CoinDesk Crypto

Authorities have identified another teenager who may have played a role in July’s Twitter hack, according to the New York Times. While three individuals have been arrested so far for their alleged involvement with the attack, authorities are now looking at a 16-year-old Massachusetts resident who is thought to have ties with Graham Clark, the 17-year-old Florida man state prosecutors allege to be the ringleader of the group, people involved in the ongoing investigation told the Times. The teen has not been charged.

• The new suspect was served with a search warrant at his Massachusetts home on Tuesday, according to the report. Court documents remain under seal. The Times didn’t identify the suspect because of his age. 
  
• Citing the people involved with the probe, the report said the 16-year-old came into investigators’ focus because he allegedly continued to be involved with voice phishing attacks even after the attack on Twitter.
  
• According to the report, the teenager met Clark online and in May, it’s alleged, they both started tricking Twitter employees into revealing their login details, which helped them carry out July’s breach. 
  
• In a court proceeding earlier this month, Clark pleaded not guilty to all charges. The coordinated attack on 30 high-profile accounts, including CoinDesk’s, promised to double the money of users who sent cryptocurrency.

Related Stories

• 17-Year-Old Pleads Not Guilty to Twitter Hack as Defense Tries to Lower Bail From $725K
• Social Engineering: A Plague on Crypto and Twitter, Unlikely to Stop
• Twitter Hacker Owns $3.4M in Bitcoin, Court Sets Bail at $725K
• Officials Arrest 3 Allegedly Behind Twitter Hack

Following last year’s QuadrigaCX collapse and loss of client funds, Canada’s crypto exchanges are going the extra mile to rebuild the trust of consumers.

Announced Wednesday, Toronto-based Coinberry has acquired a financial institution bond, a requirement for registration with its provincial securities regulator, the Ontario Securities Commission.

The move is a concrete example of a general tightening of regulation in Canada, particularly in the wake of the Quadriga debacle.

Related: A New Attempt to Tokenize Real Estate Projects in Mexico and Canada

“Every Canadian crypto user remembers Quadriga and the impact of that is still fresh in the back of their minds,” said Coinberry CEO Andrei Poliakov. “People still have to trust exchanges and platforms to use crypto and the investment on Coinberry’s part protects against the corrupt human element that has struck the personal finances of many Canadians.”

Read more: Gerald Cotten: Mystery Man

In the U.S., surety bonds of this type, which provide insurance in case of dishonest or fraudulent acts by employees, have been a requirement for crypto firms to be registered with FinCEN for some time.

However, to qualify as a money service business in Canada with its version of FinCEN, the  Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) – with which Coinberry is already registered – does not require a financial institution bond. 

Related: Canadian Exchange Shakepay Gets Cold Wallet Insurance to Protect Customer Funds

In this respect, Poliakov believes “wholeheartedly” that Coinberry is the first crypto firm to go the extra mile. 

“We applied for registration with the OSC and we’ve been going through that process for quite some time,” said Poliakov. “One of the requirements was to have our financial statements publicly audited, by MNP in this case, and another requirement was to have a financial institution bond in place.”

Read more: Canadian Municipality Set to Accept Bitcoin for Property Tax Payments

Coinberry’s surety bond is underwritten by the Lloyd’s of London insurance market and the coverage limit is CAD$1,000,000 ($764,000) per claim/incident, said Poliakov.

Neither Lloyd’s nor the OSC returned requests for comment by press time.

There may well be other crypto firms in the process of going through the registration process with the OSC, Poliakov said, adding that a general clampdown when it comes to crypto compliance has seen Ontario regulators blocking firms that don’t play ball. Last week, BitMEX was blocked from serving Ontario-based customers.

“I cannot speak to whether the others in Canada are in the process of getting this,” Poliakov said in a follow-up email. “I do know some platforms are not applying at all, while others (like BitMEX) have already received instructions from the OSC to cease operation in Ontario because they are not going the registration route.”

Related Stories

• Crypto Derivatives Exchange BitMEX to Block Ontario Traders
• Mining Firm Hut 8 Reports 28% Drop in Q2 Revenue Following Bitcoin Halving

Following last year’s QuadrigaCX collapse and loss of client funds, Canada’s crypto exchanges are going the extra mile to rebuild the trust of consumers.

Announced Wednesday, Toronto-based Coinberry has acquired a financial institution bond, a requirement for registration with its provincial securities regulator, the Ontario Securities Commission.

The move is a concrete example of a general tightening of regulation in Canada, particularly in the wake of the Quadriga debacle.

Related: A New Attempt to Tokenize Real Estate Projects in Mexico and Canada

“Every Canadian crypto user remembers Quadriga and the impact of that is still fresh in the back of their minds,” said Coinberry CEO Andrei Poliakov. “People still have to trust exchanges and platforms to use crypto and the investment on Coinberry’s part protects against the corrupt human element that has struck the personal finances of many Canadians.”

Read more: Gerald Cotten: Mystery Man

In the U.S., surety bonds of this type, which provide insurance in case of dishonest or fraudulent acts by employees, have been a requirement for crypto firms to be registered with FinCEN for some time.

However, to qualify as a money service business in Canada with its version of FinCEN, the  Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) – with which Coinberry is already registered – does not require a financial institution bond. 

Related: Canadian Exchange Shakepay Gets Cold Wallet Insurance to Protect Customer Funds

In this respect, Poliakov believes “wholeheartedly” that Coinberry is the first crypto firm to go the extra mile. 

“We applied for registration with the OSC and we’ve been going through that process for quite some time,” said Poliakov. “One of the requirements was to have our financial statements publicly audited, by MNP in this case, and another requirement was to have a financial institution bond in place.”

