Crypto Pirates

So you believe your week has already begun poorly? One punter is struggling from Bitcoin and XLM losses of US$11.6 million / AU$15.4 million. Stolen from their Coinbase account in an alleged ten-minute theft, the "Aaand It's Gone" crypto punchlines virtually write themselves here.

According to the US Attorney's Office, an unidentified Coinbase user received notification that their account had been restricted following their April acquisition of 200 Bitcoin. While the notice appeared to originate from Coinbase, it was actually a Trojan horse used to initiate the alleged fraud.

It is unknown how the scammers acquired knowledge of the purchase nearly immediately after it was completed. Regardless, the user phoned the phone number indicated on the message, expecting they would be connected to a Coinbase customer care agent, and performed a series of account modifications, including permitting remote access to the eight-figure account. After that, about 206 Bitcoin were stolen out in a matter of minutes.

"Once allowed access to the Victim Account, UI-1 (also known as GR in the US District Court complaint filing) upped the daily transaction limit and also attempted to deactivate various notifications and alert settings on the Victim Account," Assistant US Attorney Dan G. Boyle explains.

"Around US$11,570,138 worth of virtual currency was transferred out of the Victim Account without GR's authorisation between 2:02:40 PST and 2:12:41 PST on or about April 20, 2021."

Following that, the digital monies were transferred across multiple accounts via a series of transactions. As of now, detectives believe they have tracked down 10.2 Bitcoin of the total haul, which was deposited in an account with Huobi Global (one of the world's major exchanges). Federal Judge Dolly M Gee of the United States of America has now issued a warrant for the recovery of the $833,000 parcel, with investigators filing a forfeiture notification.

"Huobi Global has agreed to keep the monies frozen awaiting the outcome of the forfeiture case," said Thom Mrozek, Director of Media Relations for the US Attorney's Office in Los Angeles.

"While no one has been charged or detained, our investigation is ongoing."

At the moment, both Coinbase and Huobi Global have declined to comment publicly on the cryptocurrency heist.

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Cryptocurrency payments continue to expand in popularity and demand on a global scale. Cybercriminals are likely the most vocal proponents of cryptocurrency payments, as it is their favourite method of getting ransom monies.

However, it is not just cybercriminals who benefit from cryptocurrency payments. Numerous firms are already rewarding cryptocurrency payments through a variety of programmes and offers. MasterCard, for example, recently stated that it would enable its network partners to enable their customers to purchase, sell, and retain cryptocurrencies via a digital wallet, as well as reward them with digital currencies through loyalty programmes.

Another example is Geolancer, a Quadrant-developed programme for manually verifying Points of Interest data on the ground. It compensates Geolancers who collect POIs in their neighbourhood with cryptocurrency.

El Salvador became the first country in the world to adopt bitcoin as legal cash earlier this month. Additionally, The Economic Times noted that Indian, Pakistani, Bangladeshi, and Filipino expats in Qatar are increasingly experimenting with cryptocurrencies to send money home and avoid costs levied by wire transfer providers and other middlemen.

However, the situation may be different in China. All financial transactions involving cryptocurrency have been declared illegal by the government. After years of salvos against volatile currencies, this move now brings the hammer down on China's digital trading.

Singapore's adoption of cryptocurrency payments

Singaporeans have been reported to be investing in cryptocurrencies or utilising them as a form of payment. Indeed, 37% of Singaporeans were found to be paying for purchases using cryptocurrency or interested in doing so, according to the latest Worldpay from FIS' Generation Pay report.

The study examines different generations' buying habits, purchase experiences, and payment preferences, ranging from Gen Z through baby boomers. While there is still a long way to go before cryptocurrencies become a widely accepted means of payment, the strong adoption rate demonstrates that more people are becoming aware of how crypto payments work.

According to the latest Worldpay from FIS' 2021 Generation Pay research, a sizable percentage of Singaporeans (37 percent) are using or interested in using cryptocurrencies to pay for purchases. The research examines the spending habits, purchasing experiences, and payment preferences of different generations, from Gen Z to baby boomers. Gen Y (58 percent) is the most receptive to crypto payments, while boomers (16 percent) are the least receptive.

On average, data indicate that when it comes to using digital currencies as a method of payment, central bank digital currencies CBDCs (23 percent) are favoured above cryptocurrencies (11 percent). Another 22% answered that they had no preference and are happy to pay with either method. On a generational level, Gen Zs (18%) have the lowest level of interest in CBDCs. 24 percent indicated they will utilise both CBDCs and cryptocurrencies. Similarly, a sizeable proportion of Gen Ys (29 percent) stated that they will utilise both CBDCs and cryptocurrencies.

For many who love cryptocurrencies, the fundamental reason is that they are decentralised and provide them with greater control over their money (67 percent ). This is an especially compelling cause for Gen Y to exist (74 percent ). On the other hand, people who support CBDCs argue that they are more secure because they are backed by the government (64 percent ). Additional reasons for their aversion to cryptocurrencies include a belief that crypto wallets are more vulnerable (31%), and that cryptocurrencies could be utilised for unlawful purposes (30 percent).

Developing a cryptocurrency ecosystem

According to Phil Pomford, General Manager for Global eCommerce, APAC, and WorldPay at FIS, the globe is currently experiencing the second wave of widespread crypto buying, with significant institutional money entering the market but still a few years away from widespread cryptocurrency use.

