Bitfinex

Bitfinex Securities El Salvador receives Digital Asset Service provider license in El Salvador

The license granted by El Salvador’s National Digital Asset Commission will allow Bitfinex Securities to issue and trade secondary assets on a regulatory-compliant platform.

Digital asset exchange Bitfinex Securities El Salvador has received a digital asset service provider license under El Salvador’s new Digital Assets Issuance Law, which was passed by El Salvador’s National Congress in January, with the goal of fostering increased financial innovation and growth in the Central American country. 

According to the announcement, the license, which was granted on April 11 by El Salvador’s National Digital Asset Commission, makes Bitfinex Securities El Salvador “the world’s first international digital asset platform to receive approval to be licenced as a Digital Asset Service Provider” in El Salvador 

Paolo Ardoino, chief technology officer of Bitfinex, noted that the license will allow “Bitfinex Securities to facilitate the issuance and secondary trading of assets with clearly defined rights and obligations as outlined in the new digital asset regulatory regime.”

The announcement said that Bitfinex Securities El Salvador, a newly-formed entity, would offer a regulatory-compliant platform for companies worldwide to issue digital assets like equities, bonds, and other financial instruments. This will present a unique opportunity for businesses and individuals to leverage the advantages of issuing, investing, and trading digital assets in the favorable regulatory environment of El Salvador. 

Bitfinex Securities El Salvador will function independently from Bitfinex group’s current platform, Bitfinex Securities AIFC, managed by Bitfinex Securities Limited. 

Related: Why did 12K Bitcoin margin longs close at Bitfinex, and why didn’t it impact BTC price?

Bitfinex continues to expand its global reach. In 2022, Bitfinex’s security token platform went live in Kazakhstan. The security token platform (STO) by Bitfinex, announced in September 2021, is now regulated under the Astana International Financial Center (AIFC) in Kazakhstan.

El Salvador, the first country to establish Bitcoin (BTC) as a legal tender, continues to forge its way in becoming a tech friendly hub. On April 1, Cointelegraph reported that the country had decided to eliminate all taxes on technology innovations. Salvadoran President Nayib Bukele believes that winding down tax requirements will expedite technological development. 

Coinbase CEO says Bitcoin Lightning is ‘something we’ll integrate’

“Lightning is great and something we’ll integrate,” Brian Armstrong said in response to an allegation that he was “ignoring” the network.

Bitcoin (BTC) layer 2 scaling solution Lightning may feature on the cryptocurrency exchange Coinbase in some capacity, according to its CEO, Brian Armstrong.

In a tweet on April 8, Armstrong said that “Lightning is great and something we’ll integrate” in response to a tweet criticizing him for “actively ignoring” the network.

Armstrong provided no further details on what a Lightning integration with Coinbase would involve or when it could be expected.

Coinbase, along with Binance and the now bankrupt FTX, has been called out in the past for not integrating the Lightning network which enables faster and cheaper BTC transactions than the Bitcoin base network.

According to a GitHub repository by Lightning enthusiast David Coen, Coinbase would join Bitfinex, Kraken and OKX as the largest trading platforms to have integrated Lightning, if Armstrong stays true to his word.

Coen had previously suggested that Lightning integration may go against the business plan for many of these trading platforms, “since the priority seems to be to integrate as many altcoins as possible and follow the trends of the market.”

Armstrong claims to have tested out a Lightning network application in recent days, and sent Cointelegraph reporter Joseph Hall $100 in BTC after Hall shared a video of himself using Bitcoin in Senegal.

The $100 was a prize by Armstrong for those who shared the “best” examples of how people are using crypto in Africa. Hall said he would give away the funds to onboard others to Bitcoin.

Hall reported, however, that he hasn’t received the payment, prompting Bitcoiner Derek Ross to suggest that Armstrong “needs a lesson on Lightning.”

Coinbase has lately been more active in the Ethereum ecosystem having launched “Base” on Feb 23 — an Ethereum layer 2 application-focused network powered by fellow layer 2 Optimism.

Related: Bitcoin Lightning Network growth is organic, coming from real-world adoption

Interestingly, Armstrong wrote a “Scaling Bitcoin” article in January 2016, where he said that he would throw support behind Bitcoin scaling solutions:

“We also did it to show our support for scaling Bitcoin, and encourage things to move forward, since we’d like to see a solution sooner rather than later.”

