Hack VC Leads imgnAI in a $1.6 million Seed Funding Round

In a recent report, the renowned crypto-oriented AI platform imgnAI raised $1.6 million in a seed funding round. The successful fundraising was led by Hack VC and Rana Capital. Other participants of the seed funding round included Selini Capital, Motus Capital,dao5 and West Ham Capital. 

The company confirmed that the multi-million dollar capital will be used to expand its core business. Firstly, the imgnAI plans to enhance its infrastructure capacity to optimize operations. 

imgnAI Nets $1.6M in Seed Funding Round

The imgnAI believes that upgrading the existing infrastructure will enable the company to support product development. With the increased demand for AI-inspired products, the imgnAI plans to invest the capital in its ongoing marketing campaign.

In the statement, the AI-fueled image generation bot has sought to reach a sustainable customer base for the past two years. This forced the imgnAI to leverage its marketing capabilities to promote its products. 

Besides the marketing efforts, the imgnAI will use the investment to develop a digital collectible product dubbed Naifu. Currently, the imgnAI developers are working on completing the development of Naifu to offer the user high-performance text and images. 

An announcement conveyed by the chief executive of imgnAI, Thelema, confessed that the company’s primary objective was to develop unique products that meet the customers’ needs. 

imgnAI Reveal Next Move

The CEO confessed that imgnAI’s ongoing projects seek to push for the mainstream adoption of crypto assets. Thelema was pleased to state that the continuing development of AI products enabled its flagship image generation product, Nai, to attract a large audience. 

A review of the imgnAI website demonstrated that Nai has a thousand active users. The report indicated that over 23,000 Telegram users and 87,000 Discord servers have adopted the imgnAI Nai platform. 

Besides gaining a considerable share in the vibrant AI industry, the imgnAI plans to integrate artificial intelligence technology with crypto to meet the ever-changing market demand. 

In 2022, imgnAI launched its crypto token IMGNAI to offer customers a fast and convenient method to complete transactions. Shortly after launching, the developer of IMGNAI integrated additional features on the token to enable the user to unlock premium functions. 

Benefits of Integrating AI with Crypto

Also, the team behind the IMGNAI allowed the user to mint images as digital collectibles. The development of the imgnAI ecosystem aimed at creating user-friendly AI devices. 

A statement from the Hack VC general partner, Roshum Patel, confirmed that imgnAI’s latest development aims to provide artists with a platform to create their work. The executive confessed that the imgnAI seeks to strengthen the interaction of AI and crypto technologies.

The imgnAI seed funding round coincides with the Bangel Network pre-seed funding round that generated $3.1 million. Reportedly, the Bagel funding round was led by CoinFund.

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Coinbase Lobby Group Unveil 18 Pro-Senators in US

The rise of financial crime has forced US regulators to step up and supervise the crypto industry. The attempt to shield the customers from exploitative business activities impacted the enforcement of stringent regulations for digital assets. 

The ongoing clampdown on crypto assets in the US forced some policymakers to fight back the anti-crypto spirit. In a recent study, the Coinbase non-profit arm Stand with Crypto examined the number of pro-crypto legislators in the US.

US Senators Supporting Crypto

The Coinbase team noted that the number of policymakers supporting cryptocurrency increased year-over-year. The report findings demonstrated that around 18 senators from different states in the US supported crypto and blockchain technologies. 

Notably, the Stand with Crypto group observed that the Republican Senators Cynthia Lummis and her colleague Ted Burr demonstrated their positive crypto stance. The report labelled Lummis and Burr as the active crypto die-hards in the US Senate. 

Lummis has formulated around eight crypto bills and issued 184 public statements on digital assets. Similarly, Burr drafted eight crypto bills and 24 public statements. 

A review of Lummis and Burr’s crypto bill demonstrated that digital assets have enormous potential to promote financial inclusivity in the US. The Stand with Crypto team ranked the members of the Republican Ted Cruz and Bill Hagerty among the top five pro-crypto senators.

The report demonstrated that Cruz and Hagerty had co-authored around five bills on digital assets and issued 92 public statements. With the ongoing crypto campaigns, Cruz and Hagerty convinced the other US politicians that crypto would drive innovation to the financial sector.

Assessing the Attractiveness of the US Crypto Market

In their report, the pro-crypto senators explained that the benefits of digital assets outweigh their shortcomings. The Stand with Crypto team noted that the number of pro-crypto senators increased to 18. 

The report indicates that 14 senators are Republican and 4 Democrats. The increase in crypto supporters demonstrated that US policymakers seek to create a friendly environment for digital assets.

However, the 18 senators must challenge 30 policymakers spreading the anti-crypto campaigns on the need to create an attractive environment for digital assets. In the meantime, 30 senators have vehemently opposed using crypto assets due to the risk associated with these investments. 

According to Tracker, 23 Democrats, 5 Republicans, and 2 Independent candidates have been against the use of crypto assets. In their recent statement, the anti-crypto senators cautioned the investors on the risk related to digital assets. 

Also, the 30 senators noted that financial criminals were using crypto to conduct illicit activities, including terrorism financing and money laundering. Based on the shortcomings of crypto assets, US policymakers warned investors to be vigilant when investing in risky ventures.

US Senators Propose New Regulation for Digital Assets

The Tracker report demonstrated that the presidential aspirants, including Donald Trump and Robert F. Kennedy Jr, will support digital assets if they win the upcoming election. Kennedy used the Bitcoin theme in the ongoing campaigns to launch his manifesto. 

Consecutively, Trump vowed to enforce new legislation for digital assets if he ascended office. On the contrary the current administration led President Joe Biden demonstrated its anti-crypto stance. President Biden has made several public statements against digital assets.

Also, Massachusetts Senator Elizabeth Warren has been against crypto assets for a long time. The Stand with Crypto team noted that Senator Warren submitted three anti-crypto bills.

In her address, Senator Warren urged the regulators to enforce adequate anti-money laundering measures to restore financial integrity. In July, Senator Warren formulated the Digital Asset Anti-Money Laundering Act to clamp down on custodial digital wallets.

A review of Senator Warren’s bill demonstrated the new provision would extend the Bank Secrecy Act to digital assets to combat the use of crypto assets in illicit activities. The report showed that Warren’s bill received support from other policymakers and advocacy groups seeking effective strategies to address financial crime.

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Stellar Foundation Delays Protocol 20 Upgrade to Fix Bug

In an official publication, the Stellar Development Foundation (SDF) revealed plans to postpone the network upgrade to a later date after the developers discovered a bug. Initially, the Stellar community planned to integrate the Ethereum smart contract into its blockchain network on January 30. 

With the ongoing developments on the blockchain network, the developers discovered a bug in Stellar’s Core v20.1.0.

Significance of Stellar Protocol 20 Upgrade

After careful consideration, the Stellar technical team noted that the bug could directly affect the operation of the application and services offered by its new Soroban blockchain project. 

The project was unveiled last year to give the Stellar network a facelift. Primarily, the Protocol 20 upgrade will involve integrating additional smart contracts to allow the developers to build their applications seamlessly. 

The developers anticipate the completion of the upgrade will become the most significant upgrade in the history of Stellar. In an earlier interview, the Soroban project leader Tomer Weller envisioned the growth of decentralized finance (DeFi) in the coming days. 

The executive confessed that to support the growth of the DeFi ecosystem, it was important for the Stellar network to undergo an upgrade. Weller believed that the Protocol 20 upgrade could increase the activity on the Stellar network. 

Development on Stellar Network

Stellar ranks among the oldest blockchain networks created in 2014, when crypto was still a new concept. However, with the ongoing development in the crypto industry, the Stellar network seeks to build an innovative smart contract blockchain for developers. 

This forced the Stellar team to launch the Soroban projects last year. After a lengthy process of building the Soroban, the project team anticipated completing the upgrade on January 30. However, the plans to launch Protocol 20 upgrade seem impossible due to a bug in the network.

In a January 25 blog post, the developers agreed to prioritize fixing the bug. Based on the nature of the bug, the Stellar technical team anticipates that the expected upgrade will be ready in two weeks. 

