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Sam Bankman-Fried provides bailouts, ‘Bitcoin dead’ searches soar, and debate over hidden themes behind BAYC continues: Hodlers Digest, June 19–25

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Sam Bankman-Fried provides bailouts, ‘Bitcoin dead’ searches soar, and debate over hidden themes behind BAYC continues: Hodlers Digest, June 19–25

Coming every Saturday, Hodler’s Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more — a week on Cointelegraph in one link.

Top Stories This Week

SBF and Alameda step in to prevent crypto collapse contagion

Sam Bankman-Fried stated on June 20 that his firms Alameda Research and FTX would be “stepping in” to help companies with liquidity troubles amid the current bear market. Over the course of the week, Alameda dished out a loan of roughly $500 million to Voyager Digital, which is suffering from exposure to the potentially insolvent Three Arrows Capital, while FTX supplied BlockFi with $250 million worth of credit.

New video revives debate over Bored Ape Yacht Club’s alleged ‘racist’ imagery

YouTuber Philip Rusnack, known as Philion, published a video this week on Yuga Labs’ Bored Ape Yacht Club nonfungible token (NFT) project, arguing that the team has embedded alt-right inside jokes, Nazi imagery and racist caricatures of Black and Asian people in the artwork depicted in the tokenized avatars. Such a notion has been a long-running conspiracy theory in the NFT community, and while many people laugh it off, others take the supposed evidence as gospel.

‘Bitcoin dead’ Google searches hit new all-time high

With Bitcoin crashing back down to the lower $20,000s, Google searches for “Bitcoin dead” spiked in the week of Friday, June 18, and hit some of the highest levels on record. Google Trends tracks search interest over time and assigns scores of 1 to 100 based on the total number of user searches. During this period, “Bitcoin dead” achieved a perfect score of 100.

Bitcoin S2F model gives false sense of certainty, says Vitalik Buterin

Ethereum co-founder Vitalik Buterin has critiqued the stock-to-flow (S2F) model popularized by pseudonymous investor PlanB. The BTC-focused S2F drew significant attention during the bull run last year, as it went on a relatively long streak of accurate predictions before falling way off the mark in late 2021. Commenting on the S2F model, Buterin noted, “I know it’s impolite to gloat and all that, but I think financial models that give people a false sense of certainty and predestination that number-will-go-up are harmful and deserve all the mockery they get.”

Solend invalidates Solana whale wallet takeover plan with second governance vote

Solana-based DeFi lending protocol Solend created a counter governance vote to the controversial “SLND1 : Mitigate Risk From Whale” poll this week after listening to the strong pushback from the community. The initial vote was intended to allow Solend to reduce the market risk of a massive whale’s potential liquidation by letting the platform access the whale’s wallet. However, the idea has been vetoed after the countervote polled 1,480,264 votes in favor of not going through with the whale takeover.

Winners and Losers

At the end of the week, Bitcoin (BTC) is at $21,241.99, Ether (ETH) at $1,214.06 and XRP at $0.37. The total market cap is at $952 billion, according to CoinMarketCap.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Storj (STORJ) at 89.27%, Synthetic (SNX) at 74.21% and Polygon (MATIC) at 51.76%. 

The top three altcoin losers of the week are Harmony (ONE) at 4.06%, KuCoin Token (KCS) at 1.93% and PAX Gold (PAXG) at 1.55%.

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

Most Memorable Quotations

“Particularly in the area of digital asset trading, I feel that the UK has missed a trick […] We are getting very close to the point where it will be too late. Other jurisdictions are racing ahead of us.” 

Philip Hammond, former U.K. Chancellor of the Exchequer 

“In short, they are just ‘bad’ projects. These should not be saved. Sadly, some of these ‘bad’ projects have a large number of users, often acquired through inflated incentives, ‘creative’ marketing, or pure Ponzi schemes.” 

Changpeng Zhao, founder and CEO of Binance 

“The SEC now seems to take the position when they sued us that ‘XRP is a security and always has been,’ but they approved Coinbase going public even though Coinbase is not a registered broker-dealer.” 

