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Fusion Hacked? CEO Says That 10M FSN Tokens are Gone

The blockchain-based financial platform, Fusion Network has announced a compromised wallet on Sept. 28. The Fusion swap wallet compromise resulted in a theft of 10 million native FSN tokens.

On Sept.28, Fusion Foundation’s CEO, DJ Qian announced in the official telegram group that the token-swap wallet with an Ethereum address to swap ERC-20 FSN tokens for the tokens on the FSN mainnet had been compromised.

Qian announced on the telegram group:

“After it was stole, we found the [thief] kept moving those stolen FSN in order to wash the address holding FSN, and sent part of the them to exchanges to sell.”

The theft was due to a compromise of the swap wallet’s private key after the private key was stolen, abnormal wash-trading of the tokens were observed, in exchanges such as Bitmax and Hotbit. The loss of funds appeared to have been worth approximately $6.4 million at the time of the hack.

The remaining tokens in the wallet had been moved to a cold storage address, while major exchanges such as OKEx, Huobi, and Bitmax had been contacted.

Qian stated that a certain individual with access to the foundation’s wallet’s private keys was to blame and has collected evidence that is substantial enough to be reported to the police.

G7 Reports Stablecoins Like Libra Threaten Financial Security

According to the BBC, the G7 group of nations has drafted a report outlining nine major risks that digital currencies, such as Facebook’s proposed Libra, pose to the global financial system.

The G7 report stipulates that even if member firms of the governing Libra Association properly addressed regulatory concerns, it may well not be approved by the necessary regulators. From the report, “The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed,” concluding that, “Addressing such risks is not necessarily a guarantee of regulatory approval for a stablecoin arrangement.” The G7 also cited that global stablecoins have the potential to scale rapidly which could potentially stifle competition and destabilize financial systems if their users were to lose confidence in the coin. The report is expected to be presented at an annual meeting of the International Monetary Fund this week.

Another Setback for Libra?

Stablecoins, such as Libra, are different from other cryptocurrencies, such as Bitcoin, because they are supported by established currencies such as the dollar and euro.The report’s warning could not have come at a worse time for Facebook. On Oct. 4, major payments network PayPal withdrew from the organization. Soon to follow were payment giants Mastercard and Visa pulling out of the Libra project only a few days ago, accompanied by institutions Stripe and eBay.The BBC states that, while the report does not single out Facebook’s proposed Libra stablecoin project, it could spell further trouble for the already contentious digital payments system proposal. Global regulators have already been placing the Libra project under intense scrutiny and Facebook CEO, Mark Zuckerberg will testify before congress about Libra later this month in an attempt to address lawmaker’s concerns.

Image via Shutterstock

Ethereum Co-Founder: Facebook Not Fit to be Libra’s Driving Force

Joseph Lubin, Ethereum’s co-founder, has asserted that Facebook should not spearhead the Libra project based on the concerns raised about its reputation. He, however, proclaimed that he is a huge fan of such projects.

Lubin noted: “I don’t believe that Facebook … with the concerns that we have with respect to trust and personal identity in Facebook, should be driving that project.”

He also added that Libra suffers from its greatest asset.

Since it was launched in June 2019, Libra has been a victim of scrutiny and skepticism from regulators based on Facebook’s planned entry into the financial service industry. Some of the concerns aired entail the company’s alleged mishandling of personal data.

Lubin’s observations about Libra setbacks can be linked to the withdrawal of major backers, such as PayPal, Stripe, Mastercard, and Visa in October 2019. Notably, pressure from the American government has been inevitable in the Libra project. It, therefore, remains a matter of time to see whether it succeeds or throws in the towel.

Nevertheless, Lubin is optimistic about stablecoins as he acknowledged: “We’ll see many Libra-like projects going forward with different kinds of price-stable currencies offered.”

He, therefore, views the Libra project as just the beginning because a beaming future awaits this sector.

Joseph Lubin image via CNBC

WEF Proposes Interoperable Stablecoins as Building Blocks for a Sustainable Global Economy

Stablecoins and the technology underlying them will be the building blocks of a more sustainable, inclusive and resilient global financial system according to the World Economic Forum (WEF).

In an article published on Nov. 26, the WEF highlighted the true value that digital currencies such as stablecoins could have on creating a fairer and more inclusive financial system for the world. They however stressed the requirement for these digital currencies to function interoperability across blockchains, as well as interoperability between fiat cash and digital currencies, and between centralized and decentralized systems.

Stablecoins VS Cryptocurrency

Like a typical cryptocurrency, a stablecoin is a cryptographically signed digital asset recorded on a blockchain. The key difference is that stablecoins are pegged to ‘real-world’ assets such as fiat currency or a commodity such as precious metals like gold. This creates a far more stable token, that is shielded against price volatility, but able to perform the same functions of a regular cryptocurrency.

US Dollar Dominance

As outlined in the article, stablecoins could contribute towards a more resilient global economy by tempering some of the potential threats posed by the US dollar’s (USD) domination of global foreign currency reserves.

Foreign currency reserves are assets of central banks held in different currencies, primarily used to support their liabilities. Central banks also use reserves to help stabilize their respective national currencies. According to statistics from the IMF, the US dollar accounted for 62% of all foreign reserves held by central banks in the first quarter of 2019, while US GDP accounted for 15% of global GDP.

Source: Image taken from IMF data http://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4

A critical issue with USD reserves is that they are usually held by central banks in the form of US government bonds, and are effectively removed from circulation. Mass conversion of USD into US government bonds has kept US interest rates artificially lower for longer and pushed the United States further and further into debt. Consequently, a global scarcity of USD creates further major headwinds for US exporters, widening the trade deficit and pressuring economic growth.

The 2008 global financial crisis is evidence that a major economic disturbance can drive hard investment into USD-denominated safe assets—assets like real estate which at the time turned out to be not so safe. A similar future event with our current USD reserve reliance could effectively dry up global liquidity and cause the entire global financial system to collapse.Stablecoins could be used in lieu of foreign currency reserves. According to a speech given by Bank of England Governor, Mark Carney in August 2019—a diversified digital currency – one only partially weighted in USD – could unlock dollar funds stockpiled by governments and help increase global liquidity, trade and investment.

Diversity and InclusionStablecoins could also enhance global financial inclusion by alleviating people’s dependence on physical cash. According to the World Bank, almost 1.7 billion adults worldwide are unbanked which excludes them from participating in the world economy, creating further obstacles to escape poverty. For these people, holding, managing and transacting in cash imposes significant logistical, financial and security burdens. In addition to the unbanked, there are billions more people who might hold a minimum account balance but predominantly rely on cash for all transactions. This activity in combination with their income volatility makes it difficult for banks to accumulate enough data to provide any real service.Maintaining a smartphone is by far a more viable option for many people across the world than maintaining a bank account. Stablecoins can be exchanged through applications and stored on the security of a blockchain. Stablecoins could effectively expand the reach of consumer and small business credit across borders by reducing exposure to foreign exchange risk and the high fees associated with international payment networks.

Interoperable StablecoinsAcross different blockchains and protocols, there are currently around 200 active stablecoins. USD-backed coins like Tether, USDCoin, and Gemini Dollar the most active but recently many government-backed coins are being prioritized. The most recent is the People’s Bank of China with Digital Currency Electronic Payment (DCEP) project following President Xi Jinping’s call for blockchain action.

The WEF emphasized the need for stablecoins to be interoperable across multiple blockchains—citing blockchain interoperability as a means to increase economic and transactional scalability, speed and security.

Image via Shutterstock

European Central Bank Plans to Take the Lead on Stablecoins

The European Central Bank (ECB) has announced its plans to get “ahead of the curve” on stablecoins and accelerate their efforts in the digital currency space.

