The Pope and US regulators warn about AI risks: Law Decoded

The head of the Catholic Church warned humanity of AI’s potential dangers and explained what needs to be done to control it.

Nowadays, everyone has an opinion on artificial intelligence (AI) and its potential risks. Even Pope Francis — the head of the Catholic Church — warned humanity of AI’s potential dangers and explained what needs to be done to control it. The Pope wants to see an international treaty to regulate AI to ensure it is developed and used ethically. Otherwise, he says, we risk falling into the spiral of a “technological dictatorship.” The threat of AI arises when developers have a “desire for profit or thirst for power” that dominates the wish to exist freely and peacefully, he added. 

The same feeling was expressed by the Financial Stability Oversight Council (FSOC), which is comprised of top financial regulators and chaired by United States Treasury Secretary Janet Yellen. In its annual report, the organization emphasized that AI carries specific risks, such as cybersecurity and model risks. It suggested that companies and regulators enhance their knowledge and capabilities to monitor AI innovation and usage and identify emerging risks. According to the report, specific AI tools are highly technical and complex, posing challenges for institutions to explain or monitor them effectively. The report warns that companies and regulators may overlook biased or inaccurate results without a comprehensive understanding.

Even judges in the United Kingdom are ruminating on the risks of using AI in their work. Four senior judges in the U.K. have issued judicial guidance for AI, which deals with AI’s “responsible use” in courts and tribunals. The guidance points out potentially useful instances of AI usage, primarily in administrative aspects such as summarizing texts, writing presentations and composing emails. However, most of the guidance cautions judges to avoid consuming false information produced through AI searches and summaries and to be vigilant about anything false being produced by AI in their name. Particularly not recommended is the use of AI for legal research and analysis.

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KuCoin agrees to ban New York residents and pay $22 million in settlement

KuCoin users from New York will lose the ability to trade within 30 days and will have their accounts closed within 120 days.

Crypto exchange KuCoin has agreed to pay $22 million to the State of New York and to bar residents of the state from using its platform, according to a stipulation and consent order filed in the New York Supreme Court on Dec. 12.

According to the order, KuCoin admits that it “operates a cryptocurrency trading platform on which users, including users in New York state, can purchase or sell cryptocurrencies which are securities or commodities as defined under the laws of New York state and that Kucoin is not registered as a securities or commodities broker-dealer.” In addition, KuCoin “admits that it represented itself as an ‘exchange’ and was not registered as an exchange pursuant to the laws of New York State.”

KuCoin has agreed to close the accounts of all New York resident users within 120 days and to prevent New York residents from obtaining accounts in the future. In addition, it will restrict access to withdrawals to only within 30 days, leaving the remaining 90 days available for users to withdraw funds.

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KuCoin pledges $20K grant to TON Foundation for ecosystem development

The funding will support TON ecosystem projects, research and development efforts, community-building and marketing activities.

KuCoin Ventures, the venture arm of Seychelles-registered crypto exchange KuCoin, will provide grants to The Open Network (TON) blockchain platform, including an initial $20,000, to support the growth and expansion of the TON ecosystem.

According to a Dec.

Ian Wittkopp, accelerator head at TON Foundation, said the grants from KuCoin aid them in continuing to support real-world blockchain solutions in payments and gaming within its ecosystem.

“Today’s partnership with KuCoin Ventures is an acceleration point in the momentum of mini-app development on the The Open Network… KuCoin Ventures’ efforts align with TON’s vision of a more accessible and decentralized digital future for everyone.”

Alicia Kao, managing director of KuCoin, attributed the move to the company’s belief in TON’s potential in the blockchain industry.

“This strategic alliance aligns with our mission of promoting further development of the crypto and blockchain industry through tighter cooperation.”

“We believe this signifies a fresh synergy between exchanges and the blockchain landscape, and we aspire that this joint effort will serve as a motivating example, spurring further similar ventures,” she added.

A KuCoin spokesperson told Cointelegraph that the partnership is in its first phase.

This partnership is just the beginning. We plan to leverage this collaboration for deeper cooperation and communication… We are making all the necessary preparations for this… collaboration.”

Besides supporting the expansion of the TON ecosystem, KuCoin seeks to replicate its success with other blockchain collaborations “to facilitate the transition of cryptocurrency from a niche interest to mass adoption.”

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KuCoin Wallet spins off from KuCoin exchange, rebrands as Halo Wallet

The newly branded Halo Wallet seeks to broaden its efforts from Web3 to social finance, also known as SocialFi.

