Crypto News Headlines (20-May-2022)

The U.K.’s financial regulator and its finance ministry, the Treasury, will scrutinize the collapse of the Terra ecosystem’s crypto tokens while creating new rules for crypto assets, Bloomberg reported on Friday.

Recent market instability in stablecoins “will absolutely need to be taken into account” when the Financial Conduct Authority works with the Treasury to create the rules later this year, Sarah Pritchard, the FCA’s executive director for markets, told Bloomberg.

On May 13, Terra’s UST algorithmic stablecoin slumped as low as 23 cents, and the LUNA token, created to prevent the UST algorithmic stablecoin from being volatile, fell 96% at one point. An algorithmic stablecoin is one that in theory maintains its peg using only software and rules, meaning it is not necessarily backed by collateral. Instead, the token’s programming, or smart contract, can increase supply if the price is falling or reduce supply if the price is increasing.

In March, the U.K. said it will work on a new crypto regulatory package and planned to regulate stablecoins. In its consultation, the government proposed that algorithmic stablecoins should not be regulated.

Laurentino Cortizo, the president of Panama, has announced his opinion regarding the recently approved cryptocurrency bill, and how it might be too lax when it comes to dealing with unlawful activities like money laundering in the sector. While speaking at the Bloomberg New Economy Gateway Latin America conference in Panama City, Cortizo stated:

If I’m going to answer you right now with the information that I have, which is not enough, I will not sign that law.

Furthermore, Cortizo explained that he and his government would have to be “very careful” if the crypto bill presented has clauses dealing with money laundering activities, remarking that these are very important to Panama.

Panama allows the president to have veto power over the bills presented by the National Assembly, and Cortizo could use this attribution to repel the bill in its current form. However, Cortizo declared he and his lawyers are still reviewing the law to make a decision.

Don’t get your hopes up too much, but Ethereum’s move to proof of stake could be in the cards for this summer.

Ethereum core developer Preston Van Loon told a panel at the Permissionless conference today that there’s momentum behind finalizing the move in the next three months.

“As far as we know, if everything goes to plan, August—it just makes sense,” said Van Loon. “If we don’t have to move [the difficulty bomb], let’s do it as soon as we can.”

Ethereum Foundation Justin Drake, also on the panel, noted there’s a “strong desire to make this happen before [the] difficulty bomb in August,” according to a tweet from event co-host Bankless.

Van Loon and Drake were referring to an event called The Merge. It’s when the current Ethereum blockchain merges with the proof-of-stake beacon chain. That move will shift the network from mining—where people run powerful computers for the chance to earn ETH—to staking, in which Ethereum holders can deposit their ETH in exchange for rewards.

Concerns of a so-called crypto winter are unfounded, according to Bank of America (BAC), the second-largest U.S. bank.

Investors wondering why digital assets are not outperforming traditional ones should be aware that the cryptocurrency ecosystem is an “emerging tech asset class and the tokens that power the ecosystem trade like high growth, speculative risk assets,” analysts led by Alkesh Shah wrote in a May 17 note.

Digital assets are faced with similar headwinds to traditional assets, including: surging inflation, higher interest rates and the increased risk of a recession, the note said.

Worries of contagion risk within the crypto ecosystem and spillover effects in traditional financial markets due to the collapse of algorithmic stablecoin terraUSD (UST) are also unfounded, the bank said, though the slump probably contributed to recent volatility in bitcoin (BTC).

UST is not backed by traditional assets and the loss of its peg shows the durability of the wider stablecoin market, because the largest stablecoins maintained theirs, it added.

Bank of America says the collapse of the Terra network was due to its prioritization of UST’s adoption over its price stability, and while it is not positive about UST revival plans, it still sees the potential for a successful algorithmic stablecoin.

Michael Barr, a law professor and former advisory board member of Ripple Labs who is United States President Joe Biden’s pick for vice chair for supervision at the Federal Reserve, called for U.S. lawmakers to regulate stablecoins in an effort to address “financial stability risks.”

In a confirmation hearing before the Senate Banking Committee on Thursday, Barr said innovative technologies including cryptocurrencies had “some potential for upside in terms of economic benefit” but also “some significant risks,” citing the need for a regulatory framework on stablecoins to prevent the risk of runs. Barr added that the Fed potentially releasing a central bank digital currency was an issue that required “a lot more thought and study,” echoing Fed chair Jerome Powell’s views concerning due diligence.

