Weekly News Roundup – 16 Aug 2021
Poly Network hacker returns nearly all of the $611 million in stolen funds
• The hacker who exploited Poly Network for $611 million across three blockchains has returned nearly all of the stolen funds.
• The only funds the hacker hasn't returned are the $33 million in USDT that were frozen by Tether following the exploit. These can't be moved until Tether authorizes it but the company is working on it.
• "We’ll expedite the work with the project to return the funds," Tether CTO Paolo Ardoino told The Block. He added that the company will likely burn the tokens and reissue them in order to pass them to Poly Network, rather than trusting the hacker to move the funds once unfrozen.
• The funds have been returned over the course of two days. Yesterday, the hacker had returned around $256 million of the loot, including large amounts of BTCB, a bitcoin-pegged token on Binance Smart Chain, ether (ETH) and the stablecoin BUSD.
• The funds were stolen in the largest DeFi hack to date on August 10. They were hijacked from Poly Network, which is a cross-chain protocol that lets crypto users swap tokens among blockchains. The hacker effectively convinced the network to authorize a transaction sending large amounts of funds from three blockchains to their own accounts.
• After their identity was reportedly narrowed down by blockchain security firm SlowMist, the hacker engaged in dialogues with the Poly Network team.
• The two entities communicated by sending cryptocurrency transactions containing messages for each other. The hacker claimed they could have taken even more funds and asked for donations for people agreeing with their decision to hand the funds back. Crypto platform Poly Network rewarded hacker with $500,000 'bug bounty'.
Tether significantly increased exposure to treasury bills as of June, per reserves report
• Stablecoin issuer Tether has published a transparency report detailing the breakdown of its $62.8 billion in reserves as of June 30.
• The majority — 85% of Tether's (USDT's) reserves — was held in the "Cash & Cash Equivalents & Other Short-Term Deposits & Commercial Paper" category as of the date.
• Within this category, commercial paper and certificates of deposit formed the majority, with a 58% share. Treasury bills accounted for 29%, cash and bank deposits for 12%, and reverse repo notes for 2% of the category.
• Notably, Tether's allocation to treasury bills has increased significantly. The amount of treasury bills has increased from 3% of the cash & cash equivalents category in March to 29% of the even bigger category in June. Treasury bills are short-term government debt obligations with a maturity of one year or less.
• Tether has also made a notable change to its cash and bank deposits category this time around. Last time, cash and fiduciary deposits were separate categories. Now Tether has combined these two categories, with a new name: cash and bank deposits. And the allocation to this combined category as of June is down from 28% to 12% — meaning it has reduced the combined amount of cash and fiduciary deposits.
• This is Tether's second reserves report since its launch in 2014. Earlier this year, Tether proposed ongoing publication of the reserve breakdown as part of its $18.5 million settlement agreement with the New York Attorney General's Office. Audit firm Moore Cayman has given an assurance opinion for both the reports.
Walmart is looking for a crypto product lead
• Walmart—America's most ubiquitous retailer—is on the hunt for a cryptocurrency product lead, according to a job ad posted to LinkedIn five hours ago.
• The ad said the firm is "seeking a visionary leader" to fill the so-called digital currency and cryptocurrency product lead position. The person would create a digital currency strategy for the big box store.
• "You will be responsible for developing the Digital Currency strategy and product roadmap," the ad said. "As an expert in Digital Currencies/ Cryptocurrency and Blockchain related technologies, you will drive the vision for the product and capabilities roadmap."
• The person would also " identify crypto related investment and partnerships," the ad said.
• It's not clear from the ad what products the person would launch. The job ad was released weeks after rumors swirled that Walmart rival Amazon was poised to make a big entrance into the crypto market. Amazon has its own job ad for a digital currency and blockchain product lead.
• Still, Amazon denied reports that it would accept bitcoin as a form of payment.
Senate passes trillion-dollar infrastructure bill with unamended crypto tax language
• On August 10, the Senate passed H.R. 3684, a landmark infrastructure package months in the making that in its final steps became a flashpoint over cryptocurrency regulation in the United States.
• The final vote tally was 69-30, with one abstention from Senator Mike Rounds. The bill has been a priority for the Biden administration and saw broad bipartisan support, despite Democrats asking for more and Republicans asking for less spending.
• The bill's process, with the Senate version incubating behind closed doors with a bipartisan group, has proved controversial, especially for the crypto community.
• The language that now passed would identify anyone who provides "any service effectuating transfers of digital assets on behalf of another person" as a broker for the purposes of IRS reporting. The crypto industry immediately voiced concerns that beyond the target cryptocurrency exchanges, that language would potentially render such parties as miners, stakers, node operators and software developers responsible for reporting tax information of crypto users. That is not technologically feasible.
• Two amendments looking to correct this broad definition emerged over the past week, eventually consolidating into a compromise that included Treasury support. Due to the bill's truncated process, they didn't get a traditional vote. Senator Pat Toomey instead presented the consolidated amendment to the Senate for unanimous consent, which required no senator to object.
• Senator Richard Shelby of Alabama ultimately sank the amendment out of a desire to see his own $50 billion amendment, to add military spending, enter the bill.
• The bill still needs to pass in the House of Representatives, which is on recess until September. It is not expected to face substantial resistance in the lower chamber.
Circle wants to become a bank so it relies less on third party partners
• Circle — the fintech company behind stablecoin US dollar coin (USDC) — dropped a regulatory filing Monday morning that reveals its ambitions to become a U.S. national bank.
• Circle, which is set to go public via a special-purpose acquisition company (SPAC), told The Block in a message that it "intends to become a full-reserve national commercial bank, operating under the supervision and risk management requirements of the Federal Reserve, US Treasury and OCC, and the FDIC."
• In the new S-4 filing, the firm said that a banking framework could reduce the risks around its business, including its reliance on third-party payment systems.
• "Our ability to offer our core API services depends on our ability to maintain existing sponsorship relations and to seek out and obtain new sponsorship relationships," the filing said.
• Rival Paxos — which has its own stablecoin offering — received conditional approval from the OCC for a national trust banking license.
• “We believe that full-reserve banking, built on digital currency technology, can lead to not just a radically more efficient, but also a safer, more resilient financial system,” said Circle's chief executive officer Jeremy Allaire said in an emailed statement.
SIX Digital Exchange's CEO joins Galaxy Digital as head of Europe
• Galaxy Digital has hired former SIX Digital Exchange CEO Tim Grant to run its European division, the firm announced Thursday.
• Grant, who joins Galaxy as head of Europe next week, started his career with a nine-year stint at investment bank UBS before he dived into technology and digital assets. In 2015, he became CEO of blockchain firm R3's Lab and Research Centre where he worked just shy of two years. He then founded a digital asset firm called DrumG Technologies prior to joining SIX.
• SIX Digital Exchange provides infrastructure for digital asset platforms and is part of SIX Group, which operates the Swiss Stock Exchange. Grant became CEO in March 2020, before joining the board of directors of the Ethereum Enterprise Alliance — which the SIX Digital Exchange is part of — in April 2021.
• At Galaxy Digital, the investment firm run by billionaire Mike Novogratz, Grant's remit is to expand the firm's presence in Europe and run its operations in the region.
• In an interview with The Block, Grant said he plans to build out a team covering many of the businesses Galaxy operates stateside, including sales and trading, investment banking, and wealth management.
• "If you look at what we've done in North America, we've gotten one of the bigger banks such as Goldman and Morgan Stanley to have us on their platform," he said, referring to two different deals announced earlier this year between the investment banks and Galaxy's asset management unit.
• "I'll be getting in front of the biggest allocators and asset managers in this jurisdiction. I'm not going to name any specific firms, but the largest hedge funds in London, no question."