digital currency

MetaMask to allow users to purchase and transfer Ethereum via PayPal

The service will initially be rolled out to select PayPal users within the United States.

Digital payments platform PayPal has teamed up with MetaMask parent company ConsenSys to allow MetaMask users to purchase and transfer Ether (ETH) via PayPal’s platform.

According to the Dec. 14 announcement, the service will initially be rolled out only to select PayPal users within the United States, as the country is one of MetaMask’s largest markets in terms of users. 

The collaboration is intended to allow users to seamlessly purchase and transfer ETH from PayPal to MetaMask by simply logging onto their Mobile MetaMask App, which will then redirect them to their PayPal account to complete transactions. 

Lorenzo Santos, product manager for MetaMask, shared:

“This integration with PayPal will allow our U.S. users to not just buy crypto seamlessly through MetaMask, but also to easily explore the Web3 ecosystem.” 

Related: PayPal has become an episode of Black Mirror: Elon Musk

PayPal is among a growing number of traditional payments companies integrating crypto into their services and seeking to allow users to interact with the crypto ecosystem with ease. 

In November, global digital peer-to-peer payments company MoneyGram announced that U.S. users, including those in Washington, DC, could buy, sell and hold cryptocurrency — specifically, Bitcoin (BTC), Ether and Litecoin (LTC) — via its MoneyGram mobile app. 

In October, Western Union also filed three trademarks for managing digital wallets and exchanging digital assets, as well as commodities derivatives, which indicates the payments company likely plans to expand its services into the Web3 sphere. 

Mobile payment processing app Cash App has also added support for transactions via the Bitcoin Lightning Network to allow users to send and receive BTC on the faster, more efficient layer-2 protocol.

FalconX says exposure to FTX represented 18% of its ‘unencumbered cash equivalents’

According to the crypto brokerage firm, the 18% ratio fell well within its “counterparty exposure limits.”

Cryptocurrency trading company FalconX has disclosed that it suffered losses in the collapse of FTX. 

According to the company, its assets locked on FTX represent only 18% of its “unencumbered cash equivalents.” However, the company added that this ratio fell well within their counterparty exposure limits. 

FalconX insisted that despite its exposure to the now insolvent FTX, its finances remain strong, as it continues to facilitate “billions of dollars” in daily trade volume for its clients. The company also claimed that its monthly volume has grown by “80%+ month-over-month.”

 “In a 0% recovery scenario of FTX balances, FalconX remains one of the best-capitalized firms in digital assets,” the company said, adding that it was “highly liquid” with a 4% debt-to-equity ratio and with over 80% of its balance sheet in regulated United State banks.

Despite suffering losses in the FTX collapse, FalconX maintained it had no exposure to Genesis, Alameda Research or BlockFi.

Related: CZ and SBF duke it out on Twitter over failed FTX/Binance deal

Since the abrupt closure of FTX, some cryptocurrency companies have downplayed their exposure to the failed exchange, while others have been caught lying to their investors and clients about the impact the collapse had on them. 

BlockFi, which initially denied having a majority of its assets custodied on FTX, filed for Chapter 11 bankruptcy on Nov. 28. 

On Dec. 5, blockchain-based institutional capital marketplace Maple Finance cut all ties with Orthogonal Trading due to its alleged misrepresentation of finances following the collapse of FTX. According to Maple Finance, Orthogonal Trading had been “operating while effectively insolvent.”

National Bank of Ukraine releases draft concept for digital hryvnia

One of the design options for the Ukrainian CBDC describes the e-hryvnia available for usage in crypto exchange operations.

The National Bank of Ukraine (NBU) has introduced a draft concept for its central bank digital currency (CBDC) candidate digital hryvnia, or e-hryvnia.

Ukraine’s central bank on Nov. 28 released a statement on the concept of e-hryvnia, which aims to perform all the functions of money by supplementing cash and non-cash forms of the hryvnia as its key purpose.

