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Money Laundering Fears, DAO Maker Hack Update, SEC's DeFi Scrutiny, and Balancer's Strategy Pivot
In this episode of "Web3 Finance Flash," we dive into some of the most pressing issues in the world of cryptocurrency and decentralized finance (DeFi). We begin by exploring the growing concerns of compliance professionals regarding crypto money laundering and the challenges businesses face in combating financial crime. Next, we provide an update on the DAO Maker hack, where $600,000 in stablecoins were sent through Tornado Cash. We then discuss the U.S. Securities and Exchange Commission's (SEC) latest move to clarify its stance on DeeFye exchanges and the potential implications for the industry. Finally, we examine Balancer's decision to cut its budget and reduce headcount as it pivots its brand strategy. Join us as we unpack these developments and their impact on the ever-evolving crypto landscape.
Let's jump right in.
In this episode of "Web3 Finance Flash," we dive into some of the most pressing issues in the world of cryptocurrency and decentralized finance (DeFi). We begin by exploring the growing concerns of compliance professionals regarding crypto money laundering and the challenges businesses face in combating financial crime. Next, we provide an update on the DAO Maker hack, where $600,000 in stablecoins were sent through Tornado Cash. We then discuss the U.S. Securities and Exchange Commission's (SEC) latest move to clarify its stance on DeeFye exchanges and the potential implications for the industry. Finally, we examine Balancer's decision to cut its budget and reduce headcount as it pivots its brand strategy. Join us as we unpack these developments and their impact on the ever-evolving crypto landscape.
Let's jump right in.
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What is Web3 Finance Flash: Insights for the Busy Web3 Finance Enthusiast?
"Web3 Finance Flash: Insights for the Busy Web3 Finance Enthusiast" is a podcast presented by CryptoCFOs, the premier members-only community for CPAs, CFOs, Investors, and other finance professionals. Each episode brings you quick and informative updates on the ever-changing world of Web3 finance. Whether you're a busy enthusiast looking to stay informed or a seasoned Web3 finance professional, this podcast provides valuable insights and analysis on the latest developments in the space.
Title: "The Growing Concern of Crypto Money Laundering: Should Compliance Professionals Be Worried?"
In today's news, a recent survey has revealed that 70% of compliance officers are concerned about the threat of crypto money laundering, and they feel only partially equipped to handle it. The survey, conducted by anti-money laundering startup First AML, involved 250 U.K. business leaders in compliance, with 41% of companies reporting witnessing money laundering via cryptocurrencies.
Bion Behdin, the Chief Revenue Officer at First AML, highlighted the challenges businesses face in combating cryptocurrency-related financial crime. He emphasized the need for businesses to stay updated with regulatory guidance and develop new processes to remain compliant.
But is crypto really being used for money laundering? While the public ledger nature of blockchain makes it difficult for criminals to hide money trails, growing public awareness and the rise of on-chain sleuths have put criminal wallets in the spotlight. Law enforcement agencies are actively tracking wallet activities and have had several successes in seizing crypto from criminals.
Last year, authorities seized $25 million in Bitcoin from the Russian darknet marketplace Hydra. Additionally, Europol recently seized nearly $50 million worth of Bitcoin from a money laundering operation. A Chainalysis report also showed a decrease in year-end balances of illicit addresses, down to $2.9 billion in 2022 from around $12 billion in 2021.
In other news, we'd love to hear your thoughts on First AML, crypto money laundering, and more. Join the discussion on our social media channels and let us know how you think this will affect the industry.
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Title: "DAO Maker Hack Update: $600k Stablecoins Sent Through Tornado Cash"
In today's news, an Ethereum wallet address associated with the exploiter of the DAO Maker breach from 2021 has sent $600,000 worth of DAI stablecoin through the coin mixer Tornado Cash. According to blockchain security firm PeckShield, the wallet had been dormant for over 200 days before this recent activity. This movement comes nearly seven months after another wallet linked to the exploiter transferred $500,000 worth of DAI using the same platform, Tornado Cash.
For those who may not be aware, DAO Maker, a fundraising platform for crypto projects (not to be confused with MakerDAO), was exploited in August 2021, resulting in a loss of over $7 million. The attacker exploited a bug in DAO Maker's contract, affecting more than 5,000 accounts holding USDC.
DeFi protocols have been major targets for hackers, especially during the crypto bull run of 2021. In fact, DeFi protocols accounted for over 82% of all digital assets stolen by hackers in 2022, with a recorded loss of $3.1 billion, up from 73.3% in 2021.
In other news, the decentralized finance space continues to face challenges, as seen with the recent exploit on the centralized crypto exchange Bitrue, which reported a loss of $23 million worth of digital assets.
Let us know how you feel about this latest development in the DeFi space and how you think it will affect the industry.
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Title: "SEC Clarifies Its Stance on Decentralized Finance Exchanges"
The U.S. Securities and Exchange Commission (SEC) has taken a significant step toward asserting its authority over decentralized finance (DeFi) projects. On Friday, the SEC voted to clarify that
rules governing securities exchanges in the U.S. can also apply to DeFi projects. The move is not a change to existing rules but rather an effort to explicitly state that existing exchange rules can apply to DeFi. The proposed clarification and amendments to the definition of an exchange are subject to a vote by the Democratic majority commission, making them likely to pass.
SEC Chair Gary Gensler emphasized that many crypto trading platforms already fall under the current definition of an exchange and have a duty to comply with securities laws. He stated that these platforms do not have a choice in whether to comply with the law.
However, Republican appointees to the commission, including Commissioner Hester Peirce and Commissioner Mark Uyeda, strongly dissented with the announcement. They criticized the expansion of exchange definitions to DeFi and questioned the need for more entities to be brought into the regulatory framework for exchanges.
The five-member commission passed the announcement by a vote of 3-2. DeFi projects that facilitate the trading of assets could be considered securities exchanges by the SEC and may face civil charges if they fail to register as national securities exchanges or broker-dealers in the U.S.
The move is intended to provide clarity on the SEC's view of DeFi and may imply that the agency is already investigating certain projects. The SEC does not comment on open investigations, and no specific projects were singled out during a press call.
The SEC is also seeking public comments on the clarification, which can be submitted for 30 days after notice in the Federal Register. SEC Chair Gary Gensler is scheduled to appear before the House Financial Services Committee next week, where he and the SEC may face scrutiny over their handling of crypto firm FTX.
Title: "Balancer Cuts Budget and Reduces Headcount as It Pivots Strategy"
Decentralized finance (DeFi) liquidity protocol Balancer is making significant changes to its operations, including cutting its operating budget and laying off staff, as it seeks to overhaul its brand strategy. During a Thursday community call on Discord, Balancer's service providers announced that the protocol's OpCo, which manages the front end, has laid off two engineers and reduced its budget. The changes come as Balancer shifts its focus to improving its user interface and marketing efforts.
Orb Collective, the service provider responsible for Balancer's design, marketing, and regulatory strategies, plans to build a specialized marketing team that can effectively communicate the mechanics of Balancer to users. The new marketing approach will include a "crypto Twitter-native voice."
Jeremy Musighi, CEO of Orb Collective, expressed excitement about the new vision for the Balancer brand and emphasized the importance of having the right personnel in place to execute the new strategy.
The changes come at a challenging time for Balancer, which has faced broader market pressures. In March, Balancer disclosed that it had exposure to the Euler Finance exploit, resulting in a loss of $11.9 million worth of tokens from its liquidity pools. Additionally, the protocol experienced a read-only reentrancy bug disclosure earlier this year, which deactivated protocol fees for many of its pools and led to missed revenue opportunities during the cryptocurrency market surge in January.