Decentralized wallet KuCoin Wallet announced on April 3 that it has rebranded as Halo Wallet and launched a new SocialFi ecosystem. According to the announcement, the newly independent Halo Wallet received a fresh round of financing from several investors, including KuCoin Ventures, IDG, HashKey Capital, and other Web3 strategic partners. 

The rebranding exercise aims to expand Halo Wallet’s focus from being a Web3 wallet to supporting a broader SocialFi ecosystem. The wallet seeks to integrate a variety of on-chain and off-chain social media protocols, such as Lens and Twitter, to create a Web3 decentralized identifier (DID) system and engage with popular influencers.

In the future, Halo Wallet plans to gradually transfer governance rights of its SocialFi ecosystem to the community through a decentralized autonomous organization, or DAO. According to the company, implementing a DAO governance model promises to motivate a larger number of innovators and users to explore novel financial models and trading opportunities, thereby fostering an active SocialFi ecosystem. 

The head of Halo Wallet, Jeff Haul, noted that decentralized wallets are the primary entry point for users into the world of Web3. According to Haul, the revamped Halo Wallet offers an array of enhanced social features that assist users in creating a well-rounded social identity and locating quality information and prospects on social networks.

Related: KuCoin leads $10M funding for Chinese yuan stablecoin issuer

KuCoin Wallet has achieved significant progress in the decentralized wallet domain since its debut last June. Since its launch, the decentralized wallet has offered comprehensive coverage for both mobile and PC, incorporated assistance for tens of thousands of tokens and nonfungible token assets, rolled out features like native cross-chain swaps and staking, and amassed a user base of more than 1 million individuals.

In August, KuCoin Wallet integrated the automated market maker functionality of 1inch Network to improve token swaps. The partnership also provided KuCoin Wallet users with access to 1inch’s Limit Order Protocol functionality, which allows orders to be filled at a predetermined price when it is reached. This includes gasless limit orders for Ether (ETH).

KuCoin leads $10M funding for Chinese yuan stablecoin issuer

Circle’s investment arm has joined a funding round for CNHC, the issuer of the eponymous stablecoin pegged to the offshore yuan.

The investment arm of major cryptocurrency exchange KuCoin is moving to support new stablecoin initiatives by backing a Chinese yuan-pegged stablecoin issuer.

KuCoin Ventures has led a $10 million investment in stablecoin issuer and blockchain-based payment service provider CNHC.

Announcing the news on March 16, KuCoin Ventures said that the funding round included some prominent industry investors, including KuCoin’s investor IDG Capital and Circle Ventures, the investment arm of the USD Coin (USDC) issuer, Circle.

KuCoin chief investment officer and KuCoin Ventures lead Justin Chou told Cointelegraph that the new investment in CNHC is the first time KuCoin Ventures has invested in a stablecoin-related project.

“KuCoin is always interested in building a stronger infrastructure for the financial system,” Chou said, adding that the world is likely to see more real-world asset-backed stablecoins in the near future. He continued:

“To ensure the stability of the financial market, stablecoin designers need to find a balance between overcollateralization and efficiency. We are happy to see more algorithm-based stablecoins but they need to prove their resiliency.“

The investment​​ into CNHC reflects KuCoin Ventures’ strategy of backing Web3 infrastructure in the Asia-Pacific region, Chou said. According to the announcement, KuCoin Ventures also invested $10 million in China’s blockchain project, Conflux, in early 2022. Chou noted that Hong Kong has a well-established traditional finance ecosystem and a “real opportunity at becoming the new crypto center of the world” with new regulations and policies for digital assets.

CNHC co-founder Joy Cham told Cointelegraph that the platform launched its offshore yuan-pegged stablecoin, CNHC, about two years ago. He described the stablecoin as “more akin to a house settlement tool,” referring to CNHC’s limited exposure. According to data from CoinMarketCap, the CNHC stablecoin is only listed on one centralized exchange, TruBit Pro.

“It will be listed in more centralized and decentralized exchanges in the near future,” Cham added.

The executive also noted that CNHC currently supports settlement services in other major stablecoins, including Tether (USDT) and USDC. Cham also said that the firm had experienced some impact due to the recent banking crisis involving Silicon Valley Bank and Silvergate. “Some of the banks are our partners that help us to settle USD, but there’s other banking partners so service is still ongoing,” Cham said.

Related: Do Kwon had the right idea, banks are risk to fiat-backed stablecoins — CZ

On the other hand, KuCoin has had no impact due to those issues, as it has no exposure to Silicon Valley Bank, Silvergate, or Signature Bank, KuCoin CEO Johnny Lyu told Cointelegraph.

