Singapore Enforces New Rules on Crypto Businesses

Marina Meza
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Singapore Enforces New Rules on Crypto Businesses

Along with the ban on staking and lending, cryptocurrency exchanges are expected to hold user funds in a Trust.

Crypto sector companies in Singapore face new regulations related to user funds. In this sense, the regulatory agency directed firms to place user funds in a Trust before the end of 2023. This is to avoid an FTX-like scenario where funds are mixed or traded.

The guideline would have been sent this Monday, as announced by the local financial institution. With this measure, the authorities seek to advance in the protection of the users’ assets in crypto trading platforms. This step is a follow-up to a public consultation carried out for this purpose in late 2022, when fears about the cryptocurrency market were running high after several shocks during the winter.

New Rules for Crypto Businesses

The rules applied by the Monetary Authority of Singapore (MAS) cover all companies in the crypto sector that operate in the country, where most of these firms focus on exchange platforms or exchanges.

“This will mitigate the risk of loss or misuse of customer assets and facilitate the recovery of assets in the event of the insolvency of a DPT service provider,” the statement from the regulatory agency reads.

The aforementioned consultation with users revealed that most want segregated deposits. This means that the funds are not kept in the same account as the funds of other users. The objective would be to guarantee transparency. Thus, individual custody segregation could provide clients with greater transparency by allowing them to identify and verify their own trends.

On the other hand, a significant number of users said that the non-segregated deposit was also valid.

In any case, the new regulations must be complied with by crypto companies in a relatively short period of time. Consequently, by the end of the year, the client funds will have to be in a trust.

Other Directives from Authorities

The Monetary Authority of Singapore (MAS), the country’s main financial regulator, will enforce a ban on lending and staking for retail clients (individual traders, as opposed to institutional clients), a move that has been on the table since last October.

Apart from the trust request for crypto companies, the regulatory authorities are promoting another series of regulations. This includes a daily reconciliation of client assets, as well as the maintenance of proper books and records.

Meanwhile, the agency is working on a line to ban cryptocurrency-linked service providers from offering options to retailers. The latter includes participation or access to loans. The institutional ones would continue enjoying these services.

Regarding this last point, the MAS says that some respondents have a slightly more open point of view. Thus, they would agree that options are provided to retail investors, but with certain prior conditions, among which there is the mandatory consent of the retail customer.

Added to this is a risk disclosure, although the agency points out that a large part advocated the prohibition of these “high-risk speculative practices.”

The agency stressed that it will closely monitor market developments to ensure a more balanced environment. Under these premises, companies in the crypto sector must immediately begin preparations to comply with the new regulations.

By Marina Meza

Vitalik Buterin Does Not Stake All of His ETH

Audy Castañeda
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Vitalik Buterin Does Not Stake All of His ETH

Ethereum co-founder Vitalik Buterin confirmed that he does not stake most of his ETH, but only a very small portion.

During his participation in the Bankless Podcast, the co-founder of Ethereum, Vitalik Buterin, confessed that he does not have all of his ETH in stake, claiming that he only spends a very small part due to the complications of carrying out the configuration.

For the expert, multisig wallets are very complex when putting them to work, as these types of wallets are basically a smart contract that allows funds to be blocked. These wallets also require multiple owners to approve transactions.

Cardano founder Charles Hoskinson reacted to Buterin’s words on his Twitter account and stressed that all of his ADA are staked. Although Cardano and Ethereum are rivals, the latter is by far much more popular among the crypto community. Hoskinson added that “all” of his Cardano ADA is staked. He tweeted the following on June 29:

“I had to listen to this a few times. I’m just at a loss for words. All of our ADA is staked. Guess what, that’s how it’s supposed to be for a properly designed Proof of Stake protocol.”

Vitalik Buterin Aims at the Complexity of Multisignatures

On June 29, Vitalik Buterin admitted that he does not have all of his ETH staked, which is curious given that he is the co-founder of Ethereum. However, the expert explains the reasons and says that there are ways to make the blocking less complex, but with a certain degree of risk. Buterin explains it as follows:

“If you stake your ETH, the keys to access it have to be public in an online system. For security, it has to be a Multisig. Multisig for staking is still quite difficult to set up; it gets complicated in many ways”.

Buterin highlighted the advantages of the EigenLayer protocol, which allows both Ethereum validators and participants to “restake” their assets on other emerging networks.

However, this protocol has some notable risks for investors. One of them is centralization, as recognized by the interviewee. For him, this is a challenge that comes before the protocol is even officially launched. So far, it is in the testnet phase, and it is expected to see the light of day in 2023.

Vitalik Buterin’s statement that they do not have their ETH staked may upset the community, regardless of the reasons.