During her debut press conference on Thursday, the new ECB President Christine Lagarde urged the ECB to take the lead regarding stablecoins, citing increased interests in the space from central banks in Britain, Canada and China. Lagarde highlighted the ECB is in the process of establishing clear objectives for the bank’s digital currency task force, which will be announced in 2020.Stablecoins are digital currencies pegged to physical assets, such as gold, or fiat currency and are designed to minimize price volatility.

Responding to the Demand

During the conference, Lagarde said, “My personal conviction is that given the developments, we are seeing, not so much in the bitcoin segment but in the stablecoins projects.” She reiterated “We’d better be ahead of the curve if that happens. Because there is clearly demand out there that we have to respond to.”

The debate has raged within Europe regarding whether the ECB should issue its own digital currency but there has been considerable resistance from EU authorities.In September, the IMF released a paper entitled, Digital Currencies: The Rise of Stablecoins outlining the significant benefits stablecoins could bring to society. The IMF also said that banks could lose their intermediary roles as the public would most likely switch to stablecoin providers.

Lagarde was head of the IMF at the time and appears to be responding as to this issue with her role in the ECB, by mandating the central bank to compete with its own innovation.

The Changing of Lagarde

Lagarde appears to be on a completely different page to the former ECB President Jean Claude Triche who, last month at Caixin’s conference in Beijing, expressed his strong doubts that cryptocurrencies could ever become the future of money. “The [crypto]currency itself is not real, with the characteristics that a currency must have.” He further stated that buying a cryptocurrency is “in many respects pure speculation,” said Trichet, who led the ECB from 2003 to 2011, after a decade as governor of the Bank of France. “Even if [the cryptocurrency] is supposed to be based on underlying assets, I am observing a lot of speculation. It is not healthy.”

Image via Shutterstock

New Money Theory in Action: Circle's USDC Stablecoin

Circle is gearing up for 2020 with a renewed deep focus on stablecoins and the powerful potential they hold for people, enterprises, and governments globally.

On Dec. 17, the founders of Circle announced in a blog post, the sale of its Circle Trade OTC business to Kraken. Spokespersons from Circle stated that they are confident that Kraken will continue to deliver a best-in-class OTC liquidity service to its former customers.

2020 Road MapAccording to the blog, the focus moving forward will be to build on Circle’s core services which support its stablecoin, USDC, and unlocks financial use cases worldwide. The blog highlighted that the 2020 product roadmap will demonstrate the stablecoin focus initially in the form of new global payment, custody, and wallet APIs. The founders said, “These APIs will be offered as services to businesses and developers everywhere who will be able to take advantage of the innovation and efficiency of stablecoins without the cost, complexity, and risk of implementing this infrastructure themselves.”

Tip of the Iceberg

While Circle’s platform services have supported its Pay, Invest, Trade, and USDC products and businesses, Circle’s founders stated that what the products the public has seen is merely the tip of the “iceberg” of what the core will be capable of with the new layer of APIs. According to the blog post, these APIs will accelerate the adoption of stablecoins and USDC.

Sean Neville, Founder, Circle said, “It’s an exciting time to be building, as so much of what we’d envisioned upon founding Circle is now finally becoming reality at scale. Stablecoins, third-generation blockchains, and deep global policy engagement suggest to us that the mass-market phase of cryptocurrency adoption is approaching over the next two to three years.”

USDC: Revisited

Stablecoins are a type of digital asset or cryptocurrency designed, as the name implies, to be stable. The minimized volatility in the prices of stablecoins is due to it being pegged to some form of stable asset such as fiat money, commodities and precious metals.

There has been an increased global interest in stablecoins and digital currency backed by central bank money, the introduction of third-generation public blockchains, and the accelerated global policy interest in crypto all provide an exciting backdrop for Circle’s new platform services in 2020.Reiterating their mission, the founders of Circle wrote, “Many of us in this nascent crypto ecosystem set out years ago on a shared mission to create an improved, inclusive, open financial system for the world. We’ve made a small yet undeniable impact so far, but we’re far from done.”