Lightning was launched about two years later in March 2018, with last month marking the fifth anniversary of the network.

Cointelegraph contacted Coinbase for comment but did not receive an immediate response.

Magazine: Bitcoin in Senegal: Why is this African country using BTC?

Why did 12K Bitcoin margin longs close at Bitfinex, and why didn’t it impact BTC price?

An unprecedented number of BTC margin longs recently closed at Bitfinex, leaving analysts searching for explanations.

Since May 2022, the Bitcoin (BTC) margin markets on the Bitfinex exchange have been plagued by an unusually high open interest of over $2.7 billion. This information alone should raise a red flag, especially considering Bitcoin’s price decline from $39,000 to less than $25,000 during the same period.

Traders seeking to leverage their cryptocurrency position had borrowed over 105,000 Bitcoin. Currently, the cause of this anomaly and the number of entities involved in the trade are unknown.

Cheap borrowing favors high demand

Bitfinex’s sub-0.1% annual rate may contribute to the size of the Bitcoin lending market. To date, this has been the norm, creating enormous incentives for borrowing, even if there is no current need. Few traders would turn down such a ridiculously inexpensive leverage opportunity.

Margin borrowing can be used to take advantage of arbitrage opportunities, where a trader exploits price discrepancies between different markets. For example, borrowing Bitcoin on margin allows a trader to take a long position in one market and a short one in another, profiting from the price difference.

To understand how Bitcoin borrowing can be used to profit on derivatives markets, including those outside of Bitfinex, one must understand the distinction between futures contracts and margin markets. The margin is not a derivative contract, so the trade occurs on the same order book as spot trading. In addition, unlike futures, margin longs and shorts are not always in balance.

For example, after purchasing 10 Bitcoin using margin, the coins can be withdrawn from the exchange. Naturally, the trade, typically based on stablecoins, requires some form of collateral or a margin deposit.

If the borrower fails to return the position, the exchange will liquidate the margin to repay the lender.

Additionally, the borrower must pay interest on the BTC acquired with a margin. The operational procedures vary between centralized and decentralized exchanges, but the lender typically determines the interest rate and duration of offers.

There was a 12,000 BTC margin decline in a single trade

Historically, Bitfinex margin traders have been known to move large margin positions quickly, indicating the participation of whales and large arbitrage desks. In the most recent instance, on March 25, those investors reduced their long positions by 12,000 BTC in minutes.

Bitfinex BTC margin longs, in BTC contracts. Source: TradingView

Notice the significant decrease, although it did not affect the Bitcoin price. This supports the theory that such margin trades are market-neutral because the borrower is not leveraging their positions with the proceeds. Most likely, there is some arbitrage involving derivatives instruments.

Traders should cross-reference the data with other exchanges to confirm that the anomaly affects the entire market, given that each exchange has distinct risks, norms, liquidity and availability.

OKX, for example, provides an indicator for margin lending based on the stablecoin/BTC ratio. Traders can increase their exposure on OKX by borrowing stablecoins to purchase Bitcoin. Bitcoin borrowers, on the other hand, can only wager on the price decline.

OKX stablecoin/BTC margin lending ratio. Source: OKX

The above chart shows that OKX traders’ margin lending ratio has been stable for the past week near 30, indicating that professional traders’ long-to-short bets have not changed. This data supports the theory that Bitfinex’s decline is due to an arbitrage close unrelated to Bitcoin price movement.

Related: US government plans to sell 41K Bitcoin connected to Silk Road

Recent crypto bank closures could have triggered the movement

Another possibility for the sudden decrease in margin demand is the $4 billion deposits associated with the now-defunct Signature Bank. Crypto clients were told to close their accounts by April, according to a Bloomberg report.

While New York Community Bancorp (NYCB) purchased the majority of Signature Bank’s deposits and loans on March 19, the deal with the Federal Deposit Insurance Corporation did not include crypto-related accounts.

If those whales are forced to close their banking accounts, they will most likely reduce their arbitrage positions, including those in margin markets. For the time being, all assumptions are speculative, but one thing is sure: the 12,000 BTC long margin reduction at Bitfinex did not affect Bitcoin prices.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Tether strikes at WSJ over ‘stale allegations’ of faked documents for bank accounts

Tether has hit back at a Wall Street Journal report detailing alleged shady dealings by it and Bitfinex to open bank accounts.

