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Cryptocurrency Ban: Russia’s Central Bank Calls for Crackdown on Mining, Transactions

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By Agence France-Presse | Updated: 21 January 2022

The Russian central bank proposed Thursday cracking down on cryptocurrencies, a move which if adopted could disrupt the burgeoning virtual money sector as Russia is one of the largest crypto-mining nations in the world.

Russian authorities have for years criticised cryptocurrencies over fears they can be used for illegal activities and have called for regulation.

Authorities granted cryptocurrencies legal status in 2020, but their use in payments was never authorised.

The Bank of Russia called Thursday for reinforcing the ban on cryptocurrency payments, banning cryptocurrency mining, and tightening laws on trading virtual money.

“The use of cryptocurrencies creates significant threats to the well-being of Russian citizens and the stability of the financial system,” a report published by the central bank said.

It added that the swift growth of cryptocurrencies is driven by “speculative demand” that leads to the forming of a “bubble”.

The report added that cryptos resemble financial “pyramid schemes” because their value increases with the emergence of new players on the market.

It estimated the annual transaction volume of Russian citizens at $5 billion (roughly Rs. 37,270 crore).

Bloomberg earlier cited sources as saying that Russia’s domestic security agency, the FSB, had lobbied central bank head Elvira Nabiulina for a ban.

The FSB cited concerns over Russians frequently using the hard-to-trace transactions to support “undesirable organisations”, such as opposition groups.

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Nvidia to Pay $5.5-Million SEC Penalty for ‘Inadequate Disclosures’ About Cryptomining

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By Reuters | Updated: 7 May 2022

Nvidia Corporation has agreed to pay $5.5 million (roughly Rs. 42 crore) to settle civil charges that the technology firm did not properly disclose the impact of cryptomining on its gaming business, the US Securities and Exchange Commission (SEC) said on Friday.

In back-to-back quarters in fiscal 2018, Nvidia failed to disclose that cryptomining was a “significant element” of its revenue growth from sales of chips designed for gaming, the SEC said in a statement and charging order.

The firm, which did not admit or deny the SEC’s findings, agreed to pay a civil penalty of $5.5 million (roughly Rs. 42 crore). A spokesperson for Santa Clara, California-based Nvidia declined to comment.

In 2018, Nvidia’s chips became popular for cryptomining, the process of obtaining crypto rewards in exchange for verifying transactions on distributed ledgers, the SEC said. The regulator alleged that Nvidia knew that information, but failed to share it with investors.

Those omissions misled investors and analysts who were interested in understanding the impact of cryptomining on Nvidia’s business, the SEC said.

© Thomson Reuters 2022

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California Governor Signs Executive Order to Craft Regulations for Cryptocurrency

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By Associated Press | Updated: 5 May 2022

California, which has a economy larger than all but four countries and where much of the world’s technological innovation is born, on Wednesday became the first state to formally begin examining how to broadly adapt to cryptocurrency and related innovations.

Following a path laid out by President Joe Biden in March, Governor Gavin Newsom signed an executive order for state agencies to move in tandem with the federal government to craft regulations for digital currencies. It also calls for officials to explore incorporating broader blockchain computer coding into the government operations.

Evolving blockchain and cryptocurrency technology “is potentially an explosive creator of new companies and new jobs and new opportunities,” said Dee Dee Myers, a senior advisor to Newsom and director of the Governor’s Office of Business and Economic Development.

“So there are a lot of opportunities,” she said. “There’s also a lot of unknowns in the industry and so that’s another reason we want to engage early.”

Newsom’s order says the state — home to Silicon Valley and financial innovators like PayPal and Square — should be out front in figuring out how to adapt to new technologies.

“Too often government lags behind technological advancements, so we’re getting ahead of the curve on this, laying the foundation to allow for consumers and business to thrive,” Newsom, a Democrat, said in a statement.

California has about 39 million residents and its economy is more than $3.1 trillion (roughly Rs. 2,36,26,340 crore), larger than the United Kingdom and India. Newsom said his order is a step toward making it the nation’s first state “to establish a comprehensive, thoughtful, and harmonized regulatory and business environment for crypto assets.”

Cryptocurrencies, which are built on blockchain database technology, have exploded in popularity in recent years. About 16 percent of US adults have invested in, traded, or used cryptocurrencies and the percentage is much higher among younger men. Biden’s executive order in part asks the Federal Reserve to consider whether it should create its own digital currency.

Blockchain creates the underlying transparency of a decentralised but publicly viewable ledger. The technology can also be used to record other types of information, such as property records. The records are held on many computers that together form a global network so that no one and no institution can control them.