Read more: Canadian Municipality Set to Accept Bitcoin for Property Tax Payments

Coinberry’s surety bond is underwritten by the Lloyd’s of London insurance market and the coverage limit is CAD$1,000,000 ($764,000) per claim/incident, said Poliakov.

Neither Lloyd’s nor the OSC returned requests for comment by press time.

There may well be other crypto firms in the process of going through the registration process with the OSC, Poliakov said, adding that a general clampdown when it comes to crypto compliance has seen Ontario regulators blocking firms that don’t play ball. Last week, BitMEX was blocked from serving Ontario-based customers.

“I cannot speak to whether the others in Canada are in the process of getting this,” Poliakov said in a follow-up email. “I do know some platforms are not applying at all, while others (like BitMEX) have already received instructions from the OSC to cease operation in Ontario because they are not going the registration route.”

Related Stories

• Crypto Derivatives Exchange BitMEX to Block Ontario Traders
• Mining Firm Hut 8 Reports 28% Drop in Q2 Revenue Following Bitcoin Halving

U.S. Sen. Mike Crapo (R-Idaho), who heads the powerful Senate Banking Committee, has asked the Office of the Comptroller of the Currency (OCC) to fill his committee in on its Advanced Notice of Proposed Rulemaking for cryptocurrency services.

• The OCC, a federal banking regulator, asked the general public to weigh in on how cryptocurrencies were used or treated in the financial sector this past June.
• Around 90 banks, crypto startups, academics and industry organizations provided responses, with some major banks in particular suggesting they would be open to providing cryptocurrency services with some clearer regulation.
• Crapo's letter, dated Sept. 1, asks the OCC to “provide the committee with an update on its findings and the next steps the OCC intends to take with this technology.”
• The U.S. needs to create clear rules around cryptocurrency services “without stifling innovation,” the letter said.
• With the crypto space offering products and services as “diverse” as elsewhere in finance, Carpo wrote, “These and similar innovations are inevitable, beneficial and the U.S. should lead in their development.”
• The Senate Banking Committee has held a number of hearings around the crypto space, as Crapo’s letter points out, including on the Facebook-led Libra project.

Also read: US Regulator to Shake Up Banking With Federal Charters for Payment Firms

Related Stories

• US Regulator to Shake Up Banking With Federal Charters for Payment Firms
• The OCC’s Crypto Custody Letter Was Years in the Making
• Following OCC Letter, Some US Banks Appear Open to Providing Crypto Services
• Banks Won’t Rush to Hold Crypto – But OCC’s Regulatory Approval Makes It Harder to Ignore

Shyft Network is adding Huobi, Bitfinex and Tether to its crypto-focused anti-money laundering (AML) platform, and launching a “governance task force” including a host of new and existing members.

Announced Wednesday, Shyft’s Veriscope Governance Task Force includes recent joiners Binance and Bitfury, as well as a globally distributed collection of crypto firms such as BCW, HashKey Pro, Tokocrypto, Unocoin, Paycase Financial and CoinHako.

Shyft, a well-known participant in the race to bring crypto in line with Financial Action Task Force (FATF) AML regulations, last year hired heavyweight advisers Rick McDonell (former FATF executive secretary) and Josee Nadeau (former head of the Canadian delegation to the FATF). The two will co-chair the governance task force.

Related: Ethereum Transaction Fees Set a Record Once Again as DeFi Becomes Even Pricier

“Veriscope intends to provide a governance and rules framework whereby virtual asset service providers [VASPs] can trust each other,” McDonell said in an interview. “It keeps them in a democratic environment in terms of making rules and, because of the transparency between them, allows firms to take the risk of sharing information that could at times be commercially competitive.”  

Read more: Inside the Standards Race for Implementing FATF’s Travel Rule

In June 2019, the FATF issued guidance requiring VASPs to share know-your-customer (KYC) data between a transacting originator (sender of funds) and a beneficiary (receiver). This personally identifiable information (PII) must “travel” concurrently with digital asset transfers of over $1,000.  

In order not to simply rebuild SWIFT, a 50-year-old interbank messaging system, the industry has to think about onboarding and governance frameworks, said Shyft co-founder Joseph Weinberg. 

Related: Huobi Futures to Launch Options Trading This Week, Joining Throng Challenging Deribit

“The one thing that you can’t get away from is you still need to onboard the VASP to the network,” Weinberg said. “It’s really about defining the onboarding governance framework, an open mandate for the best practices for any VASP that has to join into the network. What are the rules?”

Despite the fact crypto was specifically designed to be pseudonymous, the industry has responded energetically with an array of technical solutions and a universally agreed-upon messaging standard.

Read more: Crypto Firms Establish Messaging Standard to Deal With FATF Travel Rule

Coordination among so many approaches to the Travel Rule problem is needed, as are responses to any changes or updates in crypto’s protean regulation from one jurisdiction to the next as well as incoming FATF guidance. 

Another key area here is interoperability, Weinberg said; “Everyone’s talking about it,” he added, but it should be governed by the exchanges rather than protocol teams. 

No firm should be precluded from accessibility but VASPs globally should be given the tools and provided with a baseline to determine how counterparties are expected to share information with counterparties, said Weinberg.

“It’s an inclusive working team that’s open to any other VASPs to join,” Weinberg said of the Veriscope effort. “It’s for the users of the system. Shyft developers are handing over the most important decisions to the stakeholders.”

Related Stories

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• Huobi and OKEx Battle for Supremacy in China

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team and edited by Bradley Keoun, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

Price Point

Bitcoin slid 4.1% Wednesday to about $11,430, wiping out the prior day’s gains and then some, as the U.S. dollar strengthened against the euro and other major currencies and reports surfaced that a major South Korean crypto exchange had been raided.