The company behind stablecoin Tether (USDT) has rebuffed a report by The Wall Street Journal claiming it had ties to entities that faked documents and used shell companies to maintain access to the banking system.

On March 3, the WSJ reported on leaked documents and emails purportedly revealing that entities tied to Tether and its sister cryptocurrency exchange Bitfinex faked sales invoices and transactions and hid behind third parties in order to open bank accounts they otherwise may not have been able to open.

In a March 3 statement, Tether called the findings of the report “stale allegations from long ago” and “wholly inaccurate and misleading,” adding:

“Bitfinex and Tether have world-class compliance programs and adhere to applicable Anti-Money Laundering, Know Your Customer, and Counter-Terrorist Financing legal requirements.”

The firm went on to say that it was a “proud” partner with law enforcement and “routinely and voluntarily” assists authorities in the United States and abroad.

Tether and Bitfinex chief technology officer Paolo Ardoino tweeted on March 3 that the report had “misinformation and inaccuracies” and insinuated that the WSJ reporters were clowns.

Tether and Bitfinex told Cointelegraph that they have no further comments aside from the public letter.

WSJ report claims Tether and Bitfinex obscured itself

The WSJ article outlines — through its reported review of leaked emails and documents — Tether and Bitfinex’s apparent dealings to stay connected to banks and other financial institutions that, if cut off from, would be  “an existential threat” to their business, according to a lawsuit filed by the pair against Wells Fargo bank.

One of the leaked emails suggests the firm’s China-based intermediaries were attempting to “circumvent the banking system by providing fake sales invoices and contracts for each deposit and withdrawal.”

Screenshot of headline from Wall Street Journal. Source: Wall Street Journal

There were also accusations in the report that Tether and Bitfinex used various means to skirt controls that would have restricted them from financial institutions, and had links to a firm that allegedly laundered money for a United States-designated terrorist organization, among others. 

Meanwhile, a person familiar with the matter told the WSJ that Tether has been under investigation by the Department of Justice in a probe headed by the U.S. Attorney’s Office for the Southern District of New York. The nature of the investigation could not be determined.

Related: Silvergate closes exchange network, releases $9.9M to BlockFi

Tether has faced multiple allegations of wrongdoing over the past few months and recently had to downplay a separate WSJ report in early February that claimed four men controlled approximately 86% of the firm since 2018.

It similarly had to combat what it called “FUD” (fear, uncertainty, and doubt) from a WSJ report last December concerning its secured loans and subsequently pledged to stop lending funds from its reserves.

Bitcoin leverage ramps up as BTC’s margin long-to-shorts ratio hits a record $2.5B high

BTC traders at Bitfinex and OKX are unwilling to use margin markets for bearish bets, creating an alarming imbalance that investors should pay close attention to.

Crypto traders’ urge to create leverage positions with Bitcoin (BTC) appears irresistible to many people, but it’s impossible to know if these traders are extreme risk-takers or savvy market-makers hedging their positions. The need to maintain hedges holds even if traders rely on leverage merely to reduce their counterparty exposure by maintaining a collateral deposit and the bulk of their position on cold wallets.

Not all leverage is reckless

Regardless of the reason for traders’ use of leverage, currently there is a highly unusual imbalance in margin lending markets that favors BTC longs betting on a price increase. Despite this, so far, the movement has been restricted on margin markets because the BTC futures markets remained relatively calm throughout 2023.

Margin markets operate differently from futures contracts in two main areas. Those are not derivatives contracts, meaning the trade happens on the same order book as regular spot trading and, unlike futures contracts, the balance between margin longs and shorts is not always matched.

For instance, after buying 20 Bitcoin using margin, one can literally withdraw the coins from the exchange. Of course, there must be some form of collateral, or a margin deposit, for the trade, and this is usually based on stablecoins. If the borrower fails to return the position, the exchange will automatically liquidate the margin to repay the lender.

The borrower must also pay an interest rate for the BTC bought with margin. The operational procedures will vary between marketplaces held by centralized and decentralized exchanges, but usually the lender gets to decide the rate and duration of the offers.

Margin traders can either long or short

Margin trading allows investors to leverage their positions by borrowing stablecoins and using the proceeds to buy more cryptocurrency. When these traders borrow Bitcoin, they use the coins as collateral for short positions, which means they are betting on a price decrease.

That is why analysts monitor the total lending amounts of Bitcoin and stablecoins to understand whether investors are leaning bullish or bearish. Interestingly, Bitfinex margin traders entered their highest leverage long/short ratio on Feb. 26.

