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Galaxy Bahamas, a subsidiary of Mike Novogratz’s crypto investment firm, received approval from the Securities Commission of The Bahamas in December for registration as a digital asset business under its Digital Assets and Registered Exchanges Act of 2020. 

Galaxy Bahamas Ltd. will physically operate out of the Bahamas and intends to initially serve as an extension of the company’s trading, custody and money services operation businesses. It will also offer market making and staking services, the latter of which has recently seen increased scrutiny in the U.S.

“In light of the FTX dispute, customers, counterparties and regulators may view operations within the Bahamanian cryptoeconomy as more risky than operations in other jurisdictions,” the firm said in a February filing.

Galaxy Digital didn’t immediately respond to a request for comment.

The move comes amid increased scrutiny of crypto firms, including recent news that the New York Department of Financial Services ordered Paxos to stop issuing Binance USD. Last week, crypto exchange Kraken agreed to settle charges brought by the Securities and Exchange Commission for failing to register its staking program.

© 2023 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 Polkadot community is looking into conducting a research study centered around “token morphism,” a term used to describe the process that was used to transform the protocol’s native dot token from a security into software.

Polkadot announced that it achieved token morphism in November 2022, a process it said was the direct result of three years of dialogue with the U.S. Securities and Exchange Commission. Now, the project is considering funding a study that will explore how it managed the feat, according to a post on its governance forum.

The proposed purple paper will offer guidelines on token morphism for Polkadot and the wider crypto ecosystem, the proposal stated. It comes amid increasing regulatory scrutiny from the SEC and other regulators, including enforcement actions against stablecoin issuer Paxos and crypto exchange Kraken this month that have spurred fears of sweeping enforcement actions targeted at the broader crypto space in the U.S.

The proposal requested 14,776.74 dot tokens ($90,000) to sponsor the research. This funding will cover the work done by team members and ad hoc subject matter experts that include several of the people who were part of Polkadot’s dialogue with the SEC. The proposal asked for the funds to be delivered in two installments of 7,388.37 dot each.

While Polkadot has previously claimed success in its interactions with the SEC, the regulator has not publicly confirmed any such regulatory approval. The Web3 Foundation, which funds the development of the Polkadot ecosystem, did not immediately respond to a request for comment from The Block.

© 2023 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.

Cryptocurrency prices were once again driven lower by regulatory developments, with Paxos and the New York Department of Financial Services going toe to toe and Binance suffering the consequences. 

Bitcoin was down 1.1% over the past day, trading around $21,600 by 9 a.m. EST, according to TradingView data. The leading crypto by market cap fell on the news that Paxos was ordered to stop issuing the BUSD stablecoin. It briefly fell below $21,500 before recovering, although it has yet to climb back above $21,750. 

BTCUSD chart by TradingView

Paxos announced it would stop issuing new BUSD stablecoins effective Feb. 21 on orders from the New York Department of Financial Services, a Binance spokesperson told The Block. The New York regulator said the order had arisen “as a result of several unresolved issues related to Paxos’ oversight of its relationship with Binance.”

“It is important to note that the Department only approved the Paxos-issued BUSD on the Ethereum blockchain,” the regulator said in a statement. “The Department has not authorized Binance-Peg BUSD on any blockchain, and Binance-Peg BUSD is not issued by Paxos.”

Ether sold off sharply following the news, falling around 3.2%. Ripple’s XRP slipped 3.8% in the past day, Cardano’s ADA sank 4.1%, and Polygon’s MATIC plunged 8.7%. Binance’s BNB fell below $300, down 6%.

BNBUSD chart by TradingView

Paxos tokens avoided major sell-offs, while pax gold was trading around $1,822, down 0.2% over the past 24 hours. The pax dollar was at parity with the U.S., although it briefly traded below parity. 

“There is currently no restriction on the listing or exchange in New York of existing Paxos-issued BUSD by DFS-licensed entities,” New York’s DFS added in the statement. “The Department is monitoring Paxos closely to verify that the company can facilitate redemptions in an orderly fashion subject to enhanced, risk-based, compliance protocols.”

© 2023 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.

Bakkt is nixing its consumer app to focus on its business-to-business technology solutions.

Bakkt, which offers a platform for commerce to link to cryptocurrency, said it will continue its core focus of providing businesses with crypto and loyalty experiences for their customers through SaaS and API solutions on a secure and compliant platform.

“The discontinuation of the app ensures we are supporting the relationship our partners and clients have with their customers,” said CEO Gavin Michael. “We are focusing our investment on our core solutions that have product-market fit and are positioned to scale quickly.”

The move comes as cryptocurrency prices have slumped from their 2021 high and regulators crack down on crypto companies. 

The app will officially sunset on March 16.  

Last year, Bakkt agreed to buy Apex Crypto, a platform for integrated crypto trading. Apex provides services to more than 30 signed fintech partners, serving more than five million customers. 