There is heavy disagreement about the legitimacy of cryptocurrency, even among some of the world’s richest people. Elon Musk is an avid supporter of dogecoin while Warren Buffet recently said he wouldn’t pay $25 (roughly Rs. 1,900) for all of the world’s Bitcoin, the most popular cryptocurrency. Each Bitcoin is currently valued at about $38,000 but fluctuates wildly.

California’s approach will help to legitimise the technology and bring it into the mainstream, said cryptocurrency skeptic Hilary Allen, a financial regulation professor at American University in Washington, DC. But she doesn’t think it’s the best approach for the state and its residents.

She said private investors are most likely to benefit, while state government should seek simpler technological solutions rather than turning to technology that “is by its very nature complex and inefficient.”

“While this approach will create more of a market for crypto … it is unlikely to produce the best outcomes for users of public services in California,” Allen said.

California may be first to try to develop a comprehensive approach, but Ohio was the first to attempt to accept virtual currency for government services in 2018, though the program was soon discontinued because few people used it.

Colorado Governor Jared Polis, also a Democrat, said in February that his state would begin accepting cryptocurrency for government services later this year.

California lawmakers are among many around the US who have offered related legislation. But a bill by Democratic Sen. Sydney Kamlager to allow California to accept crypto assets for state services failed in its first committee this year and a similar bill by Republican Assemblyman Jordan Cunningham is stalled.

Similar measures have been introduced in Arizona, Wyoming and other states.

Despite the potential pitfalls of cryptocurrency, Newsom’s order says California should take the lead in figuring out how to adapt to the technological evolution.

His order builds on a July 2020 report by the California Blockchain Working Group, which examined the use of blockchain along with its risks and benefits.

California that same year created a new Department of Financial Protection and Innovation from what had been the Department of Business Oversight, with a goal of evaluating emerging risks and opportunities while protecting consumers.

Newsom’s order calls for the department to develop guidelines for disclosures by companies when they offer financial products and services related to cryptocurrencies. It will also provide guidelines for state-chartered banks and credit unions regarding crypto-related products.

The department will respond to consumer complaints, work with crypto companies to resolve consumer complaints and take enforcement action when needed. It will also publish consumer education materials, including advice on avoiding crypto-related scams and frauds.

Newsom’s order directs a separate agency to solicit proposals for how best to use blockchain to help the state and the public.

“It is critical that we engage early with industry and start learning the pros and cons of innovative technology early,” said Amy Tong, secretary of California’s Government Operations Agency. “We can take the next steps towards getting ahead of the curve and harnessing potential of these tools to make government better.”

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NFTs Said to Be Used in Shanghai to Record COVID-19 Lockdown, Combat Censorship

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By Reuters | Updated: 4 May 2022

Shanghai residents are turning to the blockchain to preserve memories of the city’s month-long COVID-19 lockdown, minting videos, photos, and artworks capturing their ordeal as non-fungible tokens to ensure they can be shared and avoid deletion.

Unable to leave their homes for weeks at a time, many of the city’s 25 million residents have been unleashing their frustrations online, venting about draconian lockdown curbs, and difficulties procuring food, and sharing stories of hardship, such as patients unable to get medical treatment.

That has intensified the cat-and-mouse game with Chinese censors, which have vowed to step up policing of the Internet and group chats to prevent what they describe as rumours and efforts to stoke discord over seething public frustration with the lockdown.

While some people have defiantly continued reposting such content, others are turning to NFT marketplaces like the world’s largest, OpenSea, where users can mint content and buy or sell it using cryptocurrencies, attracted in part by the fact that data recorded on the blockchain is unerasable.

The height of Shanghai’s lockdown minting moment is rooted in April 22, when netizens battled censors overnight to share a six-minute video entitled “The Voice of April”, a montage of voices recorded over the course of the Shanghai outbreak.

As of Monday, 786 different items related to the video can be found on OpenSea, alongside hundreds of other NFTs related to the lockdown in Shanghai.

On April 23, a Chinese Twitter user with the handle imFong said in a widely retweeted post, “I have minted the ‘Voice of April’ video into an NFT and have frozen its metadata. This video will exist forever on the IPFS,” referring to the interplanetary file system, a type of distributed network.

Like most major foreign social media and news platforms, Twitter is blocked in China, although residents can access it using VPNs.

A Shanghai-based programmer told Reuters that he was among those in the city who viewed their effort to keep the video alive as part of a “people’s rebellion”.

