Cryptocurrency News Coronovirus Crash

The S&P has lost nearly 9% in just three days. That’s its worst such stretch since the earliest days of the coronavirus crash in March 2020. The Dow lost 876.05, or 2.8%, to 30,516.74 on Monday, and the Nasdaq composite dropped 530.80, or 4.7% to 10,809.23.

The coronavirus crash in early 2020 was Wall Street’s last bear market, and it was an unusually short one that lasted only about a month. The S&P 500 got close to a bear market last month, but it didn’t finish a day below the 20% threshold.

Michael Wilson, a strategist at Morgan Stanley who’s been among Wall Street’s more pessimistic voices, is sticking with his view that the S&P 500 could fall further to 3,400 even if the U.S. economy avoids a recession over the next year.

That would mark another roughly 9% drop from the current level, and Wilson said it reflects his view that Wall Street’s earnings forecasts are still too optimistic, among other things.

With soaring price tags souring sentiment for shoppers, even higher-income ones, Wilson said in a report that “the next shoe to drop is a discounting cycle” as companies try to clear out built-up inventories.

Such moves would cut into their profitability, and a stock’s price moves up and down largely on two things: how much cash a company generates and how much an investor will pay for it.

There’s a new plan to regulate cryptocurrencies. Here’s what you need to know

There is wide agreement some regulation is needed, but who should do it is up for debate.
There is wide agreement some regulation is needed, but who should do it is up for debate.Chris McGrath | Getty Images

Things change fast in the world of crypto.

Prices were at dizzying heights in November, and then came the crash. In just a couple of weeks in May, cryptocurrencies lost more than half a trillion dollars in market value.

The most spectacular implosion was a cryptocurrency called TerraUSD. It was a stablecoin – meaning its value was supposed to be pegged to the U.S. dollar through a complicated algorithm.

Instead, it tanked and is now virtually worthless.

That crash reignited calls for new rules to govern a cryptocurrency market that is still something of a wild frontier. And now we have perhaps the biggest step yet toward new crypto regulation.

Two senators — a Republican and a Democrat — teamed up to unveil a broad new regulatory bill last week. But skeptics are already warning it’s a step backwards and is far too crypto-friendly.

Let’s unpack what’s going on and why a big question is who would regulate crypto.

What is the current setup?

Nearly everyone believes the crypto industry needs some sort of regulation.

New cryptocurrencies are born by the hour — and along with them, plenty of scams and fraud. The industry is currently overseen by a patchwork of federal and state regulations, which haven’t always evolved as quickly as the technology has.

The Securities and Exchange Commission (SEC) has brought dozens of crypto-related enforcement actions in the past few years. So has the Commodity Futures Trading Commission (CFTC).

After the May crash, Treasury Secretary Janet Yellen called on Congress to pass “comprehensive” regulations on stablecoins in particular.

Democratic Senator Kirsten Gilibrand, of New York, says this phase of the internet’s evolution – with cryptocurrency and other technologies known collectively as Web3 – poses similar risks to the early days of social media – sometimes called Web2.

“Congress failed to regulate Web2,” she said. “We failed to create a regulatory agency over various platforms that are now doing extreme harm to our youth and dividing this country. We are not going to make the same mistake with Web3.”

What is this new bill then?

It was introduced earlier this month by Senator Gillibrand and Senator Cynthia Lummis, a Republican from Wyoming.

It lays out a framework for regulating the crypto industry.

This includes tax requirements for various digital assets, and imposing stricter requirements for stablecoins, which, according to Gillibrand, would have disallowed the TerraUSD coin that imploded in May.

It also has provisions about cybersecurity, the possible creation of a self-regulatory organization, and some disclosure requirements. And it includes provisions directing the Federal Energy Regulatory Commission to study the energy impact of the cryptocurrency industry.

El Salvador is mining cryptocurrency with 300 computers in plant powered by Tecapa Volcano.
El Salvador is mining cryptocurrency with 300 computers in plant powered by Tecapa Volcano.Alex Peña | Getty Images

But perhaps most importantly — and the thing that has skeptics most concerned — is that the bill defines most cryptocurrency as commodities, which would be overseen by the Commodity Futures Trading Commission (CFTC), instead of securities, which would fall to the much bigger Securities and Exchange Commission (SEC).

