March 2022
Crypto gets tested during wartime. What did we observe so far and what lessons can be learned?
As Russia invades Ukraine, Western countries also weaponize the international financial ecosystem through economic sanctions and SWIFT system restrictions against Russia. The Russian stock market crashed along with rapid devaluation of the ruble, losing more than 30% of its value against the dollar. Energy and food supply shortage is making the situation worse, driving up higher inflation expectations.
During uncertain times, cash becomes scarce. Banks in both Russia and Ukraine imposed cash withdrawal limits, making the ATM lines longer. Two Danish journalists have to buy a car with Bitcoin since there was limited access to cash in Ukraine. While crypto price initially dropped as the war began, it soon climbed back after surging demands from Russian and Ukrainian users, pushing Bitcoin price higher in ruble and hryvnia terms. At the same time, crypto donations from an official Ukraine Twitter account has reached over $30 million value.
While these observations are near-term, what about long-term implications?
It may still be too early to make a victorious declaration, but crypto adoption is definitely on the rise as the blockchain technology continues to function without interruption, not by war, economic sanctions, or other restrictions imposed by any centralized authorities. Our hearts go out to the people who are suffering due to this conflict and hope that the world community can continue to progress in peace.
Christian Hsieh, CEO of Tokenomy
One of the most significant hacks in the history of crypto has gone unsolved for almost six years, after an unknown attacker siphoned 3.6 million Ether — worth over $9 billion at current prices — from a decentralized fund known as TheDAO. Now, journalist Laura Shin claims that she may have discovered the person behind it.
As war rages, Ukraine Vice Prime Minister publicly asked crypto exchanges to freeze the accounts of Russianand Belarussian users. Some small Ukrainian exchanges complied with this request, but Binance and Kraken publicly declined.
Cynthia Lummis, US Senator from the Wyoming state, has suggested that the Federal Reserve should hold bitcoin on its balance sheet. Speaking on a panel hosted by the Orrin G. Hatch Foundation, Lummis said, “I think it’s a great idea to be honest” for the Fed to buy bitcoin as it holds over $40 billion in foreign currency reserves.
Russians own more than 16.5 trillion rubles ($214 billion) worth of cryptocurrencies, which is equivalent to about 12% of the total value of global holdings, or a third of the market capitalization of Russia’s benchmark stock index. This data helps explain why the Russian government sees more value in regulating the sector than imposing an outright ban. The Minister of Finance even suggests allowing banks to offer crypto directly to consumers.
Thailand’s tax department has abandoned a plan to impose a 15% withholding tax on crypto transactions, according to the Financial Times. The news comes amid opposition from traders in the country.
The Indian government announced a 30% tax on crypto income, implying de-facto legalization. The finance minister also said a digital rupee will likely be launched in 2022 or 2023. At the same time,tthe governor of the Reserve Bank of India, Shaktikanta Das, said that cryptocurrency “is a big threat to our macroeconomic stability and financial stability.”
According to KPMG’s Pulse of Fintech report, Singapore had a 13x jump in crypto investments, with over $1.48 billion in investment completed in 2021, up from 110 million in 2020.
An unknown hacker exploited a vulnerability in the Wormhole Network, a popular cross-chain protocol, to carry out the second-largest theft from a DeFi protocol ever. Across a series of transactions, the hacker made off with roughly 120,000 Wormhole Ethereum (WeETH) worth over $320 million. Read about the lessons from the wormhole exploit by Chainalysis.
Digital publisher Forbes received a $200 million investment from Binance. Forbes is looking to go public through a merger with Magnum Opus, a special purpose acquisition company (SPAC), under the ticker symbol “FRBS.” The publisher will use the funds to accelerate its digital growth, the company said in a recent press release.
Bitcoin’s transparent public ledger makes it difficult for money laundering. U.S. Federal officials seized some $3.6 billion worth of bitcoin tied to the 2016 hack of the crypto exchange Bitfinex. Two individuals were arrested in New York and 94,000 BTC were seized by the Department of Justice.
Wells Fargo Bank believes that crypto is nearing an inflection point similar to the internet in the late 1990s, where adoption hits critical mass and then goes parabolic. The bank roughly pegs the current phase of the crypto adoption cycle to the internet in 1995 when only 14% of US adults had internet access.
Crypto lender BlockFi to pay $100 million in fines to US regulators. Cryptocurrency lending platform BlockFi is expected to pay $100 million in fines to the Securities and Exchange Commission (SEC) and other state regulators over allegations it illegally offered a high-interest yield product. BlockFi will pay $50 million to the SEC and a further $50 million to 32 state regulators. BlockFi says it is now applying to register with the SEC to offer a new crypto savings product called BlockFi Yield.
JPMorgan stakes a claim in the metaverse with Decentraland lounge. The bank claims to be the first company in the banking industry to enter the metaverse, a vast arena of different virtual worlds that also includes Crypto Voxels and Sandbox.
Mastercard to offer consulting for crypto and digital currencies. Mastercard announced it was expanding its consulting practice to include open banking, open data, crypto & digital currencies, and environment, social & governance (ESG).
Intel unveils new Bitcoin mining chip and 3,600-watt mining rig. At this year’s International Solid-State Circuits Conference (ISSCC), Intel shared tech details for its first-generation “Bonanza Mine” (BMZ1) blockchain accelerator chip, which is expected to save a ton of energy.
- The Federal Reserve Bank of Boston and Massachusetts Institute of Technology release technological research on a central bank digital currency, or CBDC. The published research describes a theoretical high-performance and resilient transaction processor for a CBDC that was developed using open-source research software, OpenCBDC.
- Blockchain transaction research firm Chainalysis issued a 2002 Crypto Crime Report. It finds that illicit activities reached all time high compared to previous years, but at the same time, criminal activities as a percentage of all crypto activities hit all time low.
- Financial advisor Andy Edstrom argues that Bitcoin is the most ESG friendly investment in his clients’ portfolio. Read about his perspective on Bitcoin Magazine, and on Coindesk by Isaiah Douglass.
- Crypto’s biggest whodunnit: who was behind the 2016 DAO attack on Ethereum? Unchained Podcast by Laura Shin and Ehrlich.
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