📉Hacks down for Q1 - temporary blip or long term trend?
Around USD 400 million was stolen across nearly 40 cryptocurrency attacks in the first three months of 2023 - down 70% from the same period in 2022, according to new research from TRM Labs.
The average hack size also took a hit in Q1 2023 – to USD 10.5 million from nearly USD 30 million in the same quarter of 2022, even as the number of incidents was similar (around 40). To date, hacking victims have recovered over half of all stolen funds in Q1 2023, with surprising numbers of hackers returning funds to victims.
What’s behind this decrease in hacks and the increase in return of funds? At TRM we think these trends might be linked to recent enforcement actions which have warned off would be hackers.
Will this trend continue? It’s not uncommon to see large fluctuations in month-on-month hack data, as large hacks considerably impact the data. It’s also possible that a few big hacks later in the year could bring the average back up. For now we will have to wait and see.
đź’ˇ TRM Insights: Get everything you need to know here.
🇺🇸🇰🇷 U.S. and South Korea sanction North Korea for malicious cyber
The United States and South Korea on Tuesday announced a new tranche of North Korea sanctions. Specifically, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned four entities and one individual for North Korea’s malicious cyber activities, including hacks and deployment of IT workers to fund weapons proliferation.
South Korea’s foreign ministry separately announced sanctions against seven individuals and three entities.
In addition to sanctioning the entities and individuals, OFAC added four cryptocurrency addresses used to transact BTC, ETH, USDT and USDC to its Specially Designated Nationals (SDN) List. According to OFAC, the wallets received more than USD 2 million in cryptocurrency fund transfers from IT teams located in China and Russia.
However, blockchain analysis by TRM Labs found that the four sanctioned addresses received as much as USD 28 million. TRM is investigating the origins of these funds.
And, in the wake of new North Korea sanctions, on June 1st, TRM Talks will welcome Dr. Jung H. Pak, Deputy Assistant Secretary for Multilateral Affairs and Deputy Special Representative for the DPRK at the United States Department of State; Dr. John Park, Director of the Korea Project and Adjunct Lecturer in Public Policy at the Harvard Kennedy School’s Belfer Center; and former FBI analyst and DPRK expert Nick Carlsen of TRM’s Global Investigations team, to discuss the North Korea threat and how to mitigate it.
💡 TRM Insights: For much more on the North Korea threat check out TRM’s Insights library here.
đź‡đź‡° Hong Kong SFC finalizes new rules for retail crypto trading
In an impressive display of speed, the Hong Kong Securities and Futures Commission (SFC) has published the conclusion paper to its consultation on the proposed VASP regulatory regime, just 54 days after it closed. The regime includes provisions for retail participation.
According to the paper, market participants submitted a total of 152 responses, which were broadly supportive of the proposed rules, but sought clarifications on the technical and implementation details.
SFC will generally be moving forward with its proposals, with a few tweaks and clarifications to address consultation feedback. For example, with regard to the requirement for tokens to be listed on two qualifying independent indices in order to be offered to retail clients, SFC clarified indices that must comply the IOSCO Principles for Financial Benchmarks, and be independent of the token issuer and trading platform.
The regime will take effect June 1st, 2023.
🌍 IOSCO Consults on Regulatory Recommendations for CASPs
The proposals aim to "support greater consistency with respect to regulatory frameworks and oversight," and "address concerns related to market integrity and investor protection.”
The consultation closes July 31st. Thereafter, IOSCO aims to finalize its recommendations by year end and "expects that jurisdictions will review their current regulatory frameworks to ensure that they comply with the standards and fix any gaps promptly.”
🇪🇺🇬🇧 UK EU Financial Services Reg MOU
Last week, the UK and the European Union signed an MOU on establishing greater financial services regulatory cooperation in order to foster “bilateral exchanges of views and analysis relating to regulatory developments and other issues of common interest” as well as improve transparency of regulatory decision making.
The parties will hold a semi-annual Joint EU-UK Financial Regulatory Forum which will conduct forward planning for regulatory cooperation and aim to "improve transparency and reduce uncertainty.”
💡 TRM Insights: What implications could this have for crypto regulations? Although the EU has finalized its crypto framework under MiCA, the UK’s is still a work in progress and it could learn from its EU counterparts. The UK’s recent consultation also explores whether to include an equivalence provision in its framework. That provision could be informed by the MOU and continued cooperation. TLDR: If the UK and EU want to coordinate more on crypto regs in the future, that just became a whole lot easier.
The rule, according to global AML standard setter the Financial Action Task Force (FATF), requires that all virtual asset service providers must screen, record and communicate the information of both sender and recipient for crypto transactions that exceed a certain amount designated by FATF member states. The decision was made by Japan's cabinet on Tuesday.
FATF first recommended the travel rule in 2019 and, by June 2022, was urging member nations to introduce travel rule legislation immediately. Check out TRM’s primer on all things travel rule here, and TRM Talks: Travel Rule here.
Earlier this month, the G-7, of which Japan holds the presidency, signaled its support for the FATF's efforts to accelerate global implementation of its travel rule.
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