He did, however, remind out that the environment continues to face a variety of issues. For example, Phil highlighted that crypto merchants in APAC are having difficulty navigating new rules and locating a partner bank in the region. Additionally, several settlement banks are unwilling to execute transactions for cryptocurrency merchants using their banking facilities.

"However, we are seeing an increase in demand for crypto in particular industries, such as NFT marketplaces built on DLT and requiring the use of cryptocurrency. It's also worth mentioning that significant firms in payments and banking are reaffirming their faith in the crypto field, such as DBS Bank, which recently launched its own crypto exchange," Phil added.

Phil noted that FIS is increasing consumer access to crypto by facilitating card-to-crypto payments on exchanges. Crypto exchanges are increasing their use of card payments in place of the more traditional dependence on bank transfers. As cryptocurrency gains traction, customers are increasingly looking for simple, convenient payment solutions that allow them to make crypto-based purchases using credit cards and other well-known financial instruments.

"Our global relationship with cryptocurrency merchants (recent examples include CEX.IO, Moonpay, and OKCoin) is also influencing how other retailers see cryptocurrency." Retailers presently require fiat cash to back crypto, and this is dependent on the exchanges' ability to settle transactions," Phil concluded.

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Could we possibly live in a world devoid of rules? Yes, in theory - we can survive without government, as our forefathers did. At its most extreme, this is referred to as anarchy - a state of lawlessness and disorder.

In reality, humans have discovered that regulations are critical to the development of a harmonious society. To foster a positive culture, we require structures and rules.

Elinor Ostrom, a Nobel laureate economist, observed that when people are required to manage shared resources such as land, fisheries, or irrigation water, they spontaneously construct rules.

Indeed, we have seen throughout history that every evolving industry undergoes a process that concludes, to a greater or lesser extent, with regulation. The most heavily regulated industries are those with the greatest potential for harm.

Consider the pharmaceutical industry, which is now heavily regulated to ensure that people around the world can rely on affordable and safe medications to protect their health. Prior to regulation, you had opportunistic con artists peddling fraudulent cures to the public.

Education is another sector where regulation ensures that the same high standards are adhered to by all institutions in order to foster trust. Food supply and hygiene are also strictly regulated to ensure the provision of a basic human need. Regulation has benefited these industries and countless others.

This debate is currently raging around cryptocurrency. Elon Musk, CEO of Tesla, was recently asked whether the US government should be involved in crypto regulation. 'I believe it is impossible to destroy cryptocurrency, but governments can stifle its advancement,' he said. 'I would advise you to 'do nothing.'

The entire crypto world is motivated by a single word: liberty. Simply the fact that governments cannot access your wallet is a significant victory for liberty.

This is not to say that crypto should be used for criminal purposes or that its image should be tarnished as a result of a minority using it for money laundering or crime.

This is especially true in emerging markets, where we must safeguard both the system and consumers. Consider employment rights in countries such as Cambodia, which would undoubtedly deteriorate in the absence of robust regulatory frameworks. Regulation acts to promote economic growth and liberty in this instance.

As a result, ensuring that the industry is transparent, clear, and compliant with the law is critical to preserving freedom.

As such, I am a firm believer that cryptocurrency should be regulated. Additionally, I believe that the industry should take the initiative – and place a premium on the positive impact that regulation can have.

Why?

Because, up to this point, crypto has been the new Wild West - and if we want to change that and become a respected financial framework, we must accept that regulation is a necessary part of maturing.

Binance flouted regulation for an extended period of time, and the result is that it is now banned in a number of economies while allegations of tax evasion and money laundering are investigated. Regulation will inevitably occur as our industry matures – so let us embrace it. There are those who want to completely regulate the industry, prohibiting financial institutions from dealing in cryptocurrency, and we play into their hands by refusing to come to the table and act responsibly.

Consider the case of technology companies. GDPR and similar laws were enacted in response to the fact that tech companies were harvesting data without restriction. They are now bound by an imposed framework and face severe penalties if they fail to comply with regulations. If technology companies had acted more responsibly with regard to customer data and regulators, the imposed restrictions could have been significantly lighter.

This is because, when left to their own devices, regulators err on the side of restricting liberty. Collaboration with regulators is critical to preserving liberty. Effectively, liberty is a matter of choice. Previously, businesses had complete control over how they used data. That option has been eliminated.

Dialogue with regulators is necessary to safeguard this option. If our industry is to advance, there is only one path forwards - we must assist governments in shaping regulation.

Attempting to conceal this fact is childish and irresponsible in the eyes of employees, partners, and consumers alike. The problem with burying your head in the sand is that one day you will awaken to discover that the world has changed without you, and most likely not in the way you desired. Rather than adjusting, it is far preferable to shape this shift.

We, as industry pioneers, should act as system custodians, preventing system abuse and protecting consumers. On the other hand, regulation without practitioner input can result in errors and misjudgments, unintended consequences, and risk. After all, we are far from the first industry to have existed without regulations. Twenty years ago, only a few countries incorporated the term 'internet' into their legislation. Today, the majority of legal systems have evolved to accommodate the new connected world. Cryptocurrency will follow the same path, whether we like it or not. The critical point is to lead this process and ensure its success. Thus, the only way forwards is through dialogue, discussion, and debate fuelled by informed opinion.

