Snapshot Web3

October 9, 2023

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Regulatory and Legal News

Taiwan aims for crypto law by November

Taiwanese lawmakers are working on a special law for offshore cryptocurrency exchanges. They aim to present the first draft for parliamentary review by the end of November 2023. The move is prompted by concerns about offshore market activities and the desire to prevent regulatory arbitrage. Officials argue that crypto assets require unique legislation separate from traditional financial products. In late September, Taiwan's Financial Supervisory Commission released guidelines to enhance investor protections in the cryptocurrency sector, covering areas like asset separation and regulations for foreign virtual asset service providers. Major cryptocurrency exchanges in Taiwan have also formed an association to represent industry interests.

European regulator publishes second consultation on MiCA

The European Securities and Markets Authority (ESMA) has released a second consultation paper on Markets in Crypto-Assets (MiCA) regulations. It covers sustainability metrics, inside information disclosures, technical requirements for white papers, trade transparency, and record-keeping for crypto-asset service providers. ESMA aims to finalize the report and submit draft technical standards to the European Commission by June 2024, following a third consultation package in Q1 2024. The previous paper, issued in July, proposed additional information requirements for registered crypto companies under MiCA.

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Innovation and Launches

Bank of Korea teams up with BIS, local institutions for wholesale CBDC experiment

The Bank of Korea (BoK) is collaborating with the Bank for International Settlements (BIS) and local institutions for a wholesale Central Bank Digital Currency (CBDC) experiment. The project aims to explore the potential of using wholesale CBDC for interbank exchanges and examine its suitability as commercial bank tokenized deposits. Additionally, the BoK will partner with the Financial Services Commission (FSC) to develop a wholesale CBDC. The wholesale CBDC system could potentially reduce settlement times and costs between financial institutions, and may also be deployed for cross-border payments. The BIS is expected to lead efforts in this regard.

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NFT, Gaming and Metaverse

First Look: Art gallery in Dubai to educate artists on NFTs, Web3

The 37xDubai art gallery, set to open in October, will offer workshops to educate artists and enthusiasts about NFTs and the Web3 ecosystem. Founder Danilo Carlucci sees it as a bridge between art and technology and a diversification move for Morningstar Ventures. The gallery will not only display NFTs but also use them as membership tokens, inspired by its Tree of Life art installation. It will host events and workshops on Web3 technology with support from advisers at Binance NFT and Binance Charity. Carlucci stresses that the gallery's NFTs prioritize artistic creativity rather than mere technology.

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Scams and Hacks

FTX used Python code to fake its insurance fund figure — Gary Wang

According to FTX's former CTO, Gary Wang, the crypto exchange utilized hidden Python code to falsely represent the value of its insurance fund, which is designed to protect user losses during large liquidation events. The $100 million insurance fund in 2021 was allegedly fabricated and didn't contain any FTX tokens (FTT) as claimed. Instead, the figure shown to the public was reportedly calculated using a random number close to 7,500 multiplied by the daily trading volume of the FTX Token. Wang also stated that the fund's value often fell short of covering the losses it was intended for. This revelation came as part of Wang's testimony on October 6, where he admitted to wire fraud, commodities fraud, and securities fraud. He has already pleaded guilty to all charges pressed against him.

Stars Arena secures funds to plug $3M exploit, set to reopen after security audit

The Stars Arena, an Avalanche-based Web3 social media app, has confirmed that it has secured the necessary funding to cover the $3 million loss resulting from an exploit. The platform was hacked, resulting in roughly $3 million worth of AVAX tokens being taken. The team has announced that it will reopen the smart contract once a thorough security audit has been conducted. Following the hack, the Stars Arena team apologized for the incident and also reported that their website was under a distributed denial of service (DDoS) attack. This marks the second exploit on the platform in the past week.

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Resource of the Day

What is finality in blockchain, and why does it matter?

Finality in blockchain means that once a transaction is added to the blockchain, it cannot be altered, ensuring its permanence and authenticity. This concept is crucial for security and trust in the system. Different consensus algorithms are used to achieve finality, and there are various types including probabilistic, economic, instant, unconditional, and state finality, each providing different levels of certainty. Challenges like forking, network latency, and vulnerabilities can affect finality, but techniques like longer confirmation times and multiple validations can enhance it. Future trends involve hybrid consensus models, advanced cryptographic methods, and improved blockchain interoperability to achieve faster and more reliable finality.

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Quick Links

Rise of Ethereum staking came at cost of higher centralization — JPMorgan

Ethereum co-founder Vitalik Buterin previously admitted that centralization is one of Ethereum’s main challenges, which could take 20 years to solve.

Binance spot market share drops for 7th consecutive month

Binance’s lost spot trading volume has reportedly been distributed among exchanges like HTX (formerly Huobi), Bybit and DigiFinex.

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Miscellaneous

Basel Committee to consider disclosure requirements for banks’ crypto assets

The Basel Committee on Banking Supervision, operating under the Bank for International Settlements, is considering implementing disclosure requirements for banks' crypto asset holdings following the banking crisis earlier this year. The committee's report identified crypto holdings as a contributing factor to the failures of several banks. It pointed out three structural trends, including the increasing role of nonbank intermediation, concentration of crypto assets in a few banks, and faster fund movement due to digitalization. The report emphasized the role of crypto in the failure of Signature Bank and mentioned that a consultation paper on crypto asset exposure disclosure will be published soon.

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The information provided in this newsletter is for informational purposes only and should not be interpreted as investment advice, endorsement, or recommendation. Cryptocurrency investments carry significant risk due to their volatility. You should consider your financial situation, investment goals, and risk tolerance before making any investments. We strongly recommend consulting a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.