The largest US crypto exchange platform by volume is reportedly developing an overseas trading platform in response to a domestic crackdown on crypto assets. According to a new report from Bloomberg, anonymous sources familiar with the matter say that Coinbase is considering whether to launch a foreign trading platform as US regulators tighten their control […]
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Given Silicon Valley Bank’s direct involvement in destabilizing USDC prices, CZ blamed banks for increasing the risks of stablecoins.
The death spiral of the Terra (LUNA) and TerraUSD (UST) ecosystem served as a catalyst to the 2022 bear market — causing losses in the millions, damaging investor sentiment and intensifying the regulatory spotlight over cryptocurrencies. However, the recent depegging of Circle’s USD Coin (USDC) led Binance CEO Changpeng ‘CZ’ Zhao to believe that traditional banks are a risk to stablecoins that are usually pegged 1:1 with fiat currencies, like the US dollar.
On March 11, Circle disclosed that Silicon Valley Bank (SVB) did not process its $3.3 billion withdrawal request. The crypto market responded to the revelation by selling off their USDC holdings, causing the US dollar-backed stablecoin to lose its peg. Given SVB’s direct involvement in destabilizing USDC prices, CZ blamed banks for increasing the risks of stablecoins.
Banks are a risk to fiat-backed stable coins.
— CZ Binance (@cz_binance) March 12, 2023
Supporting CZ’s sentiment, a community member pitched the idea of a crypto-backed stablecoin. CZ responded by highlighting the defunct algorithmic stablecoin launched by Do Kwon, saying:
“Do Kwon actually had the right idea, but just failed miserably on execution.”
Moreover, according to CZ, fiat currencies — in themselves — are a risk without getting crypto into the equation.
Fundamentals.
— CZ Binance (@cz_binance) March 11, 2023
While numerous jurisdictions have sought legal actions against Kwon, the entrepreneur continues to reside in a safe haven unknown to the authorities.
Related: Circle’s USDC instability causes domino effect on DAI, USDD stablecoins
Many investors foresaw the possibility of USDC depegging and decided to sell their holdings to avoid losses. However, for one such investor, a hasty decision led to a loss of over $2 million.
With USDC insolvency fears rampant, users are fleeing to safety in other stables. Not all of them are going to make it there in one piece, however.
— BowTiedPickle.eth | Solidity Shipper (@BowTiedPickle) March 11, 2023
Here's how one unlucky user paid $2,080,468.85 to receive $0.05 of USDT. pic.twitter.com/R8YdudWfsV
Instead of selling their USDC holdings in a liquidity pool for a 6% slippage, the investor chose to go for a “questionable " method that eventually led to a maximal extractable value (MEV) bot netting $2.045 million in profit after paying $45 in gas and $39,000 in MEV bribes.
The recent action from Binance comes in the wake of NYDFS ordering BUSD issuer Paxos to stop minting new BUSD.
Binance has turned to a new set of stablecoins in the wake of the United States Securities and Exchange Commission’s (SEC) regulatory action against its native stablecoin, BUSD. SEC had sent a Wells notice, alleging BUSD is in violation of the U.S. Securities Law.
Following SEC’s notice, the New York Department of Financial Services (NYDFS) asked BUSD issuer Paxos to stop minting new BUSD altogether. The minting ban on BUSD has forced Binance to look for alternative methods to mitigate its stablecoin needs.
According to on-chain data, the largest cryptocurrency exchange by trading volume is looking to onboard TrueUSD, along with adding support for a few decentralized stablecoins as well. The crypto exchange minted 180 million TUSD from Feb 16 to Feb 24.
1/ With the SEC’s regulation of $BUSD, #Binance is looking to collaborate with other stablecoin projects.
— Lookonchain (@lookonchain) March 6, 2023
- Minted 180M $TUSD from Feb 16 to Feb 24;
- Announced listing $LQTY in the Innovation Zone on Feb 28;
- Announced launching $TRU perpetual contract today.