The move lower pushed the largest cryptocurrency back toward the middle of its range over the past month, between roughly $10,500 and $12,400.  

Related: Blockchain Bites: How SushiSwap Drove Uniswap to DeFi’s Top Spot

Mati Greenspan, founder of the digital-asset and foreign-exchange analysis firm Quantum Economics, put a positive spin on bitcoin’s recent performance in a note to clients on Tuesday. 

“One can’t help but wonder whether the underperformance of bitcoin in this market is actually a further sign of it moving toward being considered a safe-haven asset,” Greenspan wrote. “If all the risk assets are outperforming, then surely the property of stability should count for something.”

Market Moves

Trading volumes are surging on Uniswap and other so-called decentralized cryptocurrency exchanges, challenging established venues like Coinbase while driving up fees and congestion on the Ethereum blockchain.    

Uniswap, a semi-automated platform for matching buyers and sellers of cryptocurrencies and other digital assets, saw its trading volume climb to $953.59 million on Tuesday, a more than ten-fold gain over the past month, according to the website uniswap.info. The 24-hour trading volume has crossed above $1 billion – at least 50% higher than daily trading volumes observed  on Coinbase Pro, the largest U.S.-based centralized cryptocurrency exchange. 

Related: Open Positions in Deribit’s Ether Options Hit Record High Above $500M

The rise of decentralized exchanges, or DEXs, represents a new chapter of this year’s boom in decentralized finance. The fast-growing ecosystem, known as DeFi, consists of automatic lending and trading platforms, built atop distributed computing networks like Ethereum and constructed from open-source software and programmable cryptocurrencies. They aim to provide more efficient and less costly ways of conducting transactions currently handled by banks and traditional exchanges.   

“It indicates that the DeFi flippening is real and already here,” Denis Vinokourov, head of research at the London-based prime brokerage Bequant, told CoinDesk in a Telegram chat. “Flippening” is crypto jargon, used loosely to indicate the hypothetical moment when one blockchain or digital-asset trend overtakes another. 

Read More: DeFi Flippening Comes to Exchanges as Uniswap Topples Coinbase in Trading Volume

-Omkar Godbole

Meanwhile, traditional market exchanges are struggling with outages long familiar to their crypto counterparts.

Both crypto exchanges and popular online trading platforms including Schwab, TD Ameritrade and Robinhood have a rising number of young investors who, working from home during the coronavirus pandemic, spend some of their work hours trading for their own personal accounts. 

These platforms have another thing in common: outages in the midst of high volume.

On Monday, login issues were reported from customers on Robinhood, along with a few other similar trading platforms including giants TD Ameritrade and Schwab. The outage was allegedly caused by the stock splits of Apple and Tesla. Silicon Valley-based Robinhood was the subject of  more than 400 complaints reported to U.S. regulators during the first half of 2020.

Like traditional platforms, crypto exchanges have been troubled by outages for a long time, even after they pledge to take more steps to improve stability and reduce outages. These mainstream companies may be able to learn something from the experience of crypto exchanges.

One main cause of outages at crypto exchanges is hardware failure, and the solution is to build in redundancy, Dave Weisberger, co-founder and CEO of execution provider CoinRoutes, told CoinDesk in a phone interview. By now, most exchanges have built fully redundant systems, he said, and as a result any outages caused by hardware failures are usually short-lived.

The other cause, more common, is a change in a new piece of code that was not thoroughly tested. Bugs in the new code can be triggered at a later time by an unplanned situation such as a surge in trading volumes, resulting in an outage.

“Building software which scales to serve so many users is really hard, and the operational work to make sure servers stay up and running is quite difficult,” Tushar Jain, managing partner at Multicoin Capital, told CoinDesk in a Twitter direct message.

Read More: Exchange Outages Are Going Mainstream: What Robinhood Can Learn From Crypto

-Muyao Shen

Bitcoin Watch

Bitcoin prices slid 4.4% on Wednesday as the U.S. dollar strengthened, reinforcing the cryptocurrency’s negative correlation with the greenback. 

• The U.S. Dollar Index (DXY) was trading near 92.50 at press time, having clocked a 29-month low of 91.75 on Tuesday.
• “Corrective pressures are giving the greenback a reprieve,” according to Marc Chandler, a former chief currency strategist for the giant British bank HSBC.
• The dollar is most oversold in 40 years and could continue to gain altitude in the short-term, keeping bitcoin under pressure.
• The cryptocurrency’s technical charts are also signaling scope for temporary pullback. 
• Bitcoin’s repeated rejection above $12,000 observed over the past four weeks is suggestive of bull fatigue. 
• On the downside, major support is located at $11,000.

– Omkar Godbole

Token Watch

Ether (ETH): Ethereum network transaction fees set a record once again as DeFi becomes even pricier.  

Ethereum Classic (ETC): Ethereum Classic Labs airs new plan to stop future 51% attacks after getting hit three times in the past month  and losing millions of dollars of cryptocurrency to double-spends. 

Binance coin (BNB): World’s biggest cryptocurrency exchange launches its own smart-contract-enabled blockchain, with staking for the native BNB token.  

Yearn.Finance (YFI): MakerDAO departed chief Mariano Conti says phenom token represents “most interesting thing that has happened to DeFi.” 