The SEC is headed by Gary Gensler — one of the sharpest crypto critics, who has said the crypto industry is “rife with fraud, scams and abuse.” He beefed up the SEC’s crypto enforcement team early in May, and after the crypto crash asked Congress for more funding, saying the team was still “out personed.”

But Senator Gillibrand said it made sense for the CFTC to do the heavy lifting.

“It would be inappropriate for the SEC to regulate some of these markets because they don’t function like securities,” she said. “Chair Gensler has already said … the words that ‘Bitcoin is a commodity,’ because he understands that it’s a form of value in the same way that gold is a form of value, in the same way that oil is a form of value, and that it’s more appropriately placed under the CFTC.”

Both senators are optimistic about the future of crypto. Lummis bought her first Bitcoin back in 2013 and owned more than $100,000 worth as of her most recent financial disclosure. She said this bill tried to find the “sweet spot” when it comes to regulation.

“So people who are innovating in this space know the rules of the road and people who are consuming the ultimate products know that the consumer protection elements are there,” Lummis said.

The bill is still a long way from becoming law. In terms of timing for a floor vote, Lummis said: “We’re talking months.” She has previously acknowledged the sweeping bill may ultimately be broken up into parts to go through the relevant committees.

What the critics say

There are a number of technology and finance experts who say that cryptocurrency is a purely speculative asset, and one that serves no real purpose.

And this month, a group of them wrote a letter to leaders in Congress, asking that they: “Ensure that individuals in the U.S. and elsewhere are not left vulnerable to predatory finance, fraud, and systemic economic risks in the name of technological potential which does not exist.”

One of the signatories was Molly White, a software engineer who runs the blog Web3 Is Going Just Great, which documents instances of fraud and catastrophe in the crypto universe. And she is not a fan of the new bill.

“It is very much what I think the cryptocurrency industry was hoping to see from regulators, which is a very limited set of regulations applied to the industry,” she said.

Some in the industry have responded positively so far. The Crypto Council for Innovation called it a significant step forward, and the Blockchain Association called it a “milestone moment.”

One of the biggest problems White has with the legislation is precisely that it hands over most of the regulatory power to the CFTC instead of the SEC.

White says cryptocurrencies aren’t like traditional commodities like wheat or oil, so the CFTC shouldn’t be the main regulatory muscle.

“Cryptocurrencies are more like securities because people broadly put money into them hoping for a return on their investment,” White said. “And when someone is engaging with something as an investment, that’s a good sign that it should go to the SEC.”

What’s more, White said the CFTC simply wasn’t equipped to handle the workload — even if the bill allows the CFTC to impose a fee on digital asset exchanges to help fund its large role.

“There would need to be a major change in the amount of resources going to the CFTC for them to suddenly take on this enormous and much broader set of issues than they’ve dealt with in the past,” she said. “And the SEC is frankly just more experienced in this field already.”

Financial Firms and Crypto Networks Launch Initiatives; Nonprofit Challenges Crypto Tax Provision; Crypto Enforcement Continues; UST Analysis Published

Firms Announce New Crypto Initiatives; Data Published on Crypto and NFT Use

By Robert A. Musiala Jr. and Veronica Reynolds

Late last week, a major U.S. cryptocurrency custodian announced “a groundbreaking, industry-first custody exchange network giving institutions direct access to most trading pairs across prominent exchanges.” According to a press release, the cryptocurrency custodian has fully integrated with one major U.S. crypto exchange and has commitments to integrate with four other exchanges. The press release notes that the new network will enable various benefits, including separation between qualified custody and a crypto exchange, increased access to liquidity, reduced counterparty risk, and reduced hot wallet hacking risk.

In another recent development, a major U.S. financial services firm announced that it is working with various NFT marketplaces to enable purchases of NFTs using traditional credit card payments. According to the announcement, a recent survey found that roughly half of respondents sought the ability “to pay with crypto for everyday purchases or [use] a credit or debit card to buy an NFT.”