He has himself minted an NFT based on a screenshot of Shanghai’s COVID lockdown map, showing how most of the city has been sealed off from the outside world.

“Being stuck at home because of the outbreak leaves me a lot of time,” he said, speaking on the condition of anoymity.

Other Shanghai content available on OpenSea as NFTs for sale includes Weibo posts containing complaints about the curbs, images from inside quarantine centres, and works of art inspired by life under lockdown.

Simon Fong, a 49-year-old freelance designer from Malaysia who has been living in Shanghai for nine years, began creating satirical illustrations on life under lockdown in the style of Mao-era propaganda posters.

He started minting them into NFTs, having dabbled in the market since late last year, and has now managed to sell nine of his works for an average price of 0.1 Ether ($290).

His pieces include scenes dramatising PCR testing, as well as residents’ demands for government rations.

“I chose the Mao-era propaganda style for these pieces because some people are saying that the lockdown situation is taking Shanghai backward,” Fong said.

While China has banned cryptocurrency trading, it sees the blockchain as a promising technology and NFTs have been gaining traction in the country, embraced by state media outlets and even tech companies including Ant Group and Tencent Holdings.

The protracted lockdown in Shanghai, China’s financial hub, is party of Beijing’s controversial zero-COVID strategy, a policy which has growing risks to its economy.

The COVID outbreak in Shanghai, which began in March, has been China’s worst since the early months of the pandemic in 2020. Hundreds of thousands have been infected in the city.

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Finance Minister Sitharaman Says India to Take a Considerate Decision on Crypto Regulation

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By Press Trust of India | Updated: 28 April 2022

Flagging concerns over likely misuse of crypto, Finance Minister Nirmala Sitharaman has said India will take a considerate decision on regulation around the virtual currency. The decision on crypto will not be rushed through, she said in an interaction at Stanford University.

“It will have to take its time…all of us to be sure that at least with a given available information, we’re taking the decision. It can’t be rushed through,” she said.

The minister clarified that the government is open to promote innovation and well-grounded progress made in the distributed ledger technologies, which are coming in the blockchain.

“So, our intention is in no way to hurt this (innovation around cryptocurrency)…but (we need to) define for ourselves…,” she said.

Cryptocurrencies can also be manipulated for money laundering or terror financing, the minister noted.

So, these are some of the concerns, not just India, but many countries of the world have and are also discussed in global, multilateral platforms, she added.

India is planning to introduce central bank-backed digital currency or Central Bank Digital Currency (CBDC).

Sitharaman, in her Budget speech on February 1, had announced that the digital rupee or CBDC would be issued by the RBI in the coming fiscal year.

She had also announced that the government will levy a 30 percent tax on gains made from any other private digital assets from April 1.

Speaking about CBDC, Reserve Bank of India Deputy Governor T Rabi Sankar earlier this month said a nuanced and calibrated approach is essential for the launch of India’s maiden digital currency as it would have various implications for the economy and monetary policy.

The essential learning does not come from global experience but basically comes from your own experience, he had said.

On the merger of HDFC and HDFC Bank, Sitharaman said, it is a good step because India needs a lot more big banks to take care of growing needs for infra financing.

Earlier this month, India’s largest private lender HDFC Bank agreed to take over the biggest domestic mortgage lender in a deal valued at about $40 billion (roughly Rs. 3,06,770 crore), creating a financial services titan in the largest deal in the country’s corporate history.

The proposed entity will have a combined asset base of around Rs. 18 lakh crore. The merger is expected to be completed by the second or third quarter of FY24, subject to regulatory approvals.

The transaction involves the amalgamation of HDFC and its two wholly-owned subsidiaries HDFC Holdings and HDFC Investments with HDFC Bank.

HDFC, as the promoter of HDFC Bank, holds 21 percent in the lender along with the two subsidiaries, which on the merger will be more than double the size of private sector peer ICICI Bank.

With regard to the digital divide, Sitharaman said some steps have been taken to bridge it.

Asked about the under-reporting of COVID death numbers, she said the data that the central government reported was compiled from states.

The revision was due to changes made by the state governments, she said, adding some death that took place at home was updated later by states.

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Cryptocurrency Brings Risk of Money Laundering, Terror Financing: Nirmala Sitharaman

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By ANI | Updated: 19 April 2022

Amidst the pioneering fintech revolution, the biggest risk of cryptocurrency could be money laundering and its use for financing terror, said Union Minister of Finance Nirmala Sitharaman on Monday (local time).

In her address at a seminar during the ongoing spring meet of the International Monetary Fund (IMF), Sitharaman said: “I think the biggest risk for all countries across the board will be the money laundering aspect and also the aspect of currency being used for financing terror.”