This will entail liaising with policymakers in the United Kingdom, the European Union, and the United States, as well as governments in other parts of the world where mining and crypto processing are currently located.

Thus, what would constitute sound regulation?

Cryptocurrencies are largely unregulated in the European Union at the moment. The European Parliament is considering the European Commission's proposed Regulation on Markets in Crypto Assets (MiCA). It will be incorporated into the EU's Digital Finance Strategy and is expected to have a significant impact on the operation of the EU's crypto market.

Again, it is beneficial for experts to assist in shaping this regulation. Naturally, we must ensure that cryptocurrency does not serve as a haven for money laundering, criminal funds, or other nefarious activities.

The World Economic Forum's Global Future Council on Cryptocurrencies is doing some interesting work in this area, as evidenced by its paper Navigating Cryptocurrency Regulation: An Industry Perspective on the Insight and Tools Required to Shape Balanced Crypto Regulation.

The Kalifa Review of UK FinTech correctly recognises that FinTech is not a niche or sub-sector, but a pervasive technological revolution that is permanently altering how finance works. Additionally, it frames this industry's development in terms of trust and the necessary foundations of leadership, regulation, and the rule of law.

Some green principles addressing crypto's carbon footprint are likely to be included in future regulation, which is entirely appropriate - we need to ensure that cleaner technology and energy sources are used to ensure the sustainability of next-generation finance. Crucially, we do not have to regard regulation as inherently dangerous.

Part of the issue is that because crypto is a disruptive technology, the individuals involved tend to be unconventional thinkers who dislike being bound by rules.

Others are protectionist, fearful of their profits being eroded by mainstream attention. Fear does not drive human advancement; however, it prevents us from realising our full potential.

To be truly clever, we must overcome this natural reaction and embrace the benefits of regulation - because regulators are not always opposed to financial development. By and large, they recognise that this is a genie that cannot be contained and must instead be tamed and transformed into a friend.

European regulators have expressed support for blockchain technology and its potential for digital transformation in the finance sector, both at the EU and national levels. The stated objective of this regulation is to establish a regulatory framework that is conducive to investment and growth.

And this is where governments and cryptocurrency pioneers agree: growth benefits everyone.

We can anticipate regulation promoting consumer and investor protection, market integrity, and financial stability, thereby increasing the sector's legitimacy. This synergy will attract new investors and accelerate crypto's mainstream adoption.

This will eventually result in an increase in the sector's legitimacy. As a result, the most profitable operators will rise to the top, while shady competitors will disappear from the market.

Regulation is the next frontier for cryptocurrency – it is a defining feature of our industry's success. We should not fear regulation, but rather embrace it as the next stage of crypto development concludes.

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Bitcoin ticked higher on Thursday morning, hovering above the critical $60,000 ($43,369) level, as El Salvador's president announced on Twitter that the country had purchased bitcoin on the dip.

Meanwhile, Shiba Inu's market capitalisation briefly surpassed that of rival meme token dogecoin (DOGE), putting it among the world's top ten cryptocurrencies in terms of market capitalisation.

Bitcoin (BTC) was trading at $60,530, up 2.5 percent from the previous day's close.

Shiba Inu (SHIB) jumped 20% to $0.000065. At the time of press, this value placed the company's market capitalisation at approximately $38.5 billion.

Bitcoin reached a new all-time high of nearly $67,000 last week, boosted by the debut of the world's first bitcoin exchange traded fund (ETF). However, earlier this week, its value plummeted.

According to analysts contacted by Yahoo Finance UK, a 5% to 10% correction is "quite normal" after prices have already increased by more than 55% in a month.

One investor who was unfazed by the price collapse was El Salvador's President, Nayib Bukele, who made bitcoin legal tender in his country last month, despite widespread citizen protests.

He tweeted that he had purchased 420 bitcoins, a number associated with marijuana culture. This brings the total amount held by the country to 1120 bitcoin.

He was already boasting about the returns on his investment shortly after the announcement.

"Despite over $11 million in losses, Bitcoin's rise to a new all-time high has put El Salvador's wallet in the black with about $5 million in profits, despite Bitcoin's recent plunge below $60K," Crypto Potato explained.

Naeem Aslam, AvaTrade's chief market analyst, believes that "any decline in prices should be viewed as an opportunity to acquire some digital coins at bargain prices."

"Buying the dip has historically been the primary objective of most day traders and long-term investors in the financial markets because it provides a unique window for averaging your purchasing costs, effectively maximising the notional gain on the investment," said Kunal Sawhney, CEO of Kalkine Group.

"In terms of accumulating bitcoins, interest has skyrocketed since the launch of the bitcoin ETF, and a significant correction as a result of any regulatory or market tightening encourages stakeholders to add more. With institutional investors' and governments' interest gradually increasing, the crypto-asset is likely to remain in a phase of setting and breaking new record highs in the short term."

Additionally, he stated that Shiba Inu's overtaking dogecoin "clearly demonstrates the investors' bifurcated inclination towards various crypto-assets formulated on distinct mechanisms."

"It is expected that emerging cryptocurrencies will see such actions as the underlying systems improve over time, allowing for broader investor participation," he said.

"Regardless of the influx of new digital currencies, bitcoin is likely to lead the pack in terms of accumulating so-called vibrant cryptos."

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Cream Finance, the DeFi lending protocol, has been hit by another flash loan attack. This time, the attacker stole DeFi tokens worth nearly $136 million.

