Category: Stablecoins

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Crime Crypto Exchange Illegal Stablecoins

Terra Co-founder Do Kwon Denies $39.6M Crypto Asset Freeze

Do Kwon, the CEO of Terraform Labs and the man behind the collapsed LUNA ecosystem, has denied a report from South Korean news outlet News1 claiming local prosecutors have frozen some of his crypto assets valued at 56.2 billion won (US$39.6 million).

In response to the report, Kwon tweeted that it’s a ‘falsehood’ and that he doesn’t have time to trade crypto.

Mounting Reports Matched by Kwon Denials

In his tweet Kwon also denied having accounts on the crypto exchanges KuCoin and OKX — this was a reference to his earlier denial of a September report that South Korean authorities had asked these exchanges to freeze 3,313 Bitcoin (BTC) linked to Kwon held on their platforms. 

Just a day earlier, Bloomberg had reported that South Korean prosecutors were claiming that Interpol had issued a red notice for Kwon, meaning law enforcement organisations globally had been asked to locate and apprehend him if he attempts to cross national borders.

Yet more claims against Kwon were reported back in July, when he was accused of rug pulling LUNA holders by quietly cashing out US$80 million per month in the lead-up to the blockchain’s collapse.

Despite these mounting reports against him and the fact he appears to have gone into hiding, Kwon maintains his innocence and claims to be cooperating with authorities.

Kwon Wanted in Relation to May LUNA Collapse

The legal troubles for Kwon stem from the spectacular collapse of the LUNA ecosystem in May 2022 in which the algorithmic stablecoin UST lost its peg with the US dollar, falling to virtually zero and taking down its sister token LUNA with it. 

This collapse wiped out around US$26 billion of investor value, triggered the collapse of Three Arrows Capital, contributed to the bankruptcy of crypto lenders Voyager and Celsius, and plunged the entire crypto market into a deep winter from which it is yet to emerge.

For his part in LUNA’s collapse, Kwon is now wanted by South Korean authorities for numerous crimes, including breaching the country’s capital-market laws.

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Crypto News Stablecoins Tether

Tether FUD Finally Over Amid Recent Partnership With Top 5 Accounting Firm?

An independent review from global accounting giant BDO has reported that the stablecoin issuer’s total assets exceed its consolidated liabilities. Will the FUD finally go away or stick around independent of evidence?

Top Five Accounting Firm Gives Stamp of Approval

Tether has made available its latest quarterly assurance opinion completed by BDO, a top five-ranked global independent public accounting firm. The attestation reaffirms the accuracy of the firm’s reserves report, which breaks down the assets held by the group as of June 30, 2022.

As of that date, BDO confirmed a more than 58 percent decrease in Tether’s commercial paper holdings over the prior quarter, from US$20 billion to US$8.5 billion. During the same period, the company increased its holdings of cash and bank deposits by 32 percent.

The attestation revealed a continued reduction in commercial paper investments and is said to demonstrate that “the group’s consolidated assets consistently exceed its consolidated liabilities, despite market capitulation in Q2 2022, which led to cascading failures across the industry”.

Further, the note suggests that “emerging from this black swan event [market capitulation, kicked off by Luna], Tether demonstrated its resiliency and continued commitment to transparency, dependability and commitment to removing commercial papers from reserves”.

Management noted that as of June 30, total assets exceeded total liabilities, and highlighted a figure of US$66.2 billion in relation to digital tokens issued.

Paolo Ardoino, Tether CTO, said:

We are fully committed to maintaining our role as the leading stablecoin in the market. Our commitment to transparency and the community is a longstanding pillar in the underlying ethos of the company and aligns with our responsibility as a market leader. We have once again demonstrated that commitment by aligning with BDO, one of the world’s top accounting firms.

Paolo Ardoino, CTO, Tether

‘Tether Truthers’ Silenced

So-called “Tether Truthers” have long asserted that Tether is a fraud and that its collapse would result in the entire crypto market unravelling. To date, that has proven to be a belief lacking in credence, even more so after this latest attestation.

This news would have been poorly viewed by at least one hedge fund, which accumulated a massive short position betting on its its decline. It seems no matter the evidence provided, Tether FUD is one of those persistent issues that are hard to dispose of, once and for all.

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DeFi Hackers Stablecoins

aUSD Depegs by 99% Amid Hacker Issuing 1 Billion Tokens

Another stablecoin has shown itself to be anything but stable after the Polkadot-based DeFi hub Acala Network was hacked on August 14, causing its stablecoin aUSD to suddenly lose around 99 percent of its value:

According to a Twitter thread posted by the Acala Network account, the rapid plunge in value of aUSD was caused by a “misconfiguration” of its iBTC/aUSD liquidity pool that resulted in the minting of over 1.2 billion of new aUSD.

Network Paused in Aftermath

In the aftermath of the breach, an urgent governance vote was taken to pause network activity while Acala Network developers tried to trace exactly what happened and come up with a strategy to resolve the situation:

Acala Network developers also called on any recipients of the erroneously minted aUSD to transfer them to addresses under their control so they could be burned and taken out of circulation, in the hope this might restore aUSD’s peg.

Erroneously Minted aUSD Returned and Burned

Following a hastily arranged community governance referendum on August 16, nearly 1.3 billion erroneously minted aUSD were returned to Acala Network’s Honzon protocol and burned:

While this step has taken many of the newly minted aUSD tokens out of circulation, it hasn’t yet had any impact on the stablecoin’s price – at the time of writing CoinMarketCap was reporting its value as US$0.01, still down 99 percent from its intended peg of US$1.

This depegging event follows on from the June collapse of the Terra-based stablecoin, UST, which triggered further failures of Terra-exposed DeFi projects including the comically named Magic Internet Money.

In the midst of the chaos sparked by Terra’s collapse, Tron founder Justin Sun decided to launch his own algorithmic stablecoin, USDD, which he subsequently had to prop up to the tune of US$2 billion just months after its launch when it too lost its dollar peg.

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Ethereum Stablecoins Tether USD Coin

USDT and USDC Stablecoins Throw Weight Behind ETH’s Transition to Proof-of-Stake

As Ethereum prepares itself for ‘The Merge‘, set for September 19, Tether (USDT) and Circle, issuer of the USDC stablecoin, have pledged their full support for the long-awaited transition.

The Merge will see the platform move from an energy-intensive proof-of-work (PoW) consensus mechanism to a more sustainable proof-of-stake (PoS) mechanism that will improve the efficiency of the project and dramatically reduce its environmental impact.

In a statement released on August 9, Tether labelled the transition one of the “most significant moments in blockchain history”, saying:

Tether believes that in order to avoid any disruption to the community, especially when using our tokens in DeFi projects and platforms, it’s important that the transition to PoS is not weaponised to cause confusion and harm within the ecosystem.

Tether statement

Smooth Transition ‘Essential’ for Long-Term DeFi Health

The firm added: “Tether will closely follow the progress and preparations for this event and will support PoS Ethereum in line with the official schedule. We believe that a smooth transition is essential for the long-term health of the DeFi ecosystem and its platforms, including those using our tokens.”

The announcement from Tether came on the same day as its stablecoin competitor USDC, which announced it would only support Ethereum’s highly anticipated upgrade. The issuer of USDC, Circle, views the Merge as an important milestone in the scaling of Ethereum’s ecosystem, saying in its own statement:

USDC has become a core building block for Ethereum DeFi innovation. It has facilitated the adoption of L2 solutions and helped broaden the set of use cases that today rely on Ethereum’s vast suite of capabilities. We understand the responsibility we have for the Ethereum ecosystem and businesses, developers, and end users that depend on USDC, and we intend to do the right thing.

Circle statement

As Support for Ethereum PoW Fork Increases, Buterin Not Too Bothered

The transition to a PoS blockchain means Ethereum will be effectively eliminating its mining for good, opting instead to rely on a trusted network of validators. While the majority of the community is excited about the upcoming event – none more so than Ethereum co-founder Vitalik Buterin – miners who stand to lose their income are suggesting another potential hard fork will continue the PoW mechanism. Buterin scoffs that proponents of a PoW “want to make a quick buck” and that it is “unlikely to succeed”.

Binance, the world’s largest cryptocurrency exchange by volume, has said it would not rule out support for the controversial fork, saying that while it shares the excitement for the Merge, it would also possibly support the “merge resistors” who plan to continue the use of the PoW mechanism.

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Aave Stablecoins

Aave DAO Approves Creation of Yield-Generating Algorithmic Stablecoin ‘GHO’

The Aave DAO (Decentralised Autonomous Organisation) has approved the creation of a yield-generation stablecoin called GHO.

Aave is one of the most popular crypto lending protocols. Initially launched in the Ethereum ecosystem, it also supports other layer-1 networks such as Avalanche and Fantom.

GHO to be Heavily Backed

As per a July 31 announcement, the GHO proposal was submitted by Aave Companies, an organisation of developers supporting the Aave protocol. The Aave DAO voted 99.9 percent in favour of the creation of GHO, which will be reportedly backed by a basket of cryptocurrencies:

Users keen to mint GHO will have to allocate collaterals exceeding the amount of GHO they want to mint, all while earning interest on the underlying stablecoin. In other words, users have to allocate an overcollateralised supply in order to mint the GHO.

Shortly after the Aave DAO approval was announced, user activity on the Aave network rose to a new 2022 high:

Not Your Average Stablecoin

GHO differs from algorithmic stablecoins, whose business model solely relies on two key factors to maintain parity with a fiat currency: algorithmic mechanisms and the supply and demand of investors. But they are not really backed by any kind of reserves.

Terra was the most popular algorithmic stablecoin that stormed the market throughout 2021 and early 2022. After the protocol crumbled in May, wiping over US$60 billion from the market and spreading contagion to other stablecoin protocols, Terra launched Terra 2.0 in a bid to revive the ecosystem.

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Australia CBDCs Crypto News Cryptocurrency Law Regulation Stablecoins

Reserve Bank of Australia Chief: Private Stablecoins May Be Better Than CBDCs

In a recent panel discussion of the G20 finance officials meeting in Indonesia, Reserve Bank of Australia (RBA) governor Philip Lowe signalled his support for privately issued stablecoins, subject to appropriate consumer protection guardrails.

Private Sector Better Suited to Issuing Digital Dollars?

Just weeks after Australian Treasurer Jim Chalmers said that crypto would remain excluded from foreign currency tax arrangements, RBA head Lowe has said that privately issued stablecoins may be better than central bank digital currencies (CBDCs), provided the relevant companies are suitably regulated.

Treasurer Jim Chalmers (left) and RBA governor Philip Lowe (centre) represent Australia at the the 2022 G20 finance officials meeting. Source: The West Australian

In a panel discussion that included the inherent risks of decentralised finance (DeFi) projects, talk shifted to CBDCs and their potential application in both a retail or wholesale context.

With the recent implosion of “stablecoin” UST and Luna, regulation has come into sharp focus, an issue that no doubt partially informed the RBA chief’s comments on privately issued stablecoins:

If these tokens are going to used widely by the community they are going to need to be backed by the state, or regulated just as we regulate bank deposits.

Philip Lowe, RBA governor

Lowe added: “I tend to think that the private solution is going to be better – if we can get the regulatory arrangements right – because the private sector is better than the central bank at innovating and designing features for these tokens”.

As crypto regulation is one of the newly elected federal government’s stated priorities, those who oppose retail CBDCs on the basis of financial surveillance and infringements on freedom will be pleased to hear that the RBA governor is seemingly more inclined towards a free-market solution. However, that in itself provides no guarantee, as Tether (USDT) and Circle (USDC) have both been accused of censorship in the past.

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Aave Crypto News DAO DeFi Stablecoins

DeFi Giant ‘Aave’ Announces Plans to Launch Own Stablecoin ‘GHO’

DeFi lending platform Aave plans to launch its own stablecoin, GHO, issued on the Ethereum network, the company announced in a blog post.

GHO would be a US dollar-pegged stablecoin over-collateralised by a diversified set of cryptocurrencies of users’ choice against their collateral. The proposal was submitted to the Aave DAO (Decentralised Autonomous Organisation) last week.

