Week In Crypto: Mastercard Partners With Binance; Tether Attacks Circle For Tornado Cash Freeze

August 26, 2022
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Mastercard has revealed plans for crypto payments to go mainstream, Coinbase is sued by another disgruntled exchange user and Tether says no to freezing Tornado Cash.

Mastercard has revealed plans for crypto payments to go mainstream, Coinbase is sued by another disgruntled exchange user and Tether says no to freezing Tornado Cash.

The CEO of Mastercard has been promoting its partnership with Binance, the world’s largest crypto exchange, on a new payments platform that could supercharge mass adoption of cryptocurrency.

Writing on LinkedIn, CEO Michael Miebach said that Mastercard is working with Binance to allow customers to use their crypto to make purchases at more than 90m stores worldwide.

“We can unlock the full potential of blockchain technology when we make it easier to access and easier to use,” he said. “One way we do that is by bringing crypto to everyday purchases.”

Miebach said that after launching this effort in Argentina, Mastercard has plans to expand its crypto payments offering to other markets over the next five years.

This month, the Mastercard-backed Binance Card launched in Argentina. Issued by Credencial Payments, the card will allow verified Binance users in Argentina to make purchases and pay bills using cryptocurrency.

The Binance Card will be accepted at all of Mastercard’s 90m+ merchants worldwide, both in-store and online. It also offers 8 percent crypto cashback on eligible purchases and zero fees on ATM withdrawals.

Payments made via the Binance Card will be converted to fiat currency in real time at the point of purchase.

“Payments is one of the first and most obvious use cases for crypto, yet adoption has a lot of room to grow,” said Maximiliano Hinz, general director of Binance in Latin America.

“We believe the Binance Card is a significant step in encouraging wider crypto use and global adoption.”

Coinbase hit by another lawsuit

Mastercard’s strong message of support for crypto payments adoption is about as far as the good news goes for the crypto industry this week.

In what has become a recurrent theme in the Week In Crypto, Coinbase, the largest exchange in the US, was hit by another class action lawsuit this week.

Unlike previous lawsuits, which accuse Coinbase of misleading statements on issues such as bankruptcy policy, this latest lawsuit accuses Coinbase of misleading statements on exchange security and accessibility.

Filed in a federal court in Georgia, the complaint is brought by a Coinbase customer and Georgia resident named George Kattula.

Kattula claims he was locked out of his Coinbase account for an “extended period”, during which his crypto-assets lost value and were left vulnerable to theft, as was his “sensitive personally identifiable information”.

The complaint puts the blame on poor resource allocation at the exchange, noting that “Coinbase’s user growth has outpaced its ability to provide the account services and protections it promises to consumers”.

Similar claims were made in a shareholder derivative action suit against Coinbase covered by VIXIO this month, and similar admissions were made by Coinbase CEO Brian Armstrong when he announced plans to lay off one in five staff in June this year.

Kattula’s complaint also has parallels with two other significant lawsuits that have been filed against Binance and Binance US.

In June this year, a class action suit was filed in New York by Binance US users seeking to recover losses following the collapse of the LUNA algorithmic stablecoin, which Binance had described as “safe” in its promotional materials.

And last year, Switzerland-based Liti Capital launched an arbitration lawsuit on behalf of Binance traders who lost money due to platform outages on May 19, 2021 — one of the worst days ever for the crypto-asset markets.

Liti Capital believes that thousands of traders were unable to access Binance for multiple hours that day as markets crashed leading to losses of more than $100m.

The outcome of these lawsuits will likely set the standard for platform integrity and accessibility in the crypto-asset markets in the years ahead.

Tether challenges Circle over Tornado Cash account freeze

Hacks and money laundering have been a major thorn in the side for crypto lately, particularly in light of the developing case against Tornado Cash.

Earlier this month, as reported by VIXIO, the US Treasury issued sanctions against Tornado Cash after establishing that it has been used to launder $7bn worth of crypto-assets since its launch in 2019.

Tornado Cash is a decentralised token mixing service built on the ethereum blockchain, which is used to obfuscate the trail of previous transactions connected to a certain crypto-asset.

Circle, the US-based issuer of the USDC stablecoin, immediately froze USDC funds linked to the sanctioned Tornado Cash wallet addresses, and blacklisted them to prevent further interactions using USDC.

However, several days later, Circle voiced its opposition to the sanctions brought by the Office of Foreign Assets Control (OFAC).

“This week’s far-reaching OFAC sanctions materially raised the tension between the interaction with open software protocols, the presumption and preservation of privacy, and financial crime compliance,” Circle said in a statement.

“We feel that sanctioning the protocol itself is a new escalation of policy issues.”

This week, we heard from Tether, issuer of the largest stablecoin, USDT. In contrast to Circle, Tether said it would take no such measures against Tornado-linked addresses unless specifically requested to do so by OFAC.

"Unilaterally freezing secondary market addresses could be a highly disruptive and reckless move by Tether,” the company said.

“Even if Tether recognises suspicious activities on such an address, completing a freeze without the verified instruction of law enforcement and other government agencies might interfere with ongoing and sophisticated law enforcement investigations.”

Tether also noted that Paxos, the US-based issuer of the BUSD and USDP stablecoins, has not frozen Tornado-linked addresses, nor has DAI, the algorithmic stablecoin issued by MakerDao.

“We believe that, if made without instructions from US authorities, the move by USDC to blacklist Tornado Cash smart contracts was premature and might have jeopardised the work of other regulators and law enforcement agencies around the world,” said Tether.

3AC liquidation gets green light

In other notable events this week, the Singapore High Court officially recognised a liquidation order against collapsed crypto hedge fund Three Arrows Capital (3AC).

As covered by VIXIO previously, a court in the British Virgin Islands originally filed a liquidation order against 3AC in June this year, back when the whereabouts of co-founder and CEO Zhu Su were still unknown.

The decision by the court in Singapore means that Teneo, the appointed liquidator, now has the green light to probe the local assets of 3AC, which is officially headquartered in Singapore.

3AC’s collapse in June was an early byproduct of the LUNA collapse one month earlier, and triggered a series of major bankruptcies throughout the crypto industry.

Celsius was one of the first and largest crypto platforms to freeze withdrawals citing “liquidity issues”, followed by Voyager Digital, both of which filed for bankruptcy several weeks later.

This week, in a bankruptcy hearing call, Celsius chief financial officer Chris Ferraro shocked creditors when he said the company expects to be cash-flow positive at the beginning of 2023.

Ferraro said Celsius will benefit from $61m in maturing loans to crypto exchange Bitfinex, in addition to $20m in other savings that will stop it from running out of cash in October, as was previously projected.

At Voyager, a federal judge granted the company permission to pay “retention” bonuses totalling $1.6m to 36 staff, despite opposition from Voyager’s customers.

The judge also agreed to withhold the names and positions of those who may receive the bonuses.

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