Starting June 1st, the Hong Kong Securities and Futures Commission (SFC) will begin accepting applications for licenses from cryptocurrency exchanges. The SFC has issued guidelines that prohibit the offering of crypto gifts aimed at incentivizing retail investments, including airdrops. It has also stated that stablecoins should not be allowed for retail trading until they are regulated.

According to the latest consultation on policy recommendations, licensed virtual asset providers will be allowed to serve retail investors as long as they assess the overall understanding of the investors and associated risks. The SFC sought public feedback on its initial policy recommendations in February before finalizing them.

The guidelines place the responsibility on platform operators to conduct thorough due diligence, emphasizing that meeting the minimum requirement of being included in two acceptable indices is not sufficient for listing a cryptocurrency for trading.

Under the new rules, crypto exchanges must also maintain a minimum capital of $640,000 (USD) at all times. They are also required to submit reports on available and required liquid capital, a summary of bank loans and credit facilities, and profit and loss analyses to the SFC on a monthly basis. In addition, approved tokens on regulated exchanges must have a 12-month track record.

The SFC mentioned that it will separately consult on the inclusion of derivatives, which are crucial for institutional investors. Regarding the implementation of the travel rule by the FATF, which involves sharing information on crypto transactions between financial institutions, the SFC will accept delayed submission of required information until January 1st, 2024, if immediate submission is not feasible during the virtual asset transfer.

Ledger, the renowned cryptocurrency hardware wallet manufacturer, recently introduced a new Bitcoin (BTC) key recovery feature, aiming to provide users with an additional layer of convenience and security as it will reportedly enable them to back up their private keys so that they may be recovered if lost.

However, the introduction of this feature has not been without controversy, as experts and critics raise doubts about its safety and effectiveness. More importantly, it is indicative of how Ledger may have violated the trust of its user base with potentially catastrophic consequences.

Safety or violation of trust?

When it comes to user satisfaction and building trust, being technically correct is not enough. It is impossible to overestimate the importance of addressing user concerns and striking a balance between security and convenience, as while the new feature may be useful in the long run as far as Ledger is concerned, the crypto community remains unconvinced and feels betrayed.

Since then, Ledger has responded to the criticism and concerns expressed about their new wallet recovery service. The company talks about the specifics and how it intends to help users recover lost or inaccessible Bitcoin keys. Despite the controversy, Ledger defends the implemented security measures and emphasizes their commitment to protecting user assets.

Still, experts have expressed concerns about the security of the new Bitcoin key recovery feature. They evaluate the technical aspects while also examining potential vulnerabilities and risks associated with the recovery process. Twitter user foobar told his 132,000 followers to stop using Ledger hardware wallets as soon as possible, claiming that the company has shown nothing but gross incompetence and wild misunderstanding of their own purposes. Similarly, Polygon Labs CISO Mudit Gupta informed his 61,000 followers that the new recovery feature is a horrendous idea and that no one in their right minds would support it.

What comes next?

While it is optional, the new feature will split the private keys of the users into three encrypted fragments which would be stored by three different companies, including Ledger. Users who once trusted that it was next to impossible for their private keys to ever leave their Ledger devices are understandably livid with this new feature, as they believe it defeats the purpose of having a hardware wallet in the first place.

As to why Ledger would do this, the official statement was that the feature will make it easy for anyone to own crypto by eliminating the confusing and complicated terminologies and processes associated with private keys and crypto wallets. Nevertheless, many believe that this is indeed a violation of trust and numerous Ledger users are now shifting to alternative options like Argent and Trezor.

G-7 finance ministers reportedly held discussions on the regulation of cryptocurrencies prior to the upcoming Japan summit. The representatives expressed their commitment to adhering to the standards established by the Financial Stability Board (FSB) and the International Monetary Fund (IMF) regarding crypto assets and central bank digital currencies (CBDCs).

FSB will be providing final recommendations by July 2023 and pledged to implement effective regulatory frameworks for crypto assets and stablecoin arrangements in accordance with the appropriate guidance and standards established by standard-setting bodies (SSBs).

