assets

Signum Digital scores approval to offer security tokens in Hong Kong

Hong Kong’s Security and Futures Commission greenlights Signum Digital to offer security tokens in the city after inviting applications for virtual asset trading licenses.

Signum Digital, a joint venture of Coinstreet and Somerley, has announced that it has received an approval-in-principle from the Hong Kong Securities and Futures Commission (SFC) for its security token offering (STO) and subscription platform.

Security tokens are a new category of digital assets built on blockchain technology representing ownership of tangible assets, such as private equities, real estate, art and collectibles. By being linked to real-world assets, the tokens may lower risks for potential investors, facilitate research processes and provide a foundation for the market value of the investment opportunity.

Signum Digital has claimed that, following the receipt of final authorization from Hong Kong’s SFC, it will manage the STO platform using the brand name “CS-Pro.“ This platform will be a pioneering development in Hong Kong, according to Signum.

Last month, the Hong Kong SFC released preliminary regulations for virtual asset trading platforms and urged the general public to provide their input. Under the upcoming licensing system scheduled to begin in June, the SFC mandated that digital currency exchanges submit license applications that would let everyday investors trade specific high-capitalization tokens.

Hong Kong has been proposing new initiatives for the city’s cryptocurrency and digital asset sector since last year when it invited firms interested in providing STO services to pitch proposals.

Related: Hong Kong’s losses to crypto scams doubled to $217M last year: Report

Cryptocurrency exchange Huobi Global also announced last month that it is applying for a license to operate in Hong Kong, possibly moving headquarters from Singapore to the special administrative region.

Recently, Hong Kong has displayed much interest in becoming a crypto hub, investing heavily in supporting the potential of technologies like Web3.

In mid-December 2022, Hong Kong launched its first two exchange-traded funds for cryptocurrency futures, which raised over $70 million ahead of its debut. The event came soon after the head of Hong Kong’s SFC announced in October that Hong Kong is willing to distinguish its crypto regulation approach from the Chinese crypto ban enforced in 2021.

Former Jane Street, PIMCO traders raise $15M for ZK proof-of-solvency protocol

The team said it has already lined up clients, including CoinList, Bitso and TrueUSD.

A team of former Jane Street and PIMCO traders have raised $15 million to produce a proof-of-solvency protocol for centralized exchanges, stablecoin issuers and other asset managers in the crypto space, according to a press release from the team shown to Cointelegraph. Called “Proven,” the new protocol allegedly uses zero-knowledge proofs to reveal an institution’s assets and liabilities without revealing the personal data of customers.

According to the press release, the Proven team consists of quantitative traders, portfolio managers, and researchers from Wall Street firms Two Sigma, Elm Partners, Pimco, Jane Street and others. The initial $15 million seed round was led by crypto-oriented venture capital fund Framework Ventures.

Jane Street was also the former employer of Sam Bankman-Fried, who is accused of fraud after the collapse of his crypto exchange, FTX. Proof-of-solvency protocols attempt to make exchanges more transparent in order to avoid another FTX-like disaster.

Richard Dewey, co-founder of Proven, expressed hope that the new protocol will allow crypto firms to regain the trust of the public while simultaneously protecting privacy, stating:

“The last few months have highlighted an issue that has long plagued both traditional financial and digital asset firms – efficiently fostering trust with customers while maintaining a necessary level of privacy. […] We designed Proven to be a win-win solution that enables customers and regulators to have confidence […] while at the same time protecting sensitive customer information.”

The Proven team said that it already has a list of pilot clients, including CoinList, Bitso, TrueUSD and M11 Credit.

Related: Polygon launches ID product based on ZK proofs

Since the collapse of FTX last year, many centralized exchanges, stablecoin issuers and other crypto custodians have sought to increase transparency by providing cryptographic proof of assets and liabilities. However, providing these proofs has turned out to be a challenge. Although most firms have been able to verify their on-chain assets, liabilities incurred off-chain have been much more difficult to prove to a skeptical public.

Gate.io, OKX, Kraken and other exchanges have attempted to disclose liabilities through cryptographic Merkle trees. This has allowed users to prove that their balances were included in the company’s liability statements. However, this has also been criticized for allegedly allowing companies to falsify liabilities by including negative balances.

Zero-knowledge (ZK) proof of solvency allegedly fixes this problem by allowing the exchange to use ZK proofs to show that customer balances are non-negative, according to app developer sCrypt’s technical explanation of the concept.

