🇸🇻 El Salvador tightens crypto regulation as part of the IMF deal

🚔 The country's Legislative Assembly has changed the status of Bitcoin - crypto payments will remain legal, but now only on a voluntary basis. The obligation to accept BTC as a legal tender has been canceled.

💸 The country is also reforming the type of crypto license - instead of a Bitcoin License, a CASP license is now used, which has become more difficult to obtain. All this is the result of a deal with the IMF - the organization has allocated a $1.3 billion loan to El Salvador.

🇺🇸 CryptoKnight promises to end the persecution of crypto

💥 The big event in the US yesterday was the press conference of crypto czar David Sachs. In fact, behind this beautiful position hides... Trump's crypto aide.

🗽 David Sachs stated that: “his working group is evaluating the possibility of creating a Bitcoin reserve as directed by the President” and the US will end a 4-year crackdown on cryptocurrencies.

💵 By the way, one of Sachs' claimed top priorities was to regulate stablecoins. Remember what I've been writing here for a long time: dollar stablecoins are a great opportunity for the US to keep the dollar dominant. In that sense, the previous administration's attempts to restrict their circulation are foolish.

🏦 Yesterday, however, the new legislation to regulate stables began to be debated in the Senate. And from the looks of it, it won't be as totalitarian as in Europe and Dubai. The Fed will be the regulator for stables with a cap of more than $10 billion, while coins with a smaller volume will remain under Money Service business rules. MSB legislation is smart and this type of licenses are not tough for business.

🇺🇸 Regional Bitcoin Reserves and Stablecoins as a Way to Extend the Dollar's Hegemony

🚀 This week, the United States continued to take important steps in the field of cryptocurrency regulation. According to a draft law, the state of New Mexico can invest 5% of its reserves in Bitcoin, and Missouri has already adopted a similar law. Similar initiatives are being discussed by 22 states.

💸 Also this week, discussion of the law on stablecoins began, and judging by the official statements of Waller from the Federal Reserve, the United States is evaluating dollar stablecoins as a way to extend the currency's dominance.

🦅 According to the current version of the law, the United States will only license stablecoins denominated in dollars or treasury securities on its territory. Other stablecoins will licensed later.

💰 A test project for the tokenization of assets with collateral in stablecoins will be launched by one of the leading crypto regulators. the CFTC. The new CFTC Chairperson, Caroline Pham will take an active part in the discussion.

🌐 Last Week Highlights

🇪🇺 Good news from Europe this week: the world-famous Blackrock will launch a Bitcoin ETF there. The Czech Republic also finally approved an exemption from capital tax for three-year crypto holders.

🇳🇱 In the Netherlands, Alexey Pertsev, a developer and the co-founder of Tornado Cash, was transferred to house arrest.

🇵🇱 However, the Czech Republic and Norway remain alone as supporters of creating a BTC reserve. This week, the Central Bank of Poland announced that it does not plan to buy bitcoin.

🇮🇳 Bybit will receive permission to operate in India, the largest crypto market in Asia (together with China).

🇯🇵 Bybit, Bitget, MEXC and KuCoin will be banned in Japan. The local regulator (FSA) ordered their applications to be removed from app stores.

🧨 Political memetokens on the rise

🇦🇷 Argentine President Javier Milei recently promoted the Libra token on his Twitter. However, after a quick rug-pull of the project, he quickly deleted his ad and explained that he has nothing to do with it.

🇨🇫 This is already the second such coin supported by the country's president. The first, in addition to the TRUMP token that has lost value, was the CAR coin - it was supported by the President of the Central African Republic (CAR) Faustin-Archange Touadéra. And there was a rug pull there, too.

🙈 Legally, all these coins are in a gray area for now - there are no restrictions on investing in them, but there is no insurance against rug pulls, either. Therefore, I would not recommend buying them.

🇺🇸 However, in my opinion, TRUMP stands apart - so far, its value has fallen significantly from highs more than 5 times, it still looks like having potential for price recovery. But this is a high risk deal.

🇺🇸 Cryptocurrency Market Calm: Reasons

🎲 Last week, the outflow of funds from the Bitcoin ETF, according to Farside Investors, exceeded the inflow by $577.2 million. And only one of the five trading days of the previous week did the inflow exceed the outflow, by $70.6 million on Friday. The price of Bitcoin is $96,000 at the time of writing.

💰 At the same time, the situation with crypto regulation in the world remains good. In the US, Brian Quintenz, a person from the crypto industry, has been appointed head of the CFTC. And 22 American states are in the process of adopting local Bitcoin reserves.

📊 Most likely, the calm in the market is due to the position of monetary regulators - the Fed left the rate unchanged - and the markets are waiting for the adoption of new crypto laws at the federal level. It is still unclear when the Senate will finally pass FIT21, which transfers a significant part of the SEC's powers to the CFTC.