The NBU said it has presented the e-hryvnia concept and continues developing the CBDC project with participants of the virtual assets market, payment firms and state bodies.

According to the announcement, the central bank is currently considering and developing three possible CBDC options, depending on design and main characteristics.

The first option describes the e-hryvnia for retail non-cash payments with the possible functionality of “programmed” money through smart contracts. A retail e-hryvnia would enable the implementation of targeted social payments and the reduction of government expenditures on administration, the NBU said.

The second CBDC option envisions the e-hryvnia available for usage in operations related to cryptocurrency exchange, issuance and other virtual asset operations. “The e-hryvnia can become one of the key elements of quality infrastructure development for the virtual assets market in Ukraine,” the announcement notes.

The third option includes the e-hryvnia to enable cross-border payments in order to provide faster, cheaper and more transparent global transactions.

“The development and implementation of the e-hryvnia can be the next step in the evolution of the payment infrastructure of Ukraine,” Oleksii Shaban, director of NBU payment systems and innovative development department, said in the statement. He added that a Ukrainian CBDC could have a positive impact on ensuring economic security and strengthening the monetary sovereignty of the state, as well as e sustainable economic growth.

Related: Russia aims to use CBDC for international settlements with China

According to the announcement, the Ukrainian Intellectual Property Institute registered the trademark “e-hryvnia” for the NBU in October 2022.

As previously reported, the NBU has been actively studying the possibility of issuing a CBDC in recent years, hiring blockchain developers and cooperating with major industry projects like the Stellar Development Foundation.

According to the regulator, the NBU launched a pilot project ​to issue the e-hryvnia for blockchain-based retail payments back in 2018.

MakerDAO community votes against CoinShares’ $500M investment proposal

Over 70% of the community’s votes were against CoinShares’ proposal to invest MakerDAO’s funds into various traditional assets.

Decentralized lending protocol MakerDAO has voted against crypto investment firm CoinShares’ proposal to invest between $100 million and $500 million worth of the community’s funds into a portfolio of corporate debt securities and government-backed bonds for yield as an investment strategy. 

Ultimately, 72.43% of the votes went against the proposal. Had the community voted in favor, CoinShares would have provided “a variable APY above the SOFR interest rate (3.01% as of October 26, 2022) in the community’s preferred currency (DAI, USDC, USD…) to MakerDAO, which would have been withdrawable on-chain. 

On MakerDAO’s page for the vot, a few members explained why they voted against the proposal. Feedblack Loops LLC shared:

“Since governance has voted on excess USDC then available, going to just say no to proposals of this type moving forward until the house gets in order. Coinshares had many incongruencies up front but did a decent job of articulating confusing portions of their proposal. Optimistic for a revision / different approach.”

Another user, Llama — who also voted against the proposal — said: “We believe this proposal to be extremely beyond protocol risk tolerance.”

Related: MakerDAO co-founder Nikolai Mushegian dies at 29 in Puerto Rico

In October, the MakerDAO community approved the custodianship of $1.6 billion worth of the stablecoin USD Coin (USDC) with Coinbase Prime, an institutional prime brokerage platform for crypto assets. The custodianship was expected to allow the MakerDAO community to earn a 1.5% reward on th USDC. 

On Oct. 14, Cointelegraph reported that MakerDAO’s revenue plummeted in the third quarter of 2022, caused by a fall in loan demand and few liquidations, while expenses remained high.

Could Hong Kong really become China’s proxy in crypto?

With its partial autonomy, the island city of Hong Kong has traditionally served as a gate to China, but with crypto, there is a catch.

With its partial autonomy, the island city of Hong Kong has traditionally served as “a gate to China” — the local trade center, backed by transparent English-style common law and an openly pro-business government strategy. Could the harbor, home to seven million inhabitants, inherit this role in relation to the crypto industry, becoming a proxy for mainland China’s experiments with crypto? 