Before the expected upgrade, the Stellar team took preventive measures to safeguard the blockchain network from further damage. In the report, developers confirmed that the bug posed “little risk” that would hinder the rollout plan. 

The discovery of the bug compelled the developers to consult the SDF community concerning the expected Stellar upgrade. Based on the robust responses from the SDF community, the team behind the Soroban project agreed to disarm the Stellar validators and stop the proposed January 30 community voting.

SDF Postponing Protocol 20 Upgrade

In an email statement dated January 28, the SDF spokesperson stated that six out of seven tier-1 validators agreed to disarm the validators, including SDF Satoshipay, Whalestck, Lobstr, Blockdeamon and Public Node. The spokesperson anticipates other validators will provide feedback concerning the expected Stellar upgrade. 

He added that the Protocol 20 upgrade will be postponed even if the other validators vote for the upgrade. The spokesperson anticipates the SDF will communicate the official date for the Protocol 20 upgrade.

In the meantime, the SDF will fix the bug while holding internal discussions concerning the upgrade. The SDF restated that the ongoing voting for the upgrade required a quorum to allow the foundation to decide whether the Protocol 20 upgrade should proceed.

A review of the Stellar website demonstrated that around 43 validator nodes are available on the network. In a subsequent report, the SDF team claimed that the bug occurs when a transaction request is made on the Soroban protocol. 

The report demonstrated that Soroban transaction requests commanding for a refund and fee-bumped interfere with the program. After assessing the bug, the SDF team observed that the existing code does not send the refund request to the fee-bump account as required.

The SDF confirmed that the Soroban has been in operation since last October. After the launch of Soroban, the Stellar team has been working on engineering the protocol to attract a large audience. Additionally, the SDF plans to launch a $100 million fund to support the developers building on Soroban.

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TD Cowen Analysts Say Ethereum ETF Will Not Happen Till 2025

Despite the securities and exchange commission (SEC)’s skepticism around cryptocurrencies, there has been some optimism that Ethereum ETFs may be approved soon.

The optimism is coming after the SEC approved 11 spot Bitcoin ETFs earlier this month. However, Investment bank TD Cowen says this isn’t likely to happen until late 2025. The bank earlier stated that the approval could come in November 2024 after the U.S general elections.

However, considering the trends surrounding the regulatory space, TD Cowen has changed its estimation, expecting the approval to come either by late 2025 or early 2026.

“We do not expect the SEC in 2024 to approve a spot Ethereum ETF,” TD Cowen Washington Research Group, led by Jaret Seiberg, wrote in a note on Monday. “This is a political call. We believe there is no upside for SEC Chair Gary Gensler to approve a spot Ethereum ETF given how upset progressive Democrats were over the agency’s approval of a spot bitcoin ETF earlier this month.”

The bank maintains that SEC chair Gary Gensler is not in a hurry to approve an Ethereum ETF because he needs the support of progressives for his agenda both before and after the election this year.

So, “there is no reason to provoke a needless fight,” TD Cowen said. “We say needless, as our view remains that Gensler is in no hurry to approve an Ethereum ETF as he would first like more experience with the performance of the recently approved spot Bitcoin ETFs. This is consistent with his broader approach to crypto, which is to move incrementally and slowly when it comes to providing regulatory approvals or clarity,” it further stated.

The Optimists

Several applications have been submitted for spot Ethereum ETFs, many of which belong to already approved spot Bitcoin ETF issuers like BlackRock and Fidelity. The SEC last week announced delays on decisions concerning some of the applications that were due.

Despite the delays, some analysts remain optimistic that an Ethereum ETF approval could come this year, contrary to TD Cowen’s position.

A Bloomberg analyst, James Seyffart in a recent interview said there was a 60% chance of the SEC approving an Ethereum ETF in the summer of 2024.

“So if the SEC wants to get geared up and ready to go and wants everyone to go at the same time, they’ll likely do it on May 23 unless they can figure out some way to deny or delay this whole process and do what they want.”

According to some analysts, the approval, even if denied, could be appealed just like the case with Grayscale’s Bitcoin ETF case which eventually led to the approval of the 11 Bitcoin ETFs.

JP Morgan Analysts Agree with TD Cowen

Other analysts from JP Morgan have given their own estimation of when they expect an Ethereum ETF to be approved. They agree with TD Cowen that it may go beyond May if ever the approval comes, as the SEC has to classify Ethereum as a commodity first.

“In our opinion, for the SEC to approve spot Ethereum ETFs in May, it would need to classify Ethereum as a commodity (similar to bitcoin) rather than a security,” JPMorgan’s Nikolaos Panigirtzoglou said earlier this month. “This is far from given, and I wouldn’t put more than a 50% chance to the SEC classifying Ethereum as a commodity before May.”

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Experts Disagree on Possible Dismissal of SEC-Coinbase Case

Coinbase has been in court since June 2023 as the SEC alleges that the exchange violates crypto laws with its offerings. The crypto industry eagerly awaits the outcome of this lawsuit.

While some experts say the court may dismiss the case, others doubt this could happen, and believe the case will go on. During a New York District Judge Katherine Polk Failla questioned both the SEC and Coinbase for over four hours during oral arguments.

Bloomberg Intelligence senior litigation analyst Elliott Stein believes that Judge Failla will dismiss the case, putting the chances of Coinbase beating the SEC at 70 percent in a post last week.  

“Our Thesis: Coinbase is 70% likely to beat the SEC, if not outright on this motion, then later,” Stein wrote. “Even if the case survives, it likely reaches the Supreme Court, which we think will narrow Howey,” Stein wrote, referring to a test that’s based on a 1946 U.S. The Supreme Court case the SEC often cites in determining whether or not an asset is a security. 

Strain stated after the hearing that Coinbase has a better chance of winning the case than he initially thought. “Coming out of the hearing, I thought Coinbase did a lot better than I anticipated,” Stein said in an interview. 

SEC Faces Tough Questions

During the hearing last week, Judge Failla grilled the SEC, asking its lawyers direct questions about what constitutes a security and expressing concern the agency may be too broad in its definition of securities.

As already known, the SEC still struggles to define what is and what isn’t a security. Judge Failla was skeptical of the SEC’s theory on what constituted securities, Stein said. He added that he could see dismissal, partly due to the questioning of the SEC.

“Her questions were very thorough and tough on both sides, but she did express concern with the SEC’s theory of what constitutes an investment contract,” Stein said. 

“We try not to make any 50/50 calls,” Stein said. “Sixty percent would suggest that it’s a very close case. I think parts of this are close, but I’m quite confident on the trading claims and the broker claims that those will be dismissed, and I think there’s good reason to believe that the staking claims will be dismissed too.” 

Other Disagree

While Stein sees a good chance that the court will dismiss the SEC case, others have said the case will go on, and could proceed to trial by 2025 at the earliest. 

“I would not expect the judge to dismiss the case at this stage,” said Samson Enzer, a former federal prosecutor in the U.S. Attorney’s Office for the Southern District of New York, the district where the Coinbase case resides. “That’s not to say she won’t dismiss or trim the case after discovery, either at summary judgment or trial, but I don’t expect her to dismiss the case at this stage.”

Enzer also commented on the Binace case with the SEC, which has also been in court since June last year. He argued that the judge may dismiss the allegation that BUSD listed on the exchange is a security.

“I would bet, but obviously this is speculation, but I think from her comments at the oral argument, I would bet that she at least dismisses the SEC’s claims that BUSD stablecoin was offered or sold as a security. The SEC’s allegations on that are remarkably weak,” Enzer said, and added that the judge honed in on that. 

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CFTC Chair Calls for Federal Laws to Regulate Crypto as Bitcoin ETFs Take Off

Chairman of the Commodities futures Trading Commission (CFTC) Rostin Behnam has called for legislation to regulate crypto at the federal level.