📄 On the one hand, the chairman of the Senate's relevant committee, Tim Scott promised to do this in the first 100 days of Trump's presidential term. On the other hand, the fact that the Senate never started considering the law in the previous convocation may lead to its reconsideration in Congress.

🤯 Although hearings on both FIT21 and the law on regulating stablecoins occur regularly, Republican legislators (they have the majority) have a more important matter to handle - approving all of Trump's new appointments, including the head of the SEC. Without this, it is unlikely that FIT21 can be expected to pass. So a new revival of the crypto market associated with this law is unlikely to occur before April-May of this year

🇪🇺 One of the first MiCA licenses and more freedom for DeFi in the US

🇨🇾 eToro became one of the first companies granted a new type of cryptocurrency license in the EU: the MiCA license.

🇦🇪 Mantra received a license in Dubai. This is a DeFi platform that deals with the tokenization of real world assets (RWA).

🇺🇸 Coinbase, Uniswap, Kraken, and other major US companies have filed a complaint to Congress about IRS requirements. They ask the tax service to lift the obligation for DeFi platforms to hand over information about their users (and their income).

🦅 If the obligation for DeFi companies in the US to hand over data to the IRS is lifted, it will truly be the beginning of a golden age of cryptocurrency in the US.

💰 Hackers stole $1.4 billion from Bybit

🧘 Bybit’s CEO, Ben Zhou hastened to calm clients - hackers got control only of the Ethereum wallet. All other client funds are safe.

✅ Withdrawals work. Checked it myself!

🤬 The Indian exchange WazirX recently experienced the same problem with a $235 million hack. What i can’t understand is how it is possible to store such large amounts of money in hot wallets.

📜 Hacks like those at WazirX and Bybit are why regulators frequently require exchanges to store clients' funds only in cold wallets. For example, both Japan and South Korea have this official requirement.

💸More about the Bybit hack

🧨 The $1.4 billion hack of the Bybit exchange has become February's main headline. 🇰🇵 North Korean hackers, the Lazarus Group are suspected of the attack.

⚫️ They stole more than 400,000 ETH and other coins.

⚫️ The hacking method was social engineering with transaction substitution - that is, when sending funds, the exchange employees did not know what kind of transaction they were making.

⚫️ There was no bank run on Bybit, although many customers (including me), withdrew funds just in case.

⚫️ The exchange has restored its Ethereum reserves. Bybit CEO Ben Zhou has announced a reward of 10% of the stolen funds - $140 million - for recovery of the funds.

🗣 My comment:

🦜 Some (including me) rushed to attack Bybit and declare negligence. In particular, they point to the lack of normal on-chain monitoring, transactions signed blindly.

🙅 This reproach is partly fair, but only partly. Because Bybit is not some kind of garbage dump (as they think in regulated jurisdictions), but one of the largest crypto exchanges in the world. Therefore, this is not just Bybit's mistake, but the Achilles heel of the entire crypto industry.

💬 It's just that the security systems of crypto exchanges and the way storage is arranged on them need to be improved. We will talk more about the Bybit hack, legal aspects, and other hacking cases this week with blockchain developer Alexander Mazaletsky.

🇪🇨 Ecuador: the country of eternal summer

🌫 For now, all crypto transactions in Ecuador are in a gray area. Talks about the need to change the situation began only last year. So far, the country's Central Bank has issued a statement, that recognizes crypto payments as illegal in Ecuador, but allows cryptocurrency transactions for residents.

🏦 There is still no regulation of crypto transactions for businesses or a licensing system for crypto exchanges. At the same time according to a poll provided by local outlet, Ecuador has the biggest demand on crypto - 30% or residents ready to use it for payments.

☀️ I describe all the opportunities for business and digital nomads to move to this welcoming country for foreigners in this article.

🙀 Record outflow from Bitcoin ETF

📉 This week, the price of cryptocurrencies has fallen sharply. Most major cryptocurrencies have shown a decline of 10-20%. The price of Bitcoin fell below $83,000. In the first three days of this week alone, an outflow of more than $2.4 billion was recorded from the Bitcoin ETF.

🇺🇸 The main reason is the fall of the American stock market on expectations of the trade war between the US and the EU and China declared by Trump. And the crypto market has been in a sideways trend for a long time, a correction was brewing.

📊 Nevertheless, new laws on cryptocurrencies that will be adopted in the US this year and other countries around the world are unlikely to allow the market to fall for long. An unexpected rebound is possible even in the coming days.

🔍 Bybit hack: legal aspects and new details

🔦 I summed up the Bybit hack in the article for Hackernoon.