Many also expressed their support for the Financial Action Task Force (FATF) and its efforts to expedite the global implementation of the travel rule, which mandates the exchange of information on fund transfers between financial institutions both domestically and internationally.

Everyone involved is eagerly awaiting the progress report by the FATF on the travel rule implementation due to the increasing threats posed by illicit activities like money laundering and terrorist financing, among others.

Furthermore, the IMF will be providing its own recommendations on CBDCs, to be published later this year and discussed during the upcoming summit. The G-7 consists of the United States, United Kingdom, Canada, France, Germany, Italy, and Japan, with additional representatives from the European Union, Australia, India, and other jurisdictions invited to participate in the event.

Ripple has introduced a new platform that enables governments to issue their own digital currencies in the form of CBDCs (Central Bank Digital Currencies). With this announcement, Ripple looks to continue its innovative solutions for digital payments and cross-border transactions.

On May 18th, the launch of the Ripple CBDC Platform took place, which leverages the same blockchain technology used in the XRP Ledger (XRPL). The platform empowers central banks, financial service providers, and governments to holistically manage and customize the entire life cycle of fiat-based CBDCs, including transactions and distribution.

The new platform facilitates inter-institutional settlement and distribution operations for financial institutions utilizing CBDCs. It also enables global central banks to issue both retail and wholesale digital currencies. The capabilities are also exemplified through the e-HKD pilot, a CBDC program initiated by the central bank of Hong Kong (HKMA). Additionally, Ripple is working with Fubon Bank in Taiwan to develop a solution for real estate asset tokenization and equity distribution.

The CBDC platform offers four key features, namely Ledger technology, Issuer, Operator, and End-User Wallets. The platform builds upon the Private Ledger function, which was initially introduced by Ripple in 2021 for CBDC issuance.

James Wallis, VP of Central Bank Engagements and CBDCs at Ripple, expressed confidence in the platform and its ability to address challenges faced by central banks and governments while developing strategies for CBDC implementations. Ripple is also collaborating with several central banks to help establish it as a trusted partner in this space.
 

Many crypto businesses are hoping that a new US Supreme Court doctrine will set a legal precedent that could theoritically force the SEC to step aside, however federal regulators remain skeptical.

In a decision issued last June, the Supreme Court sided with states challenging the authority of the EPA to regulate greenhouse gas emissions. The institution had decided to adopt a formal doctrine that actively seeks to limit the power of federal agencies.

According to the doctrine, Congress should not delegate deciding the fate of extraordinary cases involving matters of significant political and economic impact to federal agencies such as the EPA or SEC.

In its April 2023 response to the Wells notice issued to the exchange by the SEC, Coinbase talked about how the agency has no authority to make crypto decisions unilaterally, especially when it comes to token classification.

In response to the request made by Coinbase for more regulatory clarity in the crypto space, Gary Gensler claimed that this industry has more than enough information to operate within the legal framework of the country.

Gensler further stated that many cryptocurrencies have been non-compliant in the past, and that the SEC has issued rules defining what it means to be an exchange, a broker dealer, an advisor or custody asset, and how to register a securities offering.

Those rules exist, Gensler continued, before saying that there is nothing about crypto or any new technology for that matter which would make it incompatible with pre-existing public policies.

There is an ongoing heated debate amongst Bitcoin developers regarding the censorship of a new type of transaction called Ordinals BRC-20s. This development has also had a significant impact on the mining of Bitcoin, causing transaction fees to surpass the mining reward for the first time in years.

Ordinals BRC-20s are a new type of transaction on the Bitcoin blockchain that allow for the creation of smart contracts on top of the Bitcoin network. These transactions can also enable other blockchain platforms to interact with Bitcoin. However, some developers are concerned that these transactions may be harmful to the overall health of the Bitcoin network, leading to a debate amongst developers on whether or not to censor them.

