This week, regulatory affairs continued to be a top concern. Government institutions worked towards creating guidelines to adapt to the ever-changing and evolving world of cryptocurrencies. Meanwhile, the private sector showed interest in non-fungible tokens (NFTs) by collaborating on various projects. Despite these positive advancements, reports of fraudulent activities and security breaches highlighted the importance of implementing strong security measures.
Discord and Twitter compromises
Social accounts of prominent personalities suffered compromises this week. Orbiter Finance’s Discord server fell victim to a breach orchestrated by hackers on June 1. The malicious individuals took advantage of the compromised platform to promote a fake airdrop program.
TCertiK Alert, a reliable blockchain security and analytics platform, quickly informed the community about an incident. They advised the public to avoid clicking on any suspicious links. The hackers had falsely advertised a launch and airdrop of 5,000,000 ORB tokens for members of the Orbiter Finance community. Orbiter Finance acknowledged the breach on Twitter and assured users that they were taking active measures to regain control of their Discord server.
In a separate development on June 2, hackers targeted the Twitter account of Mira Murati, OpenAI’s Chief Technology Officer, promoting a fraudulent crypto scam through a deceptive tweet. Murati quickly regained control of her account and deleted the tweets.
Media personality and CEO of Euro Pacific Capital, Peter Schiff, fell victim to a similar Twitter hack incident when his Twitter account was compromised on June 3. A fraudulent tweet promoting a new cryptocurrency called GOLD was part of a breach. The hackers impersonated Peter Schiff and provided a link for users to click on. However, Schiff’s son, Spencer, raised concerns about the tweet’s authenticity since his father was in London at the time and had not responded to his messages.
Blur is targeted
In a concerning event on the Blur marketplace this week, hackers managed to pilfer 14 valuable non-fungible tokens (NFTs) amidst a surge in global sales. The cybercriminals, operating under aliases like Fake_Phishing156212 and PinkDrainer, targeted the platform as NFT trades saw a significant increase in volume and worth.
Among the stolen collectibles were MetaHeroCore #24, Doodles #1501 and #1504, and five MiladyMakers, obtained for a mere fraction of the original value. The thieves exploited the Ethereum blockchain, paying minimal transaction fees while acquiring these digital assets.
All that glitters…
A crypto influencer on TikTok admitted to wire fraud, money laundering, and aggravated identity theft after scamming lenders and the SBA of more than $1.2 million in PPP and EIDL loans.
The 31-year-old social media star, Denish Sahadevan, also known as Danny Devan online, used the stolen funds to buy and trade securities and cryptocurrency. He had over 26,000 followers on TikTok, where he posted videos offering crypto investment tips.
Amid these hacks and scams, reports from this week suggested that Web3 hacks experienced a sharp decline in May, resulting in a significant 79% drop in losses from the previous month. Although some projects still experienced vulnerabilities, the decentralized finance (DeFi) sector saw fewer rug-pulls and scams.
The UAE and Hong Kong: an unlikely pair
As the cryptocurrency industry expands globally, Asian nations have continued to push for regulatory clarity. This week, the UAE and Hong Kong formed a collaboration to improve their regulatory oversight of this new asset class in light of prevalent regulatory challenges across the world.
The two central banks held a meeting in Abu Dhabi on May 30. They agreed on several areas of collaboration, such as financial market infrastructure, cross-border connectivity, and digital asset regulation. They also announced the creation of a joint working group with participants from the banking sectors of both regions to oversee the enforcement of regulatory requirements for crypto-related businesses.
The partnership was welcomed by the CBUAE Governor, H.E. Khaled Mohamed Balama, and the HKMA Chief Executive, Eddie Yue, who both emphasized the mutual benefits and complementary advantages of working together in this emerging field.
Uncertainty abounds in the US
Meanwhile, back in the United States, industry leaders remain on edge due to regulatory uncertainty. A former executive of the Securities and Exchange Commission (SEC) raised concerns about the activities of crypto influencers and predicted a crackdown by the regulatory body.
The former SEC executive, John Reed, stressed that the anti-fraud provisions applicable to traditional securities would also extend to influencers promoting cryptocurrencies. Reed expressed astonishment at the audacity with which many of these promoters defraud their victims openly.
He cited the case of Francis Sabo, also known as “Ricky Bobby,” who faced securities fraud charges for manipulating equities through social media.
Moreover, Elizabeth Warren, a prominent member of the Senate Banking Committee, demanded an end to crypto fentanyl financing during a Senate hearing. She cited research revealing that over 90 Chinese businesses shipping fentanyl precursors accept cryptocurrency as payment.
Warren suggested that the House bring back the Digital Asset Anti-Money Laundering Act to disrupt the financial channels of the fentanyl trade and curb cryptocurrency payments associated with it. The use of cryptocurrency in financing the fentanyl trade has raised concerns due to its anonymity and the rising number of fentanyl-related overdoses in the United States.
In response to the inherent unpredictability of cryptocurrencies and the associated risks tied to the custody of customers’ digital assets, the US Commodity Futures Trading Commission (CFTC) is considering a comprehensive overhaul of its risk management rules.
Commissioner Christy Goldsmith Romero emphasized the necessity of companies being adequately prepared for the volatility of digital assets and the emergence of novel risks arising from advancements in technologies such as artificial intelligence, cloud services, and digital assets integration within the banking and brokerage sectors. The dynamic nature of these emerging markets prompts a review of risk management measures.
The US looks to make progress
As US investors push to clarify which crypto assets are securities and commodities, reports from June 2 revealed that The US Senate is formulating a bill to restructure and redefine regulations for the cryptocurrency industry.
The proposed legislation aims to reclassify digital assets from securities to commodities, providing clear guidelines and consistency in this evolving landscape. Discussions among bipartisan House committees, Senate members, regulators, and the private sector will focus on market structure reforms and addressing stakeholders’ concerns.
The bill introduces new criteria for decentralized networks, allows token issuers to self-certify decentralization to the SEC with potential objections, and mandates platform registration with the SEC, Commodity Futures Trading Commission (CFTC), or both to ensure regulatory clarity. This move coincides with the European Union’s adoption of comprehensive crypto regulations under the Markets in Crypto-Assets (MiCA) framework.
The European regulatory landscape
This week, a European Parliament-commissioned study recommended treating all digital assets as securities by default and granting legal acknowledgment to decentralized finance (DeFi) protocols. The report suggested categorizing digital assets as transferable securities, subjecting them to comparable rules and authorizations as conventional stocks and bonds unless specified otherwise by national regulators.
In a separate development, the European Banking Authority (EBA) intends to expand guidelines to cover “crypto-asset service providers” to mitigate loopholes exploited for terrorism financing and money laundering. This step aims to regulate and address potential illicit activities effectively.
Feedback on the proposed amendments is encouraged before the August 31 deadline. Furthermore, the EBA highlights additional risks associated with cryptocurrency conversion platforms and operators in high-risk jurisdictions. These actions align with global efforts to regulate cryptocurrencies, mirroring recent initiatives by the European Securities and Markets Authority (ESMA).
A recent fascination with NFTs
US cereal giant Kellogg’s has taken a potential leap into non-fungible tokens (NFTs) by filing twelve trademarks for its well-known brands. The filings, submitted to the US Patent and Trademark Office, suggest Kellogg’s interest in utilizing its intellectual property for NFT creation across various products.
Brands such as Kellogg’s, Froot Loops, Special K, and Pop-Tarts are among those mentioned. It shows the company’s curiosity about exploring the metaverse and the realm of NFTs. While the filings secure Kellogg’s rights in the web3 space, they do not guarantee the launch of NFT or metaverse-related assets.
This week, Japan’s leading airline, All Nippon Airways (ANA), embarked on a new venture by entering the world of non-fungible tokens (NFTs). ANA introduced ANA GranWhale NFT, a marketplace centered around aviation themes. The inaugural collection showcases the remarkable artwork of renowned aerial photographer Luke Ozawa.
ANA aims to unlock the potential of NFTs within the aviation industry, offering customers unique and immersive experiences. The first NFT, featuring Ozawa’s digital photograph accompanied by a film, will be auctioned at a starting price of 100,000 yen. ANA plans to unveil a second collection of NFTs, presenting 3D model airplanes representing their inaugural Boeing 787 aircraft.
Nike also partnered with EA Sports to bring its NFT sneaker collection from the Swoosh web3 marketplace into upcoming EA Sports titles. The collaboration, announced by Nike on June 1, will introduce Nike’s “virtual creations” (NFTs) into popular games like FIFA, Madden NFL, and NBA Live.
Players will have the opportunity to purchase customizable wearable NFTs to enhance their in-game avatars. It bears mentioning that Nike’s foray into NFTs began with the launch of its .swoosh NFT platform in November 2022.