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Here's How the FTX Collapse Turned into an Identity Issue

 

The cryptocurrency love affair has ended. After years of expansion and investment profits, everything came crashing down in November 2022 with the demise of the FTX Trading exchange. The devastation was evident. 

Since then, investors have abandoned cryptocurrency, a steady stream of news reports about collapsed exchanges has been published, and political figures have demonised digital currencies. All of this is justified. 

John J. Ray, the new CEO of FTX, acknowledged to lawmakers that there had been "no record keeping whatsoever" and that the cryptocurrency exchange had effectively participated in "old-fashioned embezzlement" before a hearing of the US House Financial Services Committee in December. 

It makes sense that the public, the press, the markets, and the political class are all incensed. At first look, all this commotion and confusion suggests that there is a fundamental issue with crypto. But this couldn't be further from the truth. 

The exodus away from cryptocurrencies is not a critique of their importance to society or of the blockchain technology that underpins them. The root of the difficulty with encryption is an identification issue. 

Leaving currency behind 

Crypto facilitates transactions online and in the metaverse that would not otherwise be possible. It enables people to preserve ownership over money, data, and other assets in a highly connected digital environment without a centralised authority, together with blockchain. 

However, despite the fact that gaining digital ownership is essential for spurring a wide range of innovation, the FTX collapse has highlighted a dilemma. The digital wallets that stored people's cryptocurrency money have security weaknesses built right in. 

Clients at FTX lacked the only thing that could have safeguarded their money: they did not possess the encryption keys to their digital wallets. The central authority, FTX, did. Furthermore, things got out of control because there were no regulators in place to supervise interactions and transactions. 

Digital wallets control cryptocurrency

Using a crypto-based digital wallet, one can purchase and trade non fungible tokens (NFTs) and other digital assets, as well as use real-world goods in virtual environments and vice versa. 

Although blockchain made it possible for a central authority (such as a bank) to no longer administer digital assets, that authority has typically retained control over the digital wallet that serves as a vault for those assets. This is what made it possible for FTX to access client funds without their permission.

A system that is already in place for proving ownership online and protecting the wallet to that person is what's now missing. Fortunately, the solution isn't difficult to implement or prohibitively expensive. Users have authority over their digital identity and all of its associated elements thanks to self-sovereign identity (SSI). This encompasses NFTs, virtual things, digital money, and more. Consider an SSI as a private and secure digital passport that combines identity information and a wallet for identities. 

The development of a virtual environment that reflects existing trust in the real world depends heavily on SSI. These include the right to own property, the rules and guidelines established by governments and financial organisations to allow the transfer of ownership of commodities and property, and central administrators like escrow firms that handle bigger, more complicated transactions. 

The situation changes from one that is fundamentally risky and unreliable to one that provides a high level of security when using a secure digital wallet. Without it, Web3, the metaverse, and other decentralised token-based developments cannot be fully utilised.

US Secretary of the Treasury Janet Yellen Sued Over Tornado Cash Sanctions

 

The US Treasury Department is facing a second lawsuit after its decision in August to sanction Tornado Cash, a crypto-mixing service that conceals the sources of coin transactions. 

The lawsuit filed Wednesday in the U.S. District Court for the Northern District of Florida asserts the Treasury’s sanctions misused its power and targeted US cryptocurrency investors. 

A crypto advocacy group, Coin Center, and a host of the popular industry podcast Bankless, who relied on Tornado Cash for regular privacy issues, named the 78th United States secretary of the treasury, Janet Yellen, as one of the defendants in their lawsuit. 

“The Administration’s use of the foreign-affairs power to punish domestic cryptocurrency users was unprecedented and unlawful,” the lawsuit reads, referring to the sanctions imposed by the Office of Foreign Asset Control (OFAC). 

Earlier this year in August, the Treasury’s Office of Foreign Assets Control accused Tornado of laundering more than $7 billion of cryptocurrencies since its establishment in 2019, including some virtual currencies siphoned by a North Korea-sponsored hacking group. 

