A library of snippets
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The Bank Policy Institute, an industry group that represents large U.S. banks, said Wednesday that it was confident future research would conclude that “CBDCs would pose considerable and unavoidable costs to the financial system and economy while producing few, if any, tangible benefits.”
From Biden’s Digital Dollar Could Rile Banks and Crypto – WSJ:
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I’m actually doing a little experiment of my own in this space at the moment, using an artificial intelligence machine learning (and probably quantum resistant cloud-based) trading bot to manipulate my meagre holdings. So far so good: with this robot brain taking care of business, my crypto-fortune has soared by (*checks notes*) about twenty quid to date. Obviously before I committed my coins to this cyber trader I took the precaution of getting to know the people behind the enterprise, firstly by knowing one of them for a decade and secondly going to stay with one of the others for the weekend. Not everyone is able to take these simple precautions though. Take a look at what’s been going on in South Africa where the now-infamous Mirror Trading International (MTI) persuaded tens of thousands of investors that they had a sophisticated trading bot ready to go to work on their behalf. Ultimately, the company collapsed when the CEO (and here’s a surprise) suddenly vanished along with the cash. Africrypt, another South African cryptocurrency trading outfit, made similar claims and similarly collapsed when its directors vanished.
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The U.S. Securities and Exchange Commission said on Wednesday that BitConnect defrauded retail investors out of $2 billion in 2017 and 2018 through a scam involving a crypto trading bot said to offer a guaranteed return on investment.
From SEC: BitConnect Scammed Investors Out of $2 Billion With Fake Crypto Trading Bot | Tom’s Hardware.
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The Metaverse Will Steal Your Identity
“Individuality will dissolve into mindless conformity. […] Online life, above all, offers one the chance to pick their tribe, their gang, their comrades. Offline we are limited geographically in our affiliations, but online, you can scour the world for your crowd. The explosion of conspiracy theories, extremism, and a general distrust of any elite opinion is not a consequence of individual bad actors online, but the simple ability, brought to us by the internet, to find people who share and reinforce our opinion, no matter what that opinion may be. The metaverse will supercharge these trends.”
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A new Office for Digital Identities and Attributes (ODIA) will be set up in the Department for Digital, Culture, Media and Sport as an interim governing body for digital identities.
From New legislation set to make digital identities more trustworthy and secure – GOV.UK.
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When KLAYswap customers requested kakao.min.js from the adversary, the adversary served them a malicious javascript file that caused users’ cryptocurrency transactions to transfer funds to the adversary instead of the intended destination. After running the attack for several hours, the adversary withdrew its route and cashed out by converting its coins to untraceable currencies. By the time the dust settled, the adversary had stolen approximately $2 million worth of various currencies from users of KLAYswap and walked away with approximately $1 million dollars worth of various cryptocurrencies. (Some losses were due to fees and exchange rates associated with exfiltrating the currencies from the KLAYswap ecosystem.)
From Attackers exploit fundamental flaw in the web’s security to steal $2 million in cryptocurrency.
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Digital items known as non-fungible tokens burst into mainstream culture last year, as several animal collections including Bored Ape Yacht Club, Cool Cats and Pudgy Penguins spiked in price, aided by celebrity endorsements and social media hype. By the end of 2021, nearly $41bn had been spent on NFTs — making the market almost as valuable as the global art market.
But almost as rapidly, large portions of the market have begun to deteriorate, leaving novice investors with big losses and raising questions about the long term outlook for NFTs.
From The great NFT sell-off: has the digital collectibles craze hit its peak? | Financial Times:
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Deep learning and other artificial-intelligence approaches are quickly becoming the only way to keep up with threats, she adds. They’ve worked to help keep PayPal’s fraud rate remarkably low, at 0.32 percent of revenue—a figure far better than the 1.32 percent average that merchants see, according to a study by LexisNexis.
From How PayPal Boosts Security with Artificial Intelligence | MIT Technology Review.
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At Spain’s CaixaBank, for example, most customers will pay €2 to handle a transaction in-person at a branch when it could have been done online. The fees are part of an attempt by European financial institutions to reduce the financial pain of negative interest rates plus the overhead of operating dense networks of retail bank branches.