🔭 The community, discussing the details of the hack, was divided into two camps: some say that Bybit themselves are to blame for the hack:
- used a blind signature (“blind signing”).
- stored too much money in one wallet. As the saying goes, “don’t put all your eggs in one basket.”
- used third-party software (Safe) and did not adapt it in any way
- did not change their security system in any way after the Radiant hack in October 2024

🤔 On the other hand, Bybit is not the first (nor will it be the last) major exchange to find itself in such a situation - remember the WazirX hack. One of the factors in the success of Lazarus Group attacks is the vulnerability of the Safe system. And finally, most importantly, Bybit is fighting for the return of the stolen funds and created the Lazarus Bounty project.

💡 This project very clearly demonstrates the main pain point of the crypto industry: hacker attacks. After the Bybit hack, DeFi protocols and centralized exchanges are involved in “money laundering” and cannot (or do not want to?) stop this process.

🤙 Lazarus has transferred the stolen Ether to an increasing number of wallets and is withdrawing funds, primarily exchanging them for Bitcoin. More than 63% of the stolen funds (slightly less than $0.5 billion) were transferred to Bitcoin, which means they will most likely not be returned.

🔙 However, there is a chance to return the remaining funds to Ethereum. Bybit divided companies into good and bad guys - “good actors” and “bad actors”. Good actors respond to requests and block hackers' funds (if they have time). Mantle blocked $41 million in stolen funds.

🔷 So far, this is the biggest success. Other companies are blocking pennies. And this is taking into account that law enforcement agencies and regulators have begun to help Bybit return funds - the FBI and OFAC called on all market participants to block transactions from 51 Lazarus wallets.

❌ But there are also those who do not cooperate with Bybit. So far, the only “bad actor” is eXch.ch, through which Lazarus has laundered $91 million.

🇸🇻 El Salvador is going to sell its Bitcoin reserve?

🔻 Yesterday, the IMF published documentation from its agreement with El Salvador. According to it, the country has committed to ban “public investments” in crypto assets.

❓It is not yet entirely clear whether it consists only new BTC purchases or includes sale of existing reserves as well. However, it’s clear that the IMF loan is more important for El Salvador, than the status of the most crypto-friendly jurisdiction in Latin America.

⤴️ This is one of the few bad news in crypto regulation. The overwhelming majority of regulatory trends point to market growth in the long term - as soon as the US passes all the announced laws, and the global stock market stops shaking due to fears of trade wars.

🇺🇸 Market recovery before crypto summit

🏛 Tomorrow, the White House will host a crypto summit led by crypto czar David Sachs and with the participation of US President Donald Trump. Against this backdrop, the market is showing signs of recovery:
- Bitcoin is again above $90,000
- Yesterday's Bitcoin ETF trading finally showed a small inflow (not outflow) of $22 million.

💰 At the same time, Trump's plans to include not only Bitcoin and Ethereum, but also Solana, Cardano and Ripple in the national cryptocurrency reserve are being discussed.

💢 The inclusion of altcoins in the state reserve is a very controversial initiative. In particular, Solana co-founder Anatoly Yakovenko believes excessive state control over cryptocurrencies will greatly harm decentralization. Yakovenko also notes that the new administration's approach to creating the reserve is still unclear - the criteria by which certain cryptocurrencies are included, as well as the principles upon which the US cryptocurrency reserve will operate.

🖋 Trump signs executive order to create Bitcoin reserve

👁 The executive order was published on the White House website before the crypto summit. So far, it is simply about continuing to store bitcoins previously confiscated by the US government within a “Strategic Bitcoin Reserve” and not selling them.

🫙 A “Digital Asset Stockpile” will be created for other crypto assets. The Department of Commerce and the Treasury have been instructed to prepare their proposals for creating a crypto reserve within 30 days, but in such a way as not to spend additional taxpayer funds.

🎉 We will summarize the results of the week and the crypto summit (which has not yet begun) for you tomorrow.

📅 Weekly Digest

🔻 The crypto summit did not live up to expectations - the market fall continues. Bitcoin - $81,000, Ethereum - $2,000, TON - $2.65.

💬 Although Trump announced the creation of a Bitcoin reserve, Digital Asset Stockpile and the intention to make the United States the crypto capital of the world, he said that no additional purchases of crypto with government funds are planned.

📉 Considering that the Fed does not plan to lower the rate in the near future, all the news rather suggests that no new liquidity injections into crypto are planned in the coming weeks. The total outflow of funds from American Bitcoin ETFs for the week amounted to $739 million. This is not much, but the downtrend prevails.

💹 There is also good news - the American financial regulator (OCC) allowed federal banks (more than 1,000 banks) to conduct operations with crypto. Colombia has begun considering a federal cryptocurrency law, and it is one of the largest crypto markets in LatAm.