A thread pic.twitter.com/YqCDWkd3hE
TrustToken, the stablecoin operator behind USD-pegged stablecoin TUSD is a Binance partner since June 2019. The partnership allowed Binance to buy TUSD for zero fees and redeem it for fiat currency. Binance’s TUSD relation has come a full circle, where earlier in September Binance auto liquidated TUSD to BUSD to increase its market share. Now, with a ban on BUSD, Binance is increasingly minting new TUSD to mitigate its stablecoin needs.
Binance CEO Changpeng Zhao has said that the crypto exchange will look at other options to diversify its stablecoin away from BUSD after the regulatory actions. Just a couple of weeks later, Binance announced support for the decentralized borrowing protocol Liquity (LQTY) and launched TrueFi (TRU) perpetual contracts. TRU is the native token of the decentralized finance protocol TrueFi for uncollateralized lending.
Related: Binance tried to hire Gary Gensler in 2018 for closer ties with U.S. regulators: Report
The Binance listing for Liquity and TrueFi proved to be a big boost in their price, and both tokens have surged by 200% in the last month. Cointelegraph reached out to Binance to get their views on their interest in decentralized stablecoins but didn’t get a response at press time.
Decentralized stablecoins became popular with the advent of Terra’s native stablecoin Terra-USD. Market pundits were of the opinion that decentralized stablecoins would be the next big thing in the crypto ecosystem. However, with the collapse of the Terra ecosystem in May 2022, the opinions about the nascent stablecoin concept changed fast.
The Office of the Comptroller of the Currency (OCC) used the depeg and collapse of the TerraUSD Classic (USTC) algorithmic stablecoin as an example of stablecoins’ “run risk,” and how asset-backed stablecoins also saw minor depeg events as a result.
Local police in Singapore sent an email on Monday saying that they have begun a probe connected to Do Kwon’s Terraform Labs.
Local authorities in Singapore announced they had begun a probe that is connected to Do Kwon’s Terraform Labs.
According to a Bloomberg report, Singaporean police sent an email on March 6, which said, “investigations have commenced in relation to Terraform Labs.” The email also added that the inquiries are “ongoing,” and Do Kwon is not currently in the city-state.
Last month, on Feb. 16, the United States Securities and Exchange Commission (SEC) accused Do Kwon and Terraform Labs of fraud in a new lawsuit.
Some voices in the crypto space have criticized this lawsuit as a way for the SEC to go after stablecoins with future lawsuits. Lawyers in the industry have even called the SEC’s comparisons of assets “wild."
Meanwhile, the SEC probe uncovered that Kwon removed around 10,000 Bitcoin (BTC) from the Terra platform and the Luna Foundation Guard, which he eventually changed into fiat. In total SEC allegations claim Kwon has laundered over $100 million worth of Bitcoin since the initial collapse of the platform.
At the time of writing, Do Kwon has made no comment. The Terraform Labs co-founder has been active on social media throughout the entire scandal. However, he has not tweeted since the beginning of February.
Related: Gary Gensler’s SEC is playing a game, but not the one you think
This entire saga has its roots back in May 2022 when the stablecoin UST dropped from its peg to the U.S. dollar. This caused the price to collapse to zero, which subsequently caused a major implosion in the digital asset market with a loss of nearly $40 billion.
Terraform Labs has also been under investigation by authorities in South Korea, where a warrant was out for Kwon’s arrest. South Korean police traveled to Serbia in their efforts to locate Kwon.
On Feb. 15, South Korean prosecutors requested a warrant for the arrest of a local e-commerce executive who they accused of accepting LUNA for promoting Terra Labs.
The realm of stablecoins is an ever-evolving landscape and the number of coins in circulation for the stablecoin BUSD has fallen below the 10 billion mark to approximately 9.68 billion on March 3, 2023. Over the last 30 days, BUSD’s token supply has dropped 40% lower. In contrast, the number of tethers in circulation has […]
2022 was a year of phenomenal cryptocurrency blowouts, as several projects collapsed and many more are on life support after the entire ecosystem was shattered. The fallout from these digital currency projects has not only removed billions of dollars in value from the crypto economy, but also eroded trust. The following is a look at […]
DeFi market saw another exploit this past week on the Platypus protocol, resulting in a loss of over $8 million.
Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you significant developments over the last week.