The call came two weeks after the securities and exchange commission (SEC) approved the first batch of spot Bitcoin ETFs in the U.S. Behnam expressed fears that the approval of spot bitcoin ETF products introduces risks, and reiterated the need for federal laws to regulate crypto.

“I fear that the regulatory approval of bitcoin ETPs introduces risk that, in spite of yellow flags, market participants, retail and institutional alike, may mistake the technical approval of a product—with actual regulatory oversight of the cash commodity digital assets,” Behnam said on Friday in prepared remarks at an American Bar Association event. 

Behman has been in support of special legislation to specifically regulate crypto, which according to him is a unique asset class. Up to this point however, no federal regulator has been granted authority by Congress over the cash markets for digital assets, Behnam said.

Although lawmakers have been working on drafting a bill for some time now to empower federal agencies such as the CFTC the power to watch over the industry, it is yet to become a reality.

“The concerns I have publicly voiced for the better part of six years regarding the digital asset commodity spot market have only become magnified,” Behnam said. “The need for federal legislation over cash market digital assets has never been more critical, and I will continue my call for action,” he added.

Behnam further stated that there is currently no legislation tailored towards crypto to “address the opaque and inconsistent practices in the cash markets for digital assets” around issues like conflicts of interest and customer protections.

“Instead, the ETPs have taken a speculative and volatile asset, wrapped it in a thin layer of indirect regulation, and packaged it as a shiny new product,” he further stated.

The Role of CFTC

 In spite of non-existent laws around crypto regulation, the CFTC has continued to play its own role towards ensuring that the crypto space is kept safe for investors. It has been involved in its own enforcement actions, being the “premier enforcement agency in the space” in 2023. 

In 2023, the agency brought 47 digital asset-related actions out of 96 in total in fiscal year 2023, including former FTX CEO Sam Bankman-Fried, crypto exchange Binance and its CEO Changpeng Zhao, and Celsius and its former CEO Alex Mashinsky.

“As everyone in this room knows, we can only act on digital asset fraud or manipulation when we uncover or discover anomalies through regulated market surveillance and oversight, or through tips and complaints we can pursue,” Behnam said. “We are doing all this—and making the headlines—with a restrictor plate installed,” Behnam added. “Imagine what we could do if we were given the tools to open up the throttle?”

Behnam’s Stance on Crypto

While Behnam is calling for the regulation of cryptocurrencies, he isn’t exactly working against crypto. In fact, his push for crypto regulation is good for the industry, something the SEC doesn’t want to happen.

The SEC chair Gary Gensler has repeatedly stated that there is sufficient regulation for the industry. Unfortunately, this is what has hindered the growth of the industry, and the industry looks forward to when Behman’s call will be answered.

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CFTC Advises Traders to Avoid Using AI Trading Bots

In readiness for the upcoming bull market, investors are exploring ways to maximize their returns on crypto investments. With the development of artificial intelligence, investors believe that using AI-inspired trading bots will enable them to take advantage of the upcoming bull market.

Compared to traditional trading approaches, AI-oriented trading bots automate buying and selling digital assets to provide traders with fast and efficient trading. Recently, AI trading bots have gained popularity since they allow traders to diversify their trading. 

Risks Associated with AI Trading Bots

The ongoing AI craze in crypto trading attracted the attention of global regulators to safeguard customers from manipulative business practices. In an official publication, the US Commodities and Futures Trading Commission (CFTC) warned crypto enthusiasts about using AI trading bots.

The CFTC official argued that this software cannot predict the future despite the benefits offered by AI trading bots. The CFTC report titled “Customer Advisory Cautions: The Public to Beware of Artificial Intelligence Scams” outlined the inherent risk of AI trading bots. 

In the report, the regulators underlined that despite the promises associated with AI software, investors should avoid these bots. After careful consideration, the CFTC officials noted that the AI trading bots promised the investors high investment returns. 

Based on the volatile nature of digital assets, the official advised the traders to avoid using AI-powered bots. The CFTC report noted that AI trading bots were modified to meet specific purposes. 

This implies that AI trading bots were of different categories: AI-assistive devices, trade signal algorithms and digital assets arbitrage algorithms. The regulators noted that AI firms invested heavily in marketing their products to reach a sustainable audience. 

Features of AI Trading Bot

The CFTC team observed that AI promotions have dominated social media. A review of the multiple advertisements on social media demonstrated that some influencers used false information to entice customers to buy their products.

In an earlier report, the director of customer education and outreach at CFTC, Melanie Devoe, advised the investors to be hyper-vigilant when investing in the most hyped projects.

 The executive noted that the popularity of AI projects captivated the interest of criminals seeking to exploit innocent investors. Devoe regretted that the ongoing hype on the AI project has made it difficult to distinguish a genuine product from a fake one.

In her statement, the executive outlines strategies to avoid falling into the fraudster’s trap. She urged the investors to conduct background checks before making any investment. This will involve extensively researching the company’s background information, business practices and assessing compliance levels.

The CFTC official confessed that in 2023, the AI-oriented trading bot became the centre of discussion among investors and regulators. However, the hopes of the AI trading bots’ early investors were shuttered due to the uncertainties in the crypto industry. 

Customers Suffer Losses After Using AI Trading Bots

Some affected investors regretted the failure to generate high returns even after investing in AI trading bots. The complaint lodged by the investors compelled the US regulatory agencies to react and restore the integrity of the financial industry. 

The securities regulators from Alabama, Montana and Texas joined forces to investigate fraudulent schemes promising the investors high returns. After a thorough investigation, the regulators noted that the operation of YieldTrust.ai mirrors a Ponzi scheme.

The regulators claimed the YieldTrust.ai trading bot was non-existent. In June, the regulators noted that some influencers misled investors about the features of the AI trading bots.

They noted that the YieldTrust.ai trading bot could not perform some tasks. The AI craze compelled high-profile crypto exchanges, including Bitget, to assess the use of AI bots on its platform.

In an interview with the chief executive of Bitget, Gracy Chen explained that the AI bots depend on historical data. The official argued that the AI trading bots receive, analyze and process historical data before proceeding with initail trading. 

Also, the AI bots leverage the power of self-learning to make trading more efficient. In her analysis, the executive noted that the AI bots offer the traders the most suitable trading strategies without completing the algorithms. Chen added that the AI trading bots only require a computed rate of return and price chart to execute certain tasks.

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Paradigm Leads Axiom Protocol in a $20M Series A Round

In an official announcement, the renowned smart contract infrastructure development firm Axiom completed a $20 million Series A funding round. The fundraising was led by the San Francisco venture capital Standard Crypto and Paradigm. Other participants included Robot Ventures and Ethereal Ventures.

In the January 25 blog post, the Axiom team confirmed that the funds will be used for the expansion of operations. Firstly Axiom plans to recruit new talents to fill the professional gaps in its technical unit. 

Axiom Completes a $20M Funding Round

In particular, the Axiom group plans to hire more developers to support the firm in researching, designing and managing software. Also, the announcement demonstrated that the Axiom team will reroute the multimillion-dollar capital to support the development of its first product.

For years the Axiom group has offered developers a platform to access historical data from the Ethereum network. This data plays a crucial role in excuting off-chain tasks.

With the ongoing development in the digital sector, the Axiom team revealed plans to develop a new approach to accessing on-chain data seamlessly. Initially, the developers used a traditional consensus approach to access on-chain information. 

Growing Demand for Authenticated Data

A statement from the co-founder of Axiom Yin Sun demostrated that the firm will remain committed to supporting the developers to access the on-chain platforms. The executive admitted that the current development forced the on-chain applications developers to optimize data usage to curb the high cost of data.

Sun complained that the surge in data cost has limited the developers from using data at their desired scale. To navigate the data challenges the developers opted to leverage their expertise to create more sophisticated smart contracts. 

Sun admitted that from last year the Axiom team actively supported the developers to share information on zero-knowledge proofs.The official recognized that the development of zero-knowledge technology allows the user to verify information even without disclosing confidential information.  