An impulse to such questioning was given by Arthur Hayes, the former CEO of crypto derivatives giant BitMEX in his Oct. 26 blog post. Hayes believes the Hong Kong government’s announcement about introducing a bill to regulate crypto to be a sign that China is trying to ease its way back into the market. The opinion was immediately replicated in a range of industrial and mainstream media.

What happened

In late October, the head of the fintech unit at the Securities and Futures Commission (SFC) of Hong Kong, Elizabeth Wong, announced the liberalization of Hong Kong’s regulatory landscape by allowing retail investors to “directly invest into virtual assets.” 

Up until recently, only individuals with a portfolio worth at least $1 million (which marks about 7% of the city’s population) have been granted access to centralized crypto exchanges by the SFC. The regulator has also been reviewing whether to allow retail investors to invest in crypto-related exchange-traded funds, Wong noted.

Roughly a few days after, on Oct. 21, Hong Kong’s Secretary for Financial Services and the Treasury, Christopher Hu, shared his city’s fintech plans, among other efforts, directed at “transferring wealth to the next generation.” The key is establishing a regulatory regime for virtual asset service providers, and a certain bill was already introduced to the city’s lawmakers, as Hu specified.

Finally, on Oct. 31, during the city’s FinTech Week 2022, Hong Kong Financial Secretary Paul Chan assured attendees that the digital transformation of financial services is a key priority for his team. Chan’s colleague, the CEO of the Hong Kong Monetary Authority (HKMA), Eddie Yue, promised “radical open-mindedness” regarding the innovations. 

According to him, the HKMA is in the process of establishing a regulatory regime for stablecoins and has already issued guidelines to banks about cryptocurrency or decentralized finance-related services.

Crackdown on the Mainland, uncertainty on the island

Hong Kong’s intention to open up for crypto comes a year after a devastating crackdown on the industry in Mainland China. Until 2021, the People’s Republic Of China has been enjoying a status of a world leader in hash rate and cryptocurrency mining. 

Starting in May 2021, Chinese regulators began prohibiting involvement in crypto for financial institutions, then mining operations and, finally, the work of exchanges and trading for individuals. Although that didn’t effectively outlaw the crypto ownership as such, any potential for institutional development of the crypto industry in the country was frozen.

Back then, Hong Kong officials didn’t confirm (or deny) that the island city would comply with Beijing’s hardline policy on digital assets, but investors nevertheless started considering their options.

Recent: How are ‘lite’ versions of crypto apps helping adoption?

While today it may sound ironic, in 2021, relocating his headquarters to the Bahamas, Sam Bankman-Fried of FTX was highlighting the importance of long-term regulatory guidance and clarity, which Hong Kong laced in his opinion.

This uncertainty took its toll indeed — after attracting $60 billion in crypto between July 2020 and June 2021, Hong Kong started to witness the largest players opening up alternative offices in the Caribbean or neighboring Singapore. FTX was joined by the likes of Crypto.com, BitMEX and Bitfinex.

The Hayes narrative

Mixing two plot lines — one which traces all the most important crypto innovations to China, and the other which notes Hong Kong’s historical role as the entry point to communist China — Hayes argued:

“Hong Kong’s friendly reorientation towards crypto portends China reasserting itself in the crypto capital markets.” 

According to Hayes, Hong Kong authorities cannot diverge too far from Beijing in their decisions, so opening up the crypto market amid the crackdown in the Mainland couldn’t be an autonomous act. 

The reason behind Beijing’s benevolence to such a U-turn lies in the anxiety of Hong Kong losing its status as the principal Asian financial center. It has certainly faltered during the COVID-19 pandemic when the hardline lockdown policy, exercised in China and Hong Kong, caused an investment escape wave to the neighboring competitor, Singapore, which had eased its restrictions much earlier.

Another major factor behind China’s possible support of Hong Kong’s crypto liberalization, according to Hayes, is the former’s problem with a giant United States dollar trade proficit. Historically, like almost any nation in the world, China has been storing dollar income in assets like U.S. Treasury bonds.