Hoskinson Says That’s Not a Problem in Cardano

Shortly after Vitalik Buterin’s statements, the Cardano leader responded via Twitter. As mentioned above, Hoskinson claimed to have been in complete disbelief after hearing his rival’s claims that he does not stake all the coins he owns.

The founder of EigenLayer, Sreeram Kaanan, admitted that there are complex risks with the restakking issue. In that sense, he said it is important to take a narrow approach. In other words, don’t bet everything on just one protocol.

“The restrictions are the really good point for the ecosystem,” he said. Beyond all this, Vitalik Buterin has clearly no intention of hiding weaknesses, but rather he takes a self-deprecating stance towards Ethereum. Recently, Buterin has highlighted that the Ethereum Blockchain fails utterly by not having a scaling infrastructure that allows cheaper transactions.

By Audy Castaneda

Michael Saylor Is Still a Big Bitcoin Fan

Audy Castañeda
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Michael Saylor Is Still a Big Bitcoin Fan

Saylor’s recent purchase of 12,333 BTC, at an average price of $28,136 per coin, reaffirms the company’s bullish stance on cryptocurrencies.

Former CEO of software giant MicroStrategy Michael Saylor made an appearance at this year’s Miami Bitcoin Conference. He assured that Bitcoin is here to stay and that there is no reason to worry about the prospects of a currency that has, at this stage, clearly proven its worth.

Michael Saylor Still Loves BTC

Saylor addressed the 2022 bear market and did his best to calm investors in the room. It’s unclear at this point if they were worried about Bitcoin’s future, but Saylor was quick to address the situation, letting them know that the technology behind bitcoin is revolutionary and will secure the currency’s place on the financial spectrum. He stated the following:

“The reason why bitcoin is so solid, literally solid, is because it is thermodynamically solid. This is a masterpiece of engineering because we have created a monetary asset in which we have eliminated all counterparty risk.”

He claimed that one of the top reasons why Bitcoin is so “special” is because it is easy to use. Currently, people only need internet connections and digital wallets to appreciate bitcoin and its altcoin cousins. When users try to get access to standard money tools and services, these usually don’t focus on people’s background (employment or financial history, for example). Bitcoin, in contrast, doesn’t really care about that.

With a digital wallet and internet access, one can easily start trading, buying, selling and investing in bitcoins at will. Saylor also said that right now, bitcoin’s “safe haven” status is growing, given how shady and unreliable the rest of the industry has become, following a long series of bank failures including Silicon Valley Bank, Signature Bank and First Republic Bank. He pointed out the following:

“All of those things, which could be viewed in a negative way, are positive for bitcoin because they are speeding up the principal investor’s conclusion that bitcoin is ethically sound, technically sound and economically sound. Bitcoin fixes things. Bitcoin can help everyone.”

He was very positive about the Lightning Network, which is a service that allows many smaller bitcoin transactions to happen off-chain, thus freeing up space on the network and ensuring transactions move faster.

Saylor is a maximalist who believes that Bitcoin has a bright future ahead of it despite the many ups and downs of the past two years. He concluding by asserting that “Bitcoin is here to stay. Bitcoin is the future.”

So Much Love Has Led to Trouble

MicroStrategy is arguably one of the biggest institutional bitcoin supporters. The software giant started trading and buying bitcoins in August 2020, a time when very few companies, especially ones as big as MicroStrategy, were taking such steps. The company bought around $250 million worth of BTC and then added to this purchase just a few weeks later.

In September 2020, the coin experienced a brief bearish bout that saw the price of a BTC drop from $12K to around $10K. It is easy to assume that, in most cases, companies that had been involved in transactions similar to MicroStrategy’s would decide to cut their losses. They’d probably sell their bitcoin units and get out while they could, but MicroStrategy wouldn’t.

Saylor has been investing his company’s reserves in bitcoin since late 2020. While things initially looked positive, by mid-2022, the industry took a nasty turn, but Saylor continued to invest and put his company in debt as a result.

In the last few months, MicroStrategy has lost over a billion dollars in BTC holdings. However, this does not deter Saylor, who has vowed that his company will continue to buy BTC for as long as the coin exists.

By Audy Castaneda

Panama and El Salvador Among the Countries that Charge Less Taxes on Cryptocurrencies

Audy Castañeda
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Panama and El Salvador Among the Countries that Charge Less Taxes on Cryptocurrencies

Meanwhile, Argentina manages a 15% tax on earnings with cryptocurrencies to encourage investment. Dominican Republic and Spain request taxes of 20% to 90% on profits with cryptocurrencies.