© 2023 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.

Domain name registrar Namecheap’s email account was breached, resulting in a widespread phishing campaign aimed at stealing crypto from potentially thousands of its users.

The attack was traced back to SendGrid, the email platform used by Namecheap. Hackers utilized it to execute their phishing scheme. That account is now back under control.

“We have evidence that the upstream system we use for sending emails is involved in the mailing of unsolicited emails to our clients. It was stopped immediately,” Namecheap said.

After compromising Namecheap’s SendGrid, the perpetrator sent fake emails on behalf of Namecheap to its users purporting to be from delivery firm DHL or crypto wallet MetaMask. The phishing email claiming to be from DHL appeared as a delivery fee invoice, while the MetaMask phishing email stated that KYC verification was necessary to avoid suspension of users’ wallets.

If someone clicked the link in the email, they would be directed to a bogus page requesting their private key or secret recovery phrase, which the attackers could then use to steal the funds from their wallet.

In response to the attack, MetaMask released a statement warning its users to be wary of unsolicited emails claiming to be from the team. “If you got an email today from MetaMask or Namecheap or anyone else like this, ignore it & do not click its links!” the project noted.

Phishing is a type of cyber attack that aims to steal sensitive information such as credit card credentials or, in MetaMask’s case, the seed phrase of crypto wallets. A phishing campaign is a coordinated effort by attackers to carry out multiple phishing attacks simultaneously, usually through the use of emails or fake websites. The emails or websites are designed to look legitimate and trick victims into entering their sensitive information. The information is then used for fraudulent activities, such as identity theft or unauthorized access to financial accounts.

© 2023 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.

Episode 9 of Season 5 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Punk6529.

Listen below, and subscribe to The Scoop on Apple, Spotify, Google Podcasts, Stitcher, or wherever you listen to podcasts. Feedback and revision requests can be sent to podcast@theblockcrypto.com.

Just as the internet revolutionized the taxi industry through the advent of apps like Uber and Lyft, it is only a matter of time before money gets brought into the digital age, according to the pseudo-anonymous crypto personality Punk6529.

“Eventually cash is also going to end up being a centralized database,” said Punk6529, and “the person who has the master password to the database can decide what rights you have in society.”

In this episode, Punk64529 lays out two possible futures for our society: one in which a handful of centralized corporations control the details of our daily lives, and one in which decentralized communities come to a consensus on the best path forward.

This episode is brought to you by our sponsors Circle, Railgun, Flare Network, NordVPN

About Circle
Circle is a global financial technology company helping money move at internet speed. Our mission is to raise global economic prosperity through the frictionless exchange of value. Visit Circle.com to learn more.

About Railgun
RAILGUN is a private DeFi solution on Ethereum, BSC, Arbitrum, and Polygon. Shield any ERC-20 token and any NFT into a Private Balance and let RAILGUN’s Zero-Knowledge cryptography encrypt your address, balance, and transaction history. You can also bring privacy to your project with RAILGUN SDK and be sure to check out RAILGUN with partner project Railway Wallet, also available on iOS and Android. Visit Railgun.org to find out more.

About Flare
Flare is an EVM-based Layer 1 blockchain designed to allow developers to build applications that can use data from other blockchains and the internet. By providing decentralized access to a wide variety of high-integrity data from other blockchains and the internet, Flare enables new use cases and monetization models. Build better and connect everything at Flare.Network

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© 2023 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.

Binance will continue to support Binance USD, although the exchange is ready to adjust and potentially move away from using the stablecoin as its main pair for trading.

The comments from Binance CEO Changpeng Zhao come as Paxos, the stablecoin issuer behind BUSD, has been ordered to stop issuing the stablecoin by the New York Department of Financial Services. Zhao — better known by his initials, CZ — said Binance will continue to support BUSD for the “foreseeable future.”

“We do foresee users migrating to other stablecoins over time. And we will make product adjustments accordingly. eg, move away from using BUSD as the main pair for trading, etc.,” he added. When asked why the exchange wouldn’t consider another issuer, Zhao said, “we are exploring others and non-USD-based stablecoins.”

The BUSD stablecoin is wholly owned and managed by Paxos. As a result of the NYDFS enforcement action, its market cap will only decrease over time, a Binance spokesperson told The Block.” Paxos will continue to service the product, manage redemptions and will follow up with additional information as required.”

BUSD accounts for over 37% of spot trading volume on Binance. The share went over 39% in December.

The stablecoin rose in prominence over the past few months as Binance pushed to promote its use on the exchange. Binance offers no-fee trading on BUSD trading pairs, incentivizing traders to trade with it. This was amplified by Binance’s decision to convert its users’ stablecoin holdings from USDC, USDP, and TUSD into BUSD.

© 2023 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.

