Kang Jong-Hyun, a South Korean national reportedly linked to Bithumb (although the crypto exchange vehemently denies that he had “control”), has been arrested on charges of fraud, CoinDesk Korea reported on Thursday, amid a separate and ongoing criminal tax probe at the company. South Korean prosecutors had sought Kang’s arrest last week along with two other executives including his younger sister, Kang Ji-Yeon, the CEO of two publicly traded Bithumb affiliates, Inbiogen and Bucket Studio, according to local reports. Meanwhile, hackers siphoned off roughly $5 million worth of allianceBlock (ALBT) tokens on Bonq, a decentralized borrowing protocol, which has paused its Polygon-Ethereum bridge. AllianceBlock and Bonq will mint new ALBT tokens and airdrop tokens to the affected wallet addresses. Finally, Copper, a leading crypto custody provider securing billions of dollars in crypto, disclosed a security issue related to its GitHub took place in December.
Many Cases
U.S. District Court Judge Paul Engelmayer has rejected claims in a proposed class action by customers who say Coinbase sold them unregistered securities and also failed to register as a broker-dealer, according to a filing on Wednesday. The judge found some of the plaintiffs’ claims contradictory, a win for the exchange that faces similar class-action cases in Georgia and New Jersey. Meanwhile, bankrupt cryptocurrency exchange FTX had around $1.4 billion in cash as of the end of 2022, according to an interim financial update on Wednesday. The figure is 19% higher than the $1.2 billion reported in November when FTX filed for bankruptcy protection. Finally, Charlie Munger, Berkshire Hathaway CEO Warren Buffett’s right-hand man, called for a crypto ban in a recently published Wall Street Journal op-ed.
Big Tech
Amazon Web Services (AWS), the biggest cloud infrastructure provider in the world, is hiring for its crypto unit, the “Web3 Go-To-Market (GTM) team,” which is “responsible for growing adoption of Web3 workloads on AWS.” Separately, Damus, an application from Nostr, the decentralized social media project backed by Jack Dorsey, has been listed on the Apple App Store. Cardano’s much-anticipated stablecoin project, Djed, has pulled in over 27 ADA tokens (~$10 million) as backing less than a day after launch. Finally, Ripple, the centralized crypto company currently battling the Securities and Exchange Commission over allegedly fraudulent token sales, sold $226 million worth of XRP tokens in Q4, the firm disclosed. While Ripple and XRP are separate entities, Ripple uses XRP and XRP’s public blockchain to power its various products.
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The Takeaway: Crypto’s Solutions
Former Securities and Exchange Commission (SEC) official John Reed Stark published an inflammatory Twitter thread that set thee crypto policy world ablaze. In it, Stark said the very “design language” of the “crypto-Ponzi” scheme is flawed: crypto, he said, has rarely banked the unbanked, it hardly allows anyone to “be their own bank,” as is often promised. He goes further in saying the entire crypto industry is a malicious effort to capture disaffected groups cut off from financial services and extract fees.
While it is certainly true that crypto has hardly improved financial inclusion, it would be shortsighted to accept the status quo and disregard the potential of building financial infrastructure accessible via the internet. The question is at least worth exploring, given the human prosperity tech has unlocked. Can crypto do the same for financial services as the internet and smartphones did to provide access to information and knowledge. Is it possible to be at once disappointed that crypto has not yet made those hoped-for gains while also remaining open-minded to the possibility it is the only extant potential solution to this civilizational-level problem?
Stark, who is now president of John Reed Stark Consulting LLC, also decries crypto’s promises to “restore freedom and liberty” to oppressed people around the world. In fact, as the past several years have shown, one of the primary use cases for crypto is to move capital out of repressive countries, such as Russia, Venezuela and China. Ukraine’s minister of digital transformation has said crypto is invaluable for the country’s wartime logistical needs. For those reasons alone, we should support the development of crypto services that provide increased autonomy for citizens that cannot rely on stable institutions and fair government in their own countries.
One of Stark’s final points is a familiar one: Crypto gives criminals the best chance to steal from other people and abscond with their ill-gotten gains. This doesn’t accurately reflect the evidence, and one cannot compare the prevalence of illicit financial activity in crypto and in the traditional financial system because it is nearly impossible to even estimate the level of illicit activity in comparatively opaque TradFi. Any amount of fraud, theft or other financial crime in crypto is unacceptable, but overstating the prevalence of illicit activity will not lead to sound policies that promise to combat illicit activity in crypto. Indeed, Treasury Secretary Janet Yellen testified in April 2022, “It’s harder on a large scale for an economy to actually use crypto to evade sanctions.”
Counter to crypto’s mainstream reputation as a comfortable haven for cyber criminals, the U.S. Department of Justice has become quite adept at disrupting this sort of illicit activity because of blockchain’s unique attributes. According to Chainalysis, illicit activity, as a percentage of all crypto transactions, reached an all-time low in 2022. Most importantly, we must never conflate an individual’s desire for privacy with illicit intent. There are countless legitimate reasons to protect one’s privacy apart from a desire to commit a crime without consequence. Indeed, this concept is a foundational element of our social contract and system of governance, and it deserves reassertion now more than ever before.
Without doubt, crypto needs critical town criers. But we shouldn’t wholly write off a technology that has real promise, nor should we pass harsh judgment on users and developers for not yet fulfilling the aspirations of this new technology – aspirations that include solving some of our most intractable, costly and long-standing societal problems.
NFT wash trade accounts for 6.5% of daily sales volume on OpenSea (Protos)
OlympusDAO Votes To Deposit $77M In MakerDAO (The Defiant)
Uniswap Foundation charts path forward amid cross-chain bridge governance debate (The Block)
European Union Bank Again Uses Ethereum to Explore Tokenized Bonds (Blockworks)
Mike Pence’s Nephew Among Binance’s Newest Lobbyists (Blockworks)
72% of institutional traders are crypto-skeptical this year: JPMorgan (Cointelegraph)
The UK finds its way to a tougher line on crypto (Financial Times – op-ed)
Justin Sun says he is moving to Hong Kong, warns community about being ‘too US-centric’ (Crypto Slate)
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