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One of the more interesting aspects of developments in cryptocurrency, web3 and decentralised finance is the issue of fungibility. This is an important property of money, but not of property, if you see what I mean. All money is the same, all property isn’t. This why, as J.P. Koening pointed out, if you are a fan of anonymity and have perfectly good legitimate reasons for keep your transactions away from the prying eyes of your spouse, co-workers, mom or tax authorities then sending your crypostash through a “mixer” virtually guarantees that your perfectly legitimate pile of coins will be commingled with the proceeds of crime. After all, according to Chainalysis around a quarter of all of the funds sent to mixers in 2022 come from “illicit” addresses.
Well, you might think, so what? My Bitcoins are my money. But they are not. Your Bitcoins are your property, and that’s very different.
We’ll come back to that point shortly, but first let us look at mixers in more detail. The Financial Crimes Enforcement Network (FinCEN) has classified mixers are money transmitters under the Bank Secrecy Act (BSA). This. Means that they have an to register with FinCEN and implement anti-money laundering (AML) procedures that are undoubtedly at odds with the goals of most people using mixers. Remember that mixers ability to obfuscate the source of funds depends on volume. If fewer people use the mixer it becomes easier to track funds through the mixing process.
One of the most used mixers is Tornado Cash. This has attracted headlines for being used to launder the proceeds of a number of major cryptocurrency exploits, including a $375m attack on Wormhole in February and a $100m hack of the Horizon Bridge in June. Earlier this year, the CEO Roman Semenov explained that his tool has many important uses. He said that, for example, it is an important mechanism for cryptocurrency traders who want to hide their wealth lest they fall prey to “kidnapping, torture and blackmail.”
Well, that maybe, but a few days ago The Office of Foreign Assets Control (OFAC), the agency tasked with preventing sanctions violations, added Tornado Cash to its running tally of blacklisted people, entities and cryptocurrency addresses. As a result, all U.S. persons and entities are prohibited from interacting with Tornado Cash or any of the Ethereum wallet addresses tied to the protocol. Those who do may face criminal penalties.
This has had knock-on effect
In the mundane world of dollar, dollar bills we have the concept of “money laundering” to describe what happens when dirty money is mixed with clean money (surely every one of us has touched banknotes that have been involved in some criminal activity!). But this doesn’t work for bitcoins. The “tainted” money stays tainted. Ross Anderson, Ilia Shumailov and Mansoor Ahmed from the Cambridge University Computer Laboratory wrote a terrific paper on this theme a couple of years ago. In “Making Bitcoin Legal” they pose some interesting questions about what to do with tainted cryptocurrency asking, for example, “If an identified customer says ‘Hi, what will you give me for UTXO x?’ and the exchange replies, ‘Sorry, 22% of that was stolen in a robbery last Tuesday, so we’ll only give you 78%’ does the customer then have to turn over the crime proceeds?”. Their idea of a public “taintchain” is an interesting way forward. This would be a mechanism to make stolen coins visible, in which case they might display a futuristic Gresham’s Law dynamic as good coins drive out bad ones!
Whether by taintchain or some other mechanism, it’s actually pretty each to track dirty bitcoins. You can see where this might lead: What if law enforcement agencies go to the biggest miners in the world and tell them that if they continue to confirm easily identifiable mixing transaction outputs, they will be accused of money laundering? This is not difficult to imagine, which suggests to me that Bitcoin’s lack of fungibility has far-reaching implications.
As I have written before, we could well see a strange and interesting twist in the world of cryptocurrency that has no analog in the analogue world of notes and coins: black and white money, or clean and dirty money, or light and dark money (an idea that goes back to the earliest days of cryptocurrency) in which some bitcoins will be worth more than others! Maybe a year or two from now, exchanges will be quoting two BTC-USD pairs: clean BTC at $100,000 and dirty BTC at $75,000. This doesn’t happen for GBP-USD or JPY-GBP, which confirms my feeling that whatever Bitcoin is, it isn’t currency.
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Benjamin Cohen, a veteran academic of international monetary relations, said there was “no question” sanctions against Russia would further incentivise countries such as Iran, North Korea and Venezuela to diversify away from the dollar.
From How the Ukraine war could boost China’s global finance ambitions | Financial Times:
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Snippings