What’s Hot

Police reportedly raid headquarters of Bithumb, South Korea’s largest crypto exchange (CoinDesk)

Coffee-bean supplier sells $300M of 5.5-year crypto bonds via HSBC, Singapore exchange (CoinDesk)

Bitcoin miners saw 23% revenue increase in August (CoinDesk)

Bermuda pilots “digital stimulus token” with Stablehouse to help rejuvenate economy (CoinDesk)

Minting dozens of coins a day, speculators tap into crypto craze (Bloomberg)

Is buy-and-hold really the best strategy in crypto? (Hacker Noon)

Total value on Bitcoin’s Lightning Network sets another record amid market rally (CoinDesk)

Coinbase building platform to help crypto startups launch tokens, raise cash (CoinDesk)

Analogs The latest on the economy and traditional finance

Argentina’s creditors to get back just over half of the $2.75B 100-year bonds sold three years ago (WSJ)

Top exec at $138B hedge fund Bridgewater says U.S. economy needs $1.3T-$1.7T of fresh stimulus to sustain recovery (CNBC)

Trump pledges to “help the airlines” as industry loses $5B a month (Reuters)

Federal Reserve buying $100B of mortgage bonds a month, pushing down rates (Bloomberg)

U.S. job growth to slow over next decade even as Fed prioritizes employment over inflation (CNBC)

Indonesia to digitalize state-owned enterprises for competitiveness (Nikkei Asian Review)

Deutsche Bank says “immediate deflationary pressures look to have been averted.”

Tweet of the Day Related Stories

• Bitcoin Price Drops 4% After Latest Rejection at $12K Resistance
• DeFi Flippening Comes to Exchanges as Uniswap Topples Coinbase in Trading Volume

Pornhub, the popular adult entertainment site, has added two popular cryptocurrencies as payment options.

• In a tweet Wednesday, the company announced that it’s now accepting bitcoin (BTC) and litecoin (LTC) in payment for its Pornhub Premium offering.
• The company has been accepting the verge (XVG) cryptocurrency for user payments since 2018.
• It has since started allowing its entertainers to be paid in tether (USDT), a stablecoin linked to the U.S. dollar.
• Pornhub has previously announced it would accept both tron (TRX) and horizen (ZEN) for content, too, though its web page currently lists only verge.
• Pornhub has had issues with traditional funding methods in the past, when PayPal suddenly blocked payments to the site without explanation.
• Corey Price, vice president of Pornhub, said at the time the site would look at more cryptocurrency options going forward.

LISTEN: Why This Sex Industry Executive Loves Bitcoin

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• Moderator of Darknet Marketplace AlphaBay Sentenced to 11 Years in Prison

Blockchain Research Institute (BRI), the education and innovation hub founded by father-and-son tech evangelists Don and Alex Tapscott, has opened a European arm.

Announced Wednesday, Blockchain Research Institute Europe (BRIE) launches in partnership with Blockwall, an independent venture capital firm based in Frankfurt, Germany. The new BRIE think tank will bring together a gaggle of European industry leaders, academics, policymakers, entrepreneurs and researchers, according to a joint press statement.

The goal: Getting large companies through the “trough of disillusionment” currently surrounding “enterprise blockchain.”

Related: Is This the Blockchain Firm That Will Get Enterprise to Finally Embrace Open Networks?

“We were not focused on what is typically called enterprise blockchain,” Alex Tapscott said in an interview. “I think that’s just a misnomer.”

Instead, BRI is focused on “blockchain for enterprise,” which offers a wider canvas on which distributed technologies can play out.

“Saying ‘enterprise blockchain’ is like saying ‘enterprise internet.’ There’s just one internet,” Tapscott said. “From the very beginning, we saw public protocols like Bitcoin and Ethereum as being the foundation technology that would be used by enterprises.”

Read more: Salesforce Among 12 New Members to Join Blockchain Research Institute

Related: ‘Boring Is the New Exciting’: How Baseline Protocol Connected With 600 Corporates

One particular area of growth: stablecoins.

“Stablecoins were never part of the enterprise blockchain toolkit until recently,” he said. “From first-hand experience talking to banks, supply chain, shipping and logistics companies, all of them are trying to understand how the stablecoin boom is going to transform enterprise.”

Tapscott said BRIE’s aim is to recruit large European corporates to join the BRI consortium, which includes mainly U.S. member firms like FedEx, Exxon, Coca-Cola, PepsiCo, IBM and Microsoft.

BRIE will be based in Frankfurt and staffed by four or five Blockwall staffers, with a view to hiring dedicated research staff going forward, Tapscott said. BRI has carried out over 150 research projects to date.

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After poking above $1.20 for the first time in more than two years, the euro reversed lower yesterday and is continuing to succumb to profit-taking pressures today.

Bitcoin is facing selling pressure at press time, having failed to move above a long-held resistance level on Tuesday.

• The leading cryptocurrency is currently trading near $11,390, representing a roughly 4% decline on the day, according to CoinDesk’s Bitcoin Price Index.
• Prices dropped by nearly $400 in just minutes, but have bounced slightly at the time of writing.
• The sell-off has coincided with a report that South Korean authorities have seized Bithumb, one of the country’s biggest cryptocurrency exchanges by trading volume.
• “We are seeing a significant unwinding of leverage positions in bitcoin and major alternative cryptocurrencies on Bithumb news,” Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds, told CoinDesk in a WhatsApp chat.

• The bulls failed to establish a foothold above the $12,000 mark on Tuesday.
• The cryptocurrency has failed at least four times to keep gains above $12,000 in the past five weeks.
• Immediate support is located at $11,170; a violation there would confirm a head-and-shoulders breakdown, a bearish technical pattern, on the four-hour chart.
• That possibly cannot be ruled out as the U.S. dollar is showing signs of life.
• Bitcoin has developed a relatively strong negative correlation with the greenback over the past few weeks.
• The dollar index, which tracks the value of the greenback against other major currencies, is now near 92.50 at press time, having clocked a 29-month low of 91.75 on Tuesday.
• “Corrective pressures are giving the greenback a reprieve,” according to Marc Chandler, a former chief currency strategist for the giant British bank HSBC. 