But the example of Russia, whose foreign assets were blocked due to financial sanctions after an invasion of Ukraine, has worried Chinese officials. Hence, it is highly probable they would seek another type of asset in which to store their USD income. Cryptocurrencies and related financial products might be the option.

Reality check

Speaking to Cointelegraph, David Lesperance, founder of Lesperance & Associates law firm, who has been dealing with Hong Kon and China-based clients for more than 30 years, doubted the possible interest of the Chinese government in opening up to crypto:

“Rather, they are interested in having complete control over their population, including those who reside in HK. This is demonstrated by such actions as social credit scoring, facial recognition, household registration, exit bans, zero COVID-19, etc.” 

Putting crypto aside, recent years have seen tightening political, cultural and economic control of China over Hong Kong with the national security law of 2020 sweeping the previous civil freedoms away, a change in school curricula to emphasize the Chinese history of the region and the ongoing integration of Mainland companies into the island’s juridical space. 

These signs of the shortening distance between the Mainland and Hong Kong might attract the attention of global regulators. As one banker said to CNN recently, “The worst scenario is that the West would treat Hong Kong as the same as the Mainland China, and then Hong Kong would suffer the kind of sanctions.”

The elephant in the room is China’s central bank digital currency (CBDC) project. The rapid development of the digital yuan (also known as e-CNY) and the ban on crypto is hardly a coincidence. As Ariel Zetlin-Jones, associate professor of economics at Carnegie Mellon University’s Tepper School of Business, told Cointelegraph back in 2021, in the aftermath of the crackdown:

“China clearly wants to promote the digital Yuan. Removing its competitors by banning crypto activities is one way to do this so it seems reasonable to consider this motivation as one rationale for their policies.”

The digital yuan became the most actively transacted currency in a recent six-week m-Bridge pilot of cross-border payments among the digital currencies issued by central banks of China, Hong Kong, Thailand and the United Arab Emirates. As state-owned Chinese media noted after the experiment, “Hong Kong [is] poised to be a vibrant center for e-CNY’s use in international trade.”

Recent: Breaking down FTX’s bankruptcy: How it differs from other Chapter 11 cases

Lesperance emphasized that the introduction of e-CNY and the continuing restrictions on the rest of the crypto, even when it comes to domestic miners, confirms Beijing’s drive to control the financial sphere in the first place:

“Control over the financial lives and assets of the Chinese citizens is the ultimate control. This will be achieved when all transactions are done in e-yuan. Facilitating other crypto-currencies would undermine this move toward complete control.”

Chinese central bank exec says digital yuan will offer ‘controllable anonymity’

China’s digital yuan is one of the earliest CBDCs whose pilot phase has expanded to include millions of users and billions in transaction volume.

Chinese central bank governor Yi Gang, in a recent speech at Hong Kong Fintech Week, talked about the progress of their national digital currency called the digital yuan. He outlined the progress and the adoption of the national digital currency.

During his speech, Yi noted that the digital yuan is being positioned as an alternative to cash in China, a country with a robust digital payment infrastructure. He added that “privacy protection is one of the top of the issue on our agenda.”

He went on to describe the two-layer payment system that would offer controllable anonymity to the users. At tier one, the central bank supplies digital yuan to the authorized operators and processes inter-institutional transaction information only. At tier two, the authorized operators only collect the personal information necessary for their exchange and circulation services to the public.

Yi promised that data will be encrypted and stored and, personal sensitive information would be anonymized and not shared with third parties. Users can also make anonymous transactions up to a certain amount, and there will be specialized e-wallets to facilitate those transactions. The central bank governor noted that anonymity is a two-faced sword and thus must be dealt with carefully, especially in the financial ream and explained:

“We recognize that anonymity and transparency are not black and white, and there are many nuances that need to be carefully weighed. In particular, we need to strike a precise balance between protecting individual privacy and combating illegal activities.”

