The group leading the development of the IOTA blockchain, the IOTA Foundation, has run into a troubling situation.  The non-profit was forced to halt its network this past Wednesday after discovering that the IOTA Trinity wallet had been attacked by hackers, resulting in the theft of tokens it held.  The issue is still being unraveled, but there are reports that anywhere from $300,000 to $1.6 million in IOTA tokens may have been lifted from the wallet.

When reports started flowing in on Wednesday that the wallet could have been hacked, the group took action and shut down the Coordinator node to look into the issue further.  It is reportedly looking into a security flaw found in an earlier version of the wallet, and explains, "First (but not all) exchanges have responded, reporting that no monitored funds have been transferred or liquidated.  Most evidence is pointing towards seed theft, cause still unknown and under investigation.  Victims (around 10 that identified with the IOTA Foundation so far) all seem to have recently used Trinity."

As indicated, there have been ten victims identified.  Trinity is available for mobile devices, as well as Windows and MacOS, and some reports indicate that the problem may be limited to the desktop application.  However, this has not yet been confirmed.

This isn't the first time that IOTA has run into security issues, but the possible theft of as much as $1.6 million could make it one of the most disastrous.  In the past, the wallet implementations have been known to be buggy and unstable, and tokens have been lost or sent to the wrong addresses.  The development team also previously rolled out a controversial hash function that was met with a lot of criticism, which developers refuted.  However, they later changed the code anyway to respond to those complaints.

By far, the most disastrous hit to the alternative blockchain's reputation came when a hacker out of the UK stole $11 million in IOTA tokens.  However, his run was short-lived, as law enforcement was able to track him down and arrest him, and IOTA was able to recover the majority of the stolen funds.

After this latest attack, the foundation is already working with law enforcement to determine how much damage was done.  The group explains in an announcement, "We've shifted the complete focus of all relevant resources of the IOTA Foundation to this investigation last night and we have been working in teams to investigate [the] impact and cause together with the identified victims."  It added, "We have been working on the investigation of attacked seeds and analyzed the attack pattern, using a set of newly developed tools, as well as finishing a complete manual verification (to validate tooling reliability)."

As China battles to contain the deadly Coronavirus outbreak, one expert believes that blockchain could greatly boost the country's efforts. The virus has infected over 28,000 people in just three weeks, with 563 losing their lives so far. According to an academic at the University of Hong Kong, it's time China turned to blockchain in its response efforts.

In his post on the Oxford University Faculty of Law blog, Syren Johnstone believes that the time to build borderless solutions based on decentralized technologies has come. Johnstone, who is the Executive Director of the Master in Laws Programme at the University of Hong Kong, pointed out that blockchain and artificial intelligence can be used to better manage crisis situations.

He stated, "A private blockchain network would enable the recording and tracking of anything that is donated, from donation dollars to N95 masks. It also creates clear points at which it is possible to hold a person or organization to account, from the loading of donations for delivery through to its final end-use."

This blockchain network can also have public visibility, providing end-to-end transparency to all stakeholders. This would allow the donors to trace their donations, ensuring that they are going to the intended use, which would in turn push them to become even more involved.

The network would also allow the charity foundations to make informed decisions on how to spend the donations, based on sufficient data regarding the infection. Artificial intelligence could also be integrated in this step to feed data to the network on the infections, guiding the decision-making process.

He stated, "In a blockchain-based donations context, such outcomes would not only be driven by models developed by epidemiologists but also by the current and forecast supply and utilization of limited resources. AI can also provide visibility to the decision-making process, which is critical to restore public trust in the system and the ongoing flow of much needed donations."

Currently, the Chinese government has directed all donations towards the Coronavirus outbreak to be channeled to five charity organizations. This centralization makes the response towards the epidemic slow and unnecessarily complicated, with historical data proving this centralization approach is counterproductive.

Blockchain is already in use in some of China's largest companies including Alibaba and Tencent, so why not charities? Moreover, President Xi Jinping has called for blockchain adoption in China, proving the technology is here to stay. The Coronavirus crisis, unfortunate as it is, provides the tech industry the opportunity to develop decentralized solutions which could lay the foundation for the charity sector, he argued.

European authorities have arrested 10 suspects accused of defrauding over $6 million from tens of investors. The suspects conducted a crypto pyramid scheme targeting investors in several European countries, including France, Belgium and the U.K. The arrests are the culmination of an extensive investigation that began in 2018.

The investigation was led by Europol and Eurojust, EU agencies that focus on law enforcement and criminal justice cooperation respectively. In a press release, Eurojust indicated that the scheme had defrauded 85 investors, mainly from France and Belgium, although it was based in Israel.

The scheme targeted its victims by phone, promising them incredible returns of up to 35% for a small investment. In a classic pyramid scheme technique, the fraudsters paid off the initial investors using money raised from late-stage investors. The initial payments led many of the investors to stake more money and recommend the scheme to others.

However, after some time, the payments stopped, as they always do. The criminals began to channel all payments into bank accounts belonging to several fake companies in Asian countries and Turkey.