According to a study, Panama and El Salvador are the friendliest countries in Latin America when it comes to collecting taxes on cryptocurrencies. In the ranking, there are other countries in the Caribbean Sea region, which maintain a charge close to 0% in taxes related to cryptocurrencies.

The data was compiled by Coincub, an analysis firm, in its 2023 cryptocurrency tax report, which includes a compilation of the policies of different countries around the world, focused on the collection of cryptocurrency-activity taxes.

El Salvador and Panama Stand Out Among the Most Crypto-Friendly Destinations in the World

In their report, Coincub proposed a classification of six different levels, ranging from countries that do not charge taxes, to those that have banned crypto activities altogether. Among the highly positive countries with no taxes on cryptocurrencies, El Salvador and Panama are among the only countries in Latin America.

Since El Salvador approved the Bitcoin Law and made it a legal tender in the country, it has established tax exemptions for Bitcoin. It has further regulated the issuance of digital assets to cover other cryptocurrencies than Bitcoin. In March 2023, it even consented to the elimination of all taxes on Tech industries in the country, including Bitcoin and cryptocurrencies.

Panama, at present, charges little or no taxes to foreign companies that settle in the country. Therefore, by its current tax policy, taxes on cryptocurrencies do not apply, although in 2022, there were quite a few moves to create a cryptocurrency law in Panama. Already approved by congress, it was vetoed by the Executive, and it is awaiting a decision in the Supreme Court of Justice.

Taxes on Cryptocurrencies in Other Hispanic Countries

The next level, Coincub classify countries with low taxation, less than 19%, as regions with a positive vision towards cryptocurrencies, although not at the level of Panama and El Salvador.

In this group is Argentina, where, according to the report, a 15% tax is handled for profits with cryptocurrencies, to encourage investment and avoid tax evasion.

There is also a mention of Mexico, where if the cryptocurrencies were bought by a company, when selling them, a tax of up to 30% applies. Regarding individuals, depending on the earnings, it can fluctuate between 1.92% up to 35%, with the possibility of being exempt.

Puerto Rico is also worth mentioning, as it allows tax exemptions on cryptocurrency earnings, charging only 4% of annual profits to companies registered in the country.

Hispanic Countries Less Friendly to Taxes on Cryptocurrency Gains

There is yet another group that requests a 20 to 90% tax on profits with cryptocurrencies, the Dominican Republic and Spain. In the former case, they have a 27% tax on cryptocurrency earnings and the system is not very transparent.

Spain is a tricky place for cryptocurrency taxes, although its tax system is quite transparent, and taxes can range from 19% to 26%, depending on earnings.

Finally, the report places Colombia and Cuba in the uncertain tax system group. Their systems appear to be ambivalent, even though the respective governments have increased regulation, requiring large percentages of personal income tax.

By Audy Castaneda

Stablecoins are not Stable: Getting a Grip of the Rising Threat

Marina Meza
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Stablecoins are not Stable: Getting a Grip of the Rising Threat

Recent disruptions, such as the loss of Tether’s peg to the dollar and the collapse of TerraUSD, cast doubt on the stability of these digital assets.

The exponential rise of stablecoins, marketed as a stable form of crypto, has sent ripples through the financial world. Touted for their potential to facilitate faster and cheaper transactions, stablecoins have gained popularity among traders and investors.

However, it is becoming increasingly apparent that stablecoins might not be as stable as they claim to be. This could potentially affect individual investors and the financial market in general.

Stablecoins Unexpectedly Not So Stable

Unlike other cryptocurrencies, stablecoins are pegged to an asset, often the US dollar. By tying their value to a less volatile asset, stablecoins seek to offer the best of both worlds: the speed and privacy of cryptocurrency without the price fluctuations.

Actually, the cracks in this model are beginning to show, causing great investor uncertainty and market disruption.

“We found strong evidence of stablecoin instability, although these deviations from the $1 mark gradually correct at different rates for all stablecoins. [Sometimes,] the deviations do not converge even in the long term due to the non-stationarity of the differentiated series between their price and the $1 mark,” concluded Kun Duan, a researcher at Huazhong University of Science and Technology.

Stablecoins have been largely used to enable speculative trading in other crypto assets. Tether and USD Coin, the two largest stablecoins on the market, claim to be fully asset-backed. Transparency and oversight of issuers’ ability to meet redemption requests, though, have come under scrutiny.

Some Major Stablecoins Lose US Dollar Peg

In some cases, regulators have raised concerns about the liquidity, quality, and valuation of reserve assets held by stablecoin issuers. Tether, once considered a beacon of stability, faced a loss of investor confidence. Subsequently, USDT temporarily lost its peg to the US dollar on June 15.

