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Tether has produced its latest attestation report, and it shows the stablecoin issuer has cut its reserve’s commercial paper and cash holdings while beefing up its holdings of money market funds and treasury bills. 

Attestations are verifications completed by outside accounting firms to confirm a company’s statements, in this case, Tether’s reserves report of its stablecoins. 

Accounting firm MHA Cayman found Tether’s reserves for its USDT stablecoin “exceeds the amount required to redeem the digital asset tokens issued.” The reporting date encompasses the end of September, when it last released a reserves attestation, to December 31. 

From September 21 to December 31, Tether reduced assets held in commercial paper by about 21%, from $30.5 billion to just over $24 billion. Nearly $13.4 billion will mature between 0 and 90 days – a departure from the previous attestations, which had most of its commercial paper and certificates of deposit maturing between 91 and 365 days. 

Within its commercial paper breakdown, Tether dropped its cash and bank deposits reserve allocation from $7 billion to $4 billion. It rebalanced to allocate more to money market funds, which grew from $1 billion to $3 billion. Treasury bills saw the most growth from the rebalancing, though, jumping from $19.4 billion to $34.5 billion.   

Tether is required to release quarterly attestations detailing its reserve breakdown as part of a settlement with the New York Attorney General. It began assurance reporting in March, making this the third attestation it has completed.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• A glut of crypto sponsorship deals has taken the sports world by storm, as organizations look to new avenues for post-COVID cash generation.
• The rush to get cash through the door has led to some risky business, as well as unusual deal structures. 

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A group of lawmakers in Panama will discuss two crypto-related bills on February 22, The Block has learned. 

Members of Panama’s Commerce and Economic Affairs Commission, part of the country’s National Assembly, will discuss crypto in addition to other matters at the 2:00 p.m. meeting.

The committee members are expected to discuss whether two bills in question, 696 and 697, should be combined and move forward to the wider National Assembly for discussion. The assembly said in October that a subcommittee would be formed to examine unifying the bills. 

The two bills from different representatives both address crypto, but are different in nature. The 696 bill, introduced by Cenobia Vargas in August, would regulate cryptocurrencies, tokens, NFTs and blockchain technology used in Panama. That bill recommended regulating five crypto assets: Bitcoin, Ethereum, Tether, a cryptocurrency called Elrond and a controversial token called Token 7UT.

The second, 697, is a wide-ranging crypto law introduced by independent congressman Gabriel Silva that specifically mentions Bitcoin and Ethereum as types of crypto assets. It focuses on bringing the country up to speed with the digital economy, crypto assets and the internet.

While this meeting could be a significant milestone for shaping the country’s crypto legislation, any bill would still have to go through several more steps before it could become law in Panama. 

During this meeting, each of the lawmakers is expected to defend their respective bills and answer questions from fellow committee members. Then, the committee would likely discuss whether to combine both of the proposed laws or pick one to move forward for debate in the entire National Assembly. 

If the committee unanimously agrees to move a crypto bill forward, it would go to the National Assembly for a second discussion. There, a majority of members would have to approve whether the bill moves forward for a vote.

If a majority of the members give the bill a “yes” vote, it would then finally go to Panama’s president to endorse or veto.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The UK’s financial regulator issued a warning shot on crypto mergers on Tuesday afternoon, following an acquisition announcement by Austrian exchange Bitpanda. 

Bitpanda, which is regulated in the EU, said it would buy DeFi custodian Trustology, which is Financial Conduct Authority (FCA) regulated through the Money Laundering Regulations (MLR) register. 

The acquisition is the first of its kind in the UK market and is seen by Bitpanda as a first step towards transforming its Bitpanda Pro platform into a fully-fledged prime brokerage business. 

Shortly after the announcement, the FCA issued a release highlighting that existing regulations for crypto firms do not include provisions, which allow the watchdog to assess how well new owners meet its requirements if a regulated firm is bought out. 

Other regimes give the FCA the powers to supervise, authorize or enforce against firms operating in the UK.

“The FCA can take steps to suspend or cancel the registration of a cryptoasset business if it is not satisfied the firm or its beneficial owner is fit and proper,” it said. 

It added that it has powers to suspend or cancel a firm’s cryptoasset registration on a number of grounds, including where a firm has not complied with obligations under MLRs.

A spokesperson for Bitpanda said that it and Trustology are “confident that no issues with the acquisition will arise.”

“We have a very good working relationship with the FCA who was informed of that transaction well in advance and the FCA statement was in accordance with Bitpanda’s expectations,” they said, adding:

“Given that this transaction was the first ever acquisition of an FCA registered cryptoasset firm ever, it appears that the FCA wants to highlight this specific difference in its ability to assess the suitability of new beneficial owners of FCA registered cryptoasset firms only after a transaction took place as opposed to, for example, FSMA-authorised firms such as Investment firms which can be assessed prior to such transactions.”

The release comes amid prolonged wrangling between crypto firms operating in the UK and regulators, as the deadline to be included on the FCA’s cryptoassets register by the 31st March looms ever nearer. 

Earlier in February, there were still 96 applicants awaiting decisions on their applications. 