Bitfinex margin Bitcoin longs/shorts ratio. Source: TradingView

Historically, Bitfinex margin traders are known for creating margin positions of 10,000 BTC or higher quickly, indicating the participation of whales and large arbitrage desks.

As the above chart indicates, on Feb. 26, the BTC/USD long (bulls) margin demand outpaced shorts (bears) by 133 times, at 105,300 BTC. Before 2023, the last time this indicator reached an all-time high favoring longs was Sept. 12, 2022. Unfortunately, for bulls, the result benefited bears as Bitcoin nosedived 19% over the following six days.

Traders should cross-reference the data with other exchanges to ensure the anomaly is market-wide, especially since each marketplace holds different risks, norms, liquidity and availability.

OKX, for instance, provides a margin lending indicator based on the stablecoin/BTC ratio. At OKX, traders can increase exposure by borrowing stablecoins to buy Bitcoin. On the other hand, Bitcoin borrowers can only bet on the decline of a cryptocurrency’s price.

OKX stablecoin/BTC margin lending ratio. Source: OKX

The above chart shows that OKX traders’ margin lending ratio increased through February, signaling that professional traders added leveraged long positions even as Bitcoin price failed to break the $25,000 resistance multiple times between Feb. 16 and Feb. 23.

Furthermore, the margin ratio at OKX on Feb. 22 was the highest level seen in over six months. This level is highly unusual and matches the trend seen at Bitfinex where a strong imbalance favored Bitcoin margin longs.

Related: Can Bitcoin reach $25K again in March 2023? Watch Market Talks live

The difference in the cost of leverage could explain the imbalance

The rate for leverage BTC longs at Bitfinex has been almost nonexistent throughout 2023, currently sitting below 0.1% per year. In short, traders should not panic, considering the cost of margin lending remains in a zone that is deemed healthy, and the imbalance is not present in futures contracts markets.

There may be a plausible explanation for the movement, which did not happen overnight. For instance, a possible culprit is the rising cost of stablecoin lending.

Instead of the minimal rate offered for Bitcoin loans, stablecoin borrowers pay 25% per year on Bitfinex. That cost increased significantly in November 2022 when the leading derivatives exchange FTX and their market-maker, Alameda Research, blew up.

As long as Bitcoin margin markets remain extremely unbalanced, traders should continue monitoring the data for additional signs of stress. Currently, no red flags are raised, but the size of the Bitfinex BTC/USD longs ($2.5 billion position) should be a reason for concern.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Only 4 people controlled Tether Holdings as of 2018: Report

New York Attorney General and Commodity Futures Trading Commission probes into Tether in 2021 exposed its previously unknown ownership structure.

Just four men controlled 86% of stablecoin issuer Tether Holdings Limited as of 2018, according to documents obtained by The Wall Street Journal in connection with United States authorities investigations.

Probes by the New York Attorney General’s office and the Commodity Futures Trading Commission into Tether Holdings in 2021 exposed its previously unknown ownership structure. The company is the issuer of Tether (USDT), the world’s largest stablecoin with $68 billion in circulation, according to CoinMarketCap.

According to the documents, Tether was built by the joint efforts of ex-plastic surgeon Giancarlo Devasini and former child actor and crypto entrepreneur Brock Pierce. In September 2014, Tether Holdings was incorporated in the British Virgin Islands.

Four years later, Pierce had left the company and Devasini owned about 43% of Tether. Devasini also helped to build the crypto exchange Bitfinex, where he is currently the chief financial officer. Bitfinex CEO Jean-Louis van Der Velde and chief counsel Stuart Hoegner each owned roughly 15% of Tether in 2018, according to documents.

The fourth-largest shareholder in Tether as of 2018 was a dual citizen known as Christopher Harborne in the United Kingdom and Chakrit Sakunkrit in Thailand, who owned 13%. 

Through their own holdings and another related company, the four men controlled approximately 86% of Tether, the report said.

Tether chief technology officer Paolo Ardoino tweeted that the Journal’s piece was a “clown article” that would boost the company’s growth:

According to a spokesperson for Tether, Ardoino’s posts were the company’s official response to the article. In November, another article claimed that Tether could be deemed “technically insolvent” if its assets fell 0.3%. The company labeled that article “false information.”