The backlash from the Terra implosion still haunts the crypto world, with the now-shuttered stablecoin yield platform Stablegains being sued for customer losses. The plaintiffs allege that the platform funnelled customer funds into Anchor Protocol without users’ knowledge or consent.
Platypus, the DeFi protocol that was exploited for over $8 million, is working on a compensation plan to recover some of the funds.
Florida’s Cogent Bank is proposing a $100 million participation in loans to MakerDAO’s RWA Master Participation Trust.
Bridge protocols were the primary target of exploits last year, amounting to hundreds of millions of dollars worth of stolen funds. Trustless bridges can mitigate the issue, enabling cross-chain transfers without needing a centralized custodian, potentially making it a safer option for interoperability.
After nearly four weeks of a bullish run, the DeFi market is fighting a brave battle against the bears. There were minor price drops, and the market’s overall slightly declined as bears had the upper hand toward the end of the week.
DeFi yield platform Stablegains is being sued in a Californian court for allegedly misleading investors and failing to comply with securities laws.
On Feb. 18, the plaintiffs, Alec and Artin Ohanian, filed a complaint in the United States District Court for the Central District of California, alleging that the shuttered DeFi platform diverted all its customer funds to the Anchor Protocol without their knowledge or consent. Anchor Protocol offered up to 20% yields on Terraform Labs’ algorithmic stablecoin, Terra USD (UST).
The $8.5 million Platypus flash loan attack was made possible because of code that was in the wrong order, according to a post-mortem report from Platypus auditor Omniscia. The DeFi firm is working on a compensation plan for users’ losses after a flash loan attack drained nearly $8.5 million from the protocol, affecting its stablecoin dollar peg.
In a tweet on Feb. 18, Platypus said it was working on a plan to compensate for the damages and asked users not to realize their losses in the protocol, saying this would make it harder for the company to manage the issue. Asset liquidations are also paused, the protocol said.
Crypto lending platform MakerDAO is voting on a new proposal to bring another commercial bank into its ecosystem, strengthening the connection between DeFi and traditional finance.
As per MakerDAO’s governance forum, Cogent Bank — a Florida-based commercial bank — proposes to participate with $100 million in loans to MakerDAO’s RWA Master Participation Trust.
Blockchain bridges allow DeFi users to use the same tokens across multiple blockchains. For example, a trader can use USD Coin (USDC) on the Ethereum or Solana blockchains to interact with those networks’ decentralized applications.
While these protocols may be convenient for DeFi users, they are at risk of exploitation by malicious actors. For example, in the past year, the Wormhole bridge — a popular cross-chain crypto bridge between Solana, Ethereum, Avalanche and others — was hacked, with attackers stealing over $321 million worth of wrapped Ethereum (wETH), the largest hack in DeFi history at the time.
Analytical data reveals that DeFi’s total market value dipped below $50 billion this past week. Data from Cointelegraph Markets Pro and TradingView shows that DeFi’s top 100 tokens by market capitalization had a mixed week, with most of the tokens trading in green while a few others bled in red.
Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education in this dynamically advancing space.
Customizable rollup provider Eclipse announced that the startup is launching a scaling solution that is compatible with Solana and Polygon. Eclipse disclosed that the Layer 2 blockchain can run smart contracts on Solana, and decentralized applications (dapps) will be easily migratable to the Polygon Sealevel Virtual Machine (SVM). How Eclipse’s L2 Scaling Concept Hopes to […]
The United States Securities and Exchange Commission (SEC) ordered Paxos Trust to stop issuing Binance USD. That could affect the whole stablecoins ecosystem.
New week, a new element of the crypto ecosystem is under attack. This time, the United States Securities and Exchange Commission (SEC) ordered Paxos Trust to stop issuing Binance USD (BUSD) — a dollar-pegged stablecoin. Paxos received a cease order from the New York Department of Financial Services (NYDFS).
With no other choice, Paxos announced that from Feb. 21, it would end its relationship with Binance for the branded U.S. dollar-pegged stablecoin BUSD. All existing BUSD tokens will remain fully backed and redeemable through Paxos Trust Company until “at least February 2024.” Customers can redeem their funds in U.S. dollars and convert their BUSD tokens to another Paxos-issued stablecoin, Pax Dollar (USDP). At the same time, the company “categorically disagreed” with the SEC’s opinion that BUSD is a security.