“However, the whole market is exposed at varying degrees to USDC and USDT,” Lyu said, adding that removing crypto from traditional banking could cause “long-lasting implications on the industry.” The CEO stated:

“Bitcoin was born after ‘Lehman Brothers’ yet still grew to mass adoption with about 420 million global users. The recent shutdowns of financial institutions may be the opportunity for crypto to reach mass adoption.”

The news comes amid KuCoin facing a lawsuit in the United States due to alleged violations for offering crypto trading services in New York. In a complaint filed on March 9, New York state Attorney General Letitia James argued that KuCoin violated securities law due to offering to sell and purchase cryptocurrencies that are “commodities and securities” without registration.

Total crypto market cap takes another hit, but traders remain neutral

The total crypto market cap is at risk of falling below $825 billion, but data shows traders actively adding to their longs and shorts.

The total cryptocurrency market capitalization dropped 8.1% in the past two days after failing to break the $880 billion resistance on Dec. 14. 

The rejection did not invalidate the 4-week-long ascending channel, but a weekly close below $825 billion will confirm a shift to the lower band and reduce the support level to $790 billion.

Total crypto market cap in USD, 12-hour. Source: TradingView

The overall investor sentiment toward the market remains bearish, and year-to-date losses amount to 66%. Despite this, Bitcoin (BTC) price dropped a mere 2% on the week, down to the $16,800 level at 17:00 UTC on Dec. 16.

A far different scenario emerged for altcoins which are being pressured by pending regulation and fears that major exchanges and miners could be insolvent. This explains why the total market capitalization had dropped by 4.7% since Dec. 9.

According to court documents filed on Dec. 15, a United States Trustee announced the committee responsible for part of FTX’s bankruptcy proceedings. Among those are Wintermute Asia, a leading market maker, and GGC International, an affiliate of the troubled lending platform Genesis. Investors remain in the dark about who the biggest creditors from the failed FTX exchange group are and this is fueling speculation that contagion could continue to spread.

On Dec. 15, The central bank of the Netherlands issued a warning to investors using KuCoin, saying the exchange was operating without legal registration. De Nederlandsche Bank added that the crypto firm was “illegally offering services” and “illegally offering custodian wallets” for users.

Adding to the drama, on Dec. 16, Mazars Group, a company known for its proof-of-reserve audit services for crypto companies, reportedly removed recent documents that detail exchange audits from its website. The firm was previously appointed as an official auditor for Binance’s proof-of-reserve updates, a movement that was followed by KuCoin and Crypto.com.

The Bitcoin mining sector has also suffered due to the strong correction in cryptocurrency prices and rising energy costs. Publicly-listed miner Core Scientific was offered a $72 million contingent emergency credit line to avoid bankruptcy. The financial lender requires suspension of all payments to Core Scientific’s equipment lenders while Bitcoin remains below $18,500.

The 4.7% weekly drop in total market capitalization was impacted mainly by Ether’s (ETH) 5.4% negative price move and BNB (BNB), which traded down 15.1%. Consequently, the bearish sentiment significantly impacted altcoins, with 14 of the top 80 coins dropping 12% or more in the period.

Weekly winners and losers among the top 80 coins. Source: Nomics

The Open Network (TON) gained 30% after Telegram launched bidding for anonymous phone numbers sold for TON tokens.

Bitcoin SV (BSV) rallied 11.7% after Craig Wright, the self-proclaimed Satoshi Nakamoto and leader of the altcoin project, appealed to his loss in Norway courts.

Trust Wallet (TWT) saw a 27.2% correction after its parent company (Binance) faced $1.9 billion in withdrawals in 24 hours.

Leverage demand is balanced between bulls and bears

Currently, data shows demand for leverage is split between the bulls and the bears.

Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

Perpetual futures accumulated 7-day funding rate on Dec. 16. Source: Coinglass

The 7-day funding rate was near zero for Bitcoin and altcoins, meaning the data points to a balanced demand between leverage longs (buyers) and shorts (sellers) in the period.

Traders should also analyze the options markets to understand whether whales and arbitrage desks have placed higher bets on bullish or bearish strategies.

The options put/call volume reflects a neutral market

Traders can gauge the market’s overall sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, whereas put options are for bearish ones.

A 0.70 put-to-call ratio indicates that put options open interest lag the more bullish calls by 30% and this is bullish. In contrast, a 1.40 indicator favors put options by 40%, which can be deemed bearish.