Also read: Bitcoin Miners Saw 23% Revenue Increase in August

Related Stories

• First Mover: Bitcoin Tumbles, Bithumb Reportedly Raided, Uniswap Challenges Coinbase
• Moderator of Darknet Marketplace AlphaBay Sentenced to 11 Years in Prison
• Market Wrap: Bitcoin Breaks $12K; Uniswap Crosses $1.5B Locked
• First Mover: Rookie YFI Token Jumped 8-Fold in August as DeFi Dominated

South Korean authorities have reportedly seized Bithumb, one of the country’s biggest cryptocurrency exchanges by trading volume.

• The Seoul Newspaper reported Wednesday that officers from the Seoul Metropolitan Police Agency’s Intelligent Crime Investigation Unit had raided Bithumb’s headquarters, located in the capital’s central Gangnam District.
• The police action was apparently linked to a $25 million token sale hosted on Bithumb and a proposed acquisition by a Singapore platform, BTHMB, that never materialized.
• Per a report from TheNews, some investors said they lost millions participating in the sale.
• Bithumb’s chairman, Lee Jung-hoon, has been accused of fraud and illicitly sending funds overseas.
• CoinDesk has approached Bithumb for confirmation.
• This is the second raid on a South Korean cryptocurrency exchange in a week.
• Last week, police seized Coinbit – the country’s third-largest exchange – on allegations it had faked most of its trading volumes.
• Bithumb is one of South Korea’s largest cryptocurrency exchanges – 24-hour trading volume stood at over $365 million, according to CoinGecko.
• The exchange appeared to still be active at press time.

See also: Ferrari, McLaren and $15M in Crypto Seized as Chinese Police Bust Arbitrage Scam

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• Crypto Banking Firm Cashaa Eyes India Expansion After $5M Raise
• US Moves to Seize $400M From Convicted OneCoin Money Launderer
• Moderator of Darknet Marketplace AlphaBay Sentenced to 11 Years in Prison

Cashaa, a financial firm describing itself as a “crypto-friendly neo-bank,” has just raised $5 million from Dubai-based blockchain investment and advisory firm 01ex.

• Announced Wednesday, the London, U.K.-based firm said it will soon launch in India and possibly add the rupee to its list of supported currencies alongside the U.S. dollar, the euro and pounds sterling.
• It also offers services for bitcoin, ether, the stablecoin tether and its own Cashaa coin, with more digital assets like XRP and litecoin eyed for addition going forward.
• “India has tremendous potential in its fintech sector. We believe that the next big evolution in the banking and crypto space can actually happen from India,” said Kumar Gaurav, Cashaa CEO and founder.
• Also in the cards is a move into the African and Caribbean markets, the firm said.
• The new investment will, in part, go toward covering the losses from a hack of its Delhi-based over-the-counter (OTC) operation in July of this year.
• The hack saw $3 million stolen, the firm said, adding that users who lost bitcoin in the breach have already been reimbursed from Cashaa’s own funds.
• Cashaa’s general operations were not affected by the attack, which affected only “personal systems,” per the announcement.
• The company previously raised $33 million through a token sale in 2017.
• Cashaa provides banking services to cryptocurrency firms, and says it now has over 100 companies using its beta service.

Also read: Binance Taps DeFi Excitement to ‘Fuel’ Expansion Strategy in India

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• Pornhub Adds Bitcoin and Litecoin Payments for Premium Content
• Police Reportedly Raid Headquarters of Bithumb, South Korea’s Largest Exchange
• US Moves to Seize $400M From Convicted OneCoin Money Launderer
• Moderator of Darknet Marketplace AlphaBay Sentenced to 11 Years in Prison

Trading volumes are surging on Uniswap and other so-called decentralized cryptocurrency exchanges, challenging established venues like Coinbase while driving up fees and congestion on the Ethereum blockchain.    

Uniswap, a semi-automated platform for matching buyers and sellers of cryptocurrencies and other digital assets, saw its trading volume climb to $953.59 million on Tuesday, a more than ten-fold gain over the past month, according to the website uniswap.info. The 24-hour trading volume has crossed above $1 billion – at least 50% higher than daily trading volumes observed on Coinbase Pro, the largest U.S.-based centralized cryptocurrency exchange. 

The rise of decentralized exchanges, or DEXs, represents a new chapter of this year’s boom in decentralized finance. The fast-growing ecosystem, known as DeFi, consists of automatic lending and trading platforms built atop distributed computing networks like Ethereum and constructed from open-source software and programmable cryptocurrencies. They aim to provide more-efficient and less-costly ways of conducting transactions currently handled by banks and traditional exchanges.   

Related: First Mover: Bitcoin Tumbles, Bithumb Reportedly Raided, Uniswap Challenges Coinbase

“It indicates that the DeFi flippening is real and already here,” Denis Vinokourov, head of research at the London-based prime brokerage Bequant, told CoinDesk in a Telegram chat. “Flippening” is crypto jargon, used loosely to indicate the hypothetical moment when one blockchain or digital-asset trend overtakes another. 

Uniswap’s usage has grown so rapidly that it’s taken over the top spot among fee payers on the Ethereum network, where most of the DeFi development is taking place. The total value locked in the DeFi applications, the most common metric for measuring the activity, has increased 13-fold this year to about $9.2 billion, according to the data-tracking website Defi Pulse.

Uniswap has now moved into the top spot in total value locked, at $1.7 billion, CoinDesk reported Tuesday, while overall decentralized exchange volumes nearly tripled in August to $11.6 billion from July levels. 