Investigations into the crime ring started in 2018, with Eurojust issuing investigation orders to authorities in the U.K., Bulgaria, Spain, Hungary, Portugal and the Czech Republic to assist with the investigations. In January last year, the authorities made the first arrests, bringing in four suspects arrested in France. Europol also partnered with authorities in Luxembourg to seize $1.1 million.

This is the latest case of crypto fraudsters being brought to book. In January alone, tens of crypto fraudsters have faced the law in connection to millions of dollars lost through crypto scams. The DoJ, for instance, recently charged two alleged fraudsters for using fake identities to raise over $30 million in an ICO. The two were behind CG Blockchain, a company that claimed to develop blockchain auditing tools.

The SEC, on the other hand, charged ICOBox with the issuing of an unregistered ICO in which it raised $14 million. Just days prior, it had charged a San Diego, California man for defrauding $3.5 million from investors in a cloud mining scam.

The law enforcement actions are a positive sign for the crypto industry as it indicates the authorities are cracking down on the rampant crypto scams. Once the industry sheds the scammers, it will appeal to more people and likely attract government support.

The Texas State Securities Board (TSSB) recently published the tenth-anniversary edition of its investor guide, which contained a list of risky investments—cryptocurrency included—that people should be wary of.

In its "Texas Investor Guide: Strategies for Investing Wisely and Avoiding Financial Fraud," the state regulator said cryptocurrencies require scrutiny and should be traded with care. Aside from crypto, the list also includes unregistered individuals, oil and gas offerings, and promissory notes.

According to the TSSB, digital assets are extremely volatile and that it's almost impossible for a layman to understand how it works. Promoters of crypto tokens are also just trying to take advantage of people looking for a way to get rich quickly, the board says, noting that even seniors and retirees who prioritize security over speculation have ended up investing in ICOs.

Word of advice from the regulatory body

The TSSB has some pieces of advice for investors on how to deal with cryptocurrencies. The state board warned investors to refrain from buying cryptocurrencies without knowing the trustworthiness of the token-issuing firms.

"Any investor who does decide to enter the crypto space should only deal with registered firms," TSSB advised. Further emphasizing that very little that can be done for investors that lose their funds through ICO or other crypto-related investments.

Additionally, the regulatory explained that investing in such cryptocurrency offerings leads to investors transferring funds to anonymous third parties.

The world's first central backed digital currency is yet to see the light of day, but progress is being made. This week, the Bank of England announced that it plans to explore possible use cases for a digital currency. The BoE has joined hands with the Bank of International Settlements and five other central banks in the project, among them the Bank of Japan and the European Central Bank. The move could be among the most significant steps in the push for the use of CBDCs across Europe and beyond.

The move by the BoE is one of many in the past year, as the world seeks to adopt blockchain-based digital currencies. According to the World Economic Forum, central banks are waking up to digital currencies. During the Davos 2020 conference this week, the WEF launched the CBDC Policy-Maker Toolkit that's aimed at helping central banks find the best way to integrate digital currencies into their monetary systems. The organization gathered insight from central bank researchers, international organizations, global policy‑makers and experts from over 40 institutions.

Still on CBDCs, the MIT blockchain research group believes that most of them will use technology currently being applied by existing digital currencies. The Digital Currency Initiative published a report this week stating that most CBDCs will copy features such as "the usefulness of programmability in money and the importance of preserving user privacy."

In India, the government is struggling to find some middle ground on crypto and blockchain. While the Reserve Bank has had its issues with crypto, the country's securities regulator believes blockchain will play a key role. Ajay Tiagi, the chairman of the Security and Exchange Board of India is urging the exploration of blockchain applications in the securities market, such as in clearing, settlement and record-keeping.

Still in India, the country's Telecoms and IT Minister has called for blockchain solutions for improving quality of government schools. Ravi Prasad called on the National Informatics Center to develop solutions for public schools, saying he is very keen on leveraging blockchain technology in primary education. He was speaking during the inauguration of a blockchain center of excellence in Bengaluru.

In Turkey, the city of Konya is working on integrating blockchain, including developing its own digital currency. The city has blockchain experts already looking into how the technology can be integrated in social programs. The proposed digital currency, City Coin, will be used in the social programs as well as other state payment systems.

The world's largest brewing company is also using blockchain, leveraging the technology to help African farmers prove their income. Anheuser-Busch InBev, the maker of the popular Budweiser, has developed a blockchain-powered system that keeps track of all the farmers supplying it. This system replaces the tedious paper trails previously used. The farmers can use it to prove their income to banks and other financial institutions, a crucial factor in acquiring credit facilities.

Argo Blockchain had the best year yet in 2019, a report this week revealed. The report claimed that the crypto mining company saw a tenfold increase in its revenue last year. Argo, which is listed on the London Stock Exchange generated $11 million, up from $987,000 in 2018.

While blockchain technology is rising to the top, China has scaled down its investment in the technology. A report by state-run Xinhua revealed that the country saw 245 financing deals in blockchain in 2019. These deals accounted for $3.6 billion, a 40.8% drop from the previous year. Beijing, Shenzhen and Hangzhou had the most deals, the report stated.