Protocol for decentralised lending Cream Finance has been the target of a significant flash loan attack. The attacker obtained a $2 billion loan from Aave and fled with over $136 million in Ethereum-based tokens.

Cream Finance Suffers Another Attack From Flash Loans

Cream Finance has been taken advantage of.

Earlier today, an attacker successfully used a flash loan to borrow 524,102.159 ETH from Aave, which is worth approximately $2 billion at today's prices. They then drained Cream Finance of several DeFi tokens, pocketing approximately $136 million at peak prices, according to Zerion. The attack cost $36,574.34 and the transaction can be viewed on Etherscan.

PeckShield, a firm that audits smart contracts, announced the attack this afternoon on Twitter, while Cream Finance stated that it was "investigating an exploit on C.R.E.A.M. v1 on Ethereum." The team added that it would provide additional updates as they become available.

According to Etherscan, the attacker transferred at least $92 million to one Ethereum wallet and $23 million to another. The funds were primarily made up of Cream LP tokens, which are earned by providing liquidity to the protocol, as well as XSUSHI, WNXM, YFI, and a variety of other ERC-20 tokens and stablecoins.

The attacker left the following message in the transaction's input data:

“Baave lucky, iron bank lucky, cream not. incest bad, don't do”

The message is almost certainly referring to Cream Finance's Iron Bank, which Alpha Finance utilises in conjunction with Cream. Following the attack, Alpha Finance issued an update confirming that Iron Bank and its Alpha Homora V2 product were "safe." Yearn Finance also issued an update, confirming that none of its products were impacted and that its team was assisting Cream with the investigation of the exploit.

Notably, the wallet containing the majority of the attacker's stolen funds received a transaction following the attack from a user with the Ethereum Name Service domain oilysirs.eth. The transaction included a warning to the attacker that they "are NGMI" and "will never be able to cash out that amount." The term "NGMI" is a well-known meme in the cryptocurrency community. It is frequently used as an insult to convey the message "Not Going to Make It."

Following the attack, Adam Cochran, a crypto investor and researcher, noted that Cream's staked Ethereum 2.0 service is custodial, implying that users may be reimbursed for the stolen Cream LP tokens.

Additionally, the attacker used the DeFi exchange aggregator ParaSwap to convert AAVE and PERP tokens to ETH and USDC. Additionally, they utilised Ren's bridge to transfer over $6 million into BTC.

The protocol's total value has decreased by 72%, while the price of Cream's native governance token, CREAM, has fallen by around 27%, trading at $114 at the time of press.

Notably, this is not the first time Cream Finance has come under fire. Only in August did the protocol lose $34 million in a similar attack, though the attacker later returned a portion of the funds.

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Bitcoin and all of the other major cryptocurrencies plummeted overnight, but one coin defied the trend.

On Thursday morning, amid a sea of red in the cryptocurrency market, one coin remained the brightest shade of green.

The dog cryptocurrency shiba inu (SHIB) has continued to shatter records in its best-ever week, rising more than 111% and hitting a new high shortly after 6am after rising 40% overnight.

According to CoinGecko, SHIB reached US$0.00008088 earlier this morning, a 140 million percent increase over its November low.

While the price may appear insignificant, it represents a massive increase over the coin's initial listing price of US$0.000000000972 in August 2020 and comes on a day when bitcoin and the majority of other major coins fell sharply.

Created in August 2020 as a spin-off of dogecoin by an anonymous user going by the moniker "Ryoshi," SHIB has now surpassed the market capitalisation of its predecessor, surpassing the $US30 billion mark.

The coin, which is named after the Japanese dog, is now closing the gap on dogecoin, which is currently ranked tenth in terms of market capitalisation at $US31 billion.

The majority of the increase is attributed to rumours that the coin will be listed on trading platform Robinhood.

Ironically, those rumours have resulted in SHIB surpassing Robinhood's market cap of US$30 billion.

Without citing sources, Coinmomo, a cryptocurrency analysis website, reported over the weekend that SHIB would be listed on Robinhood on Monday.

Although the coin was not listed on Monday, Robinhood had already sent a survey to users asking which cryptocurrencies they traded, including shiba inu.

At the time of press, a Change.org petition urging Robinhood to include SHIB on its platform had garnered more than 360,000 signatures.

Twitter users are bullish on the coin, particularly following a few pointed remarks from Robinhood's chief financial officer on Wednesday, Australian time.

Wall Street analysts asked Robinhood executives during a conference call on Tuesday local time whether the company planned to add additional cryptocurrencies to its platform.

"We're hearing from customers that they want more coins," said the company's chief financial officer, Jason Warnick.

"As you know, we're being extremely conscientious and diligent in this space. It is evolving in terms of regulation. There have been several concerns raised about coins traded on other platforms being unregistered securities."

"We believe it is the right thing to do, not only for shareholders and the company, but also for customers, to ensure that we apply the same level of diligence to any new coins," he continued. We do hear our customers, and they want more features, and so we're going to work as quickly as possible while maintaining the proper balance of safety and compliance to avoid making any mistakes here."

In late 2013, Billy Markus, a US software engineer, and Jackson Palmer, an Australian entrepreneur, created dogecoin as a joke mocking the wild speculation in cryptocurrencies at the time.