Brad Garlinghouse, CEO of Ripple

“Web3 and crypto, in general, is very market-driven, so you have highs and downs. When we build, we always are considering the long game.” 

Stani Kulechov, founder and CEO of Aave 

“When things are a bit harder in the market, you discover who’s actually building something that might last for the long longer term and what is going to pass away.” 

Hester Peirce, commissioner of the SEC 

“Even if we weren’t the ones who caused it, or weren’t involved in it. I think that’s what’s healthy for the ecosystem, and I want to do what can help it grow and thrive.” 

Sam Bankman-Fried, founder of Alameda Research

Prediction of the Week 

‘Foolish’ to deny Bitcoin price can go under $10K — Analysis

With the price of BTC hovering around $20,000 and the Fed yet to reveal any new information regarding efforts to reel in inflation, crypto commentators have argued that the outlook of the price in the immediate term is uncertain. However, a potential fresh pullback may only involve a trip to $16,000, according to some, while others have urged investors to consider a drop to $10,000 as a potential scenario also. 

“Consolidating $BTC in a broad range and then going up. MDD (maximum drawdown) is not that big like -20%,” Ki Young Ju, CEO of on-chain analytics platform CryptoQuant, wrote in part of a Twitter post.

“At this stage, nobody can say with certainty whether BTC will hold this range or if it will go to sub $10K price levels ever again, but it would be foolish not to have a plan for that possibility,” a tweet argued.

FUD of the Week 

Harmony’s Horizon Bridge hacked for $100M

The Horizon Bridge to the Harmony layer-1 blockchain was exploited for $100 million worth of altcoins on June 24. From 7:08 am EST until 7:26 am EST, 11 transactions were made from the bridge for various tokens before sending the tokens off to Uniswap to exchange for ETH. The Harmony team said it is working with “national authorities and forensic specialists” to determine who was responsible, and a post-mortem will follow.

China’s WeChat bans crypto and NFT-related accounts

Social media and payments app giant WeChat updated its policies to ban accounts that provide access to crypto or NFT-related services. Under the new guidelines, accounts involved with the issuance, trading and financing of crypto and NFTs will be categorized as an “illegal business” and will either be restricted or banned outright.

Iranian government to cut power supply for the country’s legal crypto mining rigs

According to reports from local media outlets this week, Iran’s Ministry of Energy will have started shutting off the power supply to all of the country’s licensed crypto mining firms by the beginning of July. The government entity cited a potential electricity deficit during the peak summer season as the reason.

Best Cointelegraph Features

The community-centered approach to Web3 — Aave founder and CEO

“What if we actually can have ownership on our own presence in social media — our profiles, our social identities?” asked Stani Kulechov.

Is there a way for the crypto sector to avoid Bitcoin’s halving-related bear markets?

BTC’s high volatility and halving-related bear markets tend to drag down investment and interest in the entire crypto market. Can this be avoided?

Lummis–Gillibrand crypto bill comprehensive but still creates division

The senators introduced new approaches to familiar questions concerning digital assets and how to divide regulatory responsibilities. 

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Bit Coin

Shiba Inu eyes 50% rally as SHIB price enters ‘cup-and-handle’ breakout mode

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Shiba Inu eyes 50% rally as SHIB price enters ‘cup-and-handle’ breakout mode

Shiba Inu (SHIB) broke out of its prevailing “cup-and-handle” pattern on Aug. 14, raising its prospects of securing additional gains in the coming weeks.

Shiba Inu could soar 50%

A cup-and-handle appears when the price falls and rises in a U-shaped trajectory in the first stage, followed by a swift move sideways or downward in the second. Notably, the price trend develops under a common resistance level.

Typically, cup-and-handle patterns resolve after the price breaks above the resistance level; SHIB did the same on Aug. 14 after rising 27% to $0.000016, as shown below.

SHIB/USD daily price chart. Source: TradingView

Per the rule of technical analysis, a cup-and-handle breakout target is determined by measuring the distance between the pattern’s lowest point and resistance line and adding it to the breakout point. As a result, SHIB could head toward $0.00002253.