Two U.S. residents have been charged with running a crypto Ponzi scheme that allegedly defrauded hundreds of investors out of a collective $44 million.

Officials with the Commodity Futures Trading Commission (CFTC) allege Sam Ikkurty (also known as Sreenivas I Rao), of Portland, Ore., and Ravishankar Avadhanam of Aurora, Ill., as well as several corporate entities controlled by the defendants, worked together to convince their victims to invest in a “so-called income fund invested in digital assets.”

The defendants have also been charged with operating an illegal commodity pool and failing to register as a Commodity Pool Operator with the CFTC.

Beginning in 2017, Ikkurty and Avadhanam allegedly told would-be investors in Ikkurty Capital, Rose City Income Fund and Seneca Ventures that the pair would use their funds to invest in various cryptocurrencies, promising very high returns – some as high as 62% annually. According to the complaint, the pair advertised via a website as well as videos posted on YouTube.

An executive with a Pakistani cryptocurrency exchange has said Islamabad can generate at least $90 million in tax revenues if authorities decide to levy a 15% tax on cryptocurrency transactions. The executive, Zeeshan Ahmed, the country general manager at Rain Financial Inc, claimed this would be possible if Pakistan adopts what one report calls “hard and fast regulations.”

In comments published by The International News, Ahmed claimed that Pakistan’s neighbor India and the United States are already getting billions of dollars in tax revenues. He said:

The US and India are collecting billions of dollars through a 30 percent tax on the profit earned from crypto trading. We can start with a 15 percent tax.

Role of Crypto in Pakistan’s Economy

Ahmed’s sentiments were echoed by his fellow executive, Aatiqa Lateef, the crypto exchange’s director of public policy. Speaking at the same event where attendees discussed the role of crypto assets in an economy, Lateef suggested his company is playing its part in helping to change regulators’ perception of cryptocurrencies.

In a seed-funding round led by Andreessen Horowitz, blockchain gaming startup Azra Games has raised $15 million to develop its flagship play-and-earn RPG title, “Project Arcanas.”

NFX, Coinbase Ventures, Play Ventures, and Franklin Templeton also participated in the round. 

“Project Arcanas” will be an RPG with plenty of NFTs, which are unique blockchain tokens that signify ownership. In the case of Arcanas, its NFTs will serve as deeds of ownership to specific characters or in-game items. 

Arcanas’ Genesis Collection will be the game’s first NFTs. These will be characters that can be staked—or locked up for a period of time to earn interest—and will play important parts in the game’s lore. Azra calls these non-fungible tokens “PFPs” (short for “Play Forever Passes”).

Ethereum’s Ropsten public testnet will undergo a “Merge” next month ahead of a rollout on the main network, developer activity on GitHub shows.

The Merge refers to Ethereum’s long-awaited move to a proof of stake network from its current proof of work design. After the shift, transactions on Ethereum would be processed and validated by stakers instead of miners, which would, in turn, create a faster and “eco-friendly” network.

Ropsten-beacon-chain config has been merged! Expect client releases 🔜Genesis: May 30, 3:00:00 PM (GMT)Merge transition: ~ June 8

— terence.eth (@terencechain) May 18, 2022

Switching the blockchain from one consensus mechanism to another is a complex change, which requires multiple tests on testnets like Ropsten before they are finally deployed on the mainnet.

Separately, Ethereum developers increased bug bounties to up to $500,000 worth of ether (ETH) or dai (DAI) earlier this week. These are awarded to developers who find out vulnerabilities or bugs on Ethereum on both public testnets and the mainnet.

The Commonwealth Bank of Australia (CBA) has put its plans for a second pilot program of crypto trading services on hold indefinitely and cut off access to those in the first round of testing.

CBA sent Cointelegraph a transcript of a Tuesday bank briefing where CEO Matt Comyn said that he was still waiting on regulatory clarity. He also said that he was “working with a number of regulators very closely, as you would imagine, about the appropriate treatment of this particular product:”

“Our intention still, at this stage, is to restart the pilot, but there are still a couple of things that we want to work through on a regulatory front to make sure that that is most appropriate.”

Comyn said there is a Treasury submission for the program already under review, but he did not share any expected timeline for its completion.