However, not all experts on zero-knowledge proofs agree that this process will work. For example, Aleph Zero blockchain founder Matthew Niemerg told Cointelegraph in a statement:

“While zero-knowledge proofs can be used to provide guarantees regarding on-chain balances, they become rather limited in auditing the solvency of a firm unless all liabilities are published (using cryptographic techniques) on-chain. Even then, there are no assurances that all liabilities are disclosed. In short, cryptography will not solve this problem in the even more pathological situation when the party being audited is deceitful.”

So, the debate over whether centralized participants can ever be truly transparent continues to rage.

Key takeaways from Circle’s $44.5B USDC reserve report

Circle has released its reserve report for December 2022, highlighting overcollateralized asset holdings currently backing 44.5 billion USDC tokens in circulation.

USD Coin (USDC) issuer Circle has released an accountant-verified report of its treasury reserve holdings backing more than $44.5 billion worth of tokens currently in circulation.

Circle’s December 2022 reserve report, reviewed by Grant Thornton accountancy group, breaks down the current make-up of the stablecoin issuer’s reserve vault. According to Circle, 44,553,543,212 USDC is currently backed by $44,693,963,701 U.S. dollars held in custody accounts.

It is worth noting that a significant portion of the latter amount is invested in various U.S. treasury bonds. As per Circle’s vice president of accounting Timothy Singh, the fair value of assets in the USDC reserve is the total balance of U.S. dollar-denominated assets, including a mix of cash and treasury bonds.

Circle’s reserve fund is registered as a government money market fund. The equity interests in the fund are wholly owned by Circle and include 14 different U.S. treasury bills valued at over $23.5 billion. The fund also holds $48.9 million in cash, while a further $33 million is due to the fund, offset by “timing and settlement differences.”

Related: Stablecoin settlements can surpass all major card networks in 2023: Data

Another two U.S. treasury securities valued at $10.5 billion are reported in a separate reserve assets category, alongside another $10.5 billion in cash held by several financial institutions on behalf of Circle.

U.S. banks holding Circle’s cash reserves include the Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank, Signature Bank, Silicon Valley Bank and Silvergate Bank.

Circle and payments platform Ripple were notable attendees that participated in cryptocurrency and blockchain-focused workshops at the World Economic Forum in Davos in January 2023. 

Circle’s vice president of global policy, Corey Then, said the organization had discussions with policymakers, traditional companies, tech firms and humanitarian organizations to unpack the possibility of using USDC as a payment solution.

Over the past two years, Circle’s position as a stablecoin issuer has consistently grown, leaving USDC as the second-most-used USD-backed stablecoin, behind Tether (USDT).

BlockFi plans to file assets and liabilities for bankruptcy case on Jan. 11

The company claimed that no members of the BlockFi management team had withdrawn any crypto from the platform since October.

Crypto lending firm BlockFi has announced it will disclose information on its assets and liabilities as well as payments received prior to its bankruptcy filing in November.

In a Jan. 9 Twitter thread, BlockFi said it had filed a presentation for its stakeholders detailing plans for future court filings and a rundown of the bankruptcy proceedings. According to the lending firm, the company reached out to 106 potential buyers shortly after its first bankruptcy hearing in November and will ask for the court’s approval regarding the bidding process on Jan. 30.

Specifically, the company claimed that no members of the BlockFi management team had withdrawn any crypto from the platform since Oct. 14 nor “made a withdrawal greater than 0.2 BTC in value at any time” after Aug. 17. The firm also noted it had “increase[d] base salaries and ma[de] retention payments” for certain employees following a $400 million revolving credit facility from FTX US in July.

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BlockFi said it planned to file its assets and liabilities, along with a statement of financial affairs on Jan 11. The announcement followed the United States Department of Justice notifying the court handling the BlockFi bankruptcy that it had seized more than 55 million shares of Robinhood — worth roughly $450 million at the time of publication — as part of the criminal case against crypto exchange FTX and its executives. BlockFi was one of the parties claiming rights to the shares given certain financial ties to FTX.

Related: BlockFi files motion to return frozen crypto to wallet users

Crypto firms FTX, Celsius Network, BlockFi and Voyager Digital all filed for Chapter 11 bankruptcy in 2022, with many users reporting losses totaling in millions of dollars. The next public hearing for FTX’s bankruptcy case is scheduled for Jan. 11, while BlockFi has an omnibus hearing on Jan. 17.