A settlement between Tether and the New York Attorney General’s office was reached in 2021 after the company allegedly misrepresented the amount of fiat collateral backing its stablecoin. In addition to paying $18.5 million in damages to the state of New York, the company was required to submit periodic disclosures of its reserves, Cointelegraph reported.

Crypto can get weird: The 5 strangest stories of the industry in 2022

Filmmakers are interested in documenting one of this year’s weirdest stories in crypto, but what else made the list?

From Terra to FTX, 2022 has given us many weird crypto stories. While investors have been enduring a bear market that saw the crypto industry sink below the $1 trillion market capitalization mark, adoption in the space has been growing, and old mysteries were finally solved.

From the incredible short squeeze of a bankrupt company’s token to old anti-crypto arguments used by a major central bank, we’re getting weird with five stories the best fiction writers couldn’t dream up.

“Comedic rapper” charged over Bitfinex hack

Back in 2016, popular cryptocurrency exchange Bitfinex suffered a major security breach that saw attackers steal 119,756 Bitcoin (BTC), worth approximately $72 million at the time. It was one of the largest crypto hacks in history, and although Bitfinex continued operating, its reputation was damaged for years to come.

This year, Heather Morgan, known by her rap name “Razzlekhan,” and her husband Ilya Lichtenstein were arrested by the Federal Bureau of Investigation for allegedly conspiring to launder crypto connected to the Bitfinex hack.

During a court appearance in New York, the pair proclaimed their innocence and were released on multimillion-dollar bonds. The weird part of this story is the details surrounding Morgan’s work as a “comedic rapper” and social media influencer. One of her songs even says it is dedicated to “the entrepreneurs and hackers, all the misfits and smart slackers.”

Morgan, who calls herself the “crocodile of Wall Street,” was labeled a master of “deceit and deception” by federal authorities. While her home was being searched, Morgan allegedly asked federal agents for permission to retrieve her cat from under the bed and, while doing so, tried to lock her phone.

Morgan and Lichtenstein reportedly traveled to Ukraine in 2019 to attain false identities and create fake passports, and have “established financial accounts” in Ukraine and Russia.

She was a regular contributor to Forbes. The day before the Bitfinex hack, she posted a picture next to Lichtenstein with a caption saying she will “always love getting into trouble w/ this crazy guy.”

Commenting on Morgan and Lichtenstein’s arrest, Dymtro Volkov, head of global innovations at crypto exchange CEX.io, told Cointelegraph that with the proper technical resources, “it is possible to track the flow of most funds moving on a blockchain network” and that “hiding a huge amount of stolen funds is actually quite a complex task.”

Notably, the pair isn’t being charged with the hack but laundering the stolen funds. The sordid details of the story have even caught the interest of filmmakers. Hulu is producing a true-crime limited series about Morgan’s life, and Netflix has ordered a docuseries on the story.

Bankrupt Celsius Network’s CEL token surges 4,000%

Shortly after cryptocurrency lending platform Celsius Network filed for bankruptcy, the price of its native utility token, CEL (CEL), jumped by more than 4,100%. In only two months, the price climbed from a bottom of $0.093 to a near $4 high.

The surge came amid rumors that Ripple, a company engaged in a legal battle with the United States Securities and Exchange Commission, could take over Celsius’ assets. Other rumors suggested Goldman Sachs planned to acquire Celsius for $2 billion.

Traders organized a massive short squeeze. Short squeezes occur when an asset’s price rises suddenly, forcing short sellers to buy back the asset at a higher price to close their positions.

The short squeeze was possible because a freeze on Celsius token transfers significantly reduced the circulating supply of CEL.

https://cointelegraph.com/historical/?utm_source=CT&utm_medium=link&utm_campaign=navigation
Click “Collect” below the illustration at the top of the page or follow this link.

At the time of the short squeeze, Cointelegraph reported that FTX had about 5.1 million CEL tokens, amounting to 90% of the total circulating supply on exchanges.

It’s currently believed traders on FTX pulled off the short squeeze, but deleted tweets suggest that the origins of the movement may not be fully understood, and some believe Alameda Research was directly involved. We do know that at least some traders are still trying to get a CEL short squeeze going again, even after the token dropped to $0.50.