They chose a Japanese dog, the shiba inu, as the coin's mascot.

Shiba inu is now only two positions behind dogecoin on the cryptocurrency leaderboard, with dogecoin ranking tenth.

SHIB has come close to catching up to doge, which has been on the market for seven years.

Analysts argue that this is a sign that the market has become "overheated."

"Dog coins are mooning once again, which historically has been a fairly good indicator of an overheated market," Delphi Digital analysts wrote in a market note published Monday. "The first time dog coins became popular was in April–May of this year, and they quickly dwindled as cryptocurrency markets cooled. In early September, dog coins were once again all the rage, and the broader cryptocurrency market experienced a fairly significant de-leveraging."

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The internet is what it is today—capable of connecting people across countries, time zones, and cultures—because of the tolerant regulatory environment in which it was born. Regulators will be far less receptive to disruptive technologies in 2021, unfortunately. This is detrimental to the future of innovation in the United States and the emerging blockchain industry.

Whichever approach Washington takes to cryptocurrency regulation over the next few months could make a multi-trillion dollar difference over the next few years. To appreciate how much we stand to lose as a result of poor blockchain policy, it's necessary to first appreciate how much we gained in the 1990s as a result of sound internet policy.

It's easy to forget that during the early years of the tech boom, the success of today's internet behemoths was far from certain. For example, during the late 1990s Dotcom Bubble, numerous businesses were written off as scams (and some of them were). Even the most promising businesses, however, were viewed as speculative bets, with their stock prices subject to extreme volatility.

Additionally, it's easy to forget that the internet's early years were unfamiliar territory for the majority of people. By modern standards, it was slow, overly complicated, and difficult to use for anyone lacking a strong technical background. Many dismissed the internet as a fad, including Nobel laureate economist Paul Krugman, who predicted in 1998: "By 2005 or so, it will become clear that the internet's economic impact will be comparable to that of the fax machine."

"A swindle," "a fad," "a bubble," "excessively complicated," and "excessively volatile." Do any of these statements ring a bell? History often plagiarises rather than rhymes. And it's impossible to ignore the fact that today's crypto sceptics use the same lingo as yesterday's internet sceptics.

Consider what might have happened if policymakers in the United States had heeded the internet's critics in the mid- to late-1990s. Consider what would have happened if they had stifled e-commerce, digital publishing, and fledgeling social media platforms in order to preserve the old way of doing things. Consider what might have happened if they had crafted regulations to stifle the free flow of physical goods, ideas, and information enabled by the internet.

The American people would have been denied trillions of dollars in economic opportunity—and the rewards of the digital age would have gone to countries with more tech-friendly policies.

This is the danger we are confronted with in the modern era.

We have entered a new era of American innovation. As with the internet, cryptocurrency has the potential to rewrite the rules of business, politics, media, finance, and even interpersonal relationships. However, if legislators succumb to cryptocurrency critics by adopting a draconian regulatory approach, the United States will miss out on the economic benefits of this game-changing technology—and entrepreneurs will flee to safer shores.

Already, the groundwork for a blockchain brain drain is being laid. Consider the Senate-passed infrastructure bill, which includes a provision that would classify crypto miners, validators, and even software developers as "brokers," requiring them to report to the IRS information about anonymous blockchain participants that they would otherwise be unable to obtain. In effect, this provision would kill the nascent DeFi (decentralised finance) industry and make investing in new cryptocurrencies nearly impossible for average Americans. In other words, this latest move sends a hostile message to blockchain advocates: "You are not welcome here."

At best, the Senate proposal demonstrates a fundamental misunderstanding of how cryptocurrencies work; at worst, it demonstrates regulatory capture and lawmakers' willingness to cave to special interests.

Regrettably, the danger of ineffective regulation does not stop there. Gary Gensler, chairman of the Securities and Exchange Commission, has stated that he believes that many digital assets are not commodities but rather securities and should be regulated as such. Using a similar logic, he has indicated his intention to crack down on the use of stable coins—cryptocurrencies pegged to the value of the US dollar. Americans are using stable coins to earn an annual percentage yield of between 4% and 8% on their savings through a variety of lending programmes. However, the SEC wishes to end these lending programmes, ostensibly to "protect investors." (What is unknown is which government agency will safeguard investors against the unlimited money printing that is devaluing their dollar savings at a rate of 5.3 percent per year.)

When it comes to cryptocurrency, Washington is off to a bad start. However, reversing course is not impossible.

Cryptocurrency regulation is not always undesirable. Indeed, this is a critical step towards widespread adoption. It is critical, however, that policymakers shape regulation in such a way that the risks associated with this new technology are minimised without jeopardising the benefits. In the 1990s, Congress devised a method for accomplishing this via the internet. While Section 230 is far from perfect and is in desperate need of reform today, it paved the way for a more accommodating regulatory environment that enabled the growth of numerous online businesses. Section 230 contains "the 26 words that created the internet" (along with "trillions of dollars in economic wealth," as Jeff Kosseff famously stated).

Indeed, regulatory clarity is critical for extracting the maximum value from the emerging crypto economy, regardless of whether that value comes from DeFi protocols, decentralised forms of social media, tokenised assets, NFTs, or some other application of blockchain technology that we can't even imagine today.

While policymakers seek the optimal regulatory balance, they should keep in mind that the United States did not become the world's technology capital by suffocating innovators with red tape. The United States became what it is today as a result of a prudential regulatory approach that fostered the entrepreneurial spirit.