US authorities are seizing $460M in Robinhood shares tied to FTX: Report

Officials reportedly told a bankruptcy judge they were in the process of seizing 56 million shares of Robinhood tied to FTX and its former CEO, Sam Bankman-Fried.

The United States Departure of Justice has reportedly seized or was in the process of seizing more than $400 million worth of Robinhood shares linked to FTX as part of the case against the crypto exchange.

According to a Jan. 4 report from Reuters, U.S. officials told a judge they were in the process of seizing assets tied to FTX and its former CEO, Sam Bankman-Fried, which included 56 million shares of Robinhood — worth roughly $468 million at the time of publication. The report comes a day after a judge in the criminal case against SBF ordered him not to access or transfer any cryptocurrency or assets from FTX or Alameda.

Amid FTX’s bankruptcy proceedings, control of the Robinhood shares has been under contention as many investors and creditors look to be made whole. BlockFi, Bankman-Fried and FTX creditor Yonathan Ben Shimon have all staked claims to the assets.

In federal court on Jan. 3, Bankman-Fried pleaded not guilty to eight criminal counts, including wire fraud, securities fraud and violations of campaign finance laws. He also previously denied moving funds from Alameda, saying he no longer had access to the wallets since stepping down as CEO in November.

Related: The outcome of SBF’s prosecution could determine how the IRS treats your FTX losses

The former FTX CEO has been under house arrest at his parent’s home in California since December but has been allowed to travel for approved reasons, including showing up for court in New York. His trial date has been set for Oct. 2.

South Korean court freezes $92M in assets related to Terra tokens

The CEO of Terraform Labs’ affiliate firm Kernel Labs reportedly held the largest amount in illegal proceeds from Terra.

More than six months after the collapse of the Terra ecosystem, South Korean authorities continue to investigate and freeze the funds of persons involved in Terra.

After seizing 140 billion won ($108 million) from Terra co-founder Shin Hyun-Seong in November, the Seoul Southern District Court has recently ruled to confiscate more assets related to Terra.

The South Korean court has ordered to freeze of 120 billion won ($92 million) in assets of former and incumbent CEOs of Terraform Labs’ affiliate firm Kernel Labs, The Korea Economic Daily reported on Dec. 20.

Founded in 2018, Kernel Labs is a blockchain consultancy firm focused on decentralized applications and blockchain payment systems. Kernel Labs is believed to have close ties with Terraform Labs, as CEO Kim Hyun-joong once reportedly served as vice president of engineering at Terraform Labs. According to some sources, Kernel Labs employees also worked at the South Korean office of Terraform Labs.

According to the new report, the Seoul Southern District Court has accepted the prosecution’s request to seize the property of seven people involved in selling pre-issued Terra (LUNA) tokens to make astronomical profits.

Kernel Labs CEO Kim is one of the persons involved in the case, reportedly holding the largest amount in illegal proceeds from Terra. Prosecutors estimated Kim’s illegal gains to amount to at least 79 billion won ($61 million). Prosecutors also found that another Kernel Labs executive, a former CEO, received about 41 billion won ($31 million) in illegal proceeds from Terra.

Kim reportedly made some major real estate purchases in South Korea in 2021. In November, he bought a building in Gangnam-gu, the most expensive area in Seoul, for 35 billion won ($27 million). In June, he also purchased an apartment in Seongdong-gu for about 9 billion won ($7 million).

Related: South Korean judge dismisses arrest warrants for Terra co-founder Do Kwon’s former associates

The news comes amid global authorities continuing to search for Terraform Labs’ controversial founder and CEO Do Kwon. According to the latest reports, South Korean authorities believe that Kwon was hiding in Serbia as of mid-December after leaving Singapore a few months ago.

As previously reported, the collapse of Terra has emerged as one of the biggest contagions on the cryptocurrency market in 2022. Terra’s algorithmic stablecoin, TerraUSD Classic (USTC), was one of top 10 cryptocurrencies before it lost its United States dollar peg in May. The event triggered a domino effect on crypto markets, causing massive liquidations and uncertainty, which subsequently undermined the crypto lending industry.

OKX cites intermittent outage amid Alibaba Cloud equipment anomaly

Alibaba Cloud Hong Kong IDC Zone C server went offline on Saturday at roughly 10 pm ET and failed to recover for over 7 hours at the time of reporting.