Binance’s letter of intent

Binance’s surprising letter of intent to acquire the collapsing FTX exchange is another weird story of 2022. At the time, many in crypto believed FTX was a solvent, well-run company. When Binance announced its intent to liquidate its holdings of FTX Token (FTT) following speculation regarding the solvency of FTX, what was seen as a rivalry between Binance and FTX soon turned into a potential buyout no one was expecting.

As FTX’s solvency was hardly being questioned, CEO Sam Bankman-Fried announced an “agreement on a strategic transaction” with Binance. It was a weird and unexpected revelation because, until that point, Bankman-Fried had dismissed concerns about the solvency of FTX.

Binance CEO Changpeng Zhao added to those concerns when he tweeted, “This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days”.

The deal fell through the next day after Binance conducted its due diligence, with the reasons becoming clear soon after.

European Central Bank spreads FUD

In late November, the European Central Bank (ECB) published a blog post in which it argued that Bitcoin’s recovery from $17,000 to $20,000 was likely an “artificially induced last gasp before the road to irrelevance.”

The ECB said that Bitcoin is “rarely used for legal transactions” and that “real Bitcoin transactions are cumbersome, slow and expensive.” The central bank daringly wrote that Bitcoin has never been used “to any significant extent for real-world legal transactions.”

Related: The most eco-friendly blockchain networks in 2022

According to the ECB, Bitcoin has benefited from “waves of new investors” while not being suitable as an investment. It doesn’t generate cash flow or dividends, nor can it be productively used or “provide social benefits.”

The statement argues that blockchain technology has “created limited value for society” and that the “Bitcoin system is an unprecedented polluter.” It also suggested that cryptocurrency promotion bears a “reputational risk for banks.”

Every point the ECB brought up has been used to attack the cryptocurrency community, and every single point has been rebuffed.

The ECB has recycled several crypto myths that have been used to hold the industry back. The post comes as the ECB accelerates progress on developing a digital euro. One of the post’s authors, Ulrich Bindseil, has authored numerous posts on central bank digital currencies.

Besides the recycled myths, what’s weird is the ECB’s unclear angle, as many don’t consider CBDCs to be competing with cryptocurrencies, which are often seen as a way to exit the shortcomings of fiat currency systems.

Speaking to Cointelegraph, Anton Bukov, co-founder of 1inch Network, said the ECB’s post was good for the cryptocurrency community, as it means the “government came to the second or even third stage of Gandhi’s thought: First they ignore you, then they laugh at you, then they fight you, then you win.”

Central African Republic’s crypto plan

The Central African Republic (CAR) became the second country to adopt Bitcoin as a legal tender earlier this year, allowing around 5 million residents to use the flagship cryptocurrency alongside the country’s fiat currency, the Central African CFA franc.

The move came after Central African Republic President Faustin-Archange Touadéra signed a bill into law establishing a regulatory framework for Bitcoin as legal tender. While the crypto community initially celebrated the move, the weird side of this soon became apparent.

Although the CAR is a mineral-rich nation, its people are among the poorest in the world. It has been devastated by a decade-long civil war, and it is estimated that nine out of 10 residents don’t even have access to the internet. CAR’s decision was accompanied by little to no explanation, with President Touadéra tweeting a simple “more to follow.”

The tweet was referring to an anouncement about the country’s “visionary” plan to create a “fantastic opportunity for anyone who believes in crypto investing.” That opportunity is the Sango project, which appears to now be an initial coin offering for the country’s CBDC.

The project claims that the country’s treasury will have a dedicated Bitcoin reserve and allow citizens to have a “voice and chance to shape the future” through a governance system. Citizenship can be acquired by locking fixed collateral in Sango. Other benefits include e-residency, land ownership and 0% income tax for digital assets.

While attracting foreign investment is an intelligent move from CAR, a Bitcoin-based initial coin offering from a war-torn country is a weird development. CEX.io’s Volkov told Cointelegraph that cryptocurrencies are “well positioned to help emerging economies fill gaps in the services their domestic financial systems are lacking” and could help connect domestic financial systems to global markets. Volkov added that the move may help the country’s economy:

“Making crypto legal tender, or at least creating a legal framework that defines its usage, allows financial companies to introduce cheap and fast financial services that customers can access even with unreliable access to the internet.”

He also said cryptocurrencies can have a “hugely positive effect on countries with developing financial systems looking to participate in the global economy.”

The stories covered in this article make it clear how unpredictable the cryptocurrency space can be during bear and bull markets. If anything, anyone following what’s going on is enjoying a rollercoaster ride they will never forget.