In other words, a 50% price rally by September.

A nonsense rally, nonetheless?

Fundamentally, Shiba Inu’s 27% intraday price rally on Aug. 14 had no visible catalysts except a metric showing that SHIB’s burn rate surged by 825% in a day. But the amount of burned SHIB is worth only over $4,500.

Shiba Inu burn rate. Source: Shibburn.com

On the whole, however, the Shiba Inu network has burned over $6.36 million worth of SHIB tokens in its lifetime.

In addition, the Shiba Inu rally came almost ten days after Binance’s announcement to add SHIB support on its payment cards issued in Europe. In doing so, the crypto exchange raised SHIB’s potential to find new users in the emerging European cryptocurrency space.

We are pleased to announce that @binance has added SHIB to the list of supported tokens for the Binance Card issued in Europe.

You can now pay with SHIB at 60+ million merchants worldwide. Furthermore, get up to 8% cashback and zero annual or FX fees!https://t.co/0Xj7IXPyt0 pic.twitter.com/FqINtnHFWx

— Shib (@Shibtoken) August 5, 2022

Weak fundamentals could offset SHIB’s technically bullish bias, however, given tha cup-and-handle setups have only a 61% success rate in meeting their profit targets, according to veteran analyst Tom Bulkowski.

Related: 3 cryptocurrencies that stand to outperform ETH price thanks to Ethereum’s Merge

Therefore, a failed cup-and-handle breakout—also on a pullback from the 200-day exponential moving average (200-day EMA; the blue wave in the chart below) near $0.00001755—could have SHIB eye an initial correction toward $0.00001306, down 20% from today’s price.

SHIB/USD daily price chart. Source: TradingView

Shiba Inu’s cup-and-handle setup could fizzle because of the token’s overbought daily relative strength index (RSI). Notably, the RSI has crossed above 70, which typically results in a period of sideways consolidation or correction.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Top 5 cryptocurrencies to watch this week: BTC, ADA, UNI, LINK, CHZ

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Top 5 cryptocurrencies to watch this week: BTC, ADA, UNI, LINK, CHZ

The S&P 500 rose for the fourth successive week as investors cheered on signs that inflation may have peaked. Bitcoin (BTC) and select altcoins also extended their recovery, suggesting that investors are increasing their exposure to risk assets.

A similar trend has played out in the cryptocurrency markets. Altcoins, led by Ether (ETH), have outperformed Bitcoin after clarity on Ethereum’s Merge, according to analysts at Glassnode.

Crypto market data daily view. Source: Coin360

However, trading firm QCP Capital is cautious about the momentum in the altcoin market. They highlighted that the open interest on Ether options had surged to $8 billion, exceeding Bitcoin option OI which was at $5 billion. Glassnode suggested that traders have been booking profits on the spread between their spot long Ether versus the quarterly short Ether futures positions.

Could Bitcoin and the altcoins extend their recovery in the next few days? Let’s study the charts of the top-5 cryptocurrencies that may outperform in the near term.

BTC/USDT

Bitcoin rose above the overhead resistance of $24,668 on Aug. 13 and Aug. 14 but the bulls could not sustain the higher levels. This indicates that bears are selling on rallies but repeated breach of an overhead resistance tends to weaken it.

BTC/USDT daily chart. Source: TradingView

The gradually upsloping 20-day exponential moving average of $23,414 and the relative strength index (RSI) in the positive territory indicate that the path of least resistance is to the upside. If bulls sustain the price above $25,000, the momentum could pick up further and the BTC/Tether (USDT) pair could rally to $28,000.

This level may act as a stiff resistance but if bulls clear this hurdle, the rally could extend to $32,000. The critical level to watch on the downside is the 20-day EMA. A bounce off it will indicate that the sentiment remains positive and traders are buying on dips.

On the contrary, if the price turns down from the current level and breaks below the 20-day EMA, it will suggest that bears remain active at higher levels. The pair could then drop to the 50-day simple moving average of $21,976.

