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This week’s huge topic is about the announcement of Ledger’s new service called “Ledger Recover” where you can sign up to have your seed phrases encrypted and backed up in 3 different custodians. If you’re new to crypto wallets, you can start by reading the article I wrote about the introduction of self-custody crypto wallets
The purpose of this service is to increase the convenience especially for people new to crypto to have an option to recover their seed phrase in case if they lost theirs and they don’t have access to their wallets.
However, this service also brings up a lot of controversy and uproar from all crypto communities, because seed phrases are meant for users to safeguard and only the users should be the sole custodian of their seed phrases.
If you choose to sign up for the Recover service, you’re granting permission for LEDGER to store your seed phrases “encrypted” with three different parties instead of doing it by yourself, which adds significant risks to your self-sovereign wealth such as additional attack vectors for hackers to gain access to your seed phrases, and regulators could subpoena you and freeze your funds if they deem you a malicious actor.
This service entirely defeats the purpose of self-custody your crypto assets in a cold storage like your hardware wallet. Not to mention that they are also charging $10 per month & you need to provide KYC to Ledger to activate this service.
Whether if your seed phrases generated by Ledger are safe or not remains to be seen. For the time being, as long as you are keeping your seed phrases safe and you performed the necessary security steps to not leak your seed phrases anywhere, your funds are safe. However, one thing we know from this fiasco is that it will take a very long time for crypto users to trust Ledger again as the pioneer hardware wallet brand for crypto asset cold storage.
If you would like to know more details on the matter, Seth for Privacy created the best thread out there explaining it.
Rep. Tom Emmer Introduces an Act That Doesn’t Hinder U.S. Crypto Adoption
The Securities Clarity Act, introduced by Majority Whip Tom Emmer and Representative Darren Soto, is aiming to provide regulatory clarity for digital assets. The bill distinguishes between the asset itself and the securities contract it may be part of, allowing tokens to transition to a different classification once they become decentralized. This distinction is crucial for token projects that need to raise capital in their early stages but want to move away from the securities framework as they develop, enabling them to be used for their intended utility.
There are various industry organizations, including Coin Center, Blockchain Association, Chamber of Digital Commerce, and the Crypto Council for Innovation that support this act. They recognize the importance of establishing clear rules and definitions for digital assets, providing certainty to investors, consumers, and businesses operating in the digital asset marketplace.
This is great news as the legislation is seen as a way to foster domestic innovation, ensure global competitiveness and protect US investors, which points U.S. crypto regulatory framework in the right direction.
Full details of the bill attached
EU’s Crypto Legal Framework Approved by Finance Ministers
Over in Europe, the Economic and Financial Affairs Council of the European Union — comprising finance ministers of all member states — has given the green light to the highly-anticipated Markets in Crypto-Assets (MiCA) regulation which was voted on May 16 after more than two and a half years of discussions.
MiