BitGo: Crypto Water Cooler — Dec 6
GM. It’s Wednesday, December 6.
Newsmakers
U.S. Treasury Pushes for Expanded AML Authority
As crypto-related money laundering schemes become more sophisticated, governments find themselves scrambling to keep up. According to Wally Adeyemo, the number two official in the U.S. Department of the Treasury, that’s the reason the Treasury is asking Congress for new resources and expanded anti-money laundering authority.
The U.S. government has previously taken actions to halt crypto money laundering and continues to do so. In October, it disrupted revenues going to Hamas, which included actions against a Gaza-based crypto exchange. Last week, it sanctioned a crypto service accused of laundering millions of dollars for North Korea. To continue to interrupt these types of illicit money flows, the Treasury wants increased enforcement powers to deal with criminals operating beyond American borders — especially groups that use mixers and other “evasive” networks.
Adeyemo provided senior members of Congress with a list of recommendations that he says will be the most significant expansion of ways to respond since 2001. Chief among the requests: secondary sanctions. Not only could the Treasury cut off bad actors from engaging in the U.S. financial system, it could also cut off any organization that keeps doing business with them. Although a relatively new tool , the use of secondary sanctions is not unprecedented.
Adeyemo also asked for a new category under the Bank Secrecy Act that would require crypto exchanges, virtual asset service providers, wallet providers, and some DeFi services and blockchain validator nodes to follow the AML rules that already apply to traditional financial institutions.
Critics say the proposal is an overreach of power and question whether the amounts attributed to terrorist funding are exaggerated. There are also questions about how this legislation could apply to transactions in dollar-pegged stablecoins — even when the transactions don’t involve U.S. “touchpoints.”
Read more →U.S Department of the Treasury
Layer-2 Resurgence Signals Return of Risk Appetite, But Not for Institutions
In a sign that optimism is returning to the crypto market, trading in layer-2s (L2), solutions, or protocols built on top of layer-1 blockchains like Ethereum is heating up. However, institutional interest, which grew steadily throughout the market downturn, has not yet extended to L2s.
The market caps of L2 tokens are relatively small. According to Coinmarketcap, their collective market cap is over $14B at time of writing; the combined market cap of Bitcoin and Ethereum is over $1T. L2s tend to be thinly traded and volatile — the first to drop on negative sentiment and the first to rise when optimism returns. Winners lately include Ethereum L2s Immutable X (IMX), a gaming-focused project, up nearly 70 percent over the past month and 265 percent year to date, and scaling projects Mantle (MNT) (which also just introduced liquid staking), up 40 percent over the past month, and Optimism (OP), up a comparatively muted 18 percent over the past month and 93 percent year to date.
In a category of its own: Blast, a proposed project that would offer “risk free rewards” tied to Ethereum staking. Despite having no product and little else besides the promise of an airdrop in 2024, the Blast contract has reached half a billion dollars in deposits. What it does have: venture backing from prominent crypto VC firms like Paradigm and Standard Crypto and co-founder Tieshun Roquerre (AKA Pacman), a 24-year-old Thiel Fellow and high school and college dropout who also founded Blur , which dethroned OpenSea to become the top NFT marketplace.
As Decrypt explains , “users are locking their funds into a bridge that will eventually connect from Ethereum to Blast — but the Blast network isn’t actually live yet. And those funds cannot be withdrawn until the expected mainnet rollout in February, drawing security concerns due to the industry’s history of network bridges being exploited for vast sums of crypto.”
Blast says that they are using best practices and multisig contracts similar to those used by Optimism and Abritrum; however, these L2s have additional security features. Paradigm’s Dan Robinson took the unusual step of publicly criticizing the project’s rollout, taking to X to write that “we don’t agree with the decision to launch the bridge before the L2, or not to allow withdrawals for three months.”
While social media has been abuzz over Blast, institutional investors are sticking to their knitting. New research from Bybit shows that their typical digital asset portfolio composition is 50 percent Bitcoin and Ether, 45 percent stablecoins, and just five percent allocated to altcoins.
Read more →Reuters
Crypto and AI: Perfect Match or Overhyped Duo?
Ever since ChatGPT debuted in November 2022, conversations about artificial intelligence (AI) have escalated; according to NBC News analysis , since May of 2023, AI is mentioned in S&P 500 earnings calls “as often as the Federal Reserve and interest rates.” However, the Census Bureau has stated that fewer than five percent of U.S. businesses recently used AI in their goods and services. The hype has clearly arrived, including in the digital asset space where “crypto meets AI” coins , and projects have been popping up like mushrooms. AiDoge or ThePepe.ai , anyone?