BTC/USDT 4-hour chart. Source: TradingView

The $24,668 level is witnessing a tough battle between the bulls and the bears. The upsloping moving averages indicate advantage to buyers but the negative divergence on the RSI suggests the momentum may be weakening.

If the price breaks below the 20-EMA, it will signal a minor advantage to the bears. The pair could then decline to the 50-SMA and later to $23,600. Alternatively, if the price turns up from the 20-EMA and rises above $25,050, the up-move may resume.

ADA/USDT

Cardano (ADA) broke and closed above the overhead resistance at $0.55 on Aug. 13. This indicates that the uncertainty has resolved in favor of the bulls.

ADA/USDT daily chart. Source: TradingView

The rising 20-day EMA of $0.52 and the RSI in the positive territory indicate that bulls have the upper hand. The ADA/USDT pair could rally to $0.63 and then to the strong overhead resistance at $0.70. This level is likely to attract strong selling by the bears.

Contrary to this assumption, if the price turns down from the current level and breaks below the 20-day EMA, it will suggest that the break above $0.55 may have been a bull trap. The pair could then decline to the 50-day SMA of $0.49 and later to $0.45.

ADA/USDT 4-hour chart. Source: TradingView

The pair completed an ascending triangle pattern on a break and close above the overhead resistance at $0.55. This pushed the RSI on the 4-hour chart to overbought levels, which may have tempted short-term traders to book profits.

The price may drop to the breakout level of $0.55. If bulls flip this level into support, the pair may continue its up-move to the pattern target at $0.65. This positive view could invalidate in the near term if the price plummets below the uptrend line.

UNI/USDT

Uniswap (UNI) has been consolidating between $8.11 and $9.83 for the past few days. This suggests that the bulls are buying the dips but the bears are defending the overhead resistance.

UNI/USDT daily chart. Source: TradingView

The longer the price remains in the range, the stronger the breakout will be from it. The 20-day EMA of $8.54 is sloping up and the RSI is in the positive territory, indicating an advantage to buyers. If bulls thrust the price above $9.83, the UNI/USDT pair could pick up momentum and rally toward $10.55 and later to $12.

Alternatively, if the price turns down from the current level and breaks below the 20-day EMA, it will suggest that the pair may continue its range-bound action for some more time. The bears will have to sink and sustain the price below $8.11 to gain the upper hand.

UNI/USDT 4-hour chart. Source: TradingView

The 4-hour chart shows that the bears are defending the zone between $9.50 and $9.83. If the price breaks below $8.74, the sellers will attempt to sink the pair to the strong support at $8.11. The buyers are expected to buy the dip to this level.

The flattening moving averages and the RSI near the midpoint suggest that the range-bound action may continue for some more time. The next trending move could start on a break above $9.83 or on a close below $8.11.

Related: Bitcoin hits $25K as bearish voices call BTC price ‘double top’

LINK/USDT

Chainlink (LINK) has been trading in a large range between $5.50 and $9.50 for the past several weeks. The bulls attempted to push the price above the range on Aug. 12 but the bears held their ground.

LINK/USDT daily chart. Source: TradingView

The 20-day EMA of $8.00 is sloping up and the RSI is in the positive territory, indicating that bulls have the upper hand. If the price rebounds off the 20-day EMA, the bulls will make one more attempt to clear the overhead hurdle at $9.50. If they succeed, the LINK/USDT pair could rally to $12.30 and then to $13.50.

Instead, if the price breaks below the 20-day EMA, it will indicate that traders are booking profits near the resistance. That could sink the pair to the 50-day SMA of $7.00 and increase the stay inside the range for a few more days.

LINK/USDT 4-hour chart. Source: TradingView

The price turned down from the overhead resistance at $9.50 and broke below the 20-EMA on the 4-hour chart. This suggests that traders may be booking profits. The pair could drop to the 50-SMA, which may act as a strong support.

