SC Ventures Exits Digital Asset Custody Infrastructure Investment

Coti plans transition to Ethereum layer-2 network in 2024Israeli blockchain developer Coti plans to introduce a scalable, privacy-focused Ethereum layer-2 protocol in 2024. This strategic move aims to extend Coti’s privacy-centric features to a wider audience within the Ethereum ecosystem.Photo by Zoltan Tasi on UnsplashIncorporating ‘garbled circuits’Taking to the X social media platform on Wednesday, Coti unveiled its plan to transition from a standalone protocol to an Ethereum layer-2. The centerpiece of the project, which Coti has termed “Coti v2: a privacy-centric Ethereum L2,” is a cryptographic method known as “garbled circuits.”Garbled circuits are a cryptographic primitive that enables two or more parties to evaluate an arbitrary Boolean circuit securely, without revealing any information beyond the output, all while using a constant number of communication rounds. This innovative approach enables the processing of transactions without exposing sensitive information and data, aligning with the platform’s commitment to privacy.Having originated in the 1980s, garbling protocols have evolved into a crucial element of privacy-preserving technologies, excelling in scenarios where confidential data needs to be part of a computation without revealing the information itself.Focusing on privacyCoti CEO Shahaf Bar-Geffen emphasized the significance of this privacy-oriented protocol, stating:“Sensitive data transmitted as public information on a blockchain is a bug, not a feature.”Bar-Geffen highlighted the protocol’s ability to prevent sensitive data from being exposed to competitors, partners and clients engaged in transactions on Coti’s chain. The CEO elaborated on how garbling protocols differentiate Coti v2 by facilitating transactions and smart contract executions where details remain private between involved parties.The Coti CEO emphasized the critical role of such privacy features in decentralized finance applications, where transaction confidentiality is as essential as transaction integrity. Coti claims that other platforms focusing solely on anonymity for privacy may face regulatory challenges and might not provide a compliant foundation for the broader ecosystem.Targeting specific use casesCoti envisions its protocol catering specifically to use cases demanding advanced privacy provisions in finance and healthcare. Currently designed for enterprises, Coti’s existing protocol enables the management of blockchain-based products such as custom-branded tokens, wallets, website integrations and fiat on-and-off ramps.In a blog post on Medium, the blockchain startup outlined that in addition to privacy, v2 will enable smart contracts, EVM compatibility and Solidity programming, alongside the features currently offered by v1. Notwithstanding these new features on the v2 product, the company confirmed to The Block that in respect of Coti’s original Cardano-based product, “Coti’s work with Cardano continues. We have a project built there called Djed, and that will continue to remain on Cardano.” Djed is an ADA-backed stablecoin pegged to the U.S. dollar.The anticipated release of Coti v2’s developer net in the second quarter of 2024 signals a move towards realizing the potential in advancing Ethereum’s privacy standards. As a layer-1 protocol, Coti presently contributes to Web3 applications by providing digital infrastructure, including tools for wallets, tokens and payment modules, with a total value locked of $31 million.The upcoming integration as a privacy-centric layer-2 positions Coti as a key player in enhancing Ethereum’s capabilities and fostering a more secure and confidential blockchain experience.