“I think regulation using technology is the only answer. Regulation using technology will have to be so adept, that it has to be not behind the curve, but be sure that it is on the top of it. And that’s not possible. If any one country thinks that it can handle it. It has to be across the board,” the Minister said.

The Union Minister reached Washington today morning on an official visit to attend the Spring Meetings at the World Bank, the G20 Finance Ministers meeting and the Central Bank Governor Meeting (FMCBG).

During the first day of the visit, Finance Minister participated in a high-level panel discussion on “Money at a Crossroad” hosted by Kristalina Georgieva, Managing Director, IMF.

“We are at the crossroads around how fast, how far, and in what proportion, but I see this as a one way street in which Digital Money is going to play a bigger role,” the IMF chief said in her opening remarks.

Sitharaman highlighted India’s performance in the digital world and the government’s efforts to build the digital infrastructure framework over the last decade, stressing the increase of the digital adoption rate in India during the COVID-19 pandemic.

“If I use 2019 data, the digital adoption rate in India is about 85 percent. But globally that same year it was only somewhere near 64 percent. So the pandemic time actually helped us to test and prove for ourselves that it is simple to use, common people can use it, and adoption actually was proven,” Sitharaman asserted.

Apart from her official engagements with the World Bank, IMF, G20, and Financial Action Task Force (FATF), Sitharaman on Monday also attended an event at the Atlantic Council, a think tank based in Washington DC.

The visit will also include several bilateral interactions, including with Indonesia, South Korea, Sri Lanka, and South Africa as well as a high-level meeting with World Bank President David Malpass, a Ministry of Finance statement said.

Notably, once the meetings conclude in Washington, Sitharaman will head to San Francisco on April 24, where she will engage with business leaders and will also interact with the faculty and students at Stanford University. She will depart for India on April 27.

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Axie Infinity: US Ties North Korean Hacker Group Lazarus to Major Crypto Theft

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By Reuters | Updated: 15 April 2022

The US has linked North Korean hackers to the theft of hundreds of millions of dollars’ worth of cryptocurrency tied to the popular online game Axie Infinity, the US Treasury Department said on Thursday.

Ronin, a blockchain network that lets users transfer crypto in and out of the game, said digital cash worth almost $615 million (roughly Rs. 4,710 crore) was stolen on March 23.

No one has explicitly assigned blame for the hack, but on Thursday the US Treasury identified a digital currency address used by the hackers as being under the control of a North Korean hacking group often dubbed “Lazarus.”

“The United States is aware that the DPRK has increasingly relied on illicit activities – including cybercrime – to generate revenue for its weapons of mass destruction and ballistic missile programs as it tries to evade robust US and UN sanctions,” a Treasury Department spokesperson said, using the initials of North Korea’s official name.

The spokesperson warned that those transacting with the wallet risk exposure to US sanctions.

Blockchain analytics firms including Chainalysis and Elliptic said the designation confirmed that North Korea was behind the break-in.

A person familiar with the matter confirmed that North Korean hackers had been the focus of the cybersecurity firm’s investigation for the past couple of weeks.

CrowdStrike, which was hired by Sky Mavis to investigate the breach, also declined comment.

Aleksander Larsen, the co-founder of Sky Mavis, which makes Axie Infinity, declined comment.

A post on the official Ronin blog said that the FBI had attributed the hack to the Lazarus Group and that the US Treasury Department has sanctioned the address that received the stolen funds.

The United States says the Lazarus hacking group is controlled by the Reconnaissance General Bureau, North Korea’s primary intelligence bureau. It has been accused of involvement in the “WannaCry” ransomware attacks, hacking of international banks and customer accounts, and the 2014 cyber-attacks on Sony Pictures Entertainment.

The United States is pushing the UN Security Council to blacklist the Lazarus Group and freeze its assets, according to a draft resolution reviewed by Reuters on Wednesday.

Hacks have long plagued crypto platforms. The Ronin hack was one of the largest cryptocurrency heists on record.

Sky Mavis said it would use a combination of its own balance sheet funds and $150 million (roughly Rs. 1,148 crore) raised from investors including Binance to reimburse the lost money.

“We are still in the process of adding additional security measures before redeploying the Ronin Bridge to mitigate future risk,” the Ronin blog said. “Expect the bridge to be deployed by end of month.”

The Treasury spokesperson said Washington will look to publish crypto cybersecurity guidelines to aid in the effort to protect against stolen virtual currency.

© Thomson Reuters 2022

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