Yi’s comments are in line with the central bank digital currency (CBDC) program head Mu Changchun, who in July reiterated a similar stance saying CBDC doesn’t have to be as anonymous as cash. Mu had said that a completely anonymous CBDC would interfere with the prevention of crimes like money laundering, terrorism financing, tax evasion and others.

Related: Hong Kong could be key for China’s crypto comeback — Arthur Hayes

China started its CBDC program as early as 2014 and, after years of development, launched the pilot in 2019. Since then, the program has expanded to millions of retail customers across the country. In 2022, the CBDC testing has expanded to some of the most populous provinces. The extent of the CBDC trail can be estimated from the fact that the total digital yuan transaction volume crossed $14 billion by the third quarter of 2022.

S. Korean watchdog goes after crypto whales to ensure AML compliance

The South Korean regulator noted that popular stablecoins used by the public might become a primary tool for money laundering using digital assets.

South Korea’s financial watchdog, the Financial Services Commission (FSC), will monitor crypto whales with assets of over 100 million won ($70,000) to prevent money laundering efforts using digital assets.

The FSC noted that having a larger proportion of digital assets and stablecoins equates to a higher money laundering risk. Thus, special focus should be placed on monitoring crypto whales with significant digital-asset and stablecoin holdings under the new Anti-Money Laundering guidelines, reported local media.

The report also noted that stablecoins, especially those commonly used by the public, are more likely to be used as a means of crime. The report reads:

“In the case of an independently listed virtual asset, it is possible that it did not meet the listing criteria of other virtual asset operators, and it can be evaluated that the risk of money laundering of virtual asset operators with a high proportion of the virtual asset is high.”

Apart from monitoring crypto whales and their activities, the report also advocates for keeping an eye on retail customers making high-value deposits. Those customers should be monitored for any significant change in holdings every quarter.

“Customers with large virtual asset holdings are at higher risk of money laundering.”

South Korea is known for its strict implementation of crypto-related policies, especially in the wake of the collapse of the Terra ecosystem. Its financial regulators have doubled down on their efforts to ensure investor protection and bring crypto legislation by early 2024.

Related: Koreans to have access to blockchain-powered digital IDs by 2024

In August, the chair of FSC said the regulator plans to expedite its review of 13 bills related to digital assets pending in the country’s National Assembly. The aim of the review is to make institutional supplements that will take a balanced approach to blockchain development, investor protection and market stability.

China accounts for 84% of all blockchain patent applications, but there’s a catch

China’s push for blockchain technology gained steam after 2019 when President Xi Jinping called for corporations from tech giants to become industry leaders in the nascent tech.

China accounts for 84% of all blockchain applications filed worldwide, according to the latest data shared by the country’s government official.

China has steered clear of the cryptocurrency market. However, the Beijing government has been supportive of the underlying blockchain technology. The country has actively promoted the use of blockchain tech over the years, and thus the high percentage of blockchain patents isn’t surprising.

President Xi Jinping has also played a key role in promoting the nascent blockchain technology. In 2019, the president called upon citizens, tech companies and stakeholders of the ecosystem to actively participate and innovate with the nascent tech as it would play a key role in the future of the next industrial revolution.

As Cointelegraph reported earlier, Chinese companies had filed 4,435 blockchain patents within one year of President Xi Jinping’s endorsement of the industry. According to another study, China accounted for roughly 60% of the world’s blockchain patent applications from 2015 to June 2021, followed by the United States and South Korea.

The figure was released on Tuesday by Wang Jianwei, deputy director of the Ministry of Industry and Information Technology. However, the figures didn’t include a timeframe in which these patent applications were filed.

Related: Tencent receives patent for blockchain-based missing person poster

While China accounts for the highest number of blockchain patent applications, the approval rate is significantly low, with only 19% of the total filed applications getting approved, reported South China Morning Post.

Another important thing to note here is that China is not very big on decentralization, which is the principle on which blockchain tech is based. This was evident from the country’s digital yuan development, where the central bank developed the digital national currency on the curated version of a blockchain with full control over its functioning rather than using the traditional distributed network approach.

