The SCL Times - Volume 17

El Salvador Defiantly Maintains Bitcoin's Legal Tender Status, Ignoring IMF Urges

Grünig Gian

In the framework of President Nayib Bukele's resounding victory in the February 4th elections, El Salvador is standing by its commitment to embrace Bitcoin, despite continued pressure from the International Monetary Fund (IMF).

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El Salvador's Vice President, Félix Ulloa, affirmed in an interview with Reuters that bitcoin will remain legal tender in the country during President Bukele's second term. This stance comes despite the IMF's recent calls for the nation to abandon Bitcoin as legal tender during ongoing negotiations for a billion-dollar loan.

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In its recent report, the IMF acknowledged the importance of digital means of payment for financial inclusion, highlighting the role of the Chivo e-wallet. However, the Fund emphasized the necessity for strict regulation and oversight of the Chivo ecosystem and Bitcoin. The directors urged the Salvadoran authorities to narrow the scope of the Bitcoin law by removing its legal tender status, citing risks to financial stability, integrity, and consumer protection.

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Ulloa countered the IMF's position, asserting that El Salvador's Bitcoin law would not be reversed. He emphasized that the recent approval of spot Bitcoin exchange-traded funds (ETFs) by the SEC only strengthened the country's resolve to maintain Bitcoin's legal tender status. El Salvador had pioneered Bitcoin's status as legal tender alongside the U.S. dollar in September 2021. Despite the opposition, the country has always maintained its commitment to Bitcoin, purchasing significant amounts of cryptocurrencies valued at over $120 million. The introduction of the Freedom Visa program, powered by Bitcoin, has garnered $153 million in investments since December 2023.

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The Salvadoran government, encouraged by Bukele's clear victory in the recent elections, now plans to launch Bitcoin-backed bonds in the first quarter of 2024. With that financial initiative, El Salvador aims to establish a unique Bitcoin-centric capital market, offering investors a 6.5% annual return over ten years.

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In addition to Bitcoin bonds, El Salvador will proceed with the construction of Bitcoin City, a tax-free crypto haven proposed by President Bukele in eastern El Salvador. The government also confirmed the issuance of passports to investors contributing $1 million in cryptocurrency.

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Vice President Felix Ulloa reportedly stated that the country would double down on its pro-Bitcoin moves in Bukele’s second term, indicating a steadfast continuation of El Salvador's innovative and controversial crypto-friendly policies.

BlackRock and Fidelity Bitcoin ETFs Soar into Top 10 with $4.8 Billion January Inflow

Mottis Fabrizio

In a notable turn of events, BlackRock and Fidelity’s spot Bitcoin ETFs snagged spots on the top 10 list for ETFs with the highest January inflows, with a combined total of $4.8 billion. As of Feb. 3, BlackRock’s iShares Bitcoin Trust landed in the eighth spot with $2.6 billion in net inflows?, and Fidelity Wise Origin Bitcoin ETF sat in 10th place with $2.2 billion, according to a Morningstar report. This rise in popularity is in sharp contrast to the Grayscale Bitcoin Trust, which saw the second-highest outflows of any ETF — losing an estimated $5.7 billion.

The U.S. spot Bitcoin ETF landscape has been fast-moving, with nearly $715 million of net positive inflows over the past six consecutive days (first days of February) going into BlackRock and Fidelity's funds - after a period of net outflows. Adding to the complexity, BlackRock and Fidelity's substantial holdings now represent approximately 0.5% of the total Bitcoin supply, signaling a notable endorsement of the cryptocurrency by the traditional financial sectors.

Hacking incident concerning Coinbase

Baruffol Tim

A hacker has allegedly breached KodexGlobal, a critical platform used for data requests by law enforcement agencies. This breach poses a significant threat to personal data across various online platforms, including major cryptocurrency exchanges such as Binance and Coinbase, as well as social media and communication services like LinkedIn and Discord.