“As DeFi assets approach $10 billion, one narrative we may see is that crypto is a completely separate, new sphere of economics and finance,” according to a blog post Tuesday by Fintech Blueprint, curated by Lex Sokolin of the Ethereum-focused developer ConsenSys. “It does not need to connect to the old world. It simply needs to be left alone to perform.”

Related: Uniswap Rises to Top of DeFi Charts Thanks to Rival Looking to Unseat It

Traders on Uniswap have paid $5 million (10,805 ETH) in transaction fees in the past 24 hours, according to data source etherscan.io. That’s more than double the amount paid for transfers of the dollar-linked stablecoin tether (USDT), which had been the top contributor, according to ethgasstation.info. 

Uniswap is designed to be more customizable than centralized exchanges like Coinbase. Instead of listing specific assets available for trading on the platform, traders can choose and list the tokens they want to transact in; currently the platform boasts more than 6,020.   

And SushiSwap, a five-day-old unaudited project that’s an adaptation of Uniswap, has already moved into to the No. 3 spot of payers of Ethereum “gas,” which is the unit used to calculate fees for token transfers on the Ethereum blockchain. 

Sushiswap, which went live on Aug. 28, pays out rewards to liquidity providers in its tokens – ticker SUSHI – in addition to a share of trading fees. 

There’s already $81 million of liquidity for sushi on Uniswap, and the 24-hour trading volume of $151.42 million exceeds that of spot-market cryptocurrency trading volumes on mid-tier exchanges like Binance US, Gemini and Poloniex. 

The “fear of missing out” on SUSHI reveals the “the DeFi craze,” according to a report Tuesday from the Norwegian cryptocurrency-analysis firm Arcane Research. 

Press officials for Coinbase, which is reportedly considering an initial public stock offering, didn’t respond to a request for comment.

DeFi has grown so quickly that centralized exchanges from Binance to FTX have rushed to roll out indexes – and new trading contracts like futures and perpetual swaps linked to those indexes – to give investors a way to bet on the industry segment’s growth.

But, according to Vinokourov, DEXs might represent a more existential threat to the centralized exchanges. 

“Those already trading on DEXs fully realize that growth will only accelerate,” Vinokourov told CoinDesk. 

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The U.S. Department of Justice (DoJ) is seeking to confiscate nearly $400 million from the attorney who helped accused crypto Ponzi scheme OneCoin launder hundreds of millions of dollars.

• The U.S. Attorney for the Southern District of New York asked the U.S. District Court judge responsible for sentencing Mark Scott – convicted last November – to impose a “forfeiture money judgment,” in a submission Monday.
• Between 2015 and 2018, Scott created a network of fake investment funds for OneCoin that laundered a total of $392,940,000 – the amount the DoJ is now seeking to reclaim.
• These entities received funds from a series of shell corporations, ostensibly investors, that were actually linked to OneCoin.
• The money was then transferred out as loans that were not repaid or wired to a series of bank accounts, some linked directly to OneCoin founder, Ruja Ignatova – who disappeared in late 2017.
• As payment, Scott transferred $50 million to himself.
• U.S. prosecutors have previously estimated that OneCoin took in more than $4 billion from investors through its cryptocurrency scheme – making it one of the most successful Ponzis ever.
• Scott was found guilty last year on one count of conspiracy to commit money laundering and one count of conspiracy to commit bank fraud.
• Per Monday’s submission, the DoJ wants to freeze Scott’s assets until he has forfeited the near $400 million sum he laundered for OneCoin.
• If approved by the court, the U.S. government will be able to confiscate funds and assets, as well as any other property Scott owns, until the amount has been satisfied.
• This would include several seaside villas, sports cars, jewelry, watches and a yacht that he purchased with proceeds from OneCoin.
• He would also face losing control of the bank accounts that he used to launder OneCoin’s funds.
• Scott faces a prison term of up to 50 years when he’s sentenced on Oct. 9.

See also: Alleged Leader of OneCoin Ponzi Has Sentencing for Money Laundering Adjourned

Read the DoJ submission below:

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The leading organization supporting the Ethereum Classic network hopes to better safeguard against future 51% attacks by going after platforms that rent out hashing power.

• In a Medium post on Tuesday, Ethereum Classic Labs singled out crypto-mining marketplace NiceHash for allegedly facilitating multiple attacks against the network.
• The firm said it would take “all steps necessary to secure the Ethereum Classic network,” including pursuing “legal action against those who conduct or facilitate malicious attacks.”
• It also plans to bring in law enforcement and engage global regulators to provide “accountability” and “transparency” for hash rentals.
• Malicious actors are claimed to have repeatedly purchased hashrate (computer processing power on the network) from the NiceHash marketplace to execute the so-called 51% attacks.
• A 51% attack on a proof-of-work blockchain occurs when an actor manages to take control of the majority of the network’s hashrate (that is, 51% or more) enabling them to reorganize (or rewrite) transactions.
• Ethereum Classic has been hit by three such attacks in the last month, resulting in millions of dollars-worth of its cryptocurrency (ETC) being double spent.
• ETC Labs said is already working with authorities in “relevant jurisdictions,” adding that it will share more information as it becomes available.
• NiceHash is no stranger to controversy, with its former chief financial officer and co-founder Matjaz Skorjanec having been arrested in Germany in late 2019 following U.S. charges that he ran the cybercrime forum Darkode.
• After the first two of the recent attacks caused hashrate to plummet, ETC Labs said in late August it was implementing “a defensive mining strategy” to try and keep levels more consistent.
• While the exact details of the strategy were not revealed at the time due to confidentiality, the initiative failed to stop the third attack.

