Despite receiving regulatory approval to operate in the country, at least three exchanges have had their accounts closed by Portuguese banks. What’s the reason? Banks are concerned about potential money laundering.
In order to prevent the possibility of illegal behavior through these exchanges, Portuguese commercial banks are closing the accounts of cryptocurrency exchanges.
Furthermore, despite the fact that the exchanges are authorized to conduct business in Portugal, the banks are essentially free to decide how to terminate those accounts.
The accounts of the Portuguese cryptocurrency exchange CriptoLoja were stopped last week by Banco Comercial Português,
the largest bank in Portugal, and Banco Santander (SAN). No longer permitted is the exchange to own any capital in such institutions.
This conversation is not unique. Portuguese banks also froze the accounts of the cryptocurrency exchanges Mind the Coin and Luso Digital Assets earlier this year.
Over the past year, Portuguese institutions have begun shutting accounts with cryptocurrency exchanges due to worries that these exchanges facilitate money laundering and other illegal activity.
The corporate side finds it to be a nightmare. A straightforward payment is more difficult than it would be if we had a bank account in Portugal, according to Pedro Borges, the CEO of CriptoLoja. “These types of bothersome actions that the banks are taking are not beneficial for the nation.”
In a recent interview, Ricardo Felipe, the chief product officer of Luso, claimed that the national bank Caixa Geral de Depósitos had given him no explanation as to why the exchange was no longer permitted to have accounts there as of last year. Both Banco Santander and Banco Comercial Português reported closing accounts this year due to suspected fraudulent consumers. When questioned about these specific accusations, Borges remained silent.
As Felipe explained, “We already understood that this was only a question of time and that we would need to pay attention and concentrate our efforts on our banking connections.”
According to Felipe, Portugal’s regulatory framework permits banks to formally terminate customer accounts with cryptocurrency exchanges without seeking permission from the watchdog.
Felipe stated, “Even though we do have a regulation or license from them [on anti-money laundering], it’s not something that establishes that kind of activity with the banks.
In a recent interview, Nuno Correia, the founder and chief strategy officer of the Portuguese cryptocurrency exchange Utrust, stated
that the company hasn’t been hurt by banks cancelling their accounts. He does note the differences between the banking industry and the regulators, though.
“The Central Bank of Portugal has extensive knowledge, conducts thorough due diligence on companies, and embraces innovation at the same time. The banking industry as a whole is not affected in the same way, according to Correia.
Portuguese judicial system
The central bank of Portugal, Banco de Portugal, oversees Portuguese banks. Local attorney Joo G. Gil Figueira claims that the central bank issues licenses to numerous cryptocurrency businesses operating in the nation. Commercially independent banks, on the other hand, are free to decide whether or not to let these businesses to hold accounts in their institutions and to close those accounts at any time.
Figueira recently stated that banks prefer to engage with businesses that may not raise worries over money laundering or tax evasion, two crimes thought to be frequently associated with lenders and brokers of digital assets.
“It appears that banks do not trust their own regulator’s decision to issue such operating authorizations.
In a recent interview, Figueira was quoted as saying: “So it’s a combination of banks being sluggish to move, unprepared, frightened of money laundering, and preferring other low-hanging fruits in other areas.
Despite the fact that Luso is unable to open an account with the Banco de Portugal, Felipe expressed optimism that the future Markets in Crypto Assets bill, which is expected to take effect in 2024, will clarify how commercial banks and regulators should interact.
The Markets in Crypto Assets bill (MiCA) will give the European Union a framework for regulating digital assets, from stablecoins to initial coin offerings. Additionally, it will establish a uniform licensing system that will facilitate business establishment throughout all of the EU’s member states.
“Thanks to MiCA, we’ll become financial institutions. Even if the bank wishes to hide them, we will have the security of being awarded Portuguese partner bank accounts, said Felipe.
Figueira doesn’t believe MiCA will take any action to stop banks from canceling accounts in Portugal, though. Instead, it will serve as a “passport” allowing cryptocurrency businesses to operate across European countries.
MiCA will have an impact on consumer protection more so than [anti-money laundering/know your customer regulations], and more specifically on the creation, issuance, and investment in such assets. It won’t really have a direct bearing on the banking-related difficulties and components that we’re talking about, according to Figueira.
India is Investigating Ten Cryptocurrency Exchanges For Money Laundering.
The Enforcement Directorate of India is now pursuing an investigation against ten cryptocurrency exchanges that are suspected of being involved in the laundering of over 1 billion rupees, which is the equivalent of over $125 million in digital currency.