Independent Tether attestation reveals 58% decrease in commercial paper holdings

An independent review from the accounting firm BDO reported that the stablecoin issuer’s total assets exceed its consolidated liabilities.

An announcement from USDT issuer Tether Holdings Limited revealed information from an independent attestation about the company’s previous quarter’s performance. The reviewer, top accounting firm BDO Italia, assessed Tether’s assets as of June 30, 2022. 

Tether had previously announced a commitment to decreasing its commercial paper holdings by the end of August 2022. Data from the report revealed a 58% decrease in commercial paper exposure since the previous quarter from $20 billion to $8.5 billion.

The chief technology officer of Tether, Paolo Ardoino, tweeted that Tether has plans to continue to decrease its commercial paper holdings to $200 million by the end of August and zero them out by the following October.

Additionally, the total amount of consolidated assets held by Tether at the time of the review amounted to just over $66.4 billion. Meanwhile, the total amount of consolidated liabilities equaled nearly $66.2 billion, with nearly 99% related to digital tokens.

In May 2021 Tether began releasing quarterly statements of its stablecoin reserves after reaching a settlement with the New York Attorney General. This came after a lawsuit against Tether claimed that USDT didn’t have full backing in its reserve at all times.

The company says these reports, specifically with the oversight of BDO, are to “reinforce its dedication to transparency.” Ardoino commented on the attestation, saying:

“The utility of Tether continues to be supported by the transparency of its reserves and has been a leading source of stability, allowing us to build a tool for the global economy.”

Tether’s attestation report was released one week after the United States government sanctioned cryptocurrency mixer Tornado Cash, which contributed to a surge in USDT’s circulating supply. USDT continues to hold the top spot as the world’s largest stablecoin by market capitalization, according to data from CoinMarketCap.

Related: Tether calls thesis behind USDT short selling ‘flat out wrong’

Tether recently came out with a statement in alignment with the upcoming Ethereum Merge to proof-of-stake, which is projected to happen this September. 

Binance assures users after 3rd-party glitch briefly halted withdrawals

The exchange cited technical issues as the reasons for halting withdrawals across multiple networks earlier this morning.

Cryptocurrency exchange Binance announced a temporary freeze on withdrawals on Wednesday morning. The suspension took place across multiple networks as a result of a technical issue by a third-party provider, according to Binance. 

In a tweet, the exchange said the incident took place around 7:00 am UTC and was resolved by the team within an hour.

Binance also assured users that despite the freeze, funds are “SAFU.” This acronym stands for the exchange’s monetary fund, Secure Asset Fund for Users (SAFU). The fund was created in 2018 by Binance to compensate customers in light of a hack on the exchange. It holds 10% of all trading fees.

After questions about the fund from Twitter users, the exchange promptly clarified the purpose and its $1 billion value.

This comes only days after Binance recovered and froze nearly $450,000 worth of the stolen assets from the Curve Finance hack. In June, Binance also halted Bitcoin (BTC) withdrawals due to major network congestion. Binance is the world’s largest crypto exchange and deals with nearly 3.224 million transactions per day. 

Volatile market conditions have caused major turbulence for crypto companies. The crypto exchange Celsius also halted withdrawals in June, though it cited market instability. Shortly after it declared bankruptcy. 

As a forewarning, Coinbase announced it will halt deposits and withdrawals of Ethereum (ETH) and ERC-20 tokens during the upcoming Ethereum Merge, scheduled to take place this September. 

Related: The worst places to keep your crypto wallet seed phrase

Market volatility has caused some hodlers to reexamine where they store their digital goods. Many are turning to hardware wallets as the answer. One Twitter user responded to Wednesda’s Binance freeze with:

According to a July report, the global hardware wallet market should outpace the global exchange market. It has an anticipated value of $1.1 billion by the year 2027, whereas the exchange market should reach a value of $675 million by 2028.