Crypto exchange and wallet provider Blockchain.com closed a $110 million Series E, valuing it at less than half of its previous $14 billion. U.K.-based Kingsway Capital led the round with backing from Lakestar, Lightspeed Venture Partners and Coinbase Ventures. Meanwhile, second largest crypto exchange OKX launched off-exchange derivatives trading in an expansion of an existing partnership with asset manager CoinShares and custody joint venture Komainu. A gaggle of hedge funds will be using the system designed to minimize counterparty risk, and there are plans to expand a custom built settlement system to other exchanges.
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U.S.-based fintech CFX Labs closed $9.5 million in seed funding to expand its Solana blockchain-based stablecoin remittances network. Shima Capital, CMT Digital, Kraken Ventures, Illinois-based Metropolitan Capital Bank & Trust and others backed the oversubscribed round. Tokenization firm Superstate, founded by Compound creator Robert Leshner, raised $14 million from CoinFund, Distributed Global and a bevy of supporting VCs. It plans to expand its regulated, on-chain asset-management tools. Kinto, a startup building a compliant layer 2 for Ethereum with native AML/KYC support (using the OP stack), disclosed it raised $5 million this year in multiple early rounds from Kyber Capital Crypto and others.
Tokenomics
DYdX chain’s token, YDX, rallied 20% in the past 24 hours, just 16 days before a planned $500 million token unlock to investors and core team members. The decentralized exchange recently relaunched as a layer 1 using Cosmos. Newcomer Celestia network (a “modular blockchain” like Cosmos) saw its TIA token climb 200% (from $2.10) since launching two weeks ago, despite a slow start in terms of on-chain use. About 1/10th of the total 1 billion tokens circulate, with massive unlocks planned in 2024 and 2026. Finally, Boyaa, a gaming company listed on the Hong Kong Stock Exchange, plans to buy up to $100 million worth BTC, ETH and stablecoins, representing 38% of its total assets, as part of a planned “development in the field of Web3.”
CBDCs Go Global
The National Bank of Kazakhstan kicked off a retail payment-focused CBDC pilot Wednesday, and published findings from earlier central bank digital currency research. The country has been studying CBDCs since 2021. Meanwhile, Bank of America said CBDCs will become increasingly accessible across the globe but said a digital dollar is unlikely in the near term, in a Monday report. Finally, El Salvador, the first country to nationalize bitcoin for payments, unveiled a country-level dollar cost averaging (DCA) plan to buy more BTC. The country’s 2,744 BTC stockpile carries a $60 million loss at current prices.
Confused by crypto taxes? CoinDesk rounds up expert opinion and analysis on new IRS reporting requirements, what you should be paying in taxes, how to avoid paying too much, and what to do if you are unsure, sponsored by TaxBit.
In Europe and the U.S., there are a host of initiatives placing new requirements on participants in digital asset markets to report on transactions and meet other new provisions.
Peter Van Valkenburgh on why the crypto industry has responded with 120,000 comments to the controversial new tax regulations.
The Takeaway: The Terror of Crypto!
(Unsplash)
Does crypto finance Hamas and other terrorists?
In the last few weeks, we’ve heard a lot of back-and-forth on this question without ever really getting a definite conclusion.
It all started with a report in the Wall Street Journal in early October claiming that Palestinian groups had received about $130 million in crypto to finance their war in Israel.
Shortly after, 100-plus U.S. lawmakers, led by Sen. Elizabeth Warren (D-MA), signed a letter to President Biden raising concerns about crypto’s role in financing terrorism. (Warren is leading efforts to pass a digital assets anti-money laundering act.)
After that, blockchain forensics groups, such as Chainalysis and Elliptic, said the numbers reported by the WSJ were likely “overstated.” (The research the WSJ initially cited was provided by Elliptic.) The estimates, Chainalysis wrote, included funds “not explicitly related to terrorism financing.”
Experts like Chainalysis argue that blockchains help reveal illicit funding flows, which is why Hamas actually disavowed crypto fundraising back in April. Its supporters were getting wrapped up precisely because they used public cryptocurrency networks, like Bitcoin, allowing intelligence agencies to track them.
The crypto community, led by commentator Nic Carter, has called for the WSJ to disavow its original report, lest it poison the wider debate about crypto regulation. But the WSJ has refused to do so.
And, in fact, this weekend it showed why the question of crypto financing of terrorism is so complicated.
The new report, based on findings from Israel’s National Bureau for Counter-Terror Financing, shows that Hamas has moved on from using bitcoin, instead preferring the tether stablecoin and the Tron blockchain.
Per the report:
“The use of crypto by the Gaza money exchanges was more sophisticated than Hamas’s earlier fundraising efforts in bitcoin. Digital wallets connected to the companies moved funds overwhelmingly in the form of the stablecoin tether on a blockchain system called Tron, which has heightened user privacy.
To obscure the money trail, the exchanges often changed the wallet addresses they used each day, and sent funds through mixers, Israeli officials said.”
Intelligence chiefs say hawala networks – informal remittance systems – have funneled millions of dollars from Iran to Hamas’s military wing and that the wallets identified and targeted by Israel are probably just a fraction of those in existence. (Mixers combine currency transactions, making them harder to trace.)
All of which shows the adaptability of terrorists to find new ways to cover their tracks. As the WSJ shows, when Hamas found bitcoin was too public, it switched to an asset and chain that offered better secrecy.
“Terrorists are not stupid. They look at the capabilities of blockchain intelligence companies and they start to understand ‘okay, well, they can track us.’ So we need to be clever,” said Nicholas Smart, head of research at Crystal, another blockchain analytics firm.
In the past, terrorists were said to have used privacy coins like monero. But because of the relatively low liquidity of such projects in secondary markets, they are less popular now. Tether, on the other hand, has a market cap of $87 billion.
Smart said there are limits to what online researchers like himself can unearth.
Blockchain analysis might be good at showing the “raise,” “store” and “move” aspects of crypto transactions, but not necessarily how the money was spent. One issue with the original WSJ reporting was it quoted numbers showing the amounts of crypto raised, but not the amount that actually reached terrorists or the front lines. “Crypto solves some problems for terrorists but creates others,” said Smart.
Analytics reveals little about private peer-to-peer transactions, for instance. “It’s a big unknown how [crypto] is being used in covert channels. If there’s a Signal group between members of a terrorist group and un-hosted wallets, we can’t see that. That’s where intelligence services earn their money and understand what’s going on,” Smart said in an interview.
In other words, the inherent transparency of blockchains might help us to discover more about terrorism financing. But it’s a mistake to think it reveals everything and that analytics firms can give us the final word on whether crypto funds groups like Hamas. Smart said we need old-fashioned human intelligence allied with the blockchain type to get at the truth of these complicated funding flows.
When the crypto industry began its rapid rise in 2017, CoinEx founder Haipo Yang found himself with a choice. Although he had designed CoinEx with the value of simplicity in mind, the rapid expansion of the industry has suddenly made it possible to create a product with a level of complexity previously unimagined.
So this was his choice: He could build something for the expert, the crypto junkie who was already deeply immersed. Or, he could stick with his original values and build something for everyone. He could design for simplicity. Continue Reading
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