• The lower the hashrate of a network, the more easy (and affordable) it is to attack.
• ETC’s hashrate has now dropped to its lowest point in over three years – around 1.56 TH/s, according to Ethereum Classic Explorer.
• CoinDesk reached out to ETC Labs for more information on its new legal plan, but had not had a reply by press time.

See also: Ethereum Classic Suffers Second 51% Attack in a Week

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A Colorado man who mediated disputes on the now-defunct darknet marketplace Alphabay has been handed a lengthy prison sentence.

• According to a Tuesday press statement by the U.S. Department of Justice (DoJ), 26-year-old Bryan Connor Herrell received an 11-year prison term from U.S District Court Judge Dale Drozd.
• Herrell was responsible for settling disputes between vendors and consumers concerning trades in illicit goods such as drugs and guns, often paid for using bitcoin.
• He was also responsible for monitoring attempts to defraud users of the darknet marketplace and operated under the monikers “Penissmith” and “Botah.”
• “This sentence serves as further proof criminals cannot hide behind technology,” said U.S. Attorney McGregor Scott.
• People should think again before buying or selling drugs online: “You will be caught,” Scott said.
• Prior to being shut down by the Federal Bureau of Investigation in July 2017, AlphaBay was a popular marketplace for illicit items including stolen identities, credit cards and narcotics.
• In February, 36-year-old Ohio resident Larry Dean Harmon, former CEO of Coin Ninja, was charged by U.S. law enforcement for laundering more than $300 million in bitcoin for AlphaBay.
• Harmon’s family denied he was ever involved directly with AlphaBay with his brother claiming the marketplace used Harmon’s cryptocurrency mixer Helix without his consent or input.
• Mixers allow users to obfuscate the source of a cryptocurrency payment by outputting different coins than are sent in.
• Alphabay users traded using cryptocurrency like bitcoin because payments are outside the banking system and are semi-anonymous.
• However, transactions are traceable on most blockchains and can ultimately be used by law enforcement to link criminals to their activities.

See also: Online Black Markets’ Bitcoin Revenues Take a Hit Amid Pandemic

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Bitcoin’s Lightning Network set a record high Monday as total capacity held in the protocol’s payment channels – sometimes referred to as “total value locked” (TVL) – reached $12.4 million.

• Two weeks ago, Lightning set the prior high of $12.37 million, surpassing the long-standing previous mark of $12.3 million that was reached in early July 2019 and lasted for 405 days.
• Bitcoin’s price appreciation has certainly helped boost Lightning’s TVL as the bellwether cryptocurrency has gained more than 30% since July.

• The total number of bitcoins held on Lightning sits at 1,060, up 24% so far this year, but still remains below the record high of 1,105 BTC set in early May 2019.
• Compared with the tens of millions of dollars pouring into Ethereum and related protocols because of the decentralized finance craze, Lightning’s growth may seem slow, but a variety of data underscores the network’s steady increase in activity.

• The number of publicly broadcasting nodes, for example, has steadily increased throughout the entire lifetime of the protocol. Currently more than 7,600 nodes are connected to payment channels, up 55% from January.
• In August, Lightning’s node count grew 26%, adding 1,581 nodes, representing the largest monthly percentage growth since April 2018 and the largest real monthly growth ever.

• Lightning Labs, the company building the most popular implementation of Lightning, LND, further quantified the network’s growth in a tweet shared earlier in August. Over 70 companies are currently building on LND, the company said.

Read more: Ready to Wumbo: LND Enables More, Larger Bitcoin Transactions on Lightning

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Bitfinex parent iFinex has invested $1 million into Dusk Network – a Dutch-based company looking to create a regulated security token platform.

• Announced in a press release Tuesday, Dusk said the capital would go toward a new exchange that will bring new types of tokenized assets to the European market.
• Details remain thin on the ground, but the proposed exchange will list tokenized financial products such as equities, commodities, bonds and exchange-traded funds (ETFs).
• It will be wholly separate from Dusk Network itself, a spokesperson told CoinDesk.
• The exchange will adhere to the second Markets in Financial Instruments Directive (MiFID II) – an EU regulatory framework for transparency and investor protection – and will, therefore, be able to operate across most of Europe.
• A Dusk spokesperson declined to comment on whether iFinex will receive an equity stake or token share in return for its investment.

See also: SEC Registered Broker-Dealer Is Launching a Security Token-Friendly Platform

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A vampire protocol has driven Uniswap to the top of the decentralized finance (DeFi) charts.

As of roughly 21:00 UTC, the automated market maker (AMM) has $1.65 billion in total value locked, according to DeFi Pulse, unseating lending platform Aave.

Sources with knowledge of the situation tell CoinDesk this is driven largely by a new Uniswap competitor, SushiSwap. One of the newer members of the Weird DeFi cohort is predicated on giving rewards in perpetuity to holders of its SUSHI token.

Related: Yearn.Finance’s New Vault Leverages DeFi ‘Triforce’: ETH, MakerDAO and Curve

Read more: Yearn, YAM and the Rise of Crypto’s ‘Weird DeFi’ Moment

According to an announcement on Medium, for roughly two weeks (100,000 blocks) ahead of launch, Ethereum users who stake liquidity provider (LP) tokens from Uniswap to SushiSwap will get 10X the liquidity mining rewards in the early going (1,000 SUSHI per block now versus 100 SUSHI after launch).

Right now SushiSwap is distributing rewards for LP tokens on ETH pools matched with USDT, USDC, AMPL, DAI, LINK, YFI and others. SUSHI holders will be able to vote-in more pools later.