This is the same entrepreneurial spirit that motivated private sector technological advancements that enabled the Apollo moon landing. This is the same spirit that gave birth to smartphones, which are millions of times more powerful than the guidance computers on Apollo 11. And it is this same spirit that has inspired a group of visionaries to use blockchain technology to push the boundaries of the digital frontier.

Will Washington's leaders stifle that spirit at the expense of our economy and reputation as a global innovator? Or will they feed that spirit in order to usher in the digital revolution's next chapter?

We can only hope for the latter.

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The listing of a bitcoin exchange-traded fund and the legalisation of bitcoin in El Salvador have marked watershed moments in an asset class that US regulators are still unsure how to regulate.

On Tuesday, 19 October 2021, the New York Stock Exchange began trading the first bitcoin-linked exchange traded fund (ETF). It was a watershed moment for the cryptocurrency industry, coming eight years after the first application for a cryptocurrency ETF was filed. Rather than directly investing in bitcoin, the ProShares ETF provides investors with exposure to bitcoin futures contracts. 

While the start of trading in BITO is undoubtedly a watershed moment, the events surrounding its application and approval also provide a snapshot of the current and frequently contradictory perspectives at play in the US, as national authorities in the world's largest economy seek to shift towards a more coherent and cohesive policy regarding cryptocurrency and blockchain activity. 

The Upheaval Surrounding El Salvador's Historic First 

Not in Washington DC, New York, or Silicon Valley – but in a Central American country with a population of less than 7 million – is a stark illustration of the difficult dynamics that US officials are currently grappling with. On 7 September 2021, El Salvador became the first country in the world to adopt bitcoin as legal tender. While it was a historic day, it was not without controversy. 

After midnight, President Nayib Bukele criticised Apple and Huawei for not making Chivo – the official app Salvadorans can use to conduct crypto transactions available. Following this, the app was forced to go offline for a period of time due to the strain of user registrations. Bitcoin's price also plummeted during the day, falling from US$52,000 to just under US$43,000 at one point. 

Without a doubt, there is another side to this Salvadoran pioneering. Although Chivo's launch was undoubtedly bumpy, it eventually gained widespread adoption, eventually rising to the top of Apple's App Store finance category. 

Salvadorans have since used it to purchase Big Macs at McDonald's and Starbucks coffees. President Bukele stated that the use of the world's first cryptocurrency will save Salvadorans US$400 million annually in remittance commissions. El Salvador now has the added advantage of being the 'first mover' in legalising bitcoin transactions, which will help it attract foreign crypto investors and businesses. 

While the long-term impact of El Salvador's embrace of the BTC crypto is unknown – and there are undoubtedly a number of distinctions between El Salvador's government's actions and any future moves by the US government – the turbulent start to El Salvador's first official day with the crypto saw a loss of confidence among market traders. 

This resulted in increased trading volumes, and – as a result of the perception that large stakes would be sold off – several prominent cryptocurrency exchanges (including Coinbase, Gemini, and Kraken) experienced trading delays and outages. This is most emphatically not the type of incident that the US government wishes to see replicated as a result of their own actions. 

Pursuing New Land Laws 

BITO launches at a time when all three branches of the US government are engaged in crypto-related activity. At the moment, the US regulates the sector relatively lightly. Crypto exchanges adhere to the Bank Secrecy Act (BSA) and other regulations aimed at combating money laundering and other illegal activities. However, there are now significant efforts underway to increase the obligations of those involved in the cryptocurrency sector. 

Congress's Massive Bill 

A number of new crypto-related provisions, including new tax reporting requirements, were tucked away in the $1 trillion Infrastructure Investment and Jobs Act, which was sent to Congress as a critical component of the Biden administration's agenda. 

At the time of press, the bill is making its way through the House after passing the Senate – and thus many variables remain in play between now and when it becomes law – but the movement thus far demonstrates a clear signal of intent from US lawmakers in their desire for increased control over cryptocurrency. 

The Prospective Executive Order of the White House 

The White House is currently considering an executive order on cryptos across from the Capitol on Pennsylvania Avenue. This is being considered with a particular emphasis on the threat posed by ransomware, as well as other criminal activity in the sector.

The Legal Issues Involved 

Ripples Labs Inc. was sued by the Securities and Exchange Commission last year. The Commission asserted that Ripple violated the law by conducting an unregistered securities offering valued at US$1.3 billion. While the case is still pending, there is hope that its outcome will establish a significant precedent that will influence future cryptocurrency-related activity. 

Bureaucracy on the Move 

Along with the aforementioned US agencies, the Treasury's Financial Crimes Enforcement Network, the Commodity Futures Trading Commission, the Office of the Comptroller of the Currency, and the Office of Foreign Assets Control have all made crypto-related moves. Additionally, other US-based organisations are active in this field. 

The US Government's Undercurrents of Cryptocurrency Activity 

This current flurry of activity across the US government is motivated by a number of key themes. To begin, there is a fundamental acknowledgement of the imperative of modernisation. While those who take a conservative approach to law reform in this area may well believe that 'if it ain't broke, don't fix it,' any minimalist approach to law reform is likely to face significant pressure tests given cryptos' potential to deliver profound systemic change. 