Crypto exchange OKX witnessed service disruptions after primary infrastructure provider Alibaba Cloud announced a hardware failure in Alibaba Cloud’s Hong Kong data center.

Alibaba Cloud Hong Kong IDC Zone C server went offline on Saturday at roughly 10 pm ET and failed to recover for over seven hours at the time of reporting. On-chain data further confirms that OKX processed no transactions during this timeline.

Partial list of Alibaba Cloud’s global infrastructure. Source: Alibaba Cloud

Alibaba Cloud’s website shows that the Hong Kong (China) server hosts three availability zones, which have been operational since 2014. The cloud provider confirmed the outage through an official announcement, as shown below.

Alibaba Cloud’s official announcement about service disruption that affected OKX’s service. Source: Alibaba Cloud

While announcing the service disruption, OKX revealed that it is working together with Alibaba Cloud to resolve the issues. “Funds are safe. Sorry for any inconvenience caused,” the announcement added.

In the meantime, users cannot withdraw and deposit funds, while some claim that their account balances have glitched to show $0 in their funds. Many investors have confirmed that their trades got stuck midway and have shown concerns about possible losses.

OKX has not yet to responded to Cointelegraph’s request for comment.

Related: OKX releases proof-of-reserves page, along with instructions on how to self-audit its reserves

In early December, Avalanche blockchain entered into a partnership to power Alibaba Cloud’s Node-as-a-Service initiatives.

As Cointelegraph reported, the partnership is aimed at developing new tools for launching validator nodes on Avalanche’s public blockchain platform in Asia. The integration will allow Avalanche developers to use Alibaba Cloud’s plug-and-play infrastructure as a service to launch new validators.

During the announcement, it was revealed that Avalanche hosts over 1,200 validators and processes roughly 2 million daily transactions.

FTX debacle sees Nansen take stock of major exchange on-chain holdings

Blockchain analytics firm Nansen has released an overview of major cryptocurrency exchanges’ on-chain asset holdings and portfolios in the wake of FTX’s collapse.

The collapse of cryptocurrency exchange FTX has put industry peers under the microscope with calls for transparent accounts of token holdings and assets under management.

Major cryptocurrency exchanges like Binance, Huobi, OKX and Crypto.com have made efforts to share details of their assets and portfolios to assuage the wider space. This comes after investor confidence has been shaken, with users across the ecosystem moving Bitcoin (BTC) and other tokens off exchanges to avoid potential contagion from the FTX fallout.

Blockchain analytics platform Nansen provides industry insights and is known for its wallet-labeling features that track addresses across multiple blockchains. In a series of tweets posted on Nov. 15, Nansen listed seven major exchanges, their relevant portfolios and explanatory statements of accounts.

Related: Bitfinex CTO releases proof of reserves amid FTX bankruptcy fiasco

The assets and net worth of the exchanges are the sum of holdings in wallet addresses provided by the firms on blockchains that Nansen monitors. The analytics platform also notes that the figures are not an “exhaustive or complete statement of the actual assets/reserves held.”

The exchanges accounted for include Binance, Crypto.com, OKX, KuCoin, Deribit, Bitfinex and Huobi.

Binance, widely regarded as the largest global exchange by transaction volume, holds around $64.3 billion worth of assets across the Bitcoin, Ethereum, Tron and BNB Chain blockchains. This eclipses the other exchanges by a substantial amount.

Bitfinex has the second-largest asset holdings in reserve of the seven exchanges, according to data provided by the company. $8.23 billion of assets are held across the Bitcoin, Ethereum, Polygon, Tron, Solana, Acala, Avalanche, Cosmos, Fantom, Near, Terra and Terra Classic blockchains.

Huobi’s assets amount to a traced $3.3 billion across eight different chains. OKX reportedly holds $5.84 billion in cryptocurrency assets across the Bitcoin, Ethereum, Polygon, Arbitrum, Tron and Avalanche blockchains. 

Crypto.com holds an estimated $2.36 billion in assets across seven chains. KuCoin addresses account for $2.65 billion in assets on eight different blockchains, and Deribit holds around $1.46 billion worth of assets on the Bitcoin, Ethereum and Solana blockchains.

Nansen co-founder and CEO Alex Svanevik told Cointelegraph that the firm is planning to publish preliminary findings on the FTX situation this week. Nansen previously unpacked on-chain findings after the cataclysmic collapse of the Terra ecosystem in May 2022.