Singapore’s Central Bank Paves the Way for Digital Asset NetworksSingapore’s Monetary Authority (MAS) has taken a significant step towards the future of digital assets by proposing a comprehensive framework for the design of open and interoperable networks for tokenized digital assets.Photo by Pixabay on PexelsDetailed frameworkIn a report published on Monday, titled “Enabling Open & Interoperable Networks,” MAS presented a detailed framework aimed at understanding the design options necessary to facilitate the seamless trading of digital assets across diverse networks and liquidity pools. The framework is rooted in the core principles of financial market infrastructure and draws inspiration from cutting-edge projects that have been at the forefront of advancing these concepts.To ensure a robust and comprehensive approach, the report was jointly developed with subject matter experts from the Bank for International Settlements’ (BIS) Committee on Payments and Market Infrastructure (CPMI), with valuable contributions from prominent financial institutions including DBS Bank, JP Morgan, HSBC, SBI Digital Asset Holdings, Standard Chartered, and UOB.MAS defines digital asset networks as platforms that leverage distributed ledger technology (DLT) or blockchain to enable secure and efficient transfers of digital assets without the need for traditional intermediaries. These networks serve as the foundation for open and interoperable infrastructure, facilitating the issuance, transfer, and custody of digital assets. By promoting transparency, efficiency, and trust, the report suggests that they will play a pivotal role in shaping the digital asset ecosystem.Project GuardianThe report underscores the immense potential of digital asset networks in a future financial landscape, where digital assets and currencies can be seamlessly exchanged across different networks. MAS believes that these networks could revolutionize the way financial transactions occur, leading to increased efficiency and expanded possibilities. The framework also lays the groundwork for future exploration as part of the Project Guardian initiative, encompassing additional focused themes such as Trust Anchors and Institutional DeFi.MAS has also announced the expansion of Project Guardian to include a broader range of financial asset classes. The project now features an industry group comprising 11 leading financial institutions that will spearhead industry pilots in asset and wealth management, fixed income, and foreign exchange. Esteemed banks such as HSBC, Standard Chartered, DBS, and Citi are set to conduct multiple trials focusing on tokenization. For instance, Standard Chartered, in collaboration with Linklogis, is developing an initial token offering platform to issue asset-backed security tokens listed on the Singapore Exchange.Despite its cautious stance on cryptocurrency speculation, MAS recognizes the immense potential for value creation and efficiency gains within the digital asset ecosystem. Leong Sing Chiong, MAS’ Deputy Managing Director of Markets and Development, emphasized the authority’s optimism, stating: “We see significant potential for value creation and efficiency gains in the digital asset ecosystem.”This latest initiative by MAS comes on the heels of its recent proposal for standards governing the use of digital money, including central bank digital currencies (CBDCs) and stablecoins. Singapore’s central bank is paving the way for the future of digital assets and making a strong effort to assert its position as a global leader in digital asset innovation through the establishment of this framework alongside industry collaboration.

Kazakhstan setback for Coinbase as government blocks website accessIn alignment with the Law on Digital Assets legislation which was enacted in February, Kazakhstan’s Ministry of Culture and Information has officially confirmed that access to the Coinbase website has been blocked within the country.The development follows the enforcement of regulations prohibiting the issuance and trading of unsecured digital currencies, according to local news media.Photo by Kai Pilger on UnsplashAccusation of regulatory violationThe authorities in Kazakhstan initiated the blocking of local IP addresses from accessing Coinbase as early as September. The action was taken in response to a request from the Ministry of Digital Development. The Ministry of Digital Development accused Coinbase of violating the Law on Digital Assets, resulting in the restriction of access to the platform.The Law on Digital Assets, introduced earlier in 2023, stipulates that the issuance and circulation of unsecured digital assets are prohibited. The exception to this rule is within the Astana International Financial Center (AIFC), a designated economic zone in Kazakhstan. Permits to operate crypto trading platforms within the AIFC are issued by the Astana Financial Services Authority (AFSA).Several cryptocurrency exchanges have already received approval from the AFSA. Notable names among these approved exchanges include Binance, Bybit, CaspianEx, Biteeu, ATAIX, Upbit and Xignal&MT.Reports of access issues to the Coinbase website initially emerged in September, with the local Telegram media outlet Finance.kz referring to it as the “great Kazakh investment firewall.” This firewall was not limited to Coinbase. It also affected access to other major international crypto exchanges such as Kraken.Stringent regulationKazakhstan’s approach to crypto regulation has been notably stringent, particularly concerning its significant mining sector, which ranks among the world’s largest. In October, eight leading cryptocurrency mining operators wrote an open letter to President Kassym-Jomart Tokayev, expressing concerns about the challenging conditions faced by the crypto-mining industry.Those entities included BCD Company, TT Tech Limited, Green Power Solution, Kinur Invest, KZ Systems, AI Solutions and VerCom. High energy prices for miners were cited as a significant issue, leading to what was described as a “very distressful situation” in the sector.Mining got off on the wrong footing in Kazakhstan. Following the banning of crypto mining activities in China in May 2021, there was a sudden influx of miners into Kazakhstan. As that development wasn’t planned for, it led to major stresses being placed on the country’s electricity grid. As a consequence, blackouts occurred.While this development in Kazakhstan is unwelcome news for Coinbase, the company has experienced more positive outcomes elsewhere. Last week it emerged that the U.S. crypto exchange had outperformed Q3 revenue estimates. That said, it also emerged that the exchange’s trading volumes had declined for the second consecutive quarter in a row.Kazakhstan’s move to block Coinbase access underlines the country’s determination to enforce its digital asset regulations, contributing to a growing trend of governments worldwide seeking to bring crypto-related activities under regulatory oversight.