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Hudson Rock, a leading provider of cybercrime solutions, has uncovered athe breach and reported it in a blog post on February 4th. The post revealed that the hacker is selling access to the KodexGlobal account on BreachForums for $5,000 for full access or $300 per emergency data request (EDR). he post revealed that the hacker is selling access to the KodexGlobal account on BreachForums for $5,000 for full access or $300 per emergency data request (EDThe services that are vulnerable to these illegal EDRs include LinkedIn, Discord, Tinder, Binance, Coinbase, Chainlink, and SendGrid! If emergency data requests are conducted under false pretenses, they could lead to severe consequences! These could be serious issues, such as identity theft, extortion, and significant financial losses, especially for individuals with cryptocurrency holdings.

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How did the hacker do it? Hudson Rock suspects that the hacker likely exploited credentials from Infostealer infections. Infostealer is a method by which malware harvests confidential information from compromised computers. In this instance, the computers belonged to law enforcement officers. The discovery of over 50 different sets of credentials for Google's law enforcement system compromised through such infections supports this assertion!

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Binance's spokesperson clarified that there is no indication of a compromise on Binance's systems in response to this alarming disclosure. The spokesperson emphasized the exchange's commitment to protecting user data, highlighting thorough documentation and continuous monitoring processes to mitigate the risk of compromised accounts. Despite the unsettling revelations, Binance assures its users that their data is safe and protected against unauthorized access!

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The potential abuse of KodexGlobal for unauthorized data requests raises significant concerns over the security of sensitive user information. KodexGlobal serves as a central platform for lawful data exchanges between businesses, ensuring that requests for user information are legitimate and necessary for law enforcement purposes. The exploitation of such a system could undermine trust in the digital security framework essential for online services, especially those dealing with financial transactions and personal communication.

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In December 2023, a similar threat emerged when a hacker pretended to sell access to Binance's law enforcement portal via KodexGlobal. Although Binance did not confirm any system breaches or data thefts, the incident made it clear that online platforms are under constant threat and the urgent need for robust cybersecurity measures.

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US Energy Information Administration is looking into BTC mining energy consumption

Baruffol Tim

The U.S. Energy Information Administration (EIA) has launched a comprehensive survey of cryptocurrency mining in the United States to shed light on the sector's electricity consumption. The initiative, which has sparked both interest and controversy in the crypto community, is an important step by the government to understand and potentially regulate the impact of digital asset mining on energy consumption.

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Starting this week, the EIA, a major statistical and analytical arm of the US Department of Energy, will contact identified commercial cryptocurrency miners and ask them to provide detailed information about their energy consumption. The survey, which was approved as an emergency data collection by the Office of Management and Budget (OMB) on 26 January, is a sign of the government's growing concern about the environmental footprint of crypto mining activities.

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Joe DeCarolis, the EIA's administrator, stressed the agency's commitment to studying the impact of cryptocurrency mining on energy consumption. "Our goal is to systematically analyse and discuss the evolving energy needs of cryptocurrency mining, identify areas of that are experiencing rapid growth, and evaluate the energy sources that are meeting those needs," DeCarolis explained. The EIA also plans to seek public comment on the data collection to ensure a transparent and comprehensive approach to understanding the industry's energy consumption.

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However, the survey has not met with unanimous approval. Critics argue that it is an overly intrusive measure that could lead to a blanket registration of mining operations, which would raise privacy and operational concerns among miners. Marty Bent, a prominent bBitcoin advocate and mining director, called the initiative "one of the most Orwellian developments this administration has produced," citing fears about the detailed data being requested, including information about mining fleets and hash rates.

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The mining industry's fears are compounded by the EIA's warning of heavy penalties for non-compliance. Companies that fail to comply with the survey could be fined up to $10,633 per day. This provision has led to calls for legal action against what some see as excessive government overreach.

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UK's proposed stablecoin regulations spark industry concerns

Schmidhuber Leonie

The UK's plans to regulate stablecoins have sparked concerns in the crypto industry, with various industry groups calling for revisions. The Bank of England (BoE) and the Financial Conduct Authority (FCA) released discussion papers outlining their regulatory plans for cryptocurrencies that are linked to fiat currencies or other fixed assets. However, feedback from industry stakeholders suggests that the proposals have been met with mixed reactions. Significant revisions are needed.