Bitfinex CTO releases proof of reserves amid FTX bankruptcy fiasco

Over the past few days, major crypto exchanges, including Binance, OKX, Kucoin and Crypto.com, committed to sharing their proof of reserve to regain investor confidence.

The fall of major crypto ecosystems — such as FTX and Terra — this year highlighted the importance of transparency around the true reserves held by crypto exchanges and businesses. Amid the ongoing fear, uncertainty and doubt (FUD) across the crypto space, crypto exchange Bitfinex revealed its proof of reserves to the general public.

Over the past few days, major crypto exchanges, including Binance, OKX, Kucoin and Crypto.com, committed to sharing their proof of reserve to regain investor confidence. Walking the talk, Bitfinex chief technology officer Paolo Ardoino shared the list of the main Bitfinex wallets, last updated on November 11.

GitHub repository containing Bitfinex proof of reserves. Source: GitHub

As shown above, Ardoino shared Bitfinex’s proof of reserves on GitHub, wherein he listed a total of 135 cold and hot wallet addresses. Sparing users the trouble of going through the addresses, he listed down some of the company’s significant holdings, which included 204338.17967717 Bitcoin (BTC) and 1225600 Ether (ETH) among top holders.

Bitfinex developed an open-source library called Antani back in June 2018, which was aimed at providing transparency around proof of solvency, custody and off-chain delegated proof of vote. While overlooked in the past, Ardoino confirmed Bitfinex’s plans to revive the system that would allow users to verify their balances without compromising privacy.

Goals set by Bitfinex’s open-source library,  Antani. Source: Antani white paper

Antani’s white paper suggests that users will be able to verify their balances cryptographically, allowing Bitfinex users to confirm the existence of their funds and eradicate depegging risks.

While the revelation saw a warm welcome from the community, members pointed out that the data is incomplete as the information excludes Bitfinex’s liability figures.

Related: OKX, Kucoin say proof of reserves will be ready in a month

As a result of the massive outflows from crypto exchanges amid the FTX bloodbath, hardware-based cryptocurrency wallet provider Ledger suffered from a temporary server outage.

“​​​​After the FTX earthquake, there’s a massive outflow from exchanges to Ledger security and self-sovereignty solutions,” reasoned Ledger chief technology officer Charles Guillemet while revealing that the systems were back running soon after.

US regulator touts ‘aggressively’ policing crypto in new report

The Commodity Futures Trading Commission says 20% of its enforcement actions were aimed at the digital assets market in the 2022 fiscal year.

The United States commodities regulator certainly doesn’t want to look like it’s going easy on crypto, revealing it was behind 18 separate enforcement actions targeting digital assets in the 2022 fiscal year. 

In an Oct. 20 report from the Commodity Futures Trading Commission (CFTC), a total of 82 enforcement actions were filed in 2022’s fiscal year, imposing $2.5 billion in “restitution, disgorgement and civil monetary penalties either through settlement or litigation.”

The CFTC said that 20% of the enforcements were aimed at digital asset businesses, with hairman Rostin Behnam stating:

“This FY 2022 enforcement report shows the CFTC continues to aggressively police new digital commodity asset markets with all of its available tools.”

One of the more recent CFTC enforcement actions that gained notoriety in the crypto world was a $250,000 penalty against bZeroX, its successor Ooki DAO, and its founders in September.

The action sparked fierce criticism from the community for going after the members of a decentralized autonomous organization (DAO), with CFTC Commissioner Summer Mersinger labeling the move “blatant ‘regulation by enforcement.’”

The CFTC also highlighted actions taken during the year against the operators of the Digitex Futures exchange for illegal futures offerings, manipulation of its native token, DGTX, and failure to provide a customer identification and Anti-Money Laundering program.

It also took action against Bitfinex for engaging in “illegal, off-exchange retail commodity transactions in digital assets with U.S. persons,” and operating without registering as a futures commission merchant.

Meanwhile, the report pointed to action against Tether Holdings for making “untrue or misleading statements” and “omissions of material” in connection with its Tether (USDT) stablecoin was ordered to pay a civil monetary penalty of $41 million.

It also targeted South African pool operator and CEO Cornelius Johannes Steynberg with fraud charges for accepting around 29,400 Bitcoin (BTC), worth over $1.7 billion, from approximately 23,000 non-eligible contract participants from the United States in late June.