Liquidity mining is when users get a new token for depositing their assets somewhere. What SushiSwap is doing is new. So, by dumping assets into Uniswap now, DeFi degens can amass LP tokens, which they can dump immediately into Sushi and take advantage of this brief period of extremely generous SUSHI distribution. 

Related: Market Wrap: Bitcoin Breaks $12K; Uniswap Crosses $1.5B Locked

Read more: How DeFi ‘Degens’ Are Gaming Ethereum’s Money Legos

Once the bonus period ends, SushiSwap will redeem all the Uniswap LP tokens and move its rival’s assets over to SuhiSwap’s own pools, which is why some in the community are calling it “vampire mining.”

Whereas Uniswap keeps 3% of every trade and distributes it to liquidity providers, Sushi will distribute 2.5% to liquidity providers and the rest to SUSHI holders.

DeFi Pulse always notes the “dominance” of the leading project. Uniswap dominance currently sits at 17.5%.

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Decentralized finance (DeFi) looks set to gobble Ethereum.

On the Bankless YouTube channel Tuesday, recently departed chief of oracles at MakerDAO, Mariano Conti, spoke about how excited he is to see Yearn.Finance create a vault for yield farming with ether (ETH), the native token of the Ethereum blockchain.

“[Yearn.Finance] is probably the most interesting thing that has happened to DeFi since DeFi started. It revitalized my love for the space,” Conti said during the interview. Conti is one of nine people voted in to serve as members of the multisig securing funds in Yearn.Finance.

Related: Uniswap Rises to Top of DeFi Charts Thanks to Rival Looking to Unseat It

There’s a lot to unpack in the latest development form the $776 million project, but before we do let’s say it the simple way: Yearn.Finance will make it easy for anyone who holds ETH to get involved with yield farming with just one cryptocurrency, ETH. Because Yearn.Finance leans on Curve, previous yield farming endeavors required deposits of various stablecoins.

“It is live today. It is live right now. There is no UI,” Conti said, though he expects the user interface to come this week, maybe within the next 24 hours. A big theme of the Bankless episode is the pace at which code is getting shipped in the Yearn community, as more and more people get involved with writing it and approving it using the governance token.

This could potentially be very big for Ethereum, and ETH is up over 10% since this time yesterday.

Yearn.Finance is sometimes referred to as yEarn, iEarn or just by the name of its governance token, YFI. Only recently released, the token’s market cap has already flirted with $1 billion and YFI improbably traded as high as $38,369 per token on Aug. 31.

Related: ‘DogByte’ Attack Found in ‘Randomness’ Protocol Proof for Ethereum 2.0 Beacon Chain

Read more: First Mover: Rookie YFI Token Jumped 8-Fold in August as DeFi Dominated

In truth, Yearn.Finace is a suite of products that a community of coders is building together. It enables users to deposit assets and let the software find the best yield. (It should be noted a strong community has galvanized behind this project; CoinDesk apologizes for worrying in July that its token name stood for “You Fucking Idiot” but DeFi moves fast.)

One of the big advantages to this method at the present moment is gas savings: by running yield farming operations at scale, Yearn spreads gas costs for multiple operations across lots of users.

DeFi mythology

“This new vault, the yETH vault, I call it the triforce of DeFi,” Conti said.

The triforce is key to the mythology of video game franchise The Legend of Zelda, one that is beloved as a metaphor in geek culture. In this case, Conti is illustrating how yETH brings ETH, MakerDAO and Curve together.

Users will deposit ETH on Yearn, which will in turn deposit it in MakerDAO in order to borrow DAI. The DAI will then be deposited in CRV in order to withdraw its liquidity provider (LP) tokens and earn CRV tokens, both of which can then be plugged into whatever the optimal place to farm them might be.

“You are earning a lot of money on your ETH without losing exposure to your ETH,” Conti said. 

It’s the smart contract equivalent of “set it and forget it.”

Read more: COMP’s Sudden Growth Has Swamped a DEX Dealing Only in Stablecoins

As the Bankless crew discussed on the show, this raises one of those interesting questions for the website DeFi Pulse: will it count yETH as a deposit on MakerDAO or on Yearn? (DeFi Pulse was not immediately ready to make a ruling when contacted by CoinDesk.)

David Hoffman, a frequent crypto Twitter commentator, used a real-estate metaphor to describe the yETH flow. “This is like getting a mortgage to purchase a house and putting a renter into a house in order to pay off that house,” he said.

The real-estate metaphor was natural for Hoffman, who was part of the early team on RealT, which is tokenizing real estate. Hoffman announced on this episode that he’s joined the Bankless team full-time. Ryan Sean Adams is the founder of Mythos Capital and his Bankless brand incorporates a newsletter, podcast and YouTube show.

Aligning incentives

Notably, the writer of the yETH smart contract will earn a small portion of all profits on it. The idea here is that it gives developers an incentive to write strategies for the project, though it also sounds similar to the early days of mutual funds where a large portion of investors’ gains were wiped away by fees, until Vanguard came along and created indices.

“The genius of YFI is they seem to incent everybody to do things,” Adams said.

Read more: Why DeFi Pulse’s Key Metric Is So Simple It’s Confusing

Regardless, the Bankless hosts and Conti agreed that Yearn reflects the intentions of the original decentralized autonomous organization, The DAO, without the disaster (so far).

“It is the version of The DAO that we thought of when we thought of The DAO in [2016]. Except there’s just more of everything,” Hoffman said.

While warning users that this is all risky, the Bankless hosts emphasized this has been quite exciting for Ethereum denizens with the right risk profile.

As Hoffman put it:

“You can just go on Twitter: Every time there’s a new yield farm somebody quits their job.”

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