If the price rebounds off the 50-SMA, the bulls will again try to push the pair above $9.50. If they succeed, the pair could start the next leg of the up-move. On the other hand, if the price slips below the 50-SMA, the pair could decline to $8.29.

CHZ/USDT

Chiliz (CHZ) has been in a strong recovery for the past few days but the long wick on the Aug. 14 candlestick suggests that bears are defending the overhead resistance at $0.19.

CHZ/USDT daily chart. Source: TradingView

Although the rising 20-day EMA of $0.14 indicates an advantage to buyers, the RSI in the overbought territory suggests a minor correction or consolidation in the short term. If the price turns down from the current level, the first critical level to watch on the downside is the 20-day EMA.

A strong rebound off this level will suggest that the bulls are viewing the dips as a buying opportunity. That will improve the prospects of a break above the overhead resistance. If that happens, the CHZ/USDT pair could rally to $0.22 and then to $0.24.

Alternatively, if the price slips below the 20-day EMA, the pair could slide to the 50-day SMA of $0.12. Such a move will suggest that the pair may form a range in the near term.

CHZ/USDT 4-hour chart. Source: TradingView

The sharp rally in the pair pushed the RSI deep into the overbought territory on the 4-hour chart, indicating that a correction or consolidation was possible. The same may have started and the pair could decline to the 20-EMA, which is an important level to keep an eye on.

If the price rebounds off the 20-EMA, it will suggest that the positive sentiment remains intact. The buyers will then again try to resume the up-move. This bullish view will be negated in the near term if the price breaks and sustains below the 50-SMA.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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AML and KYC: A catalyst for mainstream crypto adoption

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AML and KYC: A catalyst for mainstream crypto adoption

For Satoshi Nakamoto, the creator of Bitcoin (BTC), the motivation to create a new payment ecosystem from scratch in 2009 stemmed from the economic chaos caused by the banking sector’s over-exuberant and risky lending practices mixed accompanied by the bursting of the housing bubbles in many countries at the time. 

“And who do you think picked up the pieces after the fallout? The taxpayer, of course,” said Durgham Mushtaha, business development manager of blockchain analytics firm Coinfirm, in an exclusive interview with Cointelegraph.

Satoshi recognized the need for a new monetary system based on equity and fairness — a system that gives back power into the hands of the people. A trustless system with anonymous participants, transacting peer-to-peer and without the need of a central entity.

Snippet from the Bitcoin whitepaper. Source: bitcoin.org

However, a subsequent market downturn — fueled by the initial coin offering bubble bursting — made the crypto industry realize the need to build credibility, authority and trust by proactively working with regulators and legislators. Enter Anti-Money Laundering (AML) and Know Your Customers (KYC) procedures.

Mushtaha started the discussion by highlighting how, unlike fiat currency, transactions in coins and tokens built on blockchain technology are far easier to trace using on-chain analytics and AML tools. Furthermore, introducing KYC procedures to identify and legitimize users across major crypto exchanges resulted in a far more robust financial system that became more impervious to money laundering and other illicit activity.

As a result, it effectively bolstered the sector’s image and enticed more people to trust their hard-earned money in the market. “I see the next bull market becoming a watershed moment, where the masses dive into crypto as fears dissipate and the sector grows exponentially,” he said.

Impact of KYC and AML on the evolution of finance

The early discussions and implementation of global AML and KYC legislation date back five decades, marked by the establishment of the Bank Secrecy Act (BSA) in 1970 and the global Financial Action Task Force (FATF) in 1989. “The risk scenario indicators developed in traditional finance over the past 50 years have been adopted into crypto and niche sectors of the industry, including decentralized finance,” added Mushtaha:

“Where we differ from traditional finance is our on-chain analytical processes. There are no blockchains in traditional finance, so they are missing a huge part of the jigsaw as the blockchain sector is not siloed.” 

Sharing insights into what today’s KYC and AML implementation looks like from a provider perspective, Mushtaha revealed that Coinfirm has over 350 risk scenario indicators that cover money laundering, financing of terrorism, sanctions, drug trade, ransomware, scams, investment fraud and more. 

