The U.S. Securities and Exchange Commission (SEC) reportedly asked Coinbase to delist all cryptocurrencies other than bitcoin prior to suing the crypto exchange in June, Coinbase CEO Brian Armstrong told the Financial Times (paywalled). The SEC, also quoted in the FT, denied the accusation saying it never made a “formal” request for crypto exchanges to halt trading of non-BTC cryptos – a point a Coinbase representative reiterated in an email to CoinDesk. “[T]he Financial Times omitted critical context regarding our conversations with the SEC,” they said. Separately, meme coin trader @cheatcoiner reportedly cornered the market on a new, over-hyped joke token called BALD on Coinbase’s L2 network Base, netting $1.4 million from an initial $500 investment. Don’t get your hopes up that something like this could happen to you – after climbing to a ~$80 million market cap, BALD insiders reportedly “rugged” the project.
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Richard Heart (born Richard Schueler), is being sued by the U.S. SEC for alleged violations related to his work on the popular – though incredibly sketchy – crypto projects HEX, PulseChain and PulseX. Heart is said to have raised over $1 billion across three different unregistered securities offerings beginning in 2019 and defrauding investors. PulseX and PulseChain, essentially forks of Ethereum and decentralized exchange Uniswap, launched earlier this month with high fees, liquidity issues and exploitable bugs. HEX, PLS and PLSX tokens fell post-launch. HEX uses a punishing burn mechanism that incentivized investors to leave their money in the project, which Heart reportedly treated as a personal piggy bank.
Open or Closed
Crypto companies in Hong Kong are having a difficult time getting bank accounts despite the local government’s push for the territory to become a crypto hub, according to a Hong Kong Economic Journal report, which quotes a director at HSBC-owned Hang Seng Bank. And when licensed crypto companies do open bank accounts, they are reportedly limited to stripped down services. Hong Kong’s central bank previously urged financial giants HSBC, Standard Chartered and Bank of China to accept crypto clients. Meanwhile, Nigeria’s Securities and Exchange Commission has ordered all crypto platform providers to stop soliciting citizens (reportedly calling out Binance in particular). This comes as Binance won an operational license in Dubai, taking another step towards becoming fully regulated in the desert city-state.
The Takeaway: DeFi Dangers
(Jacquline Brandwayn/Unsplash)
Decentralized finance (DeFi) is reeling from a recent spate of attacks on several key platforms on Sunday.
Some $70 million was stolen in total this weekend, including from Curve Finance, one of the most-used and influential decentralized exchanges, MetaMask developer Taylor Monahan estimated. Lending protocol Alchemix, yield platform Pendle and synthetic asset tool Metronome were all also hit, along with the decentralized NFT protocol JPEG.
In response, DeFi lenders began pulling funds out of other DeFi platforms including Aave, spiking borrowing fees across the specialized financial subsector, The Defiant reported.
Things undoubtedly could have been worse. In a something of a twist, white-hat hackers were able to remove assets from a few lending pools on Curve to prevent their theft. Moreover, three out of the five total malicious attacks were apparently “front run” by MEV (maximal extractable value) experts. MEV is a controversial, but unstoppable aspect of how public blockchains work, which allows third-parties and automated machines to search out and reorder unfinalized transactions waiting in the mempool for profit.
Coffeebabe.eth is responsible for reversing at least two of the malicious attacks by frontrunning the transactions, which may have been committed by multiple unconnected hackers. Chainlink, the on-chain data provider (aka “oracle” system), is also receiving some praise for preventing sector-wide collateral damage in the attack – but seemingly in a roundabout way. Had platforms like Aave or other DeFi lending protocols used the (now drained) CRV/ETH Curve pool as an on-chain oracle, they would have gotten completely rekt with bad debt,” LINK Marine ChainlinkGod tweeted. True enough, but maybe a tautology.
The nature of the attacks is apparently rooted in vulnerabilities found in a programming language called Vyper used specifically to launch smart contracts on Ethereum. The programming language’s core team – which was backed by the Curve team – announced that older versions of Vyper were vulnerable to “reentrancy” attacks. It could take days, weeks or months to truly understand what went wrong, though Vyper reps have said projects that use versions 0.2.15, 0.2.16 and 0.3.0 should reach out.
Hacks in the world of crypto are not exactly like hacks elsewhere. It’s increasingly common for attackers to return stolen funds, which are, by nature, always traceable on the blockchain, which can make it incredibly difficult for people to spend the tainted money or cash out anywhere without the entire world knowing about it. You’d think this would mean that attacks would be less common in crypto – but that is apparently not the case. Just today, security audit firm CertiK claimed that crypto users have lost at least $303 million from exploits in July 2023 alone.
While the technical aspects of the attacks are still being worked out, and the total fallout isn’t yet known, there may be at least one clear takeaway. In the days following the announcement of UniswapX, a new product from the team behind the most popular decentralized exchange Uniswap, which would essentially use off-chain mechanics to execute trades thereby saving Uniswap users in transaction fee costs, there has been talk about the future of DEXes. Apparently the world is moving in this direction: Cowswap and 0x and a bevy of protocols including now UniswapX are all using “best execution” models that take some aspects of crypto-trading off-chain.
To some extent, this brave new world of crypto trading makes sense. In any market where competitors have to innovate to attract users, costs will always trend to zero. Crypto traders have also demonstrated that’d they would often be willing to trade in some of the assurances of fully on-chain crypto for better prices, faster transactions or just a leg-up – and that is exactly what happens when you take some of the order book process behind the veil of a proprietary trading algorithm supposedly working in your favor. The fellows on “The Chopping Block” discussed all this in their most recent podcast.
But, in light of this recent black eye for DeFi, considering that even on-chain trade execution can apparently go so wrong, doesn’t it seem like an outsized risk to take out the only benefit that blockchain brings to commerce: immutability and transparency? I don’t know what the future of blockchain holds, but I’m increasingly told that it will not look like the familiar world of AMMs (automated market makers), but something more programmatic and automated. Maybe that will come to pass, but you’d think people would want to work out the kinks of crypto first.
As Web3 continues to evolve, venture capital (VC) will play an increasingly important role in supporting innovation and driving growth. VC provides a powerful boost for early-stage projects, which benefit not only from the funds needed to build and launch, but also from the advice of experienced entrepreneurs and investors in the space who can help navigate the complex landscape.
But not all VC firms are equal. Some invest in early-stage companies, while others invest in later-stage ones. Some have a specific investment thesis, while others are more opportunistic. That’s why it’s important to find a VC firm that aligns with your goals.
MEXC Ventures, the investment arm of the leading global crypto exchange and trading platform MEXC, checks all boxes.
It is now more important than ever to set industry standards and align on practical short-term and long-term objectives through pointed conversations with the best legal minds and Washington D.C.’s most important decision makers.
Join us at State of Crypto: Policy and Regulation on October 24 in Washington D.C. for an unprecedented opportunity to evaluate, dissect and ultimately shape crypto regulatory frameworks that support a vibrant, secure and healthy future for the digital economy.