Classification of Stablecoins

According to the report issued by the European Central Bank, there are 3 main types of stablecoins:

1) Tokenized funds

· Every unit of tokenized funds represent a claim on the issuer over the funds it received from users;

2) Collateralized stablecoins

· Backed by assets whose price in the currency of reference fluctuates over time;

3) Algorithmic stablecoins

· Adjustment of token supply to maintain price stability of the reference currency and guide user’s expectations on its future value.

Circle’s USDC is an example of off-chain collateralized stablecoins, which USDC is collateralized in US dollars and can be exchanged for 1 USDC :1 US dollar. For every USDC issued, there is a corresponding US dollar held in the reserve bank account. The rules of issuance and redemption of USDC are overseen by CENTRE Consortium, in which the fiat reserves are audited by Grant Thornton on a monthly basis.

Implications from New Money Theory

Money Flow

Money flow refers to the process of money transfer and redemption. Unlike traditional fiat currencies that is issued by central banks, the smart contracts of CENTRE manage the minting and redemption of USDC. For minting, onboarding customers first access the web application maintained by a licensed CENTRE token-issuing member. The issuer then executes a series of commands with the CENTRE network to mint, verify and validate fiat tokens pegged to the value of deposited funds. After the verification process, customers can use the minted tokens for transfers.

For redemption of USDC, the execution is in reverse of that for minting. Customers access the issuing web application and deposit the tokens into a wallet address made available to his account, then the issuer executes the transfer from the USD reserve to the customer’s designated bank account. In this case, this is different from the money flow of fiat currencies that the tokens are withdrawn from circulation. The USDC will be burnt or destroyed if the value of USDC surpasses the pre-funded fiat buffer maintained by Circle.

Money Form

For off-chain collateralized stablecoins, most jurisdictions do not grant legal effect to the transfer of assets outside the books of existing payment systems and security settlement systems. Only what exists in digital form can be transferred with digital means. Stablecoins such as USDC represent a digital money form and Circle will be responsible to keep USDC in safe custody outside Circle’s blockchain and deliver USDC to users when requested.

Kun Hu, CEO, Blockchain.News and strong advocate of an inclusive and open financial system, commented, “From a higher perspective, this could be viewed as an ushering in of a new form of money flow that will ultimately replace the traditional systems. As discussed in our blockchain in human history series, there are three key aspects where we expect blockchain to have the most significant impact—the issuance of money, the forms of money and the flow and transaction ability of money.” He concluded, “Stablecoins, such as USDC do strongly support two of these aspects, new money flow and new money forms as it is still an encrypted currency, but their values depend on regulation and their underlying assets, which is usually fiat currency.”

Circle's New APIs Simplify Complex Crypto Concepts For Mass Institutional Adoption

Circle, the main stablecoin leveraged by Coinbase, has expanded its services to programmable functionality of its USDC stablecoin.

Circle revealed three new APIs for businesses in a blog post on March 10. The new tools for developers are aimed to facilitate the use of USDC by traditional businesses and additionally create a digital replacement to traditional fiat channels. API tools allow software developers to build on top of and interact with an application.

Programmable Dollars For Business

The first API update, Circle’s Payments API, facilitates the use of credit card and debit card payments by businesses to then settle payments in USDC. This should greatly expedite the time it takes for businesses to receive funds from weeks to days.

Circle will also allow its users to receive cryptocurrency payments without running nodes via its Wallets API. This API provides a simplified layer of familiarity for traditional business to effectively leverage complex concepts in cryptocurrency such as gas fees or private keys.

Finally, Circle’s Marketplace API allows customers to use USDC in other ways. For example, businesses can use the API to “top up” customer funds, enable peer-to-peer payments, or pay suppliers.

