Oman’s Regulator Invites Feedback on Virtual Asset Framework

USDT, the leading U.S. dollar stablecoin issued by Tether, has been highlighted as a major conduit for money laundering and scams in Southeast Asia, according to a United Nations report released on Monday.Photo by Mathias Reding on UnsplashIllicit stablecoin useThe report has been titled “Casinos, Money Laundering, Underground Banking, and Transnational Organized Crime in East and Southeast Asia: A Hidden and Accelerating Threat.” It points out that online gambling platforms, particularly those operating illicitly, are among the favored channels for cryptocurrency-based money launderers, with a notable emphasis on the use of Tether or USDT. In a foreword to the report, Jeremy Douglas, the UN’s Regional Representative for Southeast Asia and the Pacific, noted that technology had aided crime networks in Asia, and in particular, the Mekong Delta region. Developing upon that idea, he added:”This has necessitated a revolution in the regional underground banking architecture, resulting in the development of systems and infrastructure capable of moving and laundering massive volumes of state-backed fiat and cryptocurrencies.”The report itself asserts that illegal and under-regulated crypto exchanges have become “foundational pieces of the banking architecture used by organized crime.” The document highlights law enforcement efforts in disrupting multiple money laundering networks linked to the illicit transfer of Tether funds. Last August, Singaporean authorities dismantled a network through an operation, recovering approximately $735 million in both cash and cryptocurrency. ‘Pig butchering’The UN report further suggests that USDT has been extensively employed in various underground fraud activities, including so-called "pig butchering" romantic scams. Last November, Tether froze $225 million in stolen USDT following investigations by Tether in collaboration with crypto exchange OKX and the U.S. Department of Justice. The money had been held in self-custodied wallets associated with an international human trafficking group in Southeast Asia orchestrating a pig-butchering scam. In December, Tether CEO Paolo Ardoino informed U.S. legislators in a shared letter that the company has enlisted the U.S. Secret Service and Federal Bureau of Investigation onto its platform. Later that month, the Chinese authorities uncovered a massive underground banking operation that was designed to evade the country’s foreign exchange controls. There was more related activity in December when it emerged that USDT has been integrated into the shadow economy in Cambodia, against a backdrop of the currency being prohibited for the purpose of trade within the Southeast Asian country. TRM Labs reportIn July of last year, a report by blockchain analytics firm TRM Labs, found that pro-ISIS terrorist groups in Central and Southeast Asia and the Middle East are increasingly using cryptocurrency, with a particular preference for USDT transacted over the Tron blockchain network. The UN report cites the popularity of USDT among those engaged in cyber-fraud and online casino operations, located in Myanmar, along the border with Thailand. Throughout 2023, Tether witnessed a notable expansion in its share of the global stablecoin supply, growing from 50% to 71%. At the time of writing, USDT has a market cap of $95 billion with stablecoins having an overall market capitalization of $134 billion. The UN's findings raise concerns about the stablecoin's role in facilitating illicit activities and underscore the need for enhanced regulatory scrutiny within the rapidly evolving crypto landscape.