Ordinals, which require significantly more computing power to process than standard Bitcoin transactions, have been causing mining fees to skyrocket. This has led to concerns among some experts that mining fees may become prohibitively expensive for small-scale miners, causing centralization in the mining industry.

These concerns have led some Bitcoin developers to advocate for a spam filter to be put in place to limit the number of Ordinals transactions being processed on the network. Some have even suggested that all Ordinals transactions be blocked until a solution can be found to mitigate their impact on mining fees.

Despite the controversy surrounding Ordinals, many remain optimistic. Ordinals could help Bitcoin maintain its status by allowing for the creation of more complex smart contracts and enabling interoperability with other blockchains.

Cardano (ADA) is a blockchain platform that is rapidly gaining global popularity due to its focus on scalability, security, and interoperability. Most recently, the Cardano Foundation CEO, Frederik Gregaard, provided some insight into some potential use cases, wherein he envisions a future where Cardano will play a key role in areas such as supply chain management, digital identity, and DeFi.

What has Cardano accomplished lately?

Speaking of DeFi, a new platform called Empowa has been launched on the Cardano network, aiming to tackle the housing crisis in Africa. Empower is a DeFi platform that provides affordable housing loans to low income families in the country, and is fully powered by Cardano.

In addition, Cardano has a scalability solution known as Hydra which recently went live on its mainnet. Hydra is a layer 2 scaling solution that can handle a high volume of transactions per second without compromising the security and decentralization of the Cardano network. This could be particularly useful as Ethereum gas fees continue to surge and people look for an alternative.

What comes next?

Cardano Founder and Ethereum Co-Founder Charles Hoskinson has often gone on record to say that true decentralization is the only solution the world desperately needs and that Cardano has and always will work in this direction. Ultimately, the focus on scalability, security, and interoperability is making it an attractive platform for developers and entrepreneurs who want to build decentralized applications with practical use cases.

With the launch of Empowa and the rollout of Alonzo, Cardano is certainly showing that it possesses the potential to become a major player in DeFi and smart contract spaces going forward. The implementation of Hydra will further solidify its position as a scalable and secure blockchain platform.

Texas legislators recently voted to amend their Bill of Rights to include digital currencies, allowing individuals to own, keep, and use digital currencies such as Bitcoin (BTC) and Ethereum (ETH).

The lawmakers overwhelmingly supported the amendment, possibly indicating how they feel about digital currencies in general. Only two lawmakers voted against it, with 139 voting in favor.

The amendment was included in a bill introduced by State Representative Giovani Capriglione, titled Bill HJR 146. Individuals will now have the right to use a mutually agreed-upon medium of exchange, such as digital currencies, tokens, or cash, for contracting goods and services and trading.

According to the bill, no government will prohibit or hinder the ownership or holding of any amount of form of money or other currency going forward.

The Texas Bill of Rights, like the US Bill of Rights, protects fundamental rights like free speech, religion, and the press. However, the Texas Bill of Rights includes state-specific provisions such as the right to a speedy trial and the right to possess and carry self-defense weapons.

The Texas Constitutional Enforcement group commented on the development, saying that including digital currencies in the Texas Bill of Rights is critical in protecting the financial privacy and well-being of the citizens.

UK tax authorities will reportedly soon have the power to seize Bitcoin held on exchanges. The measure is part of a new amendment to the United Kingdom Finance Bill, which seeks to strengthen the government and its ability to recover taxes owed by individuals and companies.

If the amendment is passed, tax authorities will be able to issue an order to freeze digital assets held on cryptocurrency exchanges, making it easier for them to recover unpaid taxes. This power will be similar to the ability to freeze funds held in traditional bank accounts.

The amendment has been welcomed by tax experts who believe it will help combat tax evasion in the cryptocurrency space. However, some industry experts have raised concerns about the potential for abuse of power, especially if there is no clear evidence of wrongdoing. Comparisons to the US SEC have also been made in this regard.