BTC options volume put-to-call ratio. Source: laevitas.ch

Even though Bitcoin’s price failed to break the $18,000 resistance on Dec. 14, there was no excessive demand for downside protection using options. More precisely, the indicator has been below 1.00, so slightly optimistic, since Dec. 12.

Presently, the put-to-call volume ratio stands near 0.88 because the options market is more strongly populated by neutral-to-bullish strategies that favor call (buy) options by 12%.

Derivatives markets are neutral, but the newsflow is negative

Despite the substantial weekly price decline in a handful of altcoins and the 4.7% drop in total market capitalization, derivatives metrics reflect no signs of panic.

There has been a balanced demand for longs and shorts using futures contracts. As a result, the BTC options risk assessment metric remains favorable even after Bitcoin’s 8.5% correction following the $18,370 high on Dec. 14.

Ultimately, bulls should not expect the $825 billion market capitalization to hold, which does not necessarily mean an immediate retest of the $790 billion support.

Currently, the lower band of the ascending channel continues to exert upward pressure, but the newsflow looks favorable for bears.

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.

Dutch central bank says KuCoin is not licensed and ‘illegally offering services’

“This may increase the risk of customers becoming involved in money laundering or terrorist financing,” says De Nederlandsche Bank.

The central bank of the Netherlands, De Nederlandsche Bank, has issued a warning to investors using KuCoin, saying the exchange was operating without legal registration.

In a Dec. 15 announcement, the central bank said that MEK Global Limited, or MGL, which does business in the Netherlands as KuCoin, was not in compliance with the country’s Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) regulations. De Nederlandsche Bank added the crypto firm was “illegally offering services” as well as “illegally offering custodian wallets” for users.

“Customers of MGL are not in violation,” said the bank. “However, this may increase the risk of customers becoming involved in money laundering or terrorist financing.”

First launched in 2017, KuCoin is headquartered in Seychelles and operates in most countries around the world. As a major crypto exchange, KuCoin has been the subject of scrutiny by regulators and lawmakers amid the crypto market downturn and the collapse of FTX. CEO Johnny Lyu dismissed rumors of insolvency at the exchange in July, and the firm provides proof-of-reserves data for users.

Related: Coinbase enters the Netherlands with central bank approval

In 2021, De Nederlandsche Bank made similar allegations of illegal operations against Binance Holdings Limited for allegedly violating AML/CFT regulations. Binance later paid an “administrative fine” of more than 3 million euros due to the violations.

Cointelegraph reached out to KuCoin for comment, but did not receive a response at the time of publication.

Audit firm Mazars to verify KuCoin’s proof of reserves

Mazars, the former accounting firm for Donald Trump’s companies, was hired recently to audit Binance’s PoR.

Crypto exchange KuCoin hired the international accounting firm Mazars for a third-party audit of its proof of reserves (PoR). 

According to an announcement on Dec. 5, the verification will provide the exchange customers additional transparency and reporting on whether their in-scope assets are collateralized, along with details on main, trade, margin, robot and contract accounts for Bitcoin (BTC) and Ether (ETH), as well as for the stablecoins Tether (USDT) and USD Coin (USDC).

The report should be available on KuCoin’s official website within a few weeks. CEO of KuCoin Johnny Lyu said the move is the next step in the exchange efforts to provide transparency on users’ funds. Wiehann Olivier, partner at Kucoin, also noted:

“After recent events, there is a dire need in the industry for additional transparency, and we are confident that Mazars’ PoR service offering to KuCoin and other international cryptocurrency exchanges will aid in building trust through transparency.”

As reported by Cointelegraph, Mazars was also appointed as an official auditor to conduct “third party financial verification” in Binance’s PoR on Nov. 30. Binance’s publicly shared Bitcoin information is already being reviewed. 

Related: Will Grayscale be the next FTX?

Headquartered in Paris, the international accounting firm previously worked for former United States President Donald Trump’s company. According to reports, the firm cut ties with Trump and his family in 2022.

KuCoin and Binance are among the six crypto firms requested to provide information on consumer protection by the United States Senator Ron Wyden by Dec. 12.

Wyden requested Binance, Coinbase, Bitfinex, Gemini, Kraken and KuCoin information on subsidiary companies, safeguards of consumer assets, use of customer data, and guards against market manipulation. The senator argued that crypto users with funds in FTX had “no such protections” as those offered by banks or registered brokers under the Federal Deposit Insurance Corporation or Securities Investor Protection Corporation.