North Korean Hackers Take Off With $100M Atomic Wallet HoneypotHaving reported last week on a $35 million hack of Atomic Wallet users’ funds, an update on the matter reveals that the situation is much worse than originally thought, with losses now exceeding $100 million.Photo by Kenny Eliason on Unsplash5,500 wallets compromisedThe attack has sent shockwaves throughout the crypto community, raising concerns about the security of decentralized wallets. Atomic Wallet, an Estonia-based project known for its non-custodial approach where users take full responsibility for storing their assets securely, has been hit hard by this unforeseen breach.Elliptic, a crypto compliance analysis company, published an update on the situation on Tuesday. According to that blog article, it estimates that approximately 5,500 crypto wallets have been compromised, meaning that losses have risen to more than $100 million, highlighting the severity of the attack.Despite the significant impact on users, Atomic Wallet has yet to provide an explanation regarding the root cause of these substantial losses. Users have taken to social media in frustration, demanding clarification from the company. Surprisingly, the company’s last direct update on Twitter dates back to June 7, leaving users feeling even more anxious.User frustrationOne user, Ezra Carlson, expressed frustration, questioning why Atomic Wallet didn’t warn users when they were aware of the ongoing hack. Carlson tweeted: “@AtomicWallet why won’t AM give me a straight answer about why they didn’t warn me, knowing full well that they were being hacked, that it was not safe to use AM last week before I made a transfer to my wallet that was then hacked.”Another user, “Real Deal Crypto,” criticized Atomic Wallet’s lack of updates, stating: “Your last update was five days ago — SERIOUSLY?!?!”Although Atomic Wallet acknowledged reports of compromised wallets on June 3, downplaying the impact by claiming that less than 1% of users were affected, the staggering sum of losses indicates a significant breach. Its last communication on the matter came on June 11 when, in responding to a user, the firm said that it continued to investigate and to await Twitter updates on the matter.Hack tied to North Korea’s Lazarus GroupElliptic has connected this heist to the notorious Lazarus Group, a cyber-criminal organization with ties to the North Korean regime, responsible for stealing over $2 billion in crypto assets through various thefts. This attribution marks the first time a significant crypto heist has been openly linked to the Lazarus Group since their $100 million exploit of Horizon Bridge in June 2022.In response to the heist, Elliptic has been collaborating with international investigators and exchanges, mobilizing resources to recover the stolen assets. Their efforts have reportedly led to the freezing of over $1 million worth of funds. However, the thief has adapted its behavior in response to the freezing of assets, turning to the Russia-based Garantex exchange to launder the stolen assets, as noted by Elliptic.This recent attack adds to a series of notable breaches in the crypto industry. Jimbos Protocol experienced an exploit resulting in a loss of $7.5 million, and Tornado Cash faced a malicious proposal that seized control of its governance in May. According to a report by Chainalysis, crypto hackers made off with an estimated $3.8 billion in 2022, with North Korea being responsible for a significant portion of the attacks.

Crypto Features in India-UK Markets DialogueAccording to a press release published by HM Treasury, the 2nd India-UK Financial Markets Dialogue meeting held on Wednesday featured six key themes with crypto featuring among them.©Pexels/SkitterphotoThe event brought officials from both nations together in the first in-person financial dialogue since 2017. While the meeting considered banking, insurance and reinsurance, capital markets, asset management and sustainable finance, it also allotted time to discuss payments and crypto-assets.CBDC knowledge sharingBoth sets of officials discussed the scope for augmenting knowledge on Central Bank Digital Currencies (CBDC) by way of mutual learning. The officials agreed on the importance of robust global approaches relative to the emergence and development of crypto-assets internationally. The joint statement issued following the meeting revealed that progress relative to the G20 roadmap for enhancing cross-border payments was a matter which was discussed. It’s an item that could have major implications for the use of cryptocurrency in cross border transactions.Global collaborationThe meeting marks another move towards greater global collaboration on policy and regulation relative to digital payment systems and crypto assets. Earlier this month, India’s Finance Minister Nirmala Sitharaman said that the introduction of any new regulations on digital assets needs to be coordinated on a global basis. “The G20 and its members agree that it’s not going to be possible to have an independent, standalone country dealing with crypto assets”, Sitharaman stated at a news conference following a meeting of central bank governors and G20 finance ministers.There’s a growing recognition among politicians, government and central bank officials that decentralized money doesn’t end at a territory’s borders due to its inherently decentralized properties.Taking steps to regulate cryptoWhile on the one hand strategizing as to how digital assets can be best controlled on a global level, India is also taking its own individual steps towards national regulatory action. Recently, it expanded its Prevention of Money Laundering Act (PMLA) to include consideration of digital assets. The newly amended PMLA will now deal with the exchange of digital assets for fiat money and vice versa. It also considers safekeeping, transfer and administration relative to cryptocurrency. Furthermore, its broadened scope deals with financial services offered related to virtual or digital assets.Rajagopal Menon, the VP of India’s leading cryptocurrency exchange WazirX, has said that “regulations levied by India have been baby steps toward institutional participation in the crypto exchange.” While market participants in the digital assets space are apprehensive about the regulatory measures that governments and state regulators choose to adopt, so long as the objective isn’t to regulate the innovation out of existence, such developments can have a profoundly positive effect on the digital assets market.There’s no doubt that in line with Menon’s point relative to the Indian context, the same scenario can play out in all digital markets given the application of the right regulatory approach. Institutional investment for the most part has eluded crypto despite many already heralding its arrival in recent years. Institutions move slowly and the only way in which they will be comfortable in working with digital assets is with complete regulatory clarity having been set out.So while some in crypto may be concerned at the mention of global regulatory coordination in respect of digital assets, so long as it doesn’t go too far, greater work towards improved regulatory clarity in the digital assets market can be a catalyst for further adoption and growth in India, the UK and further afield.