The Financial Action Task Force (FATF) and over 50 delegations involved in crypto supervision recently gathered to discuss how to regulate crypto assets and related service providers. While examining three key areas, they stressed the importance of international cooperation, citing that cryptocurrencies are global products.

FATF-Led Discussion on Crypto Supervision
The Financial Action Task Force held a "supervisors' forum" in France last week to discuss crypto asset supervision. The aim of the forum was "to promote more effective supervision by national authorities" in the area of crypto assets and related service providers. The FATF is an intergovernmental organization with a focus on developing policies to combat money laundering and terrorism financing. Supervisors are designated authorities or non-public bodies with compliance responsibilities of each country.

According to the FATF, this event was the first opportunity for regulators to discuss how to implement new measures for crypto assets and related service providers since it finalized them in June 2019. Attendees included 135 representatives from over 50 delegations involved in virtual asset supervision, the FATF detailed, elaborating:

Supervisors play an important role in ensuring that regulated entities, such as banks and financial institutions, implement the FATF's standards to detect and prevent money laundering and terrorist financing.

3 Key Areas Discussed
The event's participants shared their knowledge and experience in supervising and regulating virtual assets and virtual asset service providers (VASPs). They discussed three main topics, starting with the lessons learned so far from countries that have already established a regulatory framework for cryptocurrencies and VASPs.

The second topic concerns common issues when drafting VASP laws and regulations. Representatives shared their approach to developing an AML/CFT regime for VASPs in their jurisdictions and outlined how they were implementing the FATF's recommendations. The third topic discussed was about the tools, skills, procedures, and technology needed to effectively supervise VASPs. The FATF remarked:

The importance of international cooperation was also highlighted, as virtual assets are inherently global products.

The supervisors and regulators identified a number of areas that need further action which they plan to discuss at the next FATF Plenary and other supervisors' meetings to be held in May.

Implementing the FATF Standards
The supervisors' forum is an initiative of the Chinese Presidency of the FATF to promote more effective supervision by national authorities. Two have been held so far, the first of which was held in November 2019 in Sanya, China. It focused on the effectiveness of supervision without discussing crypto assets.

The FATF's explanation from its crypto guidance.
The FATF issued guidance for crypto assets and VASPs in June 2019, with the support of the G20 countries. The money-laundering watchdog subsequently revised its assessment methodology. It sets out how the FATF will determine whether countries have successfully implemented its recommendations and are regulating the crypto sector. The FATF's rules apply both when cryptocurrencies are exchanged for fiat currencies and for other digital assets.

The challenge now is for countries and affected entities to effectively implement its recommendations, the FATF affirmed. By bringing together practitioners from around the world, the organization explained that it "is beginning to develop a global knowledge base on 'what works' in supervising virtual assets," adding:

This will help ensure a consistent global approach to supervision and will help the VASP sector adjust to the new regulatory environment.

A FATF meeting.
While acknowledging that implementing its requirements will be challenging for the crypto sector, the FATF believes that "it will ultimately increase trust in blockchain technology as the backbone behind a robust and viable means to transfer value." Noting that adopting its rules will "ensure transparency of virtual asset transactions and keep funds with links to crime and terrorism out of the cryptosphere," the money laundering watchdog declared:
Countries need to implement the FATF's measures, and soon … The FATF will evaluate next steps in June 2020.

Blockchain technology has been focused on improving efficiency, reducing costs and improving speed—all of which translate to increased profitability for its users. However, in recent times, we've seen a rise in the use of blockchain for social good. The Global Blockchain Organization is one initiative, aiming to utilize the blockchain to create a better future. One of the founders, Mru Patel was at the Malta AI and Blockchain Summit where he spoke to CoinGeek's Stephanie Tower about GBO, the need for regulations and more.

The GBO will bring together various stakeholders, from regulators to banks and startups, and "create a standard regulated thing on basic values," he explained. These members will "shape the future of the blockchain through process, regulation and universal compliance towards blockchain for humanity."

The organization was launched in December 2019 in Oslo, Norway. It intends to work towards the adoption and utilization of blockchain in government, healthcare, energy, finance and infrastructure.

Patel stated, "The immediate impact we hope for is all about humanity—how to improve the lives people. At the end of the day we're giving to charities, we're building communities, we're going to raise a lot of funds."

Patel is also the President of EXcoin, a derivatives exchange for digital options trading. The platform allows its users to deposit and withdraw in crypto and offers trading in futures, options and CFDs. He has also been extensively involved in regulatory processes, especially concerning cryptocurrencies and blockchain technology.

He believes that governments across the globe must try to understand blockchain a bit better, so as to make informed decisions on how to regulate it. Most of them only know blockchain as a technology that underpins Bitcoin. Others relate it to the many crypto-related scams that have occurred in recent times. However, it's much more than this and could ultimately transform how governments operate.

On the perceived tug of war between blockchain and regulators, he explained, "Majority of the governments are focusing mainly on the fintech space to track money laundering and related activities, also on taxation. In my view, majority of them are dragging their feet. I have a view that what they are actually doing is protecting their jobs, pensions and the cartels they are involved with."