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

Similar protocols are used by Kraken, Bitmex, Gate.io and many other exchanges but were not used by FTX.

In the wake of the FTX liquidity crisis, two major crypto exchanges have announced that they will provide Proof of Reserves, also known as Proof of Funds (PoF) within the next month. 

In an official tweet, OKX stated, “We’re hiring Armanino for auditing & will publish an auditable Merkle POF asap.” The company then listed 23 BTC addresses and 13 Ethereum addresses containing some of the exchange’s reserves.

In an earlier tweet, OKX had stated that their PoF would be done “in the coming weeks (within 30 days).” This timeline has now been updated to “asap.”

CEO of KuCoin Johnny Lyu also announced that KuCoin will be providing Proof of Reserves “in about one month.” He said KuCoin will be working with “authoritative auditing institutions” to make sure that the Proof of Funds accurately represents the assets on hand.

Proof of Reserves is a technique used by some crypto exchanges to provide proof that they have enough assets to handle all withdrawals. A reputable third-party auditor records all customer balances and converts them into a cryptographic Merkle Tree. This anonymizes the data to protect privacy, but it also allows users to compare the total balances held by customers with the total assets the exchange has on hand.

Similar protocols are used by Kraken, Bitmex, Gate.io and many other exchanges, but were not used by FTX. CZ of Binance recently argued that all exchanges should provide PoFs to make sure that an exchange is not using “fractional reserves.”

One-third of estimated 115M Indian crypto users concerned about regulations

A KuCoin survey estimates that some 115 million Indian citizens are invested in cryptocurrencies, while many are still concerned about the government’s stance toward the sector.

India is now home to an estimated 115 million cryptocurrency investors despite a historically negative attitude toward the sector from the government, according to new data.

The latest gauge on the number of users in India comes from cryptocurrency exchange KuCoin, which released the findings of its ‘Into The Cryptoverse India Report’ survey on Tuesday. The estimated 115 million crypto users represent around 15% of the Indian population aged between 18 and 60.

A key highlight was the 33% of survey takers concerned by ambiguous government regulations that could deter potential investors. Security concerns were also evident, with 26% worried about hacks and exploits while 23% were concerned about losing funds in the event of a security incident.

The report is based on a sample of 2042 Indian adults aged between 18 and 60 who were polled between October 2021 and June 2022. 1541 respondents identified themselves as cryptocurrency investors who either own crypto or have traded over the past six months and intend to continue doing so.

Barriers to continued adoption and onboarding of new users are wide-ranging, with education, regulatory and security considerations as chief concerns for citizens in the country. 41% of respondents admitted not being sure what type of cryptocurrencies to invest in, while 37% found it difficult to manage the risk of portfolios. A further 21% of respondents had little knowledge of how cryptocurrencies work.

Related: India needs global collaboration to decide on crypto’s future, says finance minister

A growing section of India’s cryptocurrency users is younger than 30, with 39% of investors aged between 18 and 30 identified in the first quarter of 2022. Investing for the future also emerged as a prominent theme, with 54% of respondents seeing the potential for cryptocurrencies to provide a higher return on investment than conventional assets.

Cointelegraph reached out to KuCoin CEO Jonny Lyu to unpack the findings of their India report, who admitted that the number of crypto users in the country was a “confirmation of expectations.” Given that India is the most populous country in the world with a rapidly developing middle class that is tech savvy, Lyu expected to see a proportionally strong layer of investors engaged in cryptocurrencies:

“Despite the government’s stance affecting local crypto market sentiment, people still continue exhibiting interest in new means of value accumulation and accrual.”

Lyu also noted that regulatory concerns were not the be-all and end-all of the future adoption of cryptocurrencies in the country, suggesting that it was just one factor affecting the rate of new users in the space.

The KuCoin CEO also suggested that India’s vast population merely needs to be informed about the potential use cases of cryptocurrencies and their underlying technology in order for mass adoption to take place:

“The problem is the lack of overall awareness about the potential of cryptocurrencies. The situation may change as more Indians become aware of cryptocurrencies and sufficiently strong projects are introduced that can inject them into mass usage with accompanying informational support.”

KuCoin’s India report paints a positive picture of the growth of cryptocurrency adoption in India, but the apparent disparity in its government’s stance toward the sector continues to be a hindrance. A 30% tax on unrealized crypto gains was instituted in April 2022, which met widespread criticism, while users are also subjected to a 1% tax per transaction.

The effect of this new law was felt with data from exchanges in India showing a massive slump in transaction volumes in the wake of the tax laws enforced on cryptocurrency trading.