Stani Kulechov, founder of Aave, said the community would have to “start from a conservative angle and expand the new facilitators as the strategies become proven and battle-tested in DeFi“:

Interest Payments to Aave DAO Treasury

Users would have to borrow the stablecoin against their crypto funds and over-collateralise it just like any other Aave loan. According to the proposal, all interest payments generated by GHO minters would be transferred to the Aave DAO treasury:

If approved, the introduction of GHO would make stablecoin borrowing on the Aave Protocol more competitive, provide optionality for stablecoin users, and generate additional revenue for the Aave DAO by sending 100 percent of interest payments on GHO borrows to the DAO.

Aave governance proposal

Aave is one of the largest DeFi lending platforms, currently boasting US$6.76 billion in total value locked (TVL). The idea of launching a crypto-backed stablecoin is just one of the safer approaches taken by other cryptocurrency platforms instead of launching algorithmic stablecoins.

One protocol that has decided to back its algorithmic stablecoin is Tron Network, which over-collateralised its USDD stablecoin to prevent a TerraUSD-like collapse.

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CBDCs Crypto News Ripple Stablecoins

Ripple Pushes for Dominance on XRP Ledger, Launches ‘Innovation Challenge’

Ripple, the company behind the cryptocurrency XRP and the XRP Ledger (XRPL), has launched an innovation challenge to encourage the development of XRPL apps for central bank digital currencies (CBDCs). 

Entrants will need to either build a new solution or update an existing solution that uses CBDC tech and can be run on the XRP Ledger. 

Submissions for the challenge will be accepted from June 27 until August 25, with the winners announced on September 8 set to share in US$47,000 in prizes.

Winners of the challenge will then be invited to the Ripple CBDC Innovate Winners Only Event, which has a prize pool of US$150,000.

Challenge to Cover Three Categories

The innovation challenge will accept entries in three categories each with their own separate judging criteria: interoperability, retail-facing, and financial inclusion:

  • The interoperability category encourages entrants to build a solution that enables an XRPL-based CBDC to bridge with other digital assets, such as other CBDCs, NFTs and stablecoins.
  • The retail-facing category requires entrants to build an interface to work with a CBDC in a “hip and fashionable way”, which is accessible enough for any human to interact with.
  • The financial inclusion category instructs entrants to build a solution that can “leverage the benefits of a CBDC” to bring banking services to underserved populations.

Ripple Looking to Secure Dominant CBDC Position

Ripple has been known primarily for its cross-border payment solutions and on-demand liquidity, but recently it has also been making a push into the CBDC space. In addition to this CBDC-focused innovation challenge, last year the government of the Himalayan kingdom of Bhutan enlisted Ripple to pilot a CBDC running on the XRPL, and the Pacific island nation of Palau also partnered with Ripple to create an XRPL-based government-backed stablecoin.

In related news, earlier this year Ripple co-founder Chris Larsen joined forces with Greenpeace in a US$5 million campaign to encourage Bitcoin to abandon its proof-of-work consensus mechanism and transition to a more energy-efficient system such as proof-of-stake.

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Blockchain Crypto News Ethereum Gaming Metaverse NFTs Stablecoins Stratis

Stratis (STRAX) Token Soars 160% Amid NFT, Gaming and Stablecoin Announcement

Ethereum-based, decentralised blockchain platform Stratis has witnessed its native token STRAX rocket 103 percent in one 24-hour period this week, cooling off from a rally that at one point reached 160 percent.

STRAX took off minutes after the project announced a series of updates, including a new ticketing system via which NFTs will be used to validate entry to venues and distribute rewards at events.

Stratis has also foreshadowed several new blockchain-powered video games set to hit its mainnet later this year, along with issuing an update on its launch of a stablecoin pegged to the British pound called Great British Pound Token (GBPT).

PwC to Provide Audit Services for New Stablecoin

The platform is currently working with Price Waterhouse Coopers (PwC) to complete regulatory registration and expects the partnership to be ongoing with PwC providing auditing services for the GBPT stablecoin’s implementation.