Bitpanda has previously explained that it had applied to be on the temporary register in May 2021, but it had missed the deadline. It is now in the process of being admitted to the full register. 

The Block contacted the FCA for further clarification on its statement but had not heard back by the time of publication. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Luna Foundation Guard (LFG) has raised $1 billion through an over-the-counter sale of LUNA, the native token of the Terra blockchain.

The raise, one of the largest in the history of the crypto sector, was led by Jump Crypto and Three Arrows Capital, with Republic Capital, GSR, Tribe Capital, DeFiance Capital, and other unnamed investors participating.

The playfully named LFG — a non-profit organization based in Singapore — was set up in January to help grow the Terra ecosystem.

Proceeds from the $1 billion sale will go towards establishing a bitcoin-denominated forex reserve for UST, Terra’s biggest stablecoin.

UST is a so-called algorithmic stablecoin that has become popular within DeFi ecosystems. Pegged to the price of the US dollar, it currently boasts a market capitalization of more than $12 billion, a number that has more than tripled since November last year, according to The Block Research.

LFG said that the reserve created through the $1 billion capital injection will effectively act as a “release valve” for UST redemptions; it is designed to ensure that the price of the stablecoin remains pegged to that of the dollar during sharp selloffs in crypto markets.

How the reserve works

Unlike longer-established stablecoins, such as those issued by Tether and Circle, algorithmic alternatives do not use collateral to maintain their price.

Instead, stablecoins like UST keep their peg by relying on market incentives.

Here’s an explanation of how the mechanism works, from Terra’s website: “When the demand for Terra is high and the supply is limited, the price of Terra increases. When the demand for Terra is low and the supply is too large, the price of Terra decreases. The protocol ensures the supply and demand of Terra is always balanced, leading to a stable price.”

Users can mint new Terra-based stablecoins — of which UST is the largest — by burning LUNA tokens, and similarly, they can burn UST to mint LUNA. They are incentivized by the protocol to burn and mint in a way that ensures $1 worth of LUNA can always be traded for 1 UST, and vice versa.

The reserve has been introduced, however, to step in if selloffs in crypto markets erode those incentives.  

“The reserve assets can be utilized in instances where protracted market selloffs deter buyers from restoring the UST peg’s parity and deteriorate the Terra protocol’s open market arbitrage incentives,” said LFG. 

The reserve will initially be denominated in bitcoin, which LFG believes is less correlated to the Terra ecosystem. There are plans to stock the reserve with other non-correlated assets over time, although it is not yet clear which assets will be used.

The basic premise is that this will ensure Terra’s arbitrage incentives remain intact, even if demand for UST falls sharply. 

Kanav Kariya, president of Jump Crypto, said that the reserve mechanism “is similar to how many central banks hold reserves of foreign currencies to back monetary liabilities and protect against dynamic market conditions.”

The LUNA purchased by Jump and other investors in the $1 billion sale will be locked up over a four-year vesting period, according to LFG’s announcement.

Terraforming DeFi

Singapore-based Terraform Labs, founded by Do Kwon and Daniel Shin in 2018, is the driving force behind the Terra blockchain.

The startup is backed by Pantera Capital, Coinbase Ventures, Galaxy Digital, Binance Labs, Dunamu, Huobi Capital and OKEx. It last raised capital in a $25m Series A round in January 2021.

In the US, Terraform is currently locked in a legal battle with the Securities and Exchange Commission (SEC). The regulator is investigating whether Terra’s Mirror Protocol — a platform for trading ‘mirrored assets’ linked to the price of stocks — broke United States’ securities laws.

Terraform has countered that the watchdog improperly served Kwon subpoenas at a conference in September 2021, arguing the watchdog lacked the proper jurisdiction to serve the Singapore-based company.

On February 18, a judge in the Southern District of New York granted an application from the SEC for an order requiring Terraform to comply with the subpoenas.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• Celestia is a data availability layer that aims to solve one of the fundamental constraints of blockchain scaling — data availability
• By abstracting consensus from state execution, Celestia promises a more performant network than blockchains that lump the two together
• Celestia utilizes erasure codes to create data availability proofs that guarantee, with high probability, that all that data was posted on-chain
• Celestia nodes can scale better because they are no longer required to store and verify every transaction in the block
• Aside from improving scalability, Celestia also provides application interoperability

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OpenSea, the popular NFT marketplace, has been hit with a $1 million lawsuit brought by a disgruntled user who lost a Bored Ape NFT this month.

A collector named Timothy McKimmy is suing OpenSea in Texas for security vulnerabilities on its platform that caused his prized NFT to be sold far below fair value, according to a case filed last Friday. McKimmy’s complaint is based on a listing bug that saw his Bored Ape #3475 NFT, which he bought for 55 ETH ($137,000), sold for 0.01 ETH ($26) earlier this month.

At the time of the sale, the Bored Ape Yacht Club floor price was 100 ETH ($305,000), according to data from CoinGecko. The attacker even “flipped” the NFT in question for 98.9 ETH moments later.

As part of the suit, McKimmy says OpenSea failed to address the security issues, putting users’ NFTs at risk. The plaintiff is one of several users that reported falling for the listing bug mishap.