Also this week, a major global asset management firm announced a partnership with the blockchain arm of a fund distribution platform. According to a press release, the goal of the partnership is to incorporate the asset services of the asset management firm within the blockchain ecosystem, with the hope that the collaboration will help unlock “transactional efficiencies and enhanced transparency as well as operational agility that makes investment solutions available to a broader investor base.”

Finally, this week two survey results were published that provide insight into digital asset investor sentiment. The first found that 71 percent of the world’s wealthiest people – 46 percent of whom reported wealth of at least $30 million – have invested in digital assets. However, the survey indicates that the concentration of digital assets within investor portfolios is small, with only 14 percent allocated to “alternative investments,” which includes cryptocurrency as well as other, riskier assets. A second survey, conducted on Twitter, found that 64 percent of respondents reported they buy NFTs primarily to “make money,” with far fewer respondents reporting they do so to participate in the community and “flex” (14.7 percent), “collect digital art” (12.4 percent), or “access games and tools” (8.6 percent).

For more information, please refer to the following links:

Nonprofit Coin Center Files Lawsuit Challenging Crypto Provision of Tax Code

By Joanna F. Wasick

Last week, Coin Center, a nonprofit research and advocacy center focused on cryptocurrency public policy issues, filed a lawsuit against the United States Treasury, the Internal Revenue Service, the United States and related individuals, asserting that a recent amendment to the tax code was unconstitutional on its face. The amendment, known as the 6050I provision, was part of the Infrastructure Investment and Jobs Act passed last summer, and it will require individuals and businesses that receive $10,000 or more in cryptocurrency to report to the government the name, date of birth and Social Security number of the person who sent those funds. Coin Center’s complaint alleges that this requirement violates the Constitution in two ways: First, it violates the Fourth Amendment and the right of privacy by forcing people to collect sensitive information about others with whom they conduct direct transactions, and second, it violates the First Amendment by forcing politically active organizations to create and report lists of their donors’ names and identifying information. The complaint also names additional co-plaintiffs who, Coin Center asserts, receive the kinds of payments that would trigger the amended law and thereby be turned into “unwitting warrantless surveillance agents for the federal government.”

For more information, please refer to the following links:

OpenSea and Chainlink Announce Network Transitions

By Jordan R. Silversmith

Leading NFT marketplace OpenSea recently announced its transition to a new open-source protocol in an attempt to lower transaction costs. According to the company’s announcement, OpenSea estimates that the switch could significantly lower transaction costs, or “gas” costs, by “about 35% based on last year’s data.” The company estimates the new protocol will save users $460 million in the next year. Sellers on the marketplace will have to pay a one-time fee per collection to sell their NFTs on the new protocol.

In another network transition, decentralized oracle network Chainlink recently announced it had integrated its price information into Moonbeam, a new smart contract parachain on the Polkadot network protocol. According to reports, Chainlink noted that this venture will allow users who build within the platform to access price information compiled and aggregated from various exchanges, allowing decentralized finance developers to bring better price accuracy to their decentralized applications.

For more information, please refer to the following links:

SEC Investigates Stablecoins, Crypto Exchanges; DOJ Seizes Dark Market

By Keith R. Murphy

According to reports, the U.S. Securities and Exchange Commission (SEC) is investigating whether the developer of a well-known blockchain network and decentralized finance application violated U.S. law in how it marketed its algorithmic stablecoin and token. The SEC is reportedly looking to determine whether investor protection laws were broken in connection with the marketing of the coins, which effectively lost all their value recently. A related report indicates that the SEC has also launched a broader inquiry into whether cryptocurrency exchanges have sufficient protections against insider trading on their platforms.

According to a press release from the U.S. Department of Justice (DOJ), an illicit marketplace consisting of a series of websites selling personal information, including Social Security numbers and dates of birth, on the dark web has been seized by the DOJ and other U.S. and foreign law enforcement agencies. The administrators of the marketplace reportedly required buyers to use “digital payment methods, such as bitcoin” and employed various other techniques to maintain their anonymity and avoid detection of their activities for years.