The HMRC (HM Revenue And Customs) already possesses the authority to seize funds from bank accounts when people refuse to pay taxes which would put them under the eye of debts authorities. However, the organization is thinking about broadening this capability to also include online payment accounts like PayPal.

In a separate consultation paper, the HMRC discussed the possibility that this could include company cryptocurrency wallets if the use of digital currencies as a method of making online payments becomes increasingly widespread.

According to a recent Gallup survey conducted in the US, public trust in banks has declined significantly due to recent high-profile financial institution collapses and record setting inflation levels.

The survey, which polled at least 1,000 respondents in April, revealed that almost half of the participants were worried about their money in banks, with nearly 20% indicating they were extremely concerned.

It is worth noting that the poll was conducted after the collapse of Silicon Valley Bank and Signature Bank but before First Republic Bank failed in late April. Republicans, lower-income adults, and individuals without a college degree expressed more concern about the safety of their money in banks or other financial institutions than their counterparts.

Gallup noted that the current level of concern is similar to that of the 2008 financial crisis when several financial institutions that were believed to be too big to fail collapsed. In a separate report, the Hoover Institution think tank suggested that if half of all uninsured savers withdrew all of their cash, 186 American banks would be at potential risk of impairment.

Meanwhile, another report in the UK cited research published by Stanford University banking expert Amit Seru, estimating that over 2,315 US banks are currently holding assets worth less than their liabilities.

For all of the beautiful things the world of crypto is building towards, its not without its setbacks. From the UST depeg, FTX and more, there are more than enough ways to get the rug pulled from under your feet. For every opportunity to make life changing gains, there is something lurking around the corner to take it all back. Crypto is truly still the wild west, at least for now. In recent years, hackers have been able to exploit protocols and get away with billions in TVL. One thing is for sure, in order to drive further liquidity into this ecosystem, institutions have to be ensured that the protocol liquidity they provide will not get drained by malicious actors. Many players in the space are working to build stronger moats around these huge swaths of TVL, but what if there was a better way?

2022 was a Bad Year for Bridges

Before we dive into the potential future that deBridge have envisioned, I think its important we take a look at how we ended up here. In the last 2 years, bridge exploits have amounted to over $2.5 billion in losses. In February of 2022, Wormhole suffered a $350 million exploit. Just a month later the Ronin bridge fell victim to a $650 million exploit as well. Both of these hacks were similar in nature. The hackers targeted the huge pools of liquidity that allow these bridges to facilitate the movement of assets across chains.

Bridge Exploits by Volume

If you are new to crypto, the idea of 1 billion dollars being hacked and stolen in the span of a month probably sounds ridiculous, and you would be right. But how is this even possible? Its important that we understand how bridges work and why they are important to the broader crypto ecosystem before we can answer that.

How do Bridges Work?

Lets take Wormhole for example. Wormhole is a decentralized, universal message-passing protocol that connects to multiple blockchains. Wormhole allows different blockchains like Ethereum, Binance Smart Chain, Solana, Polygon, and Avalanche to communicate with each other. Crypto has an interoperability problem. Assets and liquidity on one blockchain may not be used on another blockchain. You can't just send USDC from the Ethereum network to Solana. But this is why bridges exist. Some protocols use bridges like Wormhole in the background giving the user a better experience. Wormhole works by holding a large amount of liquidity from multiple chains. This is what we call TVL (Total Value Locked). A user can deposit assets from one chain, and receive the corresponding assets on another. Wormhole acts as the messenger between blockchains, and the escrow service that allows all of this to happen. Unfortunately there are 2 problems with conventional bridges like Wormhole:

• They are slow
• They are enticing for hackers to exploit

Portal Bridge powered by Wormhole

Most cross chain bridges take around 20 minutes to complete these transactions, which is much too long in the world of crypto. But worst than that, because they need huge amounts of TVL to ensure large cross chain swaps without high slippage, hackers are constantly trying to exploit them because the reward for doing so is HUGE.

deBridge has the Solution

deBridge is a cross-chain interoperability and liquidity transfer protocol that has truly decentralized frameworks. It also used the classical approach of locked liquidity and wrapped assets, and has processed 110k+ transactions from over 60k unique users earning $180k+ in total fees to date. But did the team at deBridge stop there? No! The team has made the courageous move to continue to innovate and they have built a new solution that can alleviate the issues plaguing traditional bridges to date.

Recently, the deBridge team has announced the deSwap Liquidity Network (DLN). DLN is a cross-chain value transfer protocol built on top of deBridge, introducing an all-new liquidity on demand approach that solves the challenges of the classical continuously locked liquidity model.

By removing the need for locked liquidity, DLN can enable all of this for end-users and protocols that integrate with deBridge low fees, 0 slippage, faster settlement and cross chain limit orders. DLN is a trustless network where anyone can generate sustainable rewards on idle liquidity, without token incentives! Market makers, quants, protocols, DAOs, and anyone holding on-chain liquidity can join for an additional monetization channel.

deSwap Liquidity Network will enable limitless, zero slippage transfers of value across chains with 0 TVL, enabling secure and efficient transfers of value and messages simultaneously, powered by deBridge. Oh yeah! Did I mention that you can trade ANY asset on one chain for any other asset on another? Its like a mix of Wormhole and Uniswap all in one!

In Conclusion: The end of Bridge Exploits is Near!

The idea that bridges need locked liquidity to operate seamlessly may be looked upon in the future as one of the many silly decisions that the crypto industry as a whole decided to explore. DLN allows for institutions to earn fees on cross chain swaps (putting their liquidity to work) without the need to lock up their assets and risk them to an exploit. Users get quicker swaps for cheaper. Its a win-win for everybody except you hacker-man! It looks like we already have the solution and now we just need to get the (cross-chain) message out! I have been using deBridge for all my cross-chain swaps to date, and if you are looking for a more seamless experience you should give them a try!

Disclaimer: I am an investor in a deBridge private round.

De-dollarization is the process by which countries may end up abandoning the United States Dollar (USD) in international trade and transactions in favor of other currencies. For the moment, the USD is the reserve currency which is globally used in the trading of oil and other important commodities. China and Russia, on the other hand, have been at the forefront of the de-dollarization trend, exploring alternative currencies and new financial institutions that operate outside the dollar-dominated global financial system.

The United States Vs China

China has been developing its digital currency for nearly a decade with the goal of eventually replacing the USD. As countries seek to reduce their exposure to the risks and fluctuations associated with the USD, de-dollarization trends are gaining traction. In fact, many economists have advocated for the creation of a viable digital currency to serve as the new reserve currency on a global scale.

On that note, CBDCs (Central Bank Digital Currencies) have the potential to play an important role in the future of global trade and settlements. Several central banks are already collaborating with the Bank for International Settlements on the mBridge wholesale CBDC platform, which allows financial institutions to conduct large-value wholesale transactions. CBDCs may help to address some of the inefficiencies and risks in traditional payment systems as more countries adopt them, though they do have their own share of issues which cannot be ignored.

What comes next?

China is pushing for greater use of its own currency, the Yuan, in international trade and investment, which could challenge the USD in terms of dominance in global transactions. Meanwhile, Southeast Asian countries are following suit and discussing de-dollarization efforts to mitigate the risks associated with the current reserve currency.

The BRICS nations, which consist of Brazil, Russia, India, China, and South Africa, are also actively cooperating in areas where mutual interests align. As a matter of fact, these nations want to launch a new global reserve currency known as the BRICS Currency with the explicit purpose of challenging the petro-dollar and supposedly giving it a taste of its own medicine.

These recent developments point to a changing landscape in international finance, as countries seek to reduce their reliance on the United States Dollar and increase their use of alternative currencies like Bitcoin (BTC) and Ethereum (ETH). Even if only a fraction of the liquidity is directed towards cryptocurrencies, the de-dollarization trend is expected to boost them in the long run. In any case, the fact remains that an increasing number of countries are shifting away from the US financial system and toward digital assets and self-sustainment.