Features of Zero-Knowledge

The unique features of zero-knowledge proofs increased the use case of this technology in diverse industries including healthcare, banking, education and others. Currently, the growing demand for zero-knowledge technologies inspired the developers to invest in doubling down the privacy and security of these platforms.

Based on the benefits offered by the zero-knowledge technology Sun confessed that the Axiom group will enable this concept to allow the developers to access on-chain applications at a low cost. The executive envisioned the demand for reliable and convenient on-chain data to increase exceedingly in future.

Sun believes that blockchain and cryptography technologies will play a critical role in meeting the demand for authenticated data.

In a subsequent report the chief technology officer at Paradigm Georgios Konstantopoulos, revealed that the venture capital will work on improving its system to lower the cost of data. The official believes that by removing the requirement to access authenticated data the Axiom team will attain a sustainable customer base.

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SEC Delays Decisions on Ethereum ETF Applications

The securities and exchange commission (SEC) has delayed decisions on applications for an Ethereum exchange traded fund (ETF).

Following the approval of 11 spot Bitcoin ETFs by the SEC this year, many of the approved Bitcoin ETF issuers have applied for Ethereum ETFs as well.

The SEC gave feedback on some of the applications a day before the January 25 deadline. The agency in a statement said it needs more time to review the proposed rule change for BlackRock’s application..

“The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change,” the SEC’s Assistant Secretary, Sherry Haywood, noted in the official filing.

“Accordingly, the Commission… designates March 10, 2024, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change,” it added.

The largest asset management firm with over $9.1 trillion in assets under management,  Nasdaq filed for the approval of iShares Ethereum Trust on behalf of BlackRock on December 11, 2023. This is the first time the SEC is delaying a decision on the application, but has to make a decision within 240 days. 

Similarly, the SEC has delayed a decision on Grayscale’s Ethereum ETF application. According to a statement by the agency on Thursday, it is soliciting for fresh public comments on the application. 

The SEC asked whether Ethereum’s proof of stake mechanism and “concentration of control or influence by a few individuals or entities” could bring up unique concerns to make the fund susceptible to fraud and manipulation. 

This is the second time the agency is delaying a decision on Grayscale’s application. It first delayed a decision on Grayscale’s application on December 5 2023. Comments are due in 21 days with a rebuttal period that lasts 35 days, the SEC said. 

Opinions on Ethereum ETF Approval

Immediately following the approval of Bitcoin spot ETFs, some members of the crypto community became optimistic that an Ethereum spot ETF could also be around the corner. Those optimistic about an Ethereum ETF this year have said it will work in a similar way to the Bitcoin ETFs.

“We anticipate a spot Ethereum ETF approval in May with an estimated 75% likelihood. This optimistic outlook is grounded in Grayscale’s Court of Appeals victory and the subsequent approval of Ethereum Futures ETF, collectively suggesting that the approval of a spot Ethereum ETF is only a matter of time,” said Matt Kunke, research analyst at crypto market making firm GSR.

On the contrary, some analysts also believe that an Ethereum ETF may not happen this year, or at least by May. They cited concerns around the SEC’s definition of Ethereum, saying the agency may have to clearly define Ethereum as a commodity first.

“In our opinion, for the SEC to approve spot Ethereum ETFs in May, it would need to classify Ethereum as a commodity (similar to bitcoin) rather than a security,” JPMorgan’s Nikolaos Panigirtzoglou said earlier this month. “This is far from given, and I wouldn’t put more than a 50% chance of the SEC classifying Ethereum as a commodity before May.”

Other Ethereum ETF Applications

Apart from BackRock’s and Grayscale’s Ethereum ETF applications, other top firms have applied. 

These include VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, and Hashdex. The deadline for the decision on VanEck’s application is May 23, ARK 21Shares is May 24, Hashdex is May 30, Grayscale is June 18, and Invesco is July 5.

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Florida Ranked Best State for Crypto Tax -CoinLedger Report

With the ongoing amendment of the digital assets regulation, the US has demonstrated the likelihood of shutting down the crypto sector. From the last bull run the policymakers enforced unfriendly regulations that forced high-profile crypto firms to exit the US market.

Despite the anti-crypto outlook in the US some of the states leveraged the power of digital assets to boost financial inclusivity in the region. 

Analyzing Attractiveness of US States

A study conducted to examine the states in the United States supporting the mainstream adoption of digital assets demonstrated that Florida was a crypto-friendly region.

 Compared to the 50 states in the US the CoinLedger report profiled Florida as the “best state” for crypto taxes. The study recognized the unique crypto taxation regime in Florida.

 The CoinLedger report ranked each of the 50 states according to the crypto attractiveness. New York state was ranked among the worst states in the US with restrictive measures that undermine the growth of the crypto industry. 

According to the January 22 report the CoinLedger team noted that Florida exempted the crypto investor from state income tax. In the research, the CoinLedger team observed that Florida has implemented crypto-friendly regulations that stimulate the growth of the digital sector.

 A few months ago the policy makers in Florida allowed businesses and investors to pay taxes using crypto assets. Even though the use of crypto in tax remittance is still under the pilot trials Florida’s taxation approach was ranked as the best for crypto taxes. The study listed Texas and Wyoming as among the top three crypto-friendly states. 

Regulatory Approach for Digital Assets in the US

According to the report policy makers in Wyoming and Texas led by Senator Cynthia Lummis have demonstrated their pro-crypto stance. After lengthy amendments to the digital assets regulations, the policymakers allowed financial institutions and banks to offer crypto custodial services. 

In the report, Nevada was ranked the fourth crypto-friendly state. Unlike the other states, the policymakers in Nevada removed the ban on blockchain use in late 2017. Afterwards, the Nevada regulators exempted state income tax on digital assets. Slightly below Nevada, the CoinLedger ranked Arizona fifth. 

The listing on the CoinLedger was determined by the measures enforced by the US states to support the development of digital assets. In the report, Arizona was ranked among the top five crypto-friendly states after the regulators declared airdrops as tax-free at the state level.

Impact of Changes in Tax Rate on the Business

Also, investors are only required to remit 2.5 % of income generated from crypto activities to respective regulatory agencies in Nevada. After analyzing the different taxation approaches the CoinLedger team noted that New York was the worst state with a 100% income tax rate for digital assets.

Above New York, California was ranked the second worst state for crypto assets. The report indicated that the income tax rate for crypto assets ranges from 1% to 13.3% in California. Other states that were among the bottom ten included Hawaii, Massachusetts and New Jersey.

Besides assessing the taxation regime and the income tax rates in different US states the study examined the suitability of crypto regulations.

Commenting on the taxation regime for digital assets in the US the chief executive of CoinLedger David Kemmerer underlined the need for investors to comprehend local tax rules. He admitted that the state tax rates might expose the crypto investors to losses.

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UK Government Remains “Undecided” on CBDC Issuance

In response to a February consultation on a digital pound, The Bank of England and UK Treasury have said they remain undecided on the launch of a digital pound.

The BoE and UK Treasury, in the response said it is too early to conclude on whether a digital pound is necessary, even though they intend to continue with research on the subject of a central bank digital currency (CBDC).

“The Bank and HM Treasury judge that further preparatory work is justified to enable us to respond to developments in the payments landscape and to reduce materially the lead time if there is a future decision to introduce a digital pound,” the consultation response said.

The idea of a digital pound has been in consideration for some time now as central banks all over the world are working on the idea of a CBDC, some more advanced than others.

CBDCs are a way to provide fast and efficient payment options to replace public digital currencies such as Bitcoin. This is as cryptocurrencies are becoming rapidly popular and the fear of destabilizing the financial system mounts. 

The BoE and UK Treasury further stated that the design phase for the digital pound would persist in exploring the feasibility of the UK having both a retail and a wholesale CBDC. They also stated that a CBDC will not be launched earlier than 2025 even if the government eventually does launch one.

Privacy and Trust Concerns

The BoE and Treasury mentioned some concerns, among which were privacy and trust concerns from the public. There has been a public belief that a CBDC will be used for surveillance, which constitutes a violation of users’ privacy.