The DOJ’s Office of the Inspector General recently issued its Audit of the United States Marshals Service’s Management of Seized Cryptocurrency. The stated objective of the audit was to evaluate the U.S. Marshals Service’s management of seized cryptocurrency, covering the period from fiscal years 2017 through 2021. Among other findings, the audit report states that the Marshals Service lacks important operating procedures and controls and faces challenges in the management and tracking of seized cryptocurrency. The audit report provides multiple recommendations to address these deficiencies.

For more information, please refer to the following links:

Report Analyzes UST Collapse, Australia Reports Losses to Crypto Scams

By Kayley B. Sullivan

A recently published Chainalysis report examined the collapse of TerraUSD (UST), which was once one of the largest stablecoins by market capitalization. UST is an algorithmic stablecoin, which means that it is backed by an on-chain algorithm that facilitates a change in supply and demand between the stablecoin and one or more cryptocurrencies. In the case of UST, it is backed by TerraLUNA (LUNA).

Analyzing the collapse, the report first points to two traders breaking the “peg” on May 7, which led to investor panic and many holders beginning to sell off or withdraw. To repair this, Terraform Labs and other supporters purchased $2 billion UST. According to the report, this was a short-lived solution, as the continued sell-off drained those funds and LUNA became hyperinflated. As a result, both tokens crashed.

In response to the recent cryptocurrency market crash, a crypto fund and a crypto lending company have reportedly taken some steps toward potential bankruptcy. A major Dubai-based crypto fund has been liquidated by crypto lending firms and is currently in the process of repaying lenders and other counterparties. Similarly, a major crypto lending firm has hired business-restructuring lawyers, according to reports.

According to a recent report from the Australian Competition and Consumer Commission, as a result of cryptocurrency scams, Australians lost more than 205 Australian dollars in the first four months of 2022, a 166 percent increase from the same months in 2021. The report notes that 75 percent of those losses came in the form of investment-related scams.

For more information, please refer to the following links:

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Recent Enforcement Actions Indicate Heightened Scrutiny of BSA/AML Compliance and Digital Assets

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Recent enforcement actions against banks indicate a new regulator emphasis on digital assets and Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance. Last year, Anchorage Digital Bank (Anchorage)—formerly Anchorage Trust Company—became the first federally-chartered bank focused on cryptocurrency. Recently, the agency that approved its charter, the Office of the Comptroller of the Currency (OCC), issued a cease-and-desist order against Anchorage for BSA violations and shortcomings in its BSA/AML compliance program. Specifically, the OCC cited Anchorage for deficiencies in its customer due diligence (CDD) procedures for higher-risk customers and procedures for identifying and reporting suspicious activity. The cease-and-desist order also indicates insufficient and inexperienced staffing in the BSA officer function and inadequate training throughout the organization, including in operations. 

In separate enforcement action, the OCC also issued a cease-and-desist order against USAA Federal Saving Bank – slapping it with a $60 million penalty. The OCC found deficiencies including “inadequate internal controls and risk management practices; suspicious activity identification, evaluation, and reporting; staffing; training; and third-party risk management.” The Financial Crimes Enforcement Network (FinCEN) also levied an $80 million fine for the same violations.

These enforcement actions and substantial penalties signal that BSA/AML regulations are under heightened scrutiny, especially as digital asset banks become more commonplace and new AML regulations loom on the horizon. Financial institutions should plan and prepare accordingly, particularly in the areas of customer due diligence, beneficial ownership, and suspicious activity identification and reporting.

Banks that wish to avoid becoming a potential target of an enforcement action need robust compliance programs that address these areas. 

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Cryptocurrency prices plunge as major exchanges halt trading

Amid a deepening sell-off in cryptocurrencies, two popular platforms blocked investors from buying and selling the digital assets.

Crypto-lending company Celsius late Sunday said it was halting users from making withdrawals, trades and transfers between accounts “due to extreme market conditions.” The company, one of the bigger cryptocurrency lending platforms with roughly 1.7 million customers and more than $11 billion in customer assets, didn’t immediately respond to a request for comment Monday.

Hours after the Celsius announcement, Binance became the second platform to pause transactions. CEO Changpeng Zhao tweeted Monday there would be a 30-minute pause on bitcoin withdrawals “due to a stuck transaction causing a backlog.” That halt was extended, but trading later resumed on Monday.