From disregarding the issue as “FUD” to calling it an attack against the Binance exchange, crypto community members laid down various theories on the allegations that BUSD is an unregistered security. Crypto analyst Miles Deutscher expressed the most obvious point of bewilderment — nobody expects profit when purchasing a stablecoin.
The situation may have far-reaching repercussions for the stablecoins in general. As Binance CEO Changpeng Zhao has already hinted, the industry may drop the American dollar as a peg currency altogether, switching to the euro, yen or Singapore dollar. However, some experts believe the scrutiny of Paxos was not a direct attack on stablecoins but preventive action against Paxos in particular.
The SEC has filed a lawsuit against Terraform Labs and its founder, Do Kwon, for allegedly “orchestrating a multi-billion-dollar crypto asset securities fraud.” According to the agency, Kwon and Terraform offered and sold an “inter-connected suite of crypto asset securities, many in unregistered transactions.” Kwon, a South-Korean national, is currently at large and believed to be in Serbia after leaving his residence in Singapore sometime in September 2022 following a Seoul court issuing an arrest warrant for him. Interpol reportedly issued a Red Notice for Kwon to law enforcement worldwide later in September.
The Bank of Russia is preparing to roll out the first consumer pilot for the nation’s central bank digital currency (CBDC) on April 1, 2023. The upcoming CBDC pilot will involve real operations and real consumers in Russia but will be limited to a certain number of transactions and customers. Following the first pilot stage, the Bank of Russia plans to determine how to scale the digital ruble further. The news comes amid some Russian officials claiming that the Bank of Russia is considering a gold-backed token targeting cross-border transactions.
The topic of campaign donations in crypto is undoubtedly something that will come up before the next electoral cycle in the United States. Still, Kansas state lawmakers are eager to address it beforehand. According to a new bill, no person would be allowed to make or accept crypto contributions of more than $100 for any political candidate in the state’s primary or general election. For donations under $100, the receiver would need to “immediately convert” the crypto to U.S. dollars, not use the crypto for expenditures and not hodl the funds.
The report suggested that whales with Binance, FTX, and Coinbase “probably cashed out at the expense of smaller holders” by reducing their BTC stockpiles as retail investors bought.
A report from the Bank for International Settlements (BIS) suggested that trading activity on major exchanges increased in the days following the collapse of crypto firms FTX and Terraform Labs.
According to a Feb. 20 bulletin on “crypto shocks and retail losses,” the BIS reported that while the price of Bitcoin (BTC), Ether (ETH), and other tokens dropped in 2022, the number of daily active users at some exchanges including Coinbase and Binance “increased markedly” following news of the collapse of Terra and FTX. The bank suggested that “users tried to weather the storm” by moving their investments into stablecoins and other tokens likely not looking bearish at the time.
In contrast, the BIS reported that whales at the aforementioned exchanges “probably cashed out at the expense of smaller holders” by reducing their BTC stockpiles as retail investors bought crypto. The bank said analysts had looked at the number of downloads of crypto investment apps, noting that roughly 75% of users had downloaded an app when the BTC was more than $20,000 and assuming each user bought $100 in BTC the first month and each subsequent month.
Related: BIS-funded regulator to probe DeFi entry points like stablecoins
“Data on major crypto trading platforms over August 2015–December 2022 show that [...] a majority of crypto app users in nearly all economies made losses on their bitcoin holdings,” said the BIS report. “The median investor would have lost $431 by December 2022, corresponding to almost half of their total $900 in funds invested since downloading the app.” The bank added:
“While the crypto collapse may have affected individual investors, the aggregate impact on the broader system was limited.”
The market crash of 2022 has had industry leaders and regulators speak out on various concerns, from the lack of oversight at a major exchange like FTX to how the crypto market could grow to have the potential to impact traditional financial markets. In the United States, several bankruptcy cases are underway for firms including FTX, Celsius Network and Voyager Digital, while authorities have been moving forward with criminal charges against former FTX CEO Sam Bankman-Fried.