Huobi and Gate.io under fire for allegedly sharing snapshots using loaned funds

A wallet address linked to the Huobi exchange was found transferring 10,000 ETH to Binance and OKX deposit wallets soon after releasing its asset snapshot.

To counter the rising mistrust among crypto investors following the FTX collapse, crypto exchanges unanimously decided to share proof of reserve with the public as a way to showcase legitimacy. However, certain anomalies found during on-chain investigations suggest foul play and market manipulation.

Just two days after Crypto.com made its cold storage information public, investigators found that 320,000 Ether (ETH) was sent to Gate.io on Oct. 21, 2022. However, Kris Marszalek, the CEO of Crypto.com, dismissed any wrongdoing by stating that the funds were transferred accidentally and were eventually returned back to the original storage.

Gate.io released asset snapshot on Oct. 28. Source: Colin Wu

On Oct. 28, Gate.io released its proof of reserves snapshot, which, Solidity developer Shegen alleged, was done using Crypto.com’s funds, and questioned:

“This was topping up for the proof. Gate and crypto.com are fucked?”

Moreover, the crypto community suspects Huobi of attempting a similar manipulation. A wallet address linked to the Huobi exchange was found transferring 10,000 ETH to Binance and OKX deposit wallets soon after releasing its asset snapshot.

Blockchain investigator Colin Wu pointed out the transactions on Etherscan, which proves that Huobi had shown 14,858 ETH in its latest snapshot, which has since fallen down to 2,463.5 ETH at the time of writing.

Huobi’s wallet information. Source: Etherscan

While Huobi is yet to publicly retaliate against the claims put forth by the crypto community, Gate.io founder Lin Han revealed their side of the story. Han argued that the snapshot in question was taken on Oct. 19, two days before Crypto.com’s accidental fund transfer of 320,000 ETH.

Han further reiterated that Crypto.com’s funds came in after the snapshot was released and shared relevant proof for the community’s satisfaction.

The possibility of multiple crypto exchanges working together to manipulate investor funds has forced the community to keep their guard up until an official statement. Huobi has not yet responded to Cointelegraph’s request for comment.

Related: Binance shares wallet addresses and activity after proof-of-reserve pledge

As more crypto exchanges make their cold storage information public, the immutable nature of blockchain technology will allow investors and investigators to dive into the history of the exchange’s operations.

“Our objective is to allow users of our platform to be aware and make informed decisions that are aligned with their financial goals,” said Binance while revealing wallet addresses.

Amendment to UK financial services bill provides regulation for crypto activities

The bill addressed stablecoin regulation from the start. Now, the Financial Conduct Authority will be empowered to regulate activities with crypto assets if the amended bill passes.

An amendment to the Financial Services and Markets Bill now before the United Kingdom’s parliament would extend the law’s powers to regulate financial promotion and other activities to crypto assets. The amendment was written by Member of Parliament and Financial Secretary to the Treasury Andrew Griffith. 

The 335-page bill was introduced in July and had its second reading in the House of Commons on Sept. 7. According to the explanatory statement accompanying the amendment, it would:

“[…] clarify that the powers relating to financial promotion and regulated activities can be relied on to regulate cryptoassets and activities relating to cryptoassets.”

The Financial Conduct Authority (FCA), the U.K.’s financial regulator, published a “Dear Chief Executive” letter on Aug. 9, which detailed its supervisory strategy over financial firms’ so-called “alternatives portfolio.” The letter stated: “We will publish final rules for the promotion of crypto assets once the Treasury formalises legislation to bring these into our remit.”

Related: FCA green lights Revolut, making no UK crypto firms operating under temporary status

Most crypto-related businesses in the U.K. are not under the control of the FCA now, though they have the option of applying for registration and will be required to do so next year. The registration process currently looks only at Anti-Money Laundering and Countering the Financing of Terrorism measures and has proven challenging for many applicants.

The FCA also took action on the advertising of high-risk financial products in August and explicitly stated that crypto assets can be risky, but the agency was not yet regulating them. The country’s Advertising Standards Authority has been more aggressive in monitoring crypto-related advertising.

Griffith’s predecessor as financial secretary Richard Fuller stated in September that the government was committed to making the U.K. a “hub for crypto technologies.” On Oct. 10, the European Parliament Committee on Economic and Monetary Affairs passed the Markets in Crypto-Assets bill and a full parliamentary vote is expected soon.