The public also doesn’t trust central banks that CBDCs are meant to improve the lives of the people, but rather as a tool for financial control. The two respondents stated that these concerns will be addressed through legislation.

“To address these concerns, the publication confirmed that primary legislation would be introduced before the launch of any digital pound,” the BoE and the Treasury said.

They however stated that neither the BoE nor the UK Treasury would have access to users’ personal data if a retail CBDC was launched.

“Trust in all forms of money is an absolute necessity. We know the decision on whether or not to introduce a digital pound in the UK will be a major one for the future of money. It is essential that we build that trust and have the support of the public and businesses who would be using it if introduced,” Bank of England Deputy Governor for Financial Stability Sarah Breeden said.

Cash Remains King

One major notion about a CBDC is that it is meant to replace cash, making all transactions perfectly traceable by the central bank. 

The BoE and UK Treasury also addressed this issue, stating that “central bank money remains available and useful in an ever more digital economy, continuing to support UK monetary and financial stability.”

“Banknotes and coins are important for many people so we will continue to provide them for those who want to use them. You would simply have even more choice when you make payments,” the BoE and Treasury statement added.

More details will emerge as the UK government continues to research the idea of a digital pound.

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Telefónica Partners with Nova Labs to Boost Coverage in Mexico

The leading telecommunication company in Spain, Telefónica, has joined hands with Nova Labs to expand its market presence in Mexico. In a blog post dating January 24, the Telefónica team anticipates that collaborating with the company behind Helium will allow the telecommunication firm to gain a competitive edge.

Through the partnership with Nova Labs, Telefónica will tap into the benefits offered by the blockchain network.

Nova Labs Partners with Telefónica 

Before striking the partnership deal, the two companies agreed to mutually support each other in the ongoing projects. With technological advancement, the telecommunication industry has been battling security and regulatory concerns. 

Also, the adoption of artificial intelligence has exposed most of the telecom companies to fierce competition. For years Telefónica has been seeking to integrate blockchain technology into its product offering to overcome obstacles. 

However, based on the decentralized nature of blockchain technology, Telefónica believed that the Helium network was the suitable network. Compared to other blockchain networks, the benefits of the Helium network outweigh its shortcomings. 

The blog post demonstrated that the Helium network has massive potential to connect devices over a long distance. Also, the Helium network offers users a reliable platform to transmit data fast and effectively. 

Characteristics of Helium Network

Guided by the primary objective of Telefónica, the partnership with Helium will create a decentralized network from wireless devices such as 5G products and the Internet of Things (IoT). The integration of the Helium network will enable Telefónica to provide affordable prices by lowering the transaction charges.

The collaborative approach embraced by the two companies will support Telefónica in maintaining a strong network and providing coverage to Mexican internet users. Citing a recent study, Mexico is ranked among the top ten countries with high internet usage. 

The study indicated that around 70% of the Mexican population are internet users. The increase in internet use in the Mexican region inspires fast paced telecom companies to expand to the region. 

Under the partnership agreement, the Telefónica team plans to leverage the Helium mobile hotspot in North America to support its expansion plan in booming cities in Mexico, including Oaxaca. 

The report indicated that the Helium hotspot comprises multiple nodes providing a wireless network to the IoT infrastructures. According to the announcement, Telefónica anticipates that integrating the Helium network will enable the telecom company to expand its coverage to remote regions. 

Suitability of the Mexican Market

Telefónica confessed that high internet usage results in network congestion that undermines day-to-day activities. With the impending Helium integration Telefónica is optimistic that there will be better connectivity.

 This development seeks to enable the customer to use a network with the recommended stealth capability. It implies that the user can switch to the Helium network in case Telefónica experiences network traffic.

Despite the integration of Helium into the Telefónica network, the telecommunication company assured the customers that its management system would promptly manage customer activities.

Telefónica Next Move

In an exclusive interview with the chief wholesale officer at Telefónica, Jose Haro confirmed that the partnership aligns with the company’s long-term objective of expanding coverage to remote regions. 

The executive admitted that the proposed expansion to Mexico played a significant role in building solid customer relations. Haro believes that through the partnership, the company will satisfy the user’s needs. 

He anticipates that the proposed integration of the Helium network on Telefónica will be successful. The executive added that if the partnership meets the intended purpose, Telefónica will continue integrating the Helium network into the remaining portfolio of mobile networks in different countries.

A review of the Telefónica website demonstrated that the telecom company operates in North America under the brand name “Movistar.” Besides working in Mexico, the report indicates that Telefónica has expanded to around 17 in Europe and the US. 

The expansion to these regions has compelled Telefónica to diversify its product line to meet the ever-changing customers’ needs. In the meantime, Telefónica has launched multiple Web3-inspired projects for users to conduct safe and secure transactions that don’t require third-party involvement.

Editorial credit: MacroEcon / Shutterstock.com

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Experts Predict 75% Chance of Ethereum ETF Approval in 2024

Following the approval of Bitcoin ETFs, experts have predicted that Ethereum ETFs may follow within 2024. 

According to the head of Coinbase Institutional, Brett Tejpaul, there’s demand for an Ethereum ETF. Speaking with The Block, he said there’s interest in an Ethereum ETF, at least from Coinbase’s clients.

The decision lies with the securities and exchange commission though, and the commission hasn’t been very friendly towards Ethereum. Up to this point, the SEC is yet to define Ethereum as either a security or a commodity, something JP Morgan analysts fear could cause unnecessary delay for any potential ETF approval.

The Case for Optimism

Though there’s much uncertainty around the future of an Ethereum ETF, some analysts have given reasons why they are optimistic about an approval in 2024. 

“We anticipate a spot Ethereum ETF approval in May with an estimated 75% likelihood. This optimistic outlook is grounded in Grayscale’s Court of Appeals victory and the subsequent approval of Ethereum Futures ETF, collectively suggesting that the approval of a spot Ethereum ETF is only a matter of time,” said Matt Kunke, research analyst at crypto market making firm GSR.

May has been set as the deadline for decisions on a spot Ethereum ETF. Comparing the situation to that of Grayscale, Kunke added that there will be an appeal if the SEC denies the current applications for spot Ethereum ETFs in May.

He believes that such an appeal will force the SEC to approve the ETF applications, just as was the case with Grayscale. 

Another analyst and founder and CEO of institutional crypto trading platform XBTO, Philippe Bekhazi supported this argument, adding that Bitcoin and Ethereum are considered to be very similar.

“I strongly believe that we’ll see the approval of a spot Ethereum ETF this year,” he said. “Bitcoin and Ethereum are both listed and regulated futures on CME, and are likely considered pretty equal in the eyes of the SEC. Additionally, if market conditions remain strong, further pressure will be applied to make the asset accessible to institutions. Approval is definitely a question of when, not a question of if.”

Also commenting on the prospects for an Ethereum ETF, a Bloomberg analyst, James Seyffart expressed a more cautious view.

“I will just say there are two very clear bear and bull cases for Ethereum ETF approval odds. We believe the odds of approval are over 50% but not nearly as confident as we were about the Bitcoin ETFs. I would say our odds are probably around 60-65%,” said Seyffart.

At the same time, one of the current spot Bitcoin ETF issuers, Bitwise, has expressed strong optimism that a spot Ethereum ETF could be approved this year.

“We think there is a clear line of sight to an Ethereum ETF. All the ingredients are there in our view, including the existence of a large and robust regulated futures market and the existence of Ethereum futures ETFs,” said Bitwise CIO Matt Hougan.

The Race for ETFs

It took several years for Bitcoin spot ETFs to be approved, but the analysts are optimistic because Bitcoin has set the pace.

Hopefully, an Ethereum ETF will also help in bringing more institutional investors into crypto as a whole, and could be a great addition if approved. 

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Policy Makers In Virginia Formulate New Bill for Digital Assets

As we approach the 2024 Bitcoin halving, key industry players have stepped up to support the miners in navigating the long-awaited event. In the upcoming Bitcoin halving, the miners expect their mining reward to reduce from 6.25 BTC to around 3.125 BTC. Based on the significance of the impending Bitcoin halving to the entire crypto industry, the regulators prioritized formulating a new bill for digital assets. 