Similarly, TerraUSD, one of the largest algorithmic stablecoins, crashed when it failed to maintain its peg, which led to significant investor withdrawals and the interruption of its stabilization mechanism. These interruptions are not mere flashes, as they demonstrate an inherent vulnerability in stablecoin design, particularly those that are not fully backed by high-quality liquid assets.

“We have a lot of casinos here in the Wild West, and the poker chip is these stablecoins on the casino gaming tables,” said Gary Gensler, chairman of the United States Securities and Exchange Commission (SEC).

The risk of rapid withdrawals of funds may compromise the issuers’ ability to redeem the full amount due to illiquid assets. Such risk is similar to that faced by other financial investment products. Nevertheless, it is magnified for stablecoins due to the opaque and unregulated nature of the crypto ecosystem.

Tether has faced regulatory fines for claims that its stablecoin is “fully backed by US dollars.” It was found to be investing part of its reserves in risky and illiquid assets with only a small cushion of capital. Other large stablecoin issuers have placed restrictions on redemptions, further eroding investor confidence.

To conclude, investing in stablecoins carries both market, liquidity and operational risks, including cyber and fraud risks. Investors have few resources for lost or stolen crypto assets in the current regulatory environment.

The potential impact extends beyond individual investors. As stablecoins become more integrated into the banking sector, they could pose broader risks to financial stability.

By Marina Meza

Ethereum Could Be L2 Tier for Solana, But There Are Risks

Audy Castañeda
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Ethereum Could Be L2 Tier for Solana, But There Are Risks

Ethereum becoming a layer-2 for Solana is “probably more likely than you might think,” says Anatoly Yakovenko, co-founder of Solana Labs.

The CEO and co-founder of the Solana project, Anatoly Yakovenko, commented on Sunday, July 2, the idea of ​​using Ethereum as layer 2 for the Blockchain. In a series of tweets posted on Sunday, Yakovenko took a closer look at how such an integration might take shape, suggesting that technical collaboration is “probably more likely than you might think at first glance.”

Noting that these scaling solutions “are bridging protocols that provide one-way security,” Yakovenko argues that Ethereum being Layer 2 for Solana would mean that holders of SOL assets on the Ethereum Blockchain would have “finality guarantees that they can exit back to Solana, even if Ethereum double spends or creates an invalid state transition.”

Layer 2 solutions, it should be remembered, are designed to solve the problems of scalability and high commissions at times of high load on the network. However, in the case of Solana, using Ethereum as a second layer has a few different advantages.

What Could Make This Work?

Getting this setup to work would require first sending all Ethereum transactions to Solana, according to Yakovenko, as well as sending a simplified payment verification (SPV) for the resulting state, something that would serve as evidence that a consensus has been reached among validators. of Ethereum regarding the state of the network.

Finally, to identify and address potential failures within a bridging protocol, a bridge timeout mechanism will be necessary. Some examples of failures, according to Yakovenko, include conflicting SPVs for the root, invalid root computation, and censorship.

Limitations and Risks of ETH-Based Solana Layer 2

The Solana Labs co-founder highlighted the limitations and potential risks associated with this integration, saying that while it would be safe to hold SOL assets on the Ethereum Blockchain, it will not be safe to “lend or hold positions against them.”

A key risk is the possibility of an Ethereum failure or a controversial social consensus fork within the Ethereum network. In such a scenario, representations of Solana’s assets held on Ethereum could break away from the consensus fork, resulting in a situation where these assets become effectively worthless.

Lending USDC (Circle’s dollar-pegged stablecoin) based on Solana on Ethereum, could lead to a situation where the borrower can withdraw the actual USDC on Solana’s network, while the lender on Ethereum receives a “junk token”.

This scenario, Yakovenko argues, is similar to the experience of holding USDC on Ethereum’s Proof-of-Work (EthPow) chain, where certain tokens may lose value or functionality due to network issues or changes.

Additionally, the integration of Solana assets into Ethereum may have implications for various DeFi protocols. While centralized order books (CLOBs) are likely to continue to function, automated market makers (AMMs) and no-flash borrow and lend protocols could face limitations or challenges, potentially leading to inefficiencies or restrictions in the provision of liquidity and trade.

Yakovenko’s proposal came just after Ethereum co-founder Vitalik Buterin expressed his concerns regarding how US regulators are targeting various cryptocurrency projects, including Solana, which the US Securities and Exchange Commission has labeled as unregistered securities on its recent lawsuit against Binance.

“They don’t deserve it, and if Ethereum ends up ‘winning’ via getting all other Blockchains kicked off exchanges, that’s not an honorable way to win, and in the long run probably not even a win,” Buterin tweeted. last week.

By Audy Castaneda

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