Efforts to strengthen consumer protection and reduce criminal activity throughout the sector are also critical. Increased regulation, policymakers believe, will help boost investor confidence while also providing a new avenue for combating scam activity. In turn, the fact that officials from the United States and Europe engaged in a large-scale bust of suspected drug traffickers on the dark web in late October – resulting in the seizure of more than US$31 million in crypto and cash – is certain to pique authorities' appetite for new tools to investigate and prosecute crypto-related criminal activity. 

Stablecoins' current status and projected growth are also a source of concern for US policymakers. Stablecoins, which are digital tokens with their value pegged to the US dollar – or another currency or asset, as the case may be – enable traders to transact without constantly converting into dollars. They are currently largely unregulated, and US officials are concerned that they will undermine the authority and operation of central banks as technology and eCommerce companies continue to develop and incorporate them into their ecosystems. 

In turn, while a stablecoin should theoretically be backed by reserves – allowing for the crypto to be exchanged for the original asset at any time – the current lack of guarantees surrounding reserves raises doubts about whether theory and practise differ. As a result, numerous stablecoins have come under fire for making misleading statements about their holdings, essentially claiming to have a dollar-to-stablecoin reserve when this was not the case. 

Another significant point of contention in this arena is the definition of terms. Gary Gensler, Chairman of the Securities and Exchange Commission, has stated that the majority of crypto assets fall under the definition of securities and thus should be regulated by his organisation. Nonetheless, Brian Quintenz, a commissioner with the US Commodity Futures Trading Commission, has stated that cryptos are commodities and thus fall under the authority of his agency. 

According to Vanessa Savino, Deputy General Counsel at tZERO – "a technology company dedicated to democratising access to private capital markets" – bringing clarity to the crypto sector's definitions will benefit both consumers and businesses. 

"I believe that clear guidelines are necessary for this industry, for consumers to understand the products they are purchasing, and for innovators to understand the regulatory environment in which they operate and must comply. And establishing clear guidelines is the first step towards regulatory reform and progress," Ms Savino stated. 

"I believe that if innovators have firsthand knowledge of the products they wish to bring to market and the regulatory framework in which they operate, it will expedite the process and benefit consumers." 

Washington and Beijing's Rivalry for Strategic Influence 

BITO's launch comes just days after China's government declared all cryptocurrency transactions illegal in the country. Although Beijing's late September announcement is the latest in a long line of attempts to rein in the crypto sector, this most recent move is the strongest yet, and notable for the clarity of its implications. 

While efforts to circumvent the ban have continued despite it – as is customary for crypto enthusiasts in China and around the world – the reality is that the Chinese government's past and present stances have dealt a savage blow to the sector and its domestic prospects. 

Between May and July of this year, according to data released by the Cambridge Centre for Alternative Finance in mid-October, the global hash rate (the computational power required to create bitcoins) fell from 44% to zero in China. A precipitous decline from September 2019, when China's share reached as high as 75%. While other nations' shares of the global hash rate have increased as a result of China's decline in activity, the real winner is the United States, which now controls 35% of the global hash rate as of August and is thus the world leader in bitcoin mining. 

There are numerous areas in which the US and China are already engaged in significant and growing strategic competition. In turn, Beijing has almost certainly determined that it can afford – or even requires – ceding ground to the US in this area. Finally, the crypto sector's decentralised nature means that it should not be lumped in with other fields in which Washington and Beijing compete and where both can easily exert more centralised control. 

Nonetheless, as recent events demonstrate, the American and Chinese governments' approaches to cryptos will continue to be markedly different in the future, Washington is undoubtedly cognisant of the opportunity to profit from the crypto sector's decline as a result of Beijing's domestic actions. 

In turn, while the US government's precise approach is still being developed, the SEC has made a clear distinction between how the Chinese government has approached cryptocurrency and how the US government will approach it in the future. Chairman Gensler stated in early October that the US will not pursue a crypto ban in the same manner as the Chinese government, following comments made in late September by Federal Reserve Chairman Jerome Powell, who stated that he had "no intention" of doing so. 

Ahead of Time 

By establishing a coherent and consistent policy regarding cryptos, the US government will instil confidence in the industry, both domestically and globally. Apart from addressing current issues in the crypto space, key US authorities have been engaged in a continuous – and frequently contradictory discussion regarding the development of a central bank digital currency (CBDC). 

While a CBDC is not a cryptocurrency – the centralised nature of the former versus the decentralised nature of the latter exemplifies this point – the US government's potential development of one in the future is a live issue, and thus informs the current calculus surrounding crypto regulation more broadly. 

Underpinning all of this is the need for payment system modernisation, and – while some in the US government may have reservations about the crypto sector in general, there can be no doubt that the way many contemporary crypto apps provide an extremely user-friendly platform for investing in and transacting in crypto is something that all interested stakeholders in this arena can learn from. 

For Australians who are already interested in crypto – and those who are growing in their interest – significant and well-received reform in the United States would refocus attention on offerings within its markets. Additionally, it would bolster confidence in Australia's ability to implement sound policy, laying the groundwork for the crypto sector's next chapter of growth in the country.

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Is it appropriate for your small business to take a similar approach? The answer is highly dependent on your customer base, business model, and level of interest in cryptocurrency. We will explain how to determine whether cryptocurrency is appropriate for your business. Customers can pay with Bitcoin at Overstock, Dish Network, and AT&T. PayPal launched a "check out with cryptocurrency" option in March, allowing users to pay with Bitcoin, Litecoin, Ethereum, and Bitcoin Cash at merchants that accept PayPal Checkout.