The trading suspensions come amid a $1 trillion loss in cryptocurrencies in the last two months alone, according to Reuters. Some investors are shying away from risky investments in favor of more stable assets amid deepening economic worries and as the economy grapples with the highest inflation in 40 years

Bank run

The shutdown at Celsius sparked anger and frustration on social media, with the company giving no indication in its announcement when it would allow users to access their funds.

“This is not okay. You’re losing trust with your patrons and NOT ACTING IN THE BEST INTEREST OF YOUR COMMUNITY!” one person wrote to Celsius in response to their trading halt announcement.

The total of market value of cryptocurrencies plunged below $1 trillion on Monday to $983 billion, the first time it has dropped below that mark since January 2021, according to CoinMarketCap.

The situation prompted some social media users to compare Celsius to Robinhood, the trading platform that restricted customers from transactions in so-called meme stocks in early 2021 amid wild swings in their prices. That decision prompted congressional hearings and scrutiny from regulators.

It’s unclear whether Celsius depositors will get all their funds back. A cryptocurrency lender is not regulated like a bank, so there’s no deposit insurance and no legal framework for who gets their money back first, like in a bankruptcy. It’s possible that Celsius’ investors, which include Quebec’s pension fund, may get their investment back before Celsius’ depositors will.

“This was yet another bank run. You’re not reinventing anything here. They were promoting their services as a better savings account but in the end you’re just another unsecured lender,” said Cory Klippsten, CEO of Swan Bitcoin, who has been publicly skeptical of Celsius’ business model for years.

“This news is difficult”

Lending platforms such as Celsius have come under scrutiny recently because they offer yields that normal markets could not support, and critics have called them effectively Ponzi schemes. It is the second notable collapse in the cryptocurrency universe in less than two months. The stablecoin Terra imploded in early May, erasing tens of billions of dollars in a matter of hours. 

Celsius said it had “activated a clause in our Terms of Use” that allows it to halt trading.

“We understand that this news is difficult, but we believe that our decision to pause withdrawals, Swap, and transfers between accounts is the most responsible action we can take to protect our community,” Celsius said in a statement. “We are working with a singular focus: to protect and preserve assets to meet our obligations to customers.”

The most popular cryptocurrencies — including ether, solana and tether — have lost value in the sell-off. In June alone, ether has fallen 7%, while bitcoin has lost 6% of its value. Bitcoin has fallen to its lowest price since December 2020, Bloomberg News reported

Those declines are impacting crypto-focused companies including and Coinbase. plans to lay off 260 employees, or 5% of its workforce, company CEO Kris Marszalek said in a tweet Friday. 

Marszalek didn’t directly blame the crypto market slump for the layoffs, but he tweeted “the markets will turn and when they do, you can be sure that we will be ready to drive and capture the next wave of growth for cryptocurrency adoption.”

Coinbase last month reported a $430 million first-quarter loss as active monthly users declined 19%. The company also instituted a hiring freeze this month, adding that some job offers may even be rescinded. 

Earlier this month, Gemini said it plans to lay off 10% of its staff, marking the first time the company has ever had to cut jobs, Bloomberg News reported. Crypto platforms Bitso, Buenbit, and Mercado Bitcoin have also slashed staff.

—With reporting by the Associated Press.

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Ripple Sues Youtube For Allowing Spread of Cryptocurrency ‘Giveaway’ Scams

Blockchain firm Ripple sued Alphabet Inc’s YouTube on Tuesday, alleging the video-sharing platform failed to protect consumers from cryptocurrency “giveaway” scams that use fake social media profiles to dupe victims into sending money. The company says scammers on YouTube have been impersonating Ripple and its CEO, Brad Garlinghouse, to bait viewers into sending thousands of dollars worth of XRP, a cryptocurrency championed by Ripple, according to a court filing.


The scammers promise to send back up to 5 million XRP, worth nearly $1 million, but victims who participate in the fake “giveaways” never receive any money in return, said the filing. The lawsuit appears poised to raise a fresh challenge around the controversial Section 230 of the Communications Decency Act, which shields Google, Facebook and other internet companies from liability for material that users post on their platforms.