In the blog post, Jeremy Allaire, CEO, Circle said, “Until recently, for a business to take advantage of this infrastructure it has often been complicated and confusing. Crypto wallets, exchanges, blockchain transaction management, gas fees, private key security, banking connectivity, and compliance hassles have all been technical and operational impediments to the average internet business jumping into digital currency.”

Circle is currently offering early access APIs, but production APIs are on the way.

A Catalyst for Institutional Adoption

With the launch of the new APIs, Circle aims to simplify the world of digital payments so that company can setup and begin using an account with the same ease that they might open a business bank account.Allaire said “Companies should be able to then easily upload their dollars to the internet, convert them into digital currency dollars, and start storing and using these stablecoins for everyday payments.”

Circle Sold OTC Business to Re-focus on Stablecoins

As reported by Blockchain.News on Dec 18, Circle had announced that they would approach 2020 with a renewed deep focus on stablecoins and the powerful potential they hold for people, enterprises, and governments globally.

On Dec. 17, the founders of Circle announced in a blog post, the sale of its Circle Trade OTC business to Kraken. Spokespersons from Circle stated that they are confident that Kraken will continue to deliver a best-in-class OTC liquidity service to its former customers.

Along with the sale of the OTC business, Circle made a number of organizational changes to help align their operation and talent to match its stablecoin platform service focus and future roadmap. Notably among these changes was the successful sale and restructuring of Poloniex, its exchange business, to a standalone company backed by an Asian investment group. It appears that Cirlce has made good on their goal to focus on moving forward by building on Circle’s core services which support its stablecoin. At the time Allaire said, “These APIs will be offered as services to businesses and developers everywhere who will be able to take advantage of the innovation and efficiency of stablecoins without the cost, complexity, and risk of implementing this infrastructure themselves.”

Image via Shutterstock

Bitcoin Takes Black Swan Dive With Markets, Cash Still King as Stablecoin Market Caps Surge

The Bitcoin community watched from the edge of their seats as the BTC price briefly sank below to $3,900 before rebounding to between $5,300 and $5,500 in less than 30 minutes this morning.

At time of writing, Bitcoin (BTC) has temporarily stabilized at $5240, marking a loss of nearly half its value since March 7. The entire cryptocurrency market continued this week’s free fall along with the traditional markets seemingly proving once and for all that Bitcoin’s hedge value has been over-stated.

Exhibit 1: Bitcoin Price from Mar 11-13

Source: CoinMarketCap

As the broader global trading markets plummet, equities have fallen triggering the third circuit breaker as the S&P 500 fell 9.5 percent drop on Thursday. This is the second time in a week trading was temporarily halted so that excess volatility could be reined in. The Dow Jones Industrial is down around 10 percent, while the Nasdaq has fallen 9.5 percent.

Cash and Stablecoins Not BTC and Gold

Only days ago we published pieces of the ongoing Twitter debate on Bitcoin’s safe haven status as markets worldwide have been gripped by growing fears over recent weeks as the coronavirus disruption ground manufacturing in China to a halt causing bearish global ripple effects and decreasing demand for oil. A break down in the alliance between Russia and the OPEC appears to be the straw that has broken the camel’s back as oil prices took their biggest dive in 30 years.

In the digital community, we’ve seen a lot of conversion from cryptocurrency into US backed stablecoins, particularly with Tether. As shown on CoinMarketCap, marketcaps on every stablecoin are up significantly over the last 24 hours.

Exhibit 2: Market Capitalization of Tether in 7 Days

Source: CoinMarketCap

As a third circuit breaker was triggered in the markets yesterday causing a second halt to trading this week, it appears that people are not turning to either Bitcoin or Gold in the face of the crisis but cold hard cash and their digital alternatives.

Image Via Shutterstock

G20 Agency Warns Countries of Systemic Risks Posed by Global Stablecoins

The Financial Stability Board (FSB), the G20 body that advises on ways to improve the global financial system, has published a study on the challenges, which stablecoins pose for the global economy. The FSB stated that regulatory frameworks have already covered several activities associated with stablecoins, although there are other risks that many national regulators could be left unprepared for.