Virginia Introduces New Bill for Digital Assets

The bill was presented before the Virginia Senate, outlining new rules for miners, digital assets service providers, and a new taxation regime. The draft bill No. 339 was developed by 34-year-old Senator Saddam Azlan Salim. 

A review of the proposed bill demonstrated that Bitcoin miners would not be required to obtain a money transmitter license from the regulators. This indicates that Virgina plans to create a friendly environment for Bitcoin miners to attract more regional investments. 

The new bill will allow Bitcoin miners to operate freely in industrial zones. Initially the regulators had levied restrictive measures on Bitcoin miners to address noise and air pollution in industrial zone.

The restrictive measure forced potential investors to expand to other regions with less regulatory requirements. Under the new rules, individuals or entities in the digital assets mining industry will not be required to obtain any license to operate in Virginia. However, the bill outlines the terms and conditions the crypto miners should fulfill to operate in the region.

The new rules aim to create a friendly environment for businesses dealing with digital assets to thrive. The report demonstrated that if the policymaker approved the new bill, businesses engaging in the buying and selling digital assets would not be required to complete the securities registration requirements under the specific condition. 

In these cases, the digital asset service provider (DASPs)must demonstrate that their product are not grouped as investment contract. Also, the DASP will only be exempted from the securities registration if the digital asset was not promoted as a financial investment at the initial sale negotiation.

Difference Between Financial Investment and Digital Assets

With the new rules, the DASP must implement adequate security measures to prevent potential investors from purchasing digital assets as financial investments. Even though some financial investments have similar characteristics to crypto assets, the new provision defines clear rules for digital asset. 

The report revealed that companies majoring in mining and staking services would be classified under the digital asset category but not as financial investments. This will require the miners and staking service providers to file a notice to the relevant authority to be excluded from financial services providers.

 With the growing demand for digital assets, the new rule seeks to promote the mainstream adoption of crypto assets in Virginia. Reports indicate that if the new rule takes effect, the investors will tap to the tax benefits for every crypto-related transaction.

 The new rule states that individuals will receive a tax exemption for every transaction totaling $200. The tax exemption will also apply to returns generated from the buying and selling digital assets. 

Overview of the New Rule

The policymakers anticipated the new rules would take effect on Jan 1 this year. However, based on Virginia’s existing rulemaking process, the Senate plans to review the new rules thoroughly. 

According to the existing rule, if digital assets bill no:339 receives the regulatory nod at the Senate, the rules will proceed to the following rulemaking process that will involve review by a member of the House of Delegates.

 The final stage will involve signing the bill into law. The new provision for digital assets mirrors legislative efforts made by policymakers in other US states such as Missouri, Indiana, and Nebraska.

 The impressive adoption of crypto assets in the US amid the ongoing regulatory uncertainties for digital assets forced the regulators to collaborate with key industry players in the rulemaking process. 

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Hackers Exploit Concentric Liquidity Management Protocol Stealing $1.8M

In a January 22 report, the prominent liquidity manager Concentric was hit by a security breach resulting in a loss of substantial amounts. Updating the X community the Concentric regretted that the hackers deployed a social engineering attack to gain unauthorized access to the protocol deployer account.

Following the discovery of the hacking incident, the Concentric team launched a thorough investigation into the matter.

Concentric Suffers Security Breach Leading to $1.8M Losses

In a subsequent report, the probing team noted that the hackers exploited the private keys to gain access to the Concentric protocol. The technical team observed that the hackers took charge of the deployer account and issued commands to the vaults. 

The report demonstrated that the hacker also upgraded the vaults to gain access to the funds on these platforms. In the report, the Concentric team lamented that the hackers heisted measurable amounts of funds from the compromised vaults.

Shortly after the hacking incident renowned blockchain analytic firms stepped up in the ongoing investigation to assess the damages and the severity of the security incident. A report from the New York-based blockchain security company CertiK demonstrated that the Concentric security incident impacted a loss of approximately $1.8 million. 

After thoroughly assessing the incident CertiK analysts noted that the hackers deployed a similar mechanism to exploit the Concentric just as they did on OKX last December. They noted similarities in the external wallet used by the hackers to drain $2.7 million from the OKX decentralized exchange. 

Hackers Preying on Liquidity Management Protocols

The CertiK suspected that the OKX and Concentric hacking incident was caused by the same entity or group. In a separate report, the Concentric team confirmed that after the completion of the ongoing investigations, the probing team will formulate the post-mortem report concerning the hacking incident. 

This report will enable the technical team to strengthen the existing security measures. Also, the technical team revealed plans to conduct intense deliberation that will enable Concentric to develop a plan to address the vulnerability.

In the report, the Concentric assured the customers that the matter would soon be resolved. But before then Concentric advised the customers to block approvals on the vault addresses since the hackers managed to compromise the protocol document. Apart from this, the Concentric team noted that the attackers accessed the adminMint function on the Concentric contract to mint 0.001 CONE-1 tokens. 

Later the hackers burned the obtained CONE-1 token from the AlgebraPool. They noted that the process of minting and burning CONE-1 tokens was repeated by the hackers severally to obtain ERC-20 tokens. 

With the ongoing development in the crypto industry, hackers have been preying on liquidity management protocols that enable the company to select minimum and maximum prices. From 2021 the number of liquidity management protocols has been on the rise. 

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Dencun Upgrade Could Affect Ether Supply, Analyst Says

The Ethereum network has undergone several upgrades, and there are more to come in 2024, one of which is the Dencun Upgrade which CoinShares Ethereum research associate Luke Nolan said could affect Ether supply.

The upgrade will make it possible to send Layer 2 transactions to the Ethereum network through blobspace. Blobspace is an alternative to the current transactional calldata mechanism, which Nolan said could lead to reduced gas usage and, consequently, a lower amount of ether being burned.

Nolan’s concern stems from the fact that the old mechanism enables burning of all ether used to pay gas base fees for transactions, while the new mechanism doesn’t.

“Transactional calldata makes up 90% of the costs Layer 2s pay in terms of gas fees. But after the Dencun upgrade, instead of posting their data through calldata, Layer 2s can use the new blobspace mechanism, which has significantly lower gas costs. So, if we expect layer 2s to gradually shift to using this new blobspace mechanism, we could see gas prices settle at lower levels, which means less ether is burned,” Nolan told The Block.

Inflation in Ether Supply

Nolan expressed concern that the reduction in Ether burn due to lower gas fees through Layer 2s could lead to inflation in Ether supply. 

“Gas demand on the Ethereum network drives ether’s deflation mechanism via gas burn which can reduce the circulating supply of ether. The Dencun upgrade could see gas prices settle at lower levels,” Nolan added.

He however expressed optimism that the effect could be minimized, saying “even very high blob usage has a low impact on circulating supply.”

“Even if we see this reduced gas price because layer 2s are using the blobspace, there is no real concern that Ethereum will become significantly inflationary. The point of the Dencun upgrade is to decrease gas fees for users transacting using roll-ups, and bring users back to the network because of lower transaction fees, so more activity means more gas usage overall,” Nolan said.

He further added that the upgrade is meant to increase Ethereum’s market share, and so the inflation is a small price to pay as “secondary effects are a net positive over the long run, regardless of short-term gas fluctuation.”

Upgrade Schedule 

The Dencun Upgrade was activated on the Goerli testnet on Jan. 17. Several Ethereum improvement proposals were introduced through it, including EIP-4844, which enables the blobspace mechanism.

The upgrade is expected to be activated on the Sepolia testnet by January 30, and on the Holesky testnet on Feb. 7. After that, the mainnet activation could come as early as March, according to Nolan.

“Ethereum core devs expect that at least one month after Holesky the mainnet activation of the Dencun upgrade will go live. So at least March, or likely after. It is hard to give an exact time, as testnet bugs appear and change timeline,” Nolan said.