According to The Economics Times, the cryptocurrency exchanges, which have not yet been named, were used by several companies that have been accused of money laundering to make purchases of more than 100 million rupees worth of cryptocurrency, which were then transferred to other international wallets, the majority of which were linked to mainland China.
The exchanges had a poor control on the activities of their users.
In addition, the sources mentioned that the exchanges acquired KYC data of questionable provenance, as the accounts that were followed belonged to individuals who lived in faraway places “with no relation to the transactions.”
However, the exchanges asserted that they were in conformity with KYC laws, despite the fact that they did not provide any suspicious transaction reports (STRs) that could have led to the discovery of information regarding alleged instances of money laundering.
Therefore, the failure to comply with the measures required by regulators made it more difficult to trace the account, which, upon learning of the investigation, reportedly proceeded to withdraw their funds and log off, according to sources close to the investigation. This made it more difficult to track down the account.
“As soon as these companies discovered that they were being investigated, they shut down their operations and utilized the crypto way to transfer the money overseas. The unregulated nature of the cryptocurrency business combined with the opaque nature of the ecosystem for cryptocurrencies offered the necessary cover for these companies to park their funds offshore.
The cryptocurrency exchanges Binance and WazirX are currently under investigation in India.
Following a series of Twitter spats between the CEOs of both firms about ownership and regulatory non-compliance by WazirX, the ED has decided to focus its attention on Binance and WazirX, as was recently published on CryptoPotato.com.
After the argument between the two companies, the ED blocked WazirX’s bank accounts, which together held more than $8 million, on the grounds that the exchange had “actively” assisted in the laundering of illicit funds for more than 15 different fintech companies.
In reaction, Binance stated that it expects WazirX to “take full responsibility for its operations and users’ funds,” while emphasizing that the global cryptocurrency exchanges has nothing to do with WazirX’s operations. Binance also emphasized that it has nothing to do with WazirX’s operations.
Although the ED is investigating several cryptocurrency exchanges for money laundering, an industry executive who spoke to the Economic Times stated that the exchanges are the second point of failure in these crimes. This executive stated that the money comes in and out of these crimes primarily from traditional banks, which did very little or nothing to trace the funds, which is why “it wasn’t caught at the banking level.” Despite the fact that the ED is investigating several cryptocurrency exchanges for money laundering, the executive stated that the exchanges are the second point of failure.
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Ethereum Completes Its Final Test Before a Major Crypto Event.
Ethereum, the second-largest cryptocurrency by market value, had a final dress rehearsal before a years-awaited upgrade.
Ethereum has been mined using a proof-of-work approach since its introduction in 2010. It needs difficult math formulae and a lot of energy.
Ethereum is transitioning to proof of stake for network security. The new method uses users’ existing ether cache to verify transactions and generate tokens, rather than energy-intensive mining. It consumes less electricity and should speed transactions.
Wednesday 9:45 p.m. ET was the final test.
Ansgar Dietrichs, an Ethereum Foundation researcher, said the most meaningful statistic for success is time to finalization. “Another good exam,” he said.
Galaxy Digital’s research associate noted that after the test merging, participation reduced and there may have been a client issue, but generally, it functioned.
Christine Kim tweeted, “A successful Merge = chain finalizes.” We may see similar troubles with the mainnet upgrade, but “the Merge worked.”
Thursday’s developer meeting will address the upgrade’s timing. The merger was expected to begin in mid-September.
For years, Ethereum’s transformation has been delayed. Core developers say the merge has been gradual to allow for study, development, and implementation.
Ether, the Ethereum blockchain asset, has gained about 80% in the last month, including 10% in the last 24 hours, to $1,875. It’s down half this year.
One of Ethereum’s testnets, Goerli (named for a Berlin train station), mirrored the mainnet’s September process.
Testnets let developers try new things and make modifications before main blockchain updates. Wednesday’s exercise revealed that proof-of-stake reduces the energy needed to verify a block of transactions and that the merger process works.
Josef Je, a former Ethereum Foundation developer who now manages PWN, stated Goerli has a bottom-up testnet.
Je said it’s the most popular testnet, and proof of stake on Goerli will be almost equivalent to mainnet.
Goerli is “the closest to mainnet, which can be beneficial for testing smart contract interactions,” according to the Ethereum Foundation’s blog.
Tim Beiko, Ethereum’s protocol coordinator, claimed they knew “within minutes” if a test was successful. In the hours and days ahead, they’ll still seek for setup flaws to fix.
“We want the network to finalize and have a high participation percentage among validators,” added Beiko.
Participation rate is the easiest indicator to track, Beiko noted. Developers must discover out why if numbers drop.
