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Crypto industry news and developments
1. Tornado Cash sanction sparks fears of crypto enforcement
Tornado Cash was sanctioned by the U.S. Treasury after allegations of money laundering surfaced following a string of recent cryptocurrency heists.
Tornado Cash is a privacy protocol on the Ethereum blockchain that anonymizes coin transactions by masking transaction hashes and wallet information. In that sense, the protocol is akin to privacy coins like Monero and Zcash.
The protocol has been accused of facilitating the $455 million hack of Axie Infinity’s Ronin bridge by North Korea’s state-sponsored Lazarus Group.
The sanction stirred a lot of concerns in the crypto community. Many people are worried that this could create a slippery slope for Web3 privacy and precipitate an existential crisis for the space. Since Web3 envisions a decentralized ecosystem, the erosion of privacy could result in the same centralized internet that crypto enthusiasts lament.
On August 10, the arrest of a Tornado Cash developer in the Netherlands further shocked the community because it opened the door to broader questions about cross-border jurisdictions in the crypto space. Crypto enthusiasts are now asking the question: f the sanction is enforced by the U.S., then why was there an arrest made on foreign soil?
2. Circle blocks USDC accounts
Regulatory clampdown fears started to dominate the space immediately after the Tornado Cash ban. For example, Circle, the issuer of USD Coin (USDC), froze $75,000 worth of USDC tokens that belong to Tornado Cash users.
The decision similarly provoked widespread debates in the crypto community. Many people expressed their concern that corporate intrusion has eroded the cryptocurrency ethos of privacy and decentralization.
Following Circle’s account freezes, crypto users transferred $1.6 billion from USDC to rival stablecoin, Tether (USDT).
Tether’s approach might be paying off for now, but if the U.S. Treasury releases more specific guidelines around stablecoin issuance, the tides could turn in Circle’s favor.
3. Tether refuses to ban Tornado Cash addresses
In contrast to Circle, Tether is not blacklisting crypto wallets associated with Tornado Cash, according to data from Dune Analytics.
The company stated that it will not ban addresses associated with Tornado Cash “until the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) says otherwise.”
Tether’s CTO, Paolo Ardoino added that it’s unclear whether Tether, as a Hong Kong-based company, is required to comply with U.S. Treasury sanction rules.
In the meantime, Tether is getting ready to be audited by BDO, one of the top five global auditing firms to alleviate widespread criticisms about its reserves backing the USDT stablecoin.
4. Mass liquidation hazard for BAYC NFTs
The crypto ecosystem has recently seen the emergence of new lending platforms that offer loans in return for NFT collaterals. According to crypto analyst DoubleQ, many of these platforms have become illiquid as the floor prices for NFT collections have tanked.
BendDAO, a prominent lending platform for Bored Ape Yacht Club (BAYC) NFT collaterals, makes the most of the headlines for this anticipated liquidity crisis.
There are currently 20 BAYC NFTs on the platform with a health factor of less than 1.1 and dozens more under 1.2. Fears related to low health factors resulted in liquidity providers removing the majority of the wrapped Ethereum (wETH) tokens they had been providing to the protocol.
According to researcher NFTStatistics.eth, there are only 15 wETH left on BendDAO in return for the 15,000 ETH deposited to the protocol to buy NFTs on leverage. This could potentially trigger the liquidation of approximately $55 million worth of BAYC NFTs.
To keep up with the critical news and events in the cryptocurrency space, follow our weekly CEX.IO Ecosystem Updates on our blog.
CEX.IO Ecosystem Updates are published every Thursday and provide highly detailed reviews about the price action of Bitcoin and Ethereum, as well as their on-chain activities. Additionally, each update provides a brief synopsis of critical industry events and developments impacting major altcoins.
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