Ethereum has other upgrades scheduled for 2024, some of which analysts say could be responsible for making Ethereum to outperform Bitcoin. The Dencun upgrade may be of more interest to Ethereum users and developers though, due to high gas fees.

Currently, this is one of the challenges holding Ethereum back and besides, ether is a utility token on Ethereum and inflation in its supply shouldn’t be a concern.

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FCA Hurting Crypto Firms With Stringent Rules in The UK – Bittrex Global CEO

The financial regulator in the UK, the Financial Conduct Authority (FCA) is hurting crypto firms in the country, Bittrex Global CEO Oliver Linch says.

Speaking in an interview with The Block, the CEO who is also a lawyer said the stringent rules proposed by the FCA have been the reason why several firms have stopped operation or abandoned the UK because they couldn’t meet up.

“For certain crypto players, the FCA’s rather stringent marketing rules are acting as a deterrent and a potential reason to leave the jurisdiction,” Linch “Keeping consumers safe is of paramount importance, but the best way to do that is by forming a legal framework that is comprehensible enough for the market to remain compliant with, and explicit enough for the regulator, in this case, the FCA, to enforce,” he added.

Lunch has several years of experience in financial regulation, first as Shearman & Sterling solicitor. He later became the General Counsel and is now the CEO of Bittrex Global. 

His company, Bittrex has also had its own fair share of regulatory challenges especially in the U.S where the country’s office shut down due to pressure from the securities and exchange commission. Bittrex Global itself had announced plans to shut down operations in November last year. 

UK Advertising Rules

The UK was known as a relatively friendly environment for crypto until the FCA introduced the crypto advertising rules. The rules stipulated penalties for crypto companies that violate the provisions of the rules, including a cooling-off period for first-time investors.

The rules which came into effect on 8 October in 2023 became a stumbling block for some top crypto firms, including Revolut, a UK fintech firm. The firm suspended crypto trading for UK customers in order to “give it more time to adjust to new requirements set by the Financial Conduct Authority in October.”

Other companies include PayPal which said last year that it was temporarily pausing crypto purchases in the UK until early 2024, and crypto exchange Bybit which exited the UK in October due to the rule change.

OKX and Binance are other exchanges that were impacted. The two exchanges announced that they were reevaluating their strategies amid the rule change. 

The Positive Side

Although Linch criticized the UK’s crypto rules that seem to be suffocating some crypto firms, he also commended the crypto Sandbox, which seeks to make crypto available for use in the wider financial market.

“The Digital Securities Sandbox is a really positive initiative and a good example of the UK taking ownership of its crypto ambitions,” Linch said. “So long as potential market participants engage enthusiastically with the programme, then the adoption of crypto will continue to rise.”

He however cautioned that unless steps are taken to create a comprehensive legal framework that will implement the Sandbox, the dream of making the UK a crypto hub may never come to pass. 

“The next step is taking the learnings from the Sandbox — direct from the industry — and implementing them into a comprehensive legal framework so that regulated crypto activity can exist outside of that bubble and propel the UK forward,” Linch said. “The Digital Securities Sandbox will help but only legislation will suffice.”

He also added that the government and the FCA need to find a point of agreement as the two seem to be polarized in their views on crypto currently.

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Survey Report Shows High Adoption of AI in Gaming

In a heated on-air conversation, the game developers revisited the 2023 turn of events in the gaming industry. The dialogue was hosted by leading game media outlets, Game Developer and Game Developer Conference (GDC), to discuss the development in the vibrant gaming industry.

 The developers noted that the adoption of artificial intelligence (AI) generative tools impacted major layoffs and closure of gaming businesses last year. An announcement conveyed by the Game Developer Alissa McAloon illustrated that 2023 was a challenging year for game developers.

Adoption of AI in Gaming

 The developers lamented that with the changes in the gaming industry the game developers were exposed to severe adversity and uncertainty that undermined their efficiency at the workplace. McAloon confessed that the changes in technology and job instability affected the broad gaming sector.

The dynamism of the gaming industry grabbed the attention of key industry players to examine the factors undermining the growth of the sector. A recent survey conducted by the prominent research firm Omdia titled “2024 State of Game Industry” outlines the factors slowing the development of the gaming industry. 

The survey target group includes over 3000 developers working on different projects in the gaming sector. The Omdia drafted multiple open-ended survey questions to examine the internal and external challenges facing game developers and gaming industry.

 During the data collection stage, the Omdia team devised questionnaires that reflected on the current and past performance of the gaming industry. A review of the research findings demonstrated that lately players can easily access online and offline games.

Factors Contributing to High Adoption of AI in Game Development

On the X platform, the survey respondents argued that the uncertainties in the gaming sector undermined long-term job stability. The X post demonstrated that 56% of the participants projected that there would be significant layoffs in the gaming industry due to current developments in the AI industry.

On the contrary, 44% of the respondents still believe they will retain their current position despite the change in tech developments. The study demonstrated that the advancement of technology has impacted the automation of gaming processes. 

With the adoption of advanced technology, the study examined the roles and responsibilities undertaken by developers in the gaming sector. 

According to the report, 34% of the participants majored in developing game designs, and 32% of respondents worked at independent game studios. The remaining 18% of the employees worked for a fast-paced AAA studio. 

Besides examining the roles executed in different gaming fields, the survey assesses the products offered by diverse game developers. In the report, around 60% of the respondents built on PC games, 35% worked on creating video games on PlayStation 5, and 32% of the developers confessed to working for Xbox X/S. 

Impact of Changes on Customers Preference for Gaming

Reportedly, with the ongoing development in the gaming sector, the survey demonstrated the shift in market demand and customers’ needs that contributed to the development of new games.

 The survey demonstrated that game enthusiasts were more interested in PC PlayStation 5 and Nintendo Switch games. The quest to meet the customer’s experience forced the developers to be more creative and innovative. 

The survey revealed that approximately 33% of the game developers leveraged the power of emerging technologies such as Unity and Unreal Engine to boost game experiences. Correspondingly, around 14 % of the developers used their unique proprietary game engines to design the games to their desired specifications. 

Developers Loss Interest in Blockchain Games

Despite the changes made in the gaming sector, the survey indicated that the interest in gaming dropped in 2023. The sudden drop in gaming interest emanated from the decline in blockchain games. 

According to the survey, 77% of the respondents showed no interest in developing their games on the blockchain network. Most of the developers demonstrated their growing interest in AI-fueled games. 

Remarkably, following the invention of OpenAI generative tools, including the GPT-4, most of the game-developing studios invested heavily in these technologies to boost efficiency and performance. Even though the regulators have been striking the lightning rod on AI-powered projects on a scale of 4 out of 5 the developers complained about the ethical implications of AI technology.

 Nonetheless, the Omdia report illustrated that 31% of game developers use AI technologies to build their projects. Apart from this, 44% of the companies specializing in Business and Finance use AI technologies to optimize their operations. 

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U.S Treasury Calls for Crypto Regulation to Prevent Future Crisis

A U.S treasury official, Graham Steele has warned that policy makers in the country need to regulate crypto before the next financial crisis.

Steele, who is the Treasury’s Assistant Secretary for Financial Institutions spoke on Thursday, at an event hosted by George Washington University Law School.

“For crypto-assets, policymakers have a chance to act before a crisis to adopt higher standards that support responsible innovation,” Steele said. “At the same time, it is critical that any legislative proposals don’t undermine the already robust regulatory foundations that apply to financial institutions and capital markets.”

Steele outlined his time at the Treasury Department over the past two years overseeing cybersecurity, crypto, capital markets, among others. 

U.S lawmakers have been working on a bill to properly regulate the crypto industry. The bill was first inspired by president Joe Biden’s executive order in 2022 “outlining the first ever, whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology”.

Among other things, the executive order seeks to address concerns such as consumer protection, financial stability, climate risks and national security. Consequently, it directed the Treasury to write a report on crypto which called for regulators to monitor the sector for bad actors and issue guidance and rules. 