Rainbow Bridge, a cross-chain bridge integrated with the Aurora blockchain, has been fully restored after a temporary suspension likely due to security concerns.

On Feb. 11, Aurora suspended the bridge as a “precautionary measure.” Now, Alex Shevchenko, CEO of Aurora, told users the bridge has reopened, and no funds were lost during the temporary suspension.

“The Rainbow Bridge operations [have] been fully restored. One can execute new transfers as well as finalize the ones that [had] been started before the pause,” he noted.

The Rainbow Bridge, managed by the Aurora core team, allows users to transfer tokens between Ethereum, Aurora and Near blockchains. It holds a total value of crypto assets worth more than $250 million.

With the restoration of the bridge, users can now resume their token transfers and complete any transfers that were initiated before the suspension. The Aurora team is also conducting a comprehensive review to ensure the stability and security of the Rainbow Bridge.

“In-depth review of the issue to follow,” Shevchenko added.

Cross-chain security woes

Cross-chain bridges can be vulnerable to hacks, as they act as intermediaries between different blockchain networks, which can introduce security risks from the interoperability of different systems. In this case, no vulnerability was reported, and the Aurora team’s decision to suspend the bridge was only a precautionary measure.

According to Shevchenko, a detailed report on the matter will be published soon.

Aurora is a blockchain that is compatible with Ethereum and runs on the Near Protocol. It is known for its compatibility with the Ethereum Virtual Machine (EVM) and operates as a separate blockchain layer within the Near ecosystem.

This is not the first time the Aurora team has averted a security issue with the project. In April 2022, the Aurora team awarded a $6 million bounty to ethical hackers who discovered a critical vulnerability on the network. 

© 2023 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.

Pseudonymous crypto legend Punk6529 is famously represented on Twitter by a CryptoPunk NFT and has a collection that has generated about $24 million in trading.

But that doesn’t mean he thinks investing in non-fungible tokens is a good idea.

“The overwhelming majority of NFTs … will not manage to maintain financial value,” Punk6529 said during a recent appearance on The Scoop podcast with Frank Chaparro. “Someday we might discover that like 90% of today’s collections are dead and illiquid and nobody wants them.”

Punk6529’s comments coincide with an NFT market that is struggling to rebound after a bull run came to a screeching halt and trading volumes tanked by more than 90%. What blue-chip collections have managed to maintain value — Bored Ape Yacht Club, Doodles and Azuki to name a few — are in the process of expanding their reach by pursuing other interests like video games, merchandising and content creation.

Although skeptical of the NFT market from an investment perspective, Punk6529 said that they definitely can serve a purpose.

‘Consumer application’

“NFTs are crypto’s first true consumer application,” Punk6529 said. He first started buying NFTs in 2017 and then later purchased “a completely irresponsible number” of them around 2020. He takes his name from the CryptoPunk NFT that doubles as his profile picture on Twitter.

But acquiring NFTs for investment purposes is now largely a “misguided” notion, he said. They are instead, primarily, “cultural objects” and people should spend only part of their disposable income on the digital assets.

“The volatility of NFTs is breathtaking,” Punk6529 said. “You should buy them for the same reasons you buy almost any other consumer product in your life.”

Punk6529 also has his own NFT collection called The Memes. The collection’s floor price is about $300 and in total has generated more than $24 million in trading volume.

© 2023 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 New York Department of Financial Services (NYDFS) ordered crypto infrastructure firm Paxos to stop issuing the stablecoin Binance USD (BUSD), a Binance spokesperson told The Block.

“Paxos has informed us that they have been directed to cease minting new BUSD by the New York Department of Financial Services (NYDFS),” they said. “BUSD is a stablecoin wholly owned and managed by Paxos. As a result, BUSD market cap will only decrease over time. Paxos will continue to service the product, manage redemptions, and will follow-up with additional information as required.”

The Wall Street Journal first reported the news. The move comes after CoinDesk reported on Friday that the NYDFS is investigating Paxos. Paxos did not immediately respond to The Block’s request for comment.

The U.S. Securities and Exchange Commission is also reportedly planning to sue Paxos over BUSD, alleging that the stablecoin is an unregistered security, the WSJ reported on Sunday. The SEC sent Paxos a letter informing it of “a possible enforcement action,” per the report, citing anonymous sources. The suit is reportedly for “violating investor protection laws.”

BUSD is a stablecoin pegged to the U.S. dollar. It was launched in 2019 by Binance and Paxos. BUSD is the third largest stablecoin in the market with a total supply of over $16 billion.

Binance’s spokesperson said “Paxos also assured the funds are safe, and fully covered by reserves in their banks.”

“Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from further undue harm,” they added.

Larry Cermak, VP of Research at The Block, said, “BUSD is quite important for Binance in terms of revenue as well. Based on my estimation, Binance currently generated roughly $300 million a year from the revenue share alone. And that revenue is great and stable in bear markets.”

© 2023 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.