Related: CFTC action shows why crypto developers should get ready to leave the US

The crypto industry had previously favored the CFTC for being easier on digital asset regulation. However, Chairman Rostin Behnam has vowed to come down hard on the asset class, saying “‘Don’t expect a free pass” earlier this month.

Both the CFTC and Securities and Exchange Commission are currently wrangling for control of crypto-asset regulation.

A bill submitted by Senators Cynthia Lummis and Kirsten Gillibrand in June proposes that the CFTC oversee crypto regulation, which would be much better for the industry, as the assets would be considered commodities rather than securities, which have much more stringent rules.

However, Congress is unlikely to turn its attention to digital asset regulation until sometime next year, as confirmed by Representative Jim Himes this week.

Hodlers prefer centralized exchanges over DeFi for security: Chainalysis

Security remains a perennial concern for DeFi protocols, but DeFi will still inevitably “grow and flourish,” Bitfinex chief technology officer Paolo Ardoino believes.

Despite the rise of decentralized finance (DeFi), cryptocurrency investors appear to be sticking to centralized exchanges (CEXs) over DeFi tools, according to a new report.

Crypto investors are more comfortable holding their assets on CEXs because decentralized exchanges are still more vulnerable to the threat of hacks. This is according to a joint report by the blockchain data firm Chainalysis and Bitfinex exchange, issued on Oct. 13.

According to the study, the risks of hacks associated with CEXs have dropped significantly over the past few years, while various DeFi platforms have become increasingly hacked.

The total value stolen from centralized crypto platforms has dropped by 58% from $972 at its peak in 2018 to $413 in 2021, according to data from Chainalysis. The amount of hacks on CEXs has continued to drop this year, as $80 million has been stolen from centralized crypto platforms so far in 2022.

In contrast, DeFi hacks have been booming recently, with DeFi-related hacks now accounting for 96% of theft losses, already standing at $2.2 billion in 2022.

Additionally, year-end Bitcoin (BTC) balances on centralized platforms have remained near all-time highs in 2022 despite the ongoing cryptocurrency winter. According to Chainalysis, year-to-date Bitcoin balances for centralized exchanges now amount to 6.9 million BTC or an 11% increase from 6.2 million BTC three years ago.

It’s important to note that the study was limited to services and protocols, not taking into account the exploits of noncustodial or personal wallets. “We hope to publish research related to personal wallets in the near future,” a spokesperson for the joint report said.

Kim Grauer, director of research at Chainalysis, noted that CEXs are no longer prime targets for hackers as they were in the early days of crypto because such platforms have managed to improve security and compliance significantly. Many CEXs have specifically implemented more stringent secure operating systems like distributed denial-of-service protection standards and audited third-party security system checks.

“We’ve found in our research that many crypto fundamentals have been remarkably stable this year, despite the market turmoil,” Grauer stated, adding:

“HODLers are holding, and if anything, we saw an increase in the accumulation of crypto by longer-term holders. Much of this crypto is being held on centralized exchanges.”

Bitfinex chief technology officer Paolo Ardoino also pointed to the increasing resilience of centralized exchanges against hackers. Ardoino told Cointelegraph that he recommends investors use noncustodial hardware wallets to better protect their funds, stating:

“My advice for those holding Bitcoin and crypto is always to self custody in cold storage. […] That being said, CEXes are becoming safer places to leave your crypto with the advent of 2FA and more stringent security measures.”

Despite DeFi’s currently massive vulnerability to hacks, Ardoino still finds DeFi an interesting trend that may make a meaningful contribution to the crypto’s overall growth.

Related: $100M drained from Solana DeFi platform Mango Markets, token plunges 52%

“The growth of DeFi is comparable to that of natural systems in nature,” the chief technology off said, adding that DeFi will “inevitably grow and flourish as the technology evolves and new communities are drawn to the space.” He stressed that security remains a “perennial concern for DeFi protocols.”

The total value locked in DeFi-related smart contracts peaked at $180 billion in November last year, dropping to $53 billion. Despite the DeFi industry shrinking this year in line with the ongoing overall crypto winter, the sector has continued to see a wide number of hacks.

TempleDAO, a yield-farming DeFi protocol, became one of the latest platforms to suffer a DeFi exploit, losing more than $2.3 million to a hack on Oct. 11. In September, cryptocurrency firm Wintermute lost about $160 million due to a DeFi hack, while its centralized finance operations were not affected.