The New York-based company Roadway Moving began accepting bitcoin payments in 2017. The initial objective was to raise cryptocurrency awareness. Roadway's founder and president, Ross Sapir, is a crypto enthusiast who began investing in the cryptocurrency in 2017.

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"I am a crypto enthusiast," Sapir explains. "Crypto adheres to my fundamental values."

Sapir was already knowledgeable about cryptocurrency prior to introducing it as a payment method. However, many small business owners will need to educate themselves about cryptocurrency before they can begin accepting payments.

A good starting point is to read a cryptocurrency guide. Additionally, you should consult an accountant to ensure that you understand the tax implications and reporting requirements associated with accepting digital currencies.

"For tax purposes, cryptocurrency is treated as property. As a result, each time cryptocurrency is used, a tax realisation event occurs, potentially imposing administrative burdens on both the sender and the recipient," Sung Choi, vice president of business development at Coinme, a digital currency exchange, explained via email. "To avoid unnecessary complexity, it may be prudent to restrict the use of crypto for payments to higher-value transactions, such as car purchases."

By definition, cryptocurrency is a form of electronic cash. While it is well-suited for e-commerce businesses, Choi notes that it is less well-suited for traditional retail environments.

Take your business model into consideration.

"It's difficult to scale accepting cryptocurrency payments in a brick-and-mortar setting with multiple employees and a large number of point-of-sale (POS) devices," Choi explained.

Accepting cryptocurrency made business sense for Roadway Moving because the company handles international moves and jobs worth five or six figures on occasion.

"It's a straightforward process. It is a quick procedure. This is a safe transaction. Additionally, the fees are negligible," Sapir notes. Bitcoin payments clear in minutes rather than days when they are made internationally, he explains. "I am not concerned with funds being frozen or transactions being rejected."

Consider both sides of the argument.

Several advantages of cryptocurrency over traditional payment methods include the following:

No chargebacks: Payment disputes are a significant source of frustration for small businesses, as they are responsible for both the refund and any chargeback fees incurred when a customer's bank reverses a payment. Chargeback fees can range between $20 and $50 — and in some cases, even more — depending on the payment processor.

Reduced fees: Cryptocurrency transactions typically incur a processing fee of less than 1%. Businesses pay an interchange fee of between 1% and 3% per transaction on credit card transactions, in addition to processing fees and other fees set by the merchant services provider.

Accepting cryptocurrency payments has a number of disadvantages, which include the following:

Cryptocurrencies do not allow chargebacks. Customer transactions are not reversible, and only the retailer can issue refunds.

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Adobe is introducing a Photoshop feature that enables users to create non-fungible tokens (NFTs) from their images. These NFTs will include content credentials that marketplaces like OpenSea can display on their websites for each asset.

Adobe CPO Scott Belsky revealed the so-called "prepare as NFT" option during a Decoder podcast interview with The Verge's Nilay Patel. The tool will enable users to view attribution for the NFT's creator in addition to who minted it, Belsky explained to Patel. Adobe will sign the image cryptographically with the creator's identity using an open-source method, he added.

The new feature is available as a public beta in the Photoshop desktop app today, according to Andy Parsons, director of Adobe's Content Authenticity Initiative.

"At this stage, our goals with NFTs are straightforward: How do we assist creatives in obtaining credit for their work, and how do we assist those who are already creating NFTs in showcasing their work, regardless of where they mint it?" According to Parsons. "This provides invaluable information to collectors and marketplaces about the true creator of a work of art."

Photoshop's new NFT option enables creators to attach their social media and wallet information to an image.

"By including your social media and wallet addresses as part of your content credentials, you can reassure consumers that you are, in fact, the creator of the content," Adobe stated in a press release. "A crypto address is also beneficial if an individual wishes to mint their work as crypto art."

According to OpenSea, it will display this new content credential on its platform. It includes a screenshot of how those content credentials appear in a blog post, as well as a link to the crypto wallet associated with the image creator. If that wallet address matches the one that minted the image, a blue "match" button will appear.

"This is going to be incredible for creators, collectors, and buyers to have an additional layer of transparency," Ryan Foutty, OpenSea's vice president of business development, told The Block in an interview.

Adobe confirmed in a press release that it is also partnering with the marketplaces KnownOrigin, Rarible, and SuperRare to enable prospective buyers to determine whether the creator and minter of the NFT are the same.

"While using Adobe Photoshop, creators can use content credentials to capture edits and identity information, as well as directly attach attribution rights to an image that can be exported as an NFT," OpenSea explained in an email. This data will be used to create metadata for the NFT, the startup stated.

Potential buyers of NFTs can verify these credentials by uploading the image to a dedicated CAI tool, a project originally launched by Adobe, Twitter, and The New York Times. These credentials will also be displayed when viewing NFTs via artists' Behance portfolios, along with links to the marketplace for potential buyers.

Adobe is introducing this feature in response to increased demand for identifying the originator of content displayed via an NFT, given how easy it is to copy any image and mint it on the blockchain.

Belsky explained to Patel that the cryptographic signature "points to an IPFS-powered system that displays the attribution data," and that the tool also uses decentralised storage.

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