With AML getting more sophisticated in the decentralized finance (DeFi) space, “We can now tell you whether your wallet was directly implicated in illicit activities or has inherited risk from another address by receiving assets from ill-gotten gains.” In addition, technology has evolved alongside the crypto ecosystem to provide risk profiles on wallet addresses and transactions based on on-chain analytics.

Declining use of cryptocurrencies in money laundering

Year after year, numerous reports have confirmed a consistent decline in the use of money laundering — with transactions involving illicit addresses representing just 0.15% of cryptocurrency transaction volume in 2021. Mushtaha believes that this finding stands to reason. 

“Those involved in illicit activity would be wise to steer clear of blockchain-related assets and stick to the tried and tested dollar. The United States dollar is still the most utilized and preferred currency for money laundering,” he said while adding that, in crypto, once a wallet address has been identified as holding assets that were earned through illegal activity, there’s little the criminal can do.

99.85% of activity on blockchains is NOT crime. Keep this in mind when reviewing the next harsh regulation proposal.


Crypto Crime Trends for 2022: Illicit Transaction Activity Reaches All-Time Low in Share of All Cryptocurrency Activity https://t.co/94VB7FiyZb

— Sten Tamkivi (@seikatsu) January 16, 2022

With present-day regulatory scrutiny ensuring crypto exchanges are KYC compliant, bad actors find it difficult to off-ramp crypto assets into fiat or spend them in open markets. Speaking about the various methods most commonly used to transfer illicit funds, Mushtaha stated:

“Sure, they can try to make use of anonymizing techniques, like mixers, tumblers and privacy coins, but then their assets will be flagged and tainted for using them.”

As cryptocurrencies become more accepted and prevalent globally, criminals will turn to a black market in order to sell ill-gotten assets. Given the availability of marketplaces where money can be spent without KYC, it will be incumbent on future law enforcement agencies to crack down on such sites.

KYC and AML tools can now correlate IP addresses with wallet addresses, and clustering algorithms do an amazing job at identifying associated addresses. Such measures would be difficult, even for state-level actors, to launder through exchanges outside their borders. Mushtaha added, “The Office of Foreign Assets Control (OFAC) has lists of identified addresses belonging to sanctioned persons and entities. The assets in those addresses are too hot for anyone to handle.”

Role of CBDCs in countering money laundering

Central bank digital currencies (CBDCs) could offer central banks a level of control never seen in fiat currency. Imagine all of the issues with fiat, like government manipulation and inflation, but now with the power of on-chain analytics. CBDCs will allow more granular scrutiny of users’ spending habits and central banks to freeze holdings, limit them, set expiry dates, automatically tax every transaction or even decide what can and can’t be bought with them. “Every merchant, financial institution and retail customer would also need to comply with KYC, thereby disincentivizing money laundering,” said Mushtaha.

Libra, a permissioned blockchain-based stablecoin launched by Facebook’s parent company Meta, failed to gain traction when it was launched in 2019. Consequently, mainstream conversations around Meta’s crypto initiatives catalyzed numerous governments to try out CBDCs, with China being one the first to launch its CBDC.

Worldwide CBDC initiative overview. Source: atlanticcouncil.org

The possibilities for currency control are not the sole motivations for this wave of government-sponsored innovation. While pointing out that governments no longer follow the gold standard, Mushtaha highlighted present-day inflation as a direct result of federal and central agencies printing money at will.

“The United States printed more dollars than ever existed before. And the result of that is rampant inflation that’s off the charts.” 

Moreover, Mushtaha argued that increasing the interest rates too much, too quickly, would cause a catastrophic cascade of overextended debt-ridden financial institutions to collapse. As a result, CBDCs stand out as a solution for central banks, adding that “For the first time, central banks could destroy money as well as create it.”

Evolution of AML, KYC and technological advancements

Based on his extensive experience in the AML/KYC sector, Mushtaha stated that technology adapts to the evolution of regulations and not the other way round. Startup trading platforms that decide to integrate AML tools have the option to apply for a virtual asset service provider (VASP) and securities licenses. “Becoming compliant means a huge pool of opportunities becomes open to you. Funding in this space is only available to those focusing on compliance.” As a result, AML solution providers find themselves bridging the gap between the crypto world and the compliant financial system.

