Blockchain Bites: FATF considers DeFi, Binance Sues and One Step to a BTC ETF

A Deutsche Bank analyst said customers are increasingly preferring bitcoin over gold as a hedge of choice. A market surveillance tool could meet SEC standards to allow a bitcoin ETF. The FATF believes that existing financial precautions may not be suitable for the growing world of DeFi.

Bitcoin ETF
Solidus Labs has developed a market surveillance tool that could become a cornerstone for a bitcoin ETF … someday. For years, the SEC has rejected any proposal for a bitcoin exchange-traded funds that has seen because of concerns that the market is too small to properly monitor, excluding a class of investors who primarily use traditional investment platforms. Solidus’ new tool hopes to solve this problem by collecting data from a range of cryptographic service providers and acting as a kind of information broker, thus presenting a more comprehensive view of the bitcoin market.

Bitcoin> gold
A Deutsche Bank analyst said customers are increasingly preferring bitcoin over gold as an investment of value. “There seems to be a growing demand to use bitcoin where gold was used to cover the risk of the dollar, inflation and other things,” said Jim Reid, managing director, global head of fundamental credit strategy, as quoted by Zerohedge . Bitcoin rose 144% in the year and gold by 22%.

Cash adjacent
A group of Japanese companies said they will develop and test a private digital currency that would work alongside cash. On Thursday, Reuters reported that around 30 companies in sectors such as telecommunications, utilities and retail will conduct tests in 2021. The digital yen would be built on a common settlement platform and issued by banks during the trials, later it could be issued by other entities. “We don’t want to create another silo-type platform. What we want to do is create a framework that can make the various platforms mutually compatible, “Hiromi Yamaoka, president of the group and former executive of the Bank of Japan, told Reuters.

FATF luck?
The Financial Action Task Force (FATF) needs a whole new approach when it comes to controlling cryptocurrencies, particularly in relation to the mandates of the “Travel Rule” watchdog, according to Sian Jones of the FATF. Speaking at the second annual V20 Virtual Asset Service Provider Summit, Jones said, “Proven methods work, in a sense, in the traditional world of money. Arguably, they can be made to fit the world of intermediate cryptocurrencies. Not necessarily adapt to a world in which DeFi are not fit for purpose. “Jones added that digital resources, including the emerging field of decentralized finance, concerning the removal of intermediaries, not necessarily to prevent money laundering or protection of terrorist financing.

Binance sues
Binance has targeted Forbes Media, and two of its reporters, in court in connection with a story that the cryptocurrency exchange giant is engaged in regulatory arbitrage. The lawsuit, filed Wednesday in the United States District Court in New Jersey, charges against Binance by publishing an article last month that “contains numerous false, misleading and defamatory statements.” In particular, Binance has refuted the veracity of a third-party document that served as the basis for many of the article’s claims. Binance, which is no stranger to media squabbles, is seeking punitive damage and that the article be removed.

DeFi or bankruptcy
With the meteoric rise of decentralized finance (DeFi) there has been a similar increase in the number of programmatic exploits. Since the beginning of the year, the DeFi subsector has increased from less than $ 1 billion in total locked-in value (TVL) to $ 13.7 billion, according to DeFi Pulse.

Much of this capital went into a handful of premier smart contracts, MakerDAO, Compound and Uniswap among the first. But it also went into smaller programs, with smaller teams.

Earlier this month, blockchain analytics firm CipherTrace found that nearly $ 100 million worth of cryptocurrencies was plundered by a number of DeFi apps. In fact, these thefts account for nearly 40% of all crypto attacks in the entire industry.

Only in November, malicious attackers have dried up $ 2 million from Akropolis, $ 3.3 million from Bank Cheese, $ 6 million from Value Finance and $ 7 million by Origin Protocol.

Many of these attacks used a new financial technique called flash lending, which allows users to take out unsecured loans from a decentralized program to leverage operations on another platform.

The frequency of the flashes in loans DeFi exploits led some to believe that this tool poorly understood is the root of the problem, but now experts say they are certainly not to blame, says Will Foxley of CoinDesk.

“While many are trying to frame this trend as the result of flash loans, most of these exploits could have been committed by any well-capitalized actor. All a flash loan does is temporarily turn anyone into a well-capitalized actor, ”said Chainlink co-founder Sergery Nazarov.

The real problem lies in poorly constructed smart contracts. In particular, many smaller projects rely on “internal price oracles” which can lead to a mismatch between asset prices within a dapp and the larger market, opening up opportunity arbitrage opportunities.

At worst, attackers can design this arbitrage opportunity using flash loans, but the problem still lies in how a program handles real-time sensitive information.

This is important, especially as US, European and international watchdogs are starting to notice DeFi. Including the amount of attacks, fraud and manipulation.

“When you run [Defi] stuff about the code and you are putting it into circulation, you are missing a step and you may want to test the code, check the code, you may want to do some peer reviews of the code; Sending it live right away without those protections is risky, SEC crypto czar Valerie Szczepanik said at the parallel summit on Sept. 18.

As several cases have shown, audits are not enough to prevent these attacks, Richard Ma, CEO of Quantstamp, told Foxley. “Understanding the products and business logic is much more time-consuming and important than just a code review,” said Ma.

Insurance is a potential breakdown safety. But it will depend on the teams building redundancies, checking and rechecking the code, anticipating gaps, and securing their platforms.

Or, as CipherTrace stated in its report, “it is likely that DeFi will continue to suffer only the consequences of inadequate [anti money laundering protections] and safety. “