Rest assured there are potentially more valuable use cases, and Magazine by CoinTelegraph recently published a series of articles exploring them.
Experts interviewed say crypto is a logical payment choice with AI applications. If you’d like an AI-generated opinion, ChatGPT prefers crypto because of its programmability, transparency, traceability, and security. However, as banks continue to integrate AI, fiat may play a larger payment role in the future than experts — and ChatGPT — anticipate.
AI could help run decentralized autonomous organizations (DAOs), which today rely too much on human intervention to live up to their name. AI could be used to monitor a DAO’s activities and summarize relevant information for token holders so they can be informed voters. As AI matures, it could eventually manage logistical tasks such as onboarding new members.
Eventually it may play a role in smart contract audits and cybersecurity . Current AI iterations can help people analyze code but in smart contract auditing — where a “tiny mistake can see a project drained of tens of millions” — not so much. In an experiment with automated token security reviews, twenty-five percent of the time, GPT-4 incorrectly classified high-risk tokens as low-risk.
AI can also help with sorting out fakes — within limits. It can trace the provenance of online content and distinguish images generated by AI, helping people to identify what an author actually said or whether an image is real; verification can then be recorded to a blockchain. But AI can’t yet separate fact from fiction; people still need to decide that for themselves. Future projects to use AI and humans to validate veracity are underway.
Read more →Blockchain-Council.org
News In Brief
领英推荐
Regulation and Security
Business of Crypto
DeFi and Web3
Midweek Market Pulse
Total Market Cap: $1.56T — 7 day change as of Tuesday 12/5/23 Noon EST: +9.9%
The crypto market started December by continuing its strong uptrend with the global market cap increasing by 9.9% to $1.56T as both Bitcoin (BTC, +12.8%) and Ethereum (ETH, +8.9%) hit levels not seen since the spring of 2022.
Bitcoin hit a twenty-month high, smashing through the $40,000 barrier and surpassing $42,000 at time of writing. The largest digital asset by market cap is now up over 156.8% year to date. Data from Coinglass shows an outflow of 8,725 BTC from exchanges — a bullish signal as it implies that investors are looking to hold this BTC for the long term.
Increasing speculation that the Federal Reserve will cut interest rates in 2024 and that the oft-discussed spot Bitcoin ETFs will be approved in the new year helped to fuel the rally. Interestingly, as Bitcoin — sometimes referred to as digital gold — rallies, the price of physical gold simultaneously hit an all-time high of $2,135 per troy ounce on Monday.
Not to be overlooked, ETH also crossed above the $2,200 level for the first time since mid-May. Societe Generale, France’s third-largest bank, issued a digital green bond on the Ethereum network. The tokenized bond was purchased by TradFi institutions AXA and Generali Investments. Additionally, Mantle (MNT, +7.8%) launched its own permissionless, non-custodial liquid staking protocol , Mantle Staked Ether (mETH). Mantle is touting the solution as a “lighter weight, more modern Lido.”
Lastly, popular meme coins from the last cycle like Dogecoin (DOGE, +12.6%) and Shiba Inu (SHIB, +13.0%) also surged to double-digit weekly gains.
The Last Word
Exahashes
Noun
: One quintillion hashes
/ Exahashes per second (EH/s) is used to express the hash rate of Bitcoin — the number of calculations that can be performed per second.
About BitGo
BitGo provides the most secure and scalable solutions for the digital asset economy, offering regulated custody, borrowing and lending, and core infrastructure to investors and builders alike.
Founded in 2013 — the early days of crypto — BitGo pioneered the multi-signature wallet and later built TSS to improve upon other companies’ MPC offerings. Between multi-sig and TSS, BitGo offers the safest technology on the market and safeguards over 600 tokens across a wide variety of blockchains.
Over the years, BitGo has expanded from offering wallets into providing a full-suite solution that lets clients hold assets safely and then put them to work.
BitGo launched BitGo Trust Company in 2018, providing fully regulated, qualified cold storage to complement BitGo Inc’s original hot wallet solution. In 2020, BitGo launched BitGo Prime, which allows its clients to trade, borrow, and lend. Moreover, BitGo also provides access to DeFi, staking, NFT wallets, and beyond, and serves as the world’s sole custodian for WBTC, or wrapped Bitcoin.
Today, BitGo is the leader in digital asset security, custody, and liquidity, providing the operational backbone for more than 1500 institutional clients in over 50 countries — a list that includes many regulated entities and the world’s top cryptocurrency exchanges and platforms. BitGo also processes approximately 20% of all global Bitcoin transactions by value.
For more information, please visit www.bitgo.com .
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