Regulators in Washington are reconsidering the need for the law’s broad immunity, which helped U.S. tech companies grow but is viewed increasingly as a shelter enabling some of the world’s richest companies to avoid investments to curb crime, extremism and misinformation online. “For every scam, giveaway, a fake conspiracy that is taken down, multiple more pop up nearly immediately,” Ripple said in a blog post. “YouTube and other big technology and social media platforms must be held accountable for not implementing sufficient processes for fighting these scams.”

Garlinghouse, a long-time Silicon Valley executive, said he wants the case to be a “call to action” for the social media industry, arguing the law was written, “at a time when we didn’t understand how these platforms could be abused.” He said he had seen similar impersonations on platforms including Facebook’s photo-sharing app Instagram, but targeted YouTube in the lawsuit because it was the “slowest to respond and least proactive.”

YouTube spokesman Alex Joseph said the company takes abuse of the platform seriously and acts “quickly when we detect violations of our policies, such as scams or impersonation.” Founded in 2012, Ripple is one of the best-known companies that develop so-called blockchain technology, or the system underpinning cryptocurrencies. The company develops blockchain systems to help financial services firms carry out cross-border payments using XRP. Its filing, in the U.S. District Court for the Northern District of California, says YouTube’s failure to address the “pervasive and injurious fraud” has harmed the reputation of both Ripple and Garlinghouse.

Ripple said millions of people have viewed the scams on YouTube, which enabled the fraud to proliferate by ignoring its demands for the videos to be taken down and continuing to sell ads to the scammers. YouTube also awarded a “verification badge” to a hacked channel displaying a photo of Garlinghouse as its profile picture, falsely indicating to viewers that the account was legitimate, the filing said.

Thailand Approves Relaxed Tax Rules for Digital Assets: Here’s Why



Thailand Approves Relaxed Tax Rules for Digital Assets: Here’s Why

Thailand's cabinet also approved tax breaks for direct and indirect investments in startups. Representational image/AP

Thailand’s cabinet also approved tax breaks for direct and indirect investments in startups. Representational image/AP

The rules, in line with an earlier announcement, will allow traders to offset annual losses against gains for taxes due on cyptocurrency investments.

Thailand’s cabinet on Tuesday relaxed tax rules for investments in digital assets to help promote and develop the industry following a surge in cryptocurrency trading in Southeast Asia’s second-largest economy.

The rules, in line with an earlier announcement, will allow traders to offset annual losses against gains for taxes due on cyptocurrency investments, and exempt a value-added-tax of 7% for cryptocurrency trading on authorized exchanges, Finance Minister Arkhom Termpittayapaisith told a news conference.

The tax exemption, effective from April 2022 to December 2023, will also cover trading of retail central bank digital currency to be issued by the central bank, he said.

Digital assets have grown fast in Thailand over the past year, with trading accounts surging to about 2 million at the end of 2021 from just 170,000 earlier that year, a ministry official said in January.

People Are Losing More to Cryptocurrency Crime Than Ever; $4.52 Billion to be Precise

Users and customers lost roughly $3 billion from an alleged Ponzi scheme involving crypto wallet and exchange PlusToken.

Users and customers lost roughly $3 billion from an alleged Ponzi scheme involving crypto wallet and exchange PlusToken.

Cryptocurrency user and investor losses due to fraud and misappropriation in 2019 increased by more than five times, while hacks and thefts fell by 66%, the report showed.


“We noticed a significant uptick in malicious insiders scamming unsuspecting victims or leaching on their users through Ponzi schemes,” Dave Jevans, CipherTrace chief executive officer, told Reuters. “Attacks from the inside of organizations lead to significant exits with major consequence to the crypto-ecosystem.” Since bitcoin’s launch more than 10 years ago, governments and regulators around the world have grappled with the opaqueness and lack of transparency in the cryptocurrency market that has led to massive losses for investors. Two large losses early last year were the main drivers for the surge, CipherTrace said.