The Listing Bug

The listing bug happened when users moved their NFTs from their wallets linked to OpenSea to a different address without canceling the previous listing. Users likely elected not to cancel the listing because the step required paying a transaction fee.

Once moved to a new wallet, users likely set a new selling price which did not cancel the listing price on the OpenSea-linked wallet. The problem arose when users moved NFTs back to their OpenSea-linked wallets, activating the previous, lower listing price. Rogue actors were then able to snipe premium NFTs for a bargain price.

McKimmy’s suit demands the return of his Bored Ape as well as damages to the tune of $1 million, arguing that Bored Apes with rarity scores lower than his have sold for 500 ETH ($1.3 million).

OpenSea has three weeks to respond to the suit. Meanwhile, the company is also dealing with the fallout from a phishing attack that saw NFTs worth millions stolen from users last week.

Case number 4:22-cv-00545 was filed before the Southern District of Texas (Houston Division).

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The International Monetary Fund (IMF) warned that Nigeria’s eNaira could pose money laundering risks, despite previously stating that the central bank digital currency (CBDC) was safer than bitcoin and other cryptocurrencies. 

According to an IMF consultation published this month, using the eNaira for cross-border payments carries the risk of laundering money and financing terrorism. As such, the IMF encouraged Nigeria’s central bank to conduct broad-based risk assessments alongside its current anti-money laundering and combating the financing of terrorism protocols.

Nigeria’s CBDC uses a tiered customer identification model with strict daily transaction limits for each tranche. Customers in the lowest tier, which covers the unbanked population, can only spend the equivalent of $120 per day. The upper tiers have daily limits between $487 and $2,438.

Apart from money laundering risks, the IMF’s report also highlighted cybersecurity concerns associated with Nigeria’s CBDC.

The Central Bank of Nigeria (CBN) introduced the eNaira in October 2021 after banning banks from servicing crypto exchanges earlier in the year. In the first month, the CBN claimed almost 500,000 customers had downloaded the digital currency wallet with close to 80,000 merchant subscribers in tow.

Adoption has slowed significantly since the initial launch with only 188 million naira ($450,000) in total transactions during the first three months. In comparison, China’s e-yuan CBDC was doing upwards of $315,000 in daily transactions during this year’s Winter Olympics, according to Reuters.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

New research by journalist Laura Shin and blockchain analytics firm Chainalysis claims to identify who was behind the theft of $60 million in ether (ETH) from The DAO in 2016, pointing the finger at former TenX CEO Toby Hoenisch.

Hoenisch denies the claims, telling Forbes that “your statement and conclusion is factually inaccurate.” Hoenisch didn’t immediately respond to an email from The Block seeking comment or a message to his LinkedIn account.

The DAO was one of Ethereum’s first attempts at an on-chain funding platform where token holders would vote on funding to be handed out to projects. Yet on June 17, 2016, a hacker found a bug that led them drain it of its funds. A team of white hat hackers mobilized and managed to freeze the funds for a short period of time — during which the Ethereum blockchain was forked to fix the issue, creating Ethereum Classic (the original chain) and what we now know as Ethereum.

Shin points to transaction data to back up her claims. According to research from Chainalysis, the hacker of The DAO sent 50 BTC to a Wasabi Wallet and mixed it to try to hide the transaction history. The analytics firm claims it managed to follow the funds and they were sent to four exchanges. An employee at one of the exchanges told Shin that the funds were swapped for privacy coin Grin and sent to a Grin node called grin.toby.ai. That node’s IP address also hosted Bitcoin Lightning nodes: ln.toby.ai and lnd.ln.toby.ai. Plus a node at that IP address was called TenX.

Hoenisch used the handle @tobyai on many social media platforms, including Twitter, and one of his email addresses ended in @toby.ai, per Shin. She also claims that Hoenisch was also familiar with The DAO’s code and weaknesses with the code, having communicated with its creator slock.it over such issues.

Beyond this, Hoenisch was also fluent in English, matching a support email sent by The DAO’s hacker to ShapeShift ahead of the hack.

For more breaking stories like this, make sure to follow The Block on Twitter.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The London Stock Exchange Group (LSEG) announced on Tuesday it has struck a deal to acquire trading tech solutions provider TORA for $325 million. 

The deal includes TORA’s tech for order and execution management systems and portfolio management systems for customers trading equities, as well as infrastructure for fixed income, currencies, derivatives and digital assets. 

In a release, the exchange said the deal strengthens its presence in a “rapidly expanding asset class, at a time when institutional market participants are increasing exposure to crypto and other digital assets.”

Following completion, which is expected in the second half of the year, TORA will be part of LSEG’s data and analytics division.

Andrea Remyn Stone, group head of data and analytics at LSEG, said the deal will give customers a “global, multi-asset class financial infrastructure that operates across the capital markets and investment lifecycle as an open ecosystem.”

The push by LSEG comes as traditional financial institutions are at pains to show they can offer customers exposure to the growing digital asset ecosystem. In January this year, TP ICAP, the world’s biggest interdealer broker, launched crypto ETPs, a way for firms to gain exposure to crypto assets without directly touching them.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.