Transactions are another matter. Ethereum blocks transactions. Beiko said blocks with transactions indicate the test went properly.
Last, make sure more than two-thirds of validators are online and agree on the chain history. Normal network circumstances take 15 minutes, says Beiko.
If those three things seem excellent, there’s more to check, but things are moving nicely, said Beiko.
The Ethereum community has been testing proof-of-stake on a chain called beacon since December 2020. Beacon solved critical issues.
Beiko said the original idea needed validators to hold 1,500 ether, worth $2.7 million. The new proof-of-stake proposal requires only 32 ether, or $57,600.
“It’s not trivial, but it’s more accessible,” Beiko added.
Other events have shaped Wednesday’s test. Ethereum’s longest-running testnet, Ropsten, united its proof-of-work and proof-of-stake chains in June. It was the first big dry run for the mainnet’s planned process next month.
Beiko said testing the merge ensured that Ethereum’s software was reliable and that everything built on top of the network was ready for the changeover.
Blockchain Bridges In Trouble
Another day, another hack, and another bridge on the blockchain is destroyed.
It was the eighth heist of 2022 to target Blockchain “bridges,” which are lines of code that assist transmit cryptocurrency money between different applications. The theft occurred last week when thieves stole an estimated $190 million from American crypto business Nomad.
According to statistics from London-based blockchain analysis company Elliptic, hackers have already stolen cryptocurrency worth over $1.2 billion from bridges this year, more than double the amount they did last year.
Ronghui Hu, an associate professor of computer science at Columbia University in New York and co-founder of the cybersecurity company CertiK, stated, “This is a conflict where the cybersecurity firm or the project can’t be the winner.”
“We have so many initiatives to safeguard. When they examine a project and discover no bugs, they (hackers) can just go on to the next one until they identify a weak spot.”
Currently, the majority of digital tokens operate on their own distinct blockchain, which functions as a kind of online ledger for cryptocurrency transactions. When initiatives using these coins get isolated, their chances of being widely used are decreased.
Blockchain bridges seek to topple these barriers. In “Web3,” the much-hyped vision of a digital future where cryptocurrency is integrated into online life and commerce, backers claim they will play a crucial role.
The Nomad hack ranked as the eighth-largest cryptocurrency theft ever. A $615 million theft from Ronin, which was utilized in a well-known online game, and a $320 million theft from Wormhole, which was used in so-called decentralized banking applications, are two other bridge thefts that have occurred this year.
According to Steve Bassi, co-founder and CEO of malware detector PolySwarm, “Blockchain bridges are the most fertile ground for new vulnerabilities.”
Support has been given to Nomad and other businesses who produce blockchain bridge software.
Nomad, situated in San Francisco, claimed to have received $22.4 million from investors just five days before being hacked, including prominent exchange Coinbase Global (COIN.O). Pranay Mohan, co-founder and CEO of Nomad, referred to its security methodology as the “gold standard.”
To monitor the stolen funds, it has stated that it is collaborating with law enforcement organizations and a blockchain analysis company. It announced a reward of up to 10% for the return of money stolen from the bridge late last week. It announced on Saturday that it had so far recovered more than $32 million of the funds stolen.
The restoration of bridging user cash is our first priority, and community is what matters most in cryptocurrencies, according to Mohan. “Any party that reimburses 90% or more of monies that were misused would be regarded as a “white hat.” White hats won’t be charged by us, “He claimed, making reference to purportedly moral hackers.
According to recent discussions with several blockchain and cyber security experts, bridges’ intricacy makes them potentially vulnerable points for projects and apps.
According to Ganesh Swami, CEO of blockchain data company Covalent in Vancouver, which had some cryptocurrency stored on Nomad’s bridge when it was hacked, “one reason why hackers have targeted these cross-chain bridges in recent times is because of the immense technical sophistication involved in creating these kinds of services.”
Some bridges, for instance, alter crypto coins to make them interoperable with various blockchains while keeping the original coins in reserve. Others rely on smart contracts, intricate agreements that automatically complete transactions.
All of these could have bugs or other weaknesses in the programming that could open the door to hackers.
So how should the issue be handled?
According to some experts, audits of smart contracts and “bug bounty” programs that reward open-sourced assessments of smart contract code could assist prevent cybercrimes.
Others argue that deconcentrating control over the bridges among fewer organizations would increase their resilience and code openness.
Because they frequently use a centralized infrastructure that typically locks up assets, cross-chain bridges are a tempting target for hackers, according to Victor Young, founder and chief architect of U.S. blockchain company Analog.
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