like traditional financial services companies, [Block's] key focus seems to be on dressing up predatory loans and fees as revolutionary products, avoiding regulation and embracing worst-of-breed compliance policies in order to profit from its facilitation of fraud against consumers and the government," said Hindenburg. "The company seems to be betting that the consequences will either be a ‘cost of doing business’ or at the very least, come later."

Hindenburg announced it had taken a short position in Block as part of its report. At the time of publication, the price of Block’s stock has dropped more than 13% in the last 24 hours to $63.38.

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