Central banks around the globe are racing to speed up the process of developing and launching the digital versions of their official national currencies, also known as central bank digital currencies. In general, a central bank digital currency (CBDC) is a digital representation of fiat currency issued by a government that is not backed by a commodity such as gold.
Stablecoins — pegged to a dependable fiat currency such as the US dollar — were set to become a cornerstone of the crypto ecosystem; however the failure f the algorithmic peg mechanism fixing the price of Terra’s USD stablecoin (UST) and the unmooring of Tether from its USD peg highlight some of the risks associated with stablecoins. TerraUSD (UST), which used to be one of the largest stablecoins, shed light on market run risks associated with stablecoin when it completely lost its dollar peg, earlier this month. UST is still struggling to regain its dollar peg despite initiating multiple remedial measures. Further, on May 19, 2022, the world’s largest stablecoin, Tether, momentarily lost its dollar peg and dropped to 95 cents, much below the $1 threshold it is supposed to maintain. The fallout from Tether’s brief dip from its peg resulted in investors withdrawing more than $7 billion from Tether, once again raising fresh questions about the reserves underpinning the stablecoin.
The web has changed dramatically over the years, both for consumers and developers. The advancements in various versions of the web have allowed users to connect and interact more closely with the developers.
Due to increasing public awareness around them, NFTs have entered the mainstream consciousness in a big way. Reportedly, trading in NFTs hit $17.6 billion in 2021, reflecting a 21,000% surge from 2020′s total of $82 million. The emergence of NFTs has also created a new medium for artists and creators to showcase their creations or collections.
The crypto market boomed in 2021, growing meteorically to peak at $3 trillion in global valuation. However, the surge in the crypto industry's growth has also garnered the interest of bad actors leading to a rise of attacks in the DeFi space. Reportedly, both the crypto and the DeFi ecosystems have witnessed losses exceeding $10.2 billion over the past year, resulting from hacks, scams and other malicious activities.
The NFTs experienced a meteoric rise this year. reportedly, the booming NFTs market generated over$23 billionin trading volume this year, compared to just $ 94.9 million in 2020. However, greater commercial viability and an increase in the trading volume have also resulted in an increased risk of fraudulent activities such as AML/CFT risks, phishing attacks, and copyright violations. Naturally, the risks associated with NFTs have also captured the attention of regulators all around the globe. On February 4, 2022, the U.S. Department of Treasury published a study, warning the investors that NFTs may, potentially, become a tool for money laundering in the high-value art market. Shortly after that, on February 14, 2022, BBC reported that Her Majesty’s Revenue and Customs (HMRC), the chief tax authority in the United Kingdom, has seized three NFTs as part of a probe into a suspected value-added tax (VAT) fraud case involving 250 alleged fake companies.
The NFTs market has grown on a mind-boggling scale due to increased public awareness around them, which led to their mainstream adoption. Reportedly, the booming NFTs market generated over $23 billionin trading volume in 2021, compared to just $ 94.9 million in 2020.
Though the regulators accept that most of the activity related to crypto is licit, they are also worried about the increased use of crypto in facilitating illicit transactions. The use of cryptocurrency to dodge sanctions has been a major cause of concern for countries such as the U.S. and international governmental organizations like the United Nations (UN) and the World Bank.
The common narrative surrounding the anonymity of crypto transactions is not entirely true, in truth activities on the blockchain, especially public blockchains like Bitcoin and Ethereum are more pseudonymous.
Contrary to the popular narrative, cryptocurrencies are not completely anonymous in nature. Cryptocurrencies like Bitcoin are actually pseudo-anonymous. This means that though the transacting parties can transact between themselves without revealing their identities, their transactions are still visible on the public blockchain. Third-party firms such as blockchain analytics companies can easily trace these transactions on the public blockchain, which can, in turn, lead them to the attached crypto wallet addresses. These wallet addresses can be linked to the real-world identities of the wallet holders.