“Our report noted that the U.S. generally has strong investor and consumer protection laws that address many of the risks posed by crypto-assets,” Steele said on Thursday. “Where existing laws and regulations apply, they have to be vigorously enforced so that crypto-assets and services — and the consumers who use them — are subject to the same protections and principles as other financial products and services.”

Crypto Use Cases

One of the major arguments against crypto is that crypto assets lack real world use cases. Steele touched on this in his speech on Thursday. While there are many use cases, Steele pointed out cross-border payments as the most promising.

“There are a number of prospective use cases that proponents hold out as the ways in which these products or services can be very beneficial,” Steele said. “Those include cross border payments, faster and lower cost settlement and immutable ledgers,” he added.

“Those feel like the areas, at least in our report, that we said were the most promising,” Steele said. “So it’s less about the crypto asset itself,” he continued 

He however referred to some assets as purely speculative, citing an example with Dogecoin.

“It’s less about — I don’t even know if Dogecoin is still a thing or not, but it’s less about trading some of those things,” Steele said. 

Ripple CEO Agrees with Steele

Meanwhile, Ripple CEO Brad Garlinghouse in Davos at the World Economic Forum referred to Ripple which is a company that facilitates cross-border payments as a typical use case for crypto.

He however admitted that there is speculation in the sector, just like Steele stated on Thursday.

“What we haven’t seen yet that I still think we will eventually see is a separation of wheat and chaff,” Garlinghouse said, including how technologies can be used to solve problems. 

“I don’t get it,” Garlinghouse said. “Other than Elon Musk as the central actor, I don’t see the use case, the purpose,” he added, referring to Dogecoin.  

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EU Reaches Provisional Agreement to Combat Money Laundering Activities

The use of crypto in illicit activities has become the center of discussion among the global regulators. Despite the efforts to create a crypto-friendly environment in the European Union, the regulators expressed concerns about the rise of crypto crimes. This forced the EU regulators to take decisive action to address crypto-related crime. 

EU Enforcing Stringent Rules for Crypto Assets

In a recent publication, the EU Council and Parliament engaged in an embroiled discussion to regulate the crypto sector. In the meeting, the members of the EU Council reached a provisional agreement concerning the existing anti-money laundering (AML) rules. 

Based on the existing Western Sanctions and stringent rules on digital assets, the new provision might tougher than expected.

Under the new provision, the local crypto firms must complete the due diligence requirements to operate in the EU as a regulated entity. A review of the newly approved due diligence requirements demonstrated that the crypto-asset service providers (CASPs) in the region will be required to assess the compliance of customers’ transactions over €1,000 in crypto investments.

 Besides conducting the due diligence exercises, the new rules mandate the CASPs implement adequate security measures on transactions executed on self-hosted or noncustodial wallets. 

Scope of EU AML Rules

Under the existing EU law, the self-hosted wallets were considered high-risk and undermined the effectiveness of AML rules. The anonymity of the self-hosted wallets enabled the criminals to conceal their illicit activities. This forced the EU to develop effective measures to mitigate the risk associated with self-hosted wallets.

 Besides the measure for noncustodial wallets, the CASPs will be required to conduct due diligence on cross-border transactions. The proposed measures demonstrated the EU’s commitment to promoting safe and secure crypto transactions. 

With the changes in the crypto ecosystem, the EU noted that criminals took advantage of the unregulated financial system to launder substantial amounts of stolen funds. Based on the challenges facing the conventional financial sector, the regulators imposed the EU-wide maximum limit of €10,000 for cash transactions.

 In the latter, the official confessed that the maximum limits for cash payments aim to prevent criminals from laundering dirty money. The new rule mandates the CASPs to regularly conduct security checks on businesses engaging in cash transfers between €3,000 and €10,000. 

EU to Harmonize National Strategies for Addressing Money Laundering

In the report, the regulators confirmed that the new rules would apply to investors in the fashion, automotive, and engineering industries dealing with the large-scale production of metal, goldsmiths, luxury cars, yachts, jewelry, and airplanes. In addition, the EU Council forecasts that businesses will conduct security checks on professional football clubs in the future.

 Even though the proposed provision agreement has not reached the parliamentary approval stage, the council believes that the new rules will harmonize the regulatory approaches for combating money laundering in the EU.

A statement from the Belgian Minister of Finance, Vincent Van Peteghem, revealed that the new provisional agreement aligns with the objective of the newly launched EU AML system. The Minister stated that the new measures boost the existing national system to mitigate the money laundering and terrorist financing concerns. 

Need for Consumer Protection

Mr. Peteghem confirmed that with the new provision, notorious fraudsters, terrorists, and organized criminal groups will have no space to conduct illicit activities. Elsewhere, the renowned member of the EU parliament, Luděk Niedermayer, argued that the new rules will curb the “plethora of loopholes “used by criminals to launder funds.

Even though the representatives of the EU member states and the parliament have not approved the new provision, the regulator believes that it supports the existing financial laws.

In an earlier report, the EU approved the market for crypto assets (MiCA) regulation to provide regulatory clarity on digital assets. Before the MiCA rules took effect, the EU Council and parliament agreed to establish an AML regulatory agency that will develop a single rulebook to oversee crypto activities.

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Bitcoin Becomes Second Largest ETF Commodity a Week After Approval

Two weeks after approval of Bitcoin ETFs in the U.S, Bitcoin has grown to become the second largest commodity ETF in the U.S. The top digital asset beat silver to claim this position in terms of assets under management. 

The U.S securities and exchange commission (SEC) had last week approved 11 Bitcoin ETFs for the first time since the industry started in 2009. A little over a week after since then, the approved Bitcoin ETFs now hold approximately 647,651 bitcoin, which amounts to $27.5 billion in AUM, according to CC15Capital.

Commenting on the feat, Bitfinex Head of Derivatives Jag Kooner, said that pent-up demand for bitcoin has played a crucial role in propelling the digital asset ahead of silver in AUM terms.

“Bitcoin ETFs have exceeded silver ETFs in the U.S. in terms of size, driven by the substantial market interest they have received,” he said.

Out of the total number of Bitcoin held by the ETFs, Grayscale Grayscale Bitcoin Trust ETF (GBTC) currently holds around 619,000 bitcoin, Coinglass data shows. This makes it the single largest Bitcoin ETF at the moment.

“Grayscale’s conversion of its existing bitcoin trust into an ETF created the world’s largest bitcoin ETF overnight,” Kooner said. “The level of trading reflects the pent-up demand for these products, and we expect that it will lead to increased liquidity and stability in the market,” the analyst added.

Strong Interest in BTC

Long before any Bitcoin ETF was approved, there was a lot of skepticism around the asset and the crypto industry in general. As analysts rightly predicted, the skepticism wasn’t due to a lack of interest in Bitcoin but to fear.

It was predicted that a Bitcoin ETF would bring more confidence to mainstream investors and allow them to step into the Bitcoin pool. The rapid growth of the Bitcoin ETFs currently attests to that fact. 

As at Thursday 18 January which is the fifth day of trading, for the new assets, the cumulative trading volume for the 11 funds exceeded $12 billion, according to Yahoo Finance data compiled by The Block.

According to Kooner, this strong interest is expected to continue into the future.

“The ETF issuers have implemented competitive fee structures, featuring a range of discounted fees and fee waivers which should attract more investors and could lead to further competitive pricing among ETF providers,” he said.

“While some in the investment community still view cryptocurrencies as risky, the growth of these ETFs could pave the way for more innovative crypto ETFs and new underlying assets such as ether,” he added.

What about an Ethereum ETF?

As Bitcoin received approval to be traded as a commodity ETF, Ethereum supporters have started making moves towards getting an Ethereum ETF as well. However, according to analysts from JP Morgan and TD Cowen, an Ethereum ETF may not receive an approval any time soon.

The question however, is will an Ethereum ETF have the same level of success as Bitcoin if it eventually secures approval? 

The analysts believe that the SEC must first of all clear the second largest asset as a commodity, which is quite unlikely since the SEC has repeatedly said that Bitcoin is the only crypto asset that qualifies as a commodity, unless the agency changes its mind.

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