The main point of contention revolves around the treatment of stablecoin issuers by regulators, particularly in relation to their ability to earn interest on the reserve assets backing the tokens. While the FCA is proposing to allow regulated stablecoin issuers to retain interest income from the assets backing the tokens, the BoE is proposing to require issuers of systemically important stablecoins to hold reserve assets exclusively in the form of central bank reserves, thereby limiting their ability to earn interest.

This discrepancy has raised concerns among industry experts in the UK, with some arguing that it could stifle innovation and growth in the sector. Paul Worthington, Head of Regulatory Affairs at Innovate Finance, highlights that the BoE's approach imposes significant constraints on stablecoin firms, forcing them to rethink their business models if they wish to achieve systemic status. Such a shift, Worthington argues, could potentially limit growth opportunities.

Su Carpenter, operations manager at Crypto UK, shares similar sentiments, pointing to the potential future challenges posed by differing regulatory approaches. The inconsistency between the FCA and the BoE could pose challenges for stablecoin issuers navigating the evolving regulatory landscape.

Another area of concern is the proposed asset backing for stablecoins. The FCA's proposal to limit acceptable collateral to short-term government bonds and cash has been criticised by industry bodies in the UK, who argue that this restriction could hinder issuer flexibility and revenue generation.

Overall, the UK's approach to regulating stablecoins is under scrutiny, with industry stakeholders calling for better coordination between regulators and more flexibility in the regulatory framework. As the crypto industry continues to evolve, finding a balanced approach that encourages innovation while ensuring consumer protection will be crucial for the UK to remain competitive in the global market.

Sources

Lawrence, D. (2024, 5. Februar). Hacker allegedly gains access to law enforcement tool to target user data on Discord, Binance, Coinbase.?Cryptopolitan.?https://www.cryptopolitan.com/de/hacker-verschaffen-sich-angeblich-zugriff-auf-ein-strafverfolgungstool-um-benutzerdaten-auf-der-discord-binance-coinbase-abzugreifen/

Muriuki, L. (2024b, Februar 9). 43 phishing web domains thwarted in London cybercrime bust.?Cryptopolitan.?https://www.cryptopolitan.com/de/43-phishing-webdomains-in-london-vereitelt/

Shumba, C. (2024b, Februar 9). UK’s Planned Stablecoin Rules Need Reworking, Crypto Advocates Say.CoinDesk. https://www.coindesk.com/policy/2024/02/09/uks-planned-stablecoin-rules-need-reworking-crypto-advocates-say/

Adebayo, O. (2024, 9. Februar). United Kingdom groups reject stablecoins bill. Cryptopolitan. https://www.cryptopolitan.com/de/uni-kin-lehnen-stablecoin-gesetz-ab/

Elliott, S. (2024b, February 5). Bitcoin ETFs put BlackRock and Fidelity among January’s top 10 ETFs. Decrypt. https://decrypt.co/215730/bitcoin-etfs-blackrock-fidelity-top-10

Roy, R. (2024, February 5). BlackRock and Fidelity's Bitcoin ETFs break into top 10 with $4.8b January inflow. crypto.news. https://crypto.news/blackrock-and-fidelitys-bitcoin-etfs-break-into-top-10-with-4-8b-january-inflow/

Helms, K. (2024, 3. Februar). El Salvador stands firm on Bitcoin, defying IMF’s renewed call to drop BTC as legal tender. Bitcoin News. https://news.bitcoin.com/el-salvador-stands-firm-on-bitcoin-defying-imfs-renewed-call-to-drop-btc-as-legal-tender/

Adejumo, O. (2024, 5. Februar). El Salvador to expand Bitcoin initiatives following Bukele’s landslide re-election. CryptoSlate. https://cryptoslate.com/el-salvador-to-expand-bitcoin-initiatives-following-bukeles-landslide-re-election/

CryptoSlate. (2023, 24. Juli). Chivo Wallet | CryptoSlate. https://cryptoslate.com/products/chivo-wallet/

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