Turner Wright
The United States Securities and Exchange Commission and its chair Gary Gensler were the targets of many lawmakers and witnesses at a hearing exploring the crash of the crypto market.
In a Feb. 14 hearing at the Senate Banking Committee titled “Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets," ranking member Tim Scott said Gensler should appear before Congress before September to address additional enforcement actions in the crypto space, calling out the SEC chair for doing “rounds on the morning talk shows” rather than testifying. According to the South Carolina senator, the SEC had not provided “the slightest bit of guidance,” potentially leading to the lack of investor protection at bankrupt firms including FTX, Terra, BlockFi, Voyager, and Celsius.
“To think the SEC has failed to take any meaningful preemptive action to ensure this type of catastrophic failure does not happen again,” said Scott. “If they have the tools they need, were they just asleep at the wheel? [...] We’d be happy to have chairman Gensler testify sooner — much sooner — than later.”
Witnesses testifying at the hearing proposed different approaches for lawmakers seeking to regulate crypto. Duke Financial Economics Center policy director Lee Reiners suggested Congress pursue legislation to “carve out cryptocurrency” from the Commodity Futures Trading Commission’s authority and label it as a security under the SEC’s exclusive purview. Crypto Council for Innovation chief global regulatory officer and general counsel Linda Jeng testified that the lack of a consistent federal regulatory framework on crypto contributed to a lack of investor protection and uncertainty among firms, saying:
“The SEC has not initiated any formal rulemaking process to update securities laws that are decades old to account for the unique attributes of digital assets that are determined to be securities.”
Vanderbilt University law professor Yesha Yadav echoed some of Jeng’s concerns on developing a federal framework for crypto, but also proposed a self-regulatory regime in which exchanges could oversee themselves as a complement to public regulation. Firms that failed to comply with the rules could be forced to pay financial penalties.
In the United States, there is seemingly a regulatory tug-of-war between many government agencies looking to establish rules on crypto companies. Gensler has claimed most token projects qualify as securities under SEC guidelines and repeatedly called on firms to “come in and talk to us”. The agency has already taken enforcement actions against Kraken and Paxos in 2023.
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Brayden Lindrea
Cryptocurrency exchanges Binance and Huobi have again frozen accounts linked to last June's $100 million Harmony Horizon bridge hack.
Around $1.4 million worth of crypto frozen by the trading platforms came from accounts linked to the notorious Lazarus Group operating out of North Korea.
The investigation was carried out by blockchain analytics firm Elliptic, according to a report shared by the firm on Feb. 14. However, the firm didn’t state what coins or tokens were frozen.
Elliptic explained it passed on the intelligence to Binance and Houbi, which then acted promptly to freeze the Lazarus Group-linked accounts:
“The stolen funds remained dormant until recently, when our investigators began to see them funneled through complex chains of transactions, to exchanges. By promptly notifying these platforms about these illicit deposits, they were able to suspend these accounts and freeze funds.”
Since the Harmony exploit, it has been well documented that Lazarus Group resorted to the now-United States OFAC-sanctioned privacy mixer Tornado Cash in an attempt to break the transaction trail back to the original theft.
While this supposedly makes it easier to cash out funds at an exchange, Elliptic investigators were able to trace the entirety of the stolen funds sent through the mixer in this case, the report stated.
Elliptic CEO Simone Maini suggested the events showed the industry was taking on the responsibility to prevent money laundering and stop crypto from becoming a “haven” for illicit activity:
“Today, money laundering was detected and stolen funds linked to North Korea were frozen, in real time. As an industry we have the power and responsibility to prevent digital assets becoming a haven for money launderers and sanctions evaders, and ensure that they are a force for good.”
The Harmony bridge attack was attributed to the Lazarus Group by the United States Federal Bureau of Investigation on Jan. 24.
This isn’t the first time Binance and Huobi have cooperated together on the matter.
On Jan. 16, the two platforms managed to freeze and recover 121 Bitcoin, worth $2.5 million at the time, linked to the Harmony attack.
The recovery was, however, only a fraction of the $63.5 million laundered over that weekend, according to crypto sleuth ZachXBT, who claims the funds were funneled through Ethereum-based privacy protocol Railgun before being sent off to three different exchanges:
1/2 North Korea’s Lazarus Group had a very busy weekend moving $63.5m (~41000 ETH) from the Harmony bridge hack through Railgun before consolidating funds and depositing on three different exchanges. — ZachXBT (@zachxbt) January 15, 2023
Recent efforts from Elliptic last week also found that Lazarus Group has laundered about $100 million in Bitcoin through “Sinbad,” which they claim is a re-launch of the now OFAC-sanctioned privacy mixer Blender.
Lazarus Group is believed to have stolen well over $2 billion in crypto since it shifted its focus to the industry in 2017, according to estimates from Elliptic.
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Judith BannermanQuist
German engineering and technology giant Siemens has become one of the first companies in Germany to issue a digital bond on a public blockchain. It’s worth 60 million euros ($64 million) and has a maturity of one year, in accordance with Germany’s Electronic Securities Act.
According to the Feb. 14 announcement, the bond was sold directly to investors such as DekaBank, DZ Bank, and Union Investment, without the need for central clearing and paper-based global certificates. Siemens noted that the process enabled transactions to be executed much faster and more efficiently than traditional bond-issuing methods.
Siemens emphasized the benefits of using digital bonds over traditional bond-issuing methods in the announcement. According to the company, “issuing the bond on a blockchain offers a number of benefits compared to previous processes. For instance, it makes paper-based global certificates and central clearing unnecessary. What’s more, the bond can be sold directly to investors without needing a bank to function as an intermediary.”
Although the transaction was completed using classic payment methods because the digital euro was not yet available at the time of the transaction, it was still completed in just two days. Siemens aspires to position itself as a pioneer in the ongoing development of digital solutions for the capital and securities markets.
Siemens AG corporate treasurer Peter Rathgeb sa:
“By moving away from paper and toward public blockchains for issuing securities, we can execute transactions significantly faster and more efficiently than when issuing bonds in the past. Thanks to our successful cooperation with our project partners, we have reached an important milestone in the development of digital securities in Germany.”
Over the past few years, Siemens has been experimenting with blockchain technology. In October 2020, Cointelegraph reported that Pebbles, a blockchain-based energy trading platform backed by Siemens, held a virtual demo of its marketplace for optimized electricity trading.
Additionally, in July 2019, Siemens considered using blockchain technology for a carsharing program through Siemens Mobility, one of its subsidiaries.
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This Daily Dose was brought to you by Cointelegraph.