Stablecoins a threat to the global financial system

The study acknowledges that stablecoins have significant potential to contribute to the development of the global financial system. Digital assets could give millions of people without bank accounts access to the international financial system and provide consumers across the globe greater freedom for low-cost transactions. However, the study also presents that such benefits make stablecoins much riskier for the global economy and financial system.

The FSB warns national regulators to review standards and fix any potential disruptions caused by global stablecoins such as the Facebook-led Libra project. The agency stated that much of the mechanisms and technology used in stablecoins were mostly untested. This implies that functioning stablecoins may have hidden vulnerabilities that emerge when they are ready for mainstream application. Large-scale flows of funds into and out of a global stablecoin could test not only the ability of the financial conditions of the broader financial system but also the supporting infrastructure to handle high transaction volumes.

To respond to the potential threats posed by stablecoins, the watchdog suggests to authorities that if they cannot regulate and control fully decentralized stablecoins, then they should consider banning them. The FSB mentioned that national regulators should monitor the fast pace of innovation within the digital asset space to attempt and recognize any weaknesses or regulatory loopholes before they take effect. All G20 member countries should come together to clarity regulatory powers and fix potential gaps within their national frameworks to sufficiently address risks posed by global stablecoins.

Since stablecoins work across borders, the watchdog urges member countries to consider creating a flexible cross-border framework to enable stablecoins not to find a gap over the differences between each jurisdiction. The FSB also proposes the creation of high interagency cooperation between international partner agencies.

Concerns on regulating stablecoins

This is not the first time when global regulator like the G20 regulatory watchdog is calling for the world’s leading economies to plug gaps in their regulatory frameworks to avoid stablecoins from undermining financial stability. Last year, the European Central Bank raised concerns regarding the lack of governance framework and regulation of stablecoins. The European Central Bank expressed uncertainties concerning the regulatory treatment and governance of stablecoins. Besides Facebook’s Libra stablecoin, several other stablecoins exist. But governments, central banks, and global regulators have appeared not to like the idea of private entities ‘creating money’ pegged to fiat currencies. It is clear that the G20 watchdog also has similar concerns over stablecoins.

Image via Shutterstock

Five EU Member States Take Position Against Stablecoins

Five members of the 27-member European Union Bloc has urged the body to pass regulations to stiffen the emergence and existence of stablecoins in the region.

The legislation is backed by France, Italy, The Netherlands, Spain, and Germany. As reported by Reuters, the motion being moved by these country’s ministers will see the European Union restrict the use of stablecoins or asset-backed digital currencies like Tether (USDT) in the zone until associated risks and regulations have been duly addressed.

The move by affected projects to seek regulations will be expected to face to face “a tough approach” as German Finance minister Olaf Scholz told reporters during a joint statement. This tough approach will also include a “ban on any private sector activities” that do not meet regulations. “We all agree that it’s our task to keep financial market stable and to ensure that what is a task for states remains a task for states,” Scholz added justifying the need to stiffen stablecoin regulations.

The Move Is an Approach to Clampdown on Facebook Libra

The move by the EU members sponsoring these stablecoin regulations can be seen as an attack on the embattled Facebook Libra project.

“We’re waiting for the Commission to issue very strong and very clear rules to avoid the misuse of cryptocurrencies for terrorist activities or for money laundering,” French Finance Minister Bruno Le Maire said, adding, “The central bank, I mean the ECB, is the only one to be allowed to issue a currency. And this point, it’s something that cannot be jeopardized or weakened by any kind of project including the so-called Libra project.”

Prior to this time, The European Union has been bullish on stablecoins as the European Central Bank President Christine Lagarde once urged the members to take the lead on stablecoins.

The EU however is known to have a dislike for the Libra project with most members of the union as most regulators in the region have scrutinized the project.