Moreover, the governing agency imposed a ban on crypto wallets linked with Tornado Cash, in addition to a related piece of code known as smart contracts, a type of computer program that automatically executes transactions. 

Tornado Cash is a coin mixing service on the Ethereum (ETH) network created to enhance the privacy of customers. The service was banned by OFAC in August, with the government agency claiming North Korean hackers had laundered hundreds of millions of dollars using the service. 

Last month, the US Treasury Department clarified that the sanctions do not restrict users in the US from viewing and distributing the open-source Tornado Cash code. 

The lawsuit claimed that there are valid reasons for customers to utilize privacy-enhancing technologies such as Tornado Cash. As a result of OFAC’s sanctions against the privacy mixer these individuals now essentially disclose their complete transaction history to anybody who is looking at the network data.

“An order effectively requiring Defendants to decriminalize the use of the 20 Tornado Cash addresses would allow Plaintiffs to conduct their legitimate activities with some measure of anonymity, use their preferred software tool without fear of penalties, and engage in important expressive associations,” the suit added.

Financier Diakonov Called Russia the Future Cryptocurrency Center of the World

 

Mr. Diakonov predicted the future of cryptocurrency and called it a possible alternative to traditional money. "Time will tell how it will be built into the system of international payments and trade," he said.
The financier also stated that Russia can become a cryptocurrency world center since it has the necessary knowledge, capabilities and technologies to create this product. However, it is difficult to guess when this scenario will come to life,since the concepts of cryptocurrencies proposed by the Ministry of Finance and the Central Bank do not reflect the current situation. 

"If the task is to transfer part of the international settlements into the "new currency," in case this instrument will acquire the scale, then sanctions measures from the West may affect it as well. And we may see the next prohibitive measures of an international nature," he explained. 

According to Mr. Diakonov, China, as Russia's largest business partner, is not yet ready to switch to cryptocurrency trading. However, he suggested that the country would start using the digital yuan. "Here we see great prospects for creating new synthetic products that will become a growth point for the economy," he concluded. 

Earlier, the founder and CEO of the world's largest cryptocurrency exchange Binance, Changpeng Zhao, said that next year there will be more transparency in the regulation of crypto-assets, and this is a positive signal for the market. In addition, there will be new options for their use. But the crypto market moves cyclically, and an upturn is followed by a downturn. Whether it happens next year or later is hard to predict. Asset volatility will continue regardless of who comes to the market. "Our personal goal for next year is to get as many licenses around the world as we can; we expect to get 10 to 20 more licenses next year." 

In addition, there will be new ways to use them. But the crypto market moves cyclically, and a period of recovery is followed by a recession – it will happen next year or later, it is difficult to predict. Asset volatility will continue regardless of who comes to the market. "Our personal goal for next year is to get as many licenses around the world as possible. We expect to get another 10-20 licenses next year." 

Earlier, the Ministry of Finance submitted to the government a bill on the legalization of cryptocurrencies. According to the document, Russians will have the right to legally invest up to 600 thousand rubles ($7,600) in cryptocurrency annually. However, this will require special testing.

Banning Crypto Could Lead To The Indian Market Plummeting By Billions?




Crypto-currency if banned in India could lead to the Indian market going down by an approximate amount of $13 Billion, experts say.

An analysis of the revenues that companies could generate if crypto-currency were legalized was made by the experts, which also had a premise of Indian-founded crypto-companies.

Per the sources, the analysis reflected that “as part of their total estimated revenue” in India companies could’ve generated $4.9 billion as on crypto-white papers, $2.1 billion from expert blockchain coders, $1.27 billion from content creators and $4.5 billion from miscellaneous jobs.

According to the experts it sure is quite a herculean and next to impossible task for India to ban the crypto-currency on such a mass level and they’d end up regulating it.

The government of India is on the task of banning and is deliberating it with quite some thought. It also is considering imposing sanctions on any crypto related dealings.

The government still has quite a detailed and elaborate reviewing to go through before they draft a proper legislation.

Despite all the reports and analysis displayed by the experts the government has quite a strong will to go with the drafting of the bill that bans the crypto-currency and associated dealings.