Mushtaha shared an instance working with a startup that is currently developing a nonfungible token (NFT)-based KYC solution using zero-knowledge Proofs. “The cleverness comes from their recognition that NFTs used for KYC don’t need to solve the double spend problem, so can be disengaged from the blockchain entirely. This then allows for private biometric data to be stored on the NFT and a zk-Proof to be sent to each platform where the individual wants to open an account.”

Although the solution is designed to perform as a centralized entity for storing the NFT information “most likely on a permissioned (publicly inaccessible) chain,” Mushtaha affirms it’s a step in the right direction as NFTs serve KYC use cases over the next decade as digitalization continues to permeate across industry verticals.

In terms of AML, new tools and advancements are coming out every month owing to the accelerated rate of innovation. According to Mushtaha, an in-house tool allows Coinfirm to analyze every wallet address that contributes assets to a smart contract-controlled liquidity pool, adding that “We can provide risk profiles for tens of thousands of addresses at a time.”

AI innovations focusing on algorithmically generated transaction-based user behavior pattern recognition will be a key trend. “The blockchain holds a wealth of behavior-related data, that can be used to analyse money laundering patterns, and then extrapolate risk profiles for wallet addresses that behave in these ways,” explained Mushtaha.

Machine learning tools, which have collected large pools of data sets over the years across the crypto landscape, will also be utilized to predict potential trade outcomes.

Governments monitoring cross-border crypto transactions

The FATF issued its revised guidance in October last year, where they labeled every crypto asset that preserves privacy or that doesn’t involve an intermediary of some kind as high risk. This is not surprising as the FATF’s explicit mandate is to eliminate “any threats to the integrity of the international financial system,” of which it considers cryptocurrencies to be one. Hence, the introduction of the Travel Rule in 2019 requires all VASPs to pass on certain information to the next financial institution in a transaction. 

When the rule gets applied to un-hosted wallet addresses held by private individuals, however, “The FATF seems to be laying the groundwork to apply the Travel Rule to these wallets if peer-to-peer transactions increase in the next few years, potentially imposing on privacy rights,” said Mushtaha.

A more prudent approach, according to Mushtaha, would be to harmonize the mostly fragmented implementation approaches of the existing Travel Rule across jurisdictions, making cross-border transactions more straightforward while also focusing on VASP compliance.

Crypto entrepreneurs’ role in countering money laundering

Given the availability of off-the-shelf AML solutions designed to tailor-fit each VASP’s particular requirements, Mushtaha believes “there really is no excuse anymore” for neglecting compliance. It is also incumbent on VASPs to establish comprehensive educational materials for their users as the world prepares for frictionless mass adoption.

#Binance works closely with regulators worldwide, with the purpose of driving Web3 into the mainstream.

Hear from Binance VP, Global Marketing, James Rothwell who covers the importance of regulation in establishing a Web3 world. pic.twitter.com/ZaJfLQPX35

— Binance (@binance) August 2, 2022

Mushtaha believes that crypto entrepreneurs are in a unique position to help write the next chapter of the global financial system, and they should understand that AML compliance isn’t an impediment to their success — but a catalyst. “Most retail investors want to navigate this space safely, managing their risks while transacting,” he recommended. “And giving these investors peace of mind should be a VASP’s priority.” 

Working toward a regulatory future

KYC and AML are necessary elements of today’s macro economy and are important components of the crypto space. Mushtaha disagrees with the belief that regulations erode anonymity. 

“Regulations will drive mass adoption, but it’s incumbent on the players in this space to proactively put forward the framework for regulation that encourages innovation while disincentivizing illicit activity. There is a need to strike a balance where one can monitor money laundering while maintaining a user’s privacy. These are not mutually exclusive goals; you can have both.” 

And, to investors, Mushtaha advised the age-old adage, “do your own research.”

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