According to the Stratis announcement, “With entities like Visa increasingly willing to accept stablecoin payments, there’s a huge opportunity to simplify cross-border and wholesale payments using blockchain technology.”

Prior to this week’s STRAX price rally, the team behind the protocol teased the upcoming launch of Sky Dream Mall, a new metaverse project powered by the Stratis blockchain:

STRAX Defies Market Conditions

All of which is in clear defiance of the current bear market and the onset of the so-called ‘crypto winter’. These are arguably the most positive developments in the sector since April, when blockchain-based music platform Opulous saw the price of its token, OPUL, rally 175 percent after it announced DeFi staking, CEX listings and S-NFT sales.

You’d have to go back even further to find another one-day performance to rival that of STRAX this week. In February this year, the utility and governance token for the DEX Injective Protocol rallied more than 100 percent in a single day following the listing of Cosmos (ATOM) perpetual futures on the platform.

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Australia Banking Ethereum Stablecoins

ANZ Bank Uses Its Stablecoin A$DC to Buy Tokenised Carbon Credits

The stablecoin created by the Australia and New Zealand Banking Group (ANZ), A$DC, has been used by one of its large institutional customers to purchase a tokenised representation of Australian carbon credits, marking a significant milestone for the usage of stablecoins in the Australian economy.

In March, ANZ became the first bank to mint an Australian dollar stablecoin when it created 30 million A$DC, which were used by investment company Victor Smorgon Group (VSG) to significantly speed up and avoid conversion fees on its purchase of crypto assets.

Zerocap Acts as Market Maker

In this latest transaction, ANZ provided the A$DC stablecoin to longtime institutional customer VSG to facilitate the purchase of tokenised carbon credits known as BCAUs from the blockchain-based carbon trading platform BetaCarbon.

Digital asset manager Zerocap was also involved in the transaction, acting as a market maker and providing liquidity to convert VSG’s A$DC, which BetaCarbon doesn’t recognise, into USD Coin (USDC) so it could be accepted by BetaCarbon. Unlike VSG’s previous stablecoin transaction with ANZ, the value of this transaction has not been disclosed.

Using this payment method meant the transaction could be completed entirely on the Ethereum blockchain, removing the need to use any external payment platform such as the Visa network or the new payments platform (NPP), which would have introduced complexity, additional fees and settlement delays.

ANZ Anticipates Big Things for A$DC

ANZ’s A$DC is fully collateralised by Australian dollars and is redeemable at parity with funds held by ANZ in its managed reserve account. 

Unlike algorithmic stablecoins such as Terra-based UST and Tron-based USDD, which have faced huge issues maintaining their pegs to the US dollar, A$DC has no pegging mechanism and there is no risk that it could become de-pegged from the Australian dollar. 

According to Nigel Dobson, ANZ’s head of banking services, the bank’s stablecoin can be thought of more as a “tokenised deposit” than a typical crypto stablecoin.

Speaking to the Australian Financial Review, Dobson said ANZ saw potential for stablecoins like A$DC to help banks and other financial institutions transition to a more efficient blockchain-based infrastructure:

We see this is evolving from being internet-protocol based to one of ‘tokenised’ protocols. We think the underlying infrastructure – efficient, secure, public blockchains – will facilitate transactions, both ones we understand today and new ones that will be more efficient.

Nigel Dobson, head of banking services, ANZ

Ethereum Blockchain of Choice for Now

Dobson added that the Ethereum blockchain was favoured at the moment because it had established a set of de facto standards, including ERC-20 smart contracts. However, he anticipates a possible shift away from Ethereum to other, faster and more sustainable networks, such as Solana or Polygon, as these networks implemented similar standards and matured:

Standards are absolutely fundamental to interoperability, and they will soon allow organisations to transfer assets off expensive, and arguably unsustainable, blockchains to ones with lower cost, faster throughput and sustainability credentials.

Nigel Dobson, head of banking services, ANZ

To date, A$DC has only been used for real-world transactions by VSG, but that’s likely to change soon. Earlier this month, ANZ revealed it was planning to extend access to its stablecoin to a wider range of institutional customers and, in the long term, possibly to retail investors.