Users and customers lost roughly $3 billion from an alleged Ponzi scheme involving crypto wallet and exchange PlusToken. The other significant loss was the almost $135 million that customers lost from Canadian crypto exchange QuadrigaCX following the unexpected death of its co-founder, according to CipherTrace. The CipherTrace report also found illicit cryptocurrency money service businesses – including crypto exchanges – have transmitted funds on the payment networks of almost all the top 10 U.S. retail banks.

Analysis further revealed that a typical large U.S. bank processes billions of dollars annually in undetected cryptocurrency-related transfers. “These clandestine operations create AML (anti-money laundering) compliance risks because criminals must find ways to launder ill-gotten crypto profits,” CipherTrace said in the report.

CipherTrace research found that banks globally paid more than $6.2 billion in AML fines in 2019.

Fans accuse Chinese NFT collection of copying Bored Ape Yacht Club, but its creator says the resemblance is a coincidence

The world of NFTs, or non-fungible tokens, is no stranger to scandal: Big brands have sued NFT creators for copyright infringement; scammers have made off with millions in stolen funds after running “rug pull” operations in which they raise funds for projects that never come to fruition; and theft is rife. And now in China, local aficionados are accusing a creator of copying some of the most well-known NFTs in the world.

Last week, Chinese fans accused one local NFT creator of outright plagiarism, claiming that the popular Bored Wukong collection of digital images—one of the most popular avatar series on domestic marketplace NFTCN—bears a striking resemblance to avatars created by the globally popular Bored Ape Yacht Club (BAYC) franchise.

China’s Bored Wukong collection, which launched in November of last year, is an anthology of 390 cartoon monkey portraits in which each ape sports a bizarre and, to some degree, unique array of accessories. The NFT series takes its name from Sun Wukong, the famous Monkey King in the epic novel Journey to the West, which was written in the 1500s.

But the concept and styling of Bored Wukong—plus the adjective “bored”—are virtually identical to BAYC’s NFT project, which launched in April 2021, though the accessories on Bored Wukong are far more outlandish than BAYC’s.

Last week, NFT fans in China took aim at the local avatar collection after an article pointing out the similarity between Bored Wukong and BAYC circulated on WeChat, the nation’s ubiquitous messaging platform. The criticism eventually prompted the creator of the Bored Wukong collection, Wang Wendong, to respond in his own WeChat post.

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In his letter, Wang, a lecturer at the prestigious Central Academy of Fine Arts in Beijing, argued that the face shape of his Bored Wukong collective is different from the apes’ in BAYC, and he said that shared traits between NFT collections are akin to human celebrity look-alikes—such as Heath Ledger and Joseph Gordon-Levitt, to take Wang’s example.

China’s BAYC fans might not be convinced by Wang’s argument, but it’s a little surprising that the BAYC has defenders in China at all. Beijing’s NFT rules leave BAYC’s ludicrously expensive apes—which cost up to $3.4 million—beyond the reach of the average, law-abiding Chinese citizen.

The central Chinese government in Beijing permits the creation and sale of NFTs, but companies aren’t allowed to make profits from their sale. Consumers can’t purchase NFTs using cryptocurrency and are unofficially prohibited from reselling or speculating on NFTs, too. China has also banned conventional blockchains like Ethereum, which BAYC runs on.

Earlier this month, e-commerce giant Alibaba created its own private blockchain to mint thousands of NFT artworks representing popular winter sports to celebrate the ongoing Beijing Olympics, but the company reminded buyers that the NFTs are non-tradable and can’t be used for “commercial purpose.”

Bored Wukong has skirted some of Beijing’s NFT rules by trading on Chinese marketplace NFTCN, selling its NFTs in renminbi, and transacting on a splinter version of the Ethereum blockchain that separates the marketplace from the international trade in Ethereum’s native cryptocurrency, Ether. By isolating itself from Ether, which is illegal in China, NFTCN appears to have appeased regulators for now.

Despite China cautioning against speculating with “digital collectibles,” NFTs from the Bored Wukong collection are being resold and increasing in price. On NFTCN, one Bored Wukong monkey with blue fur and a halo of animated bananas is listed as selling last December for $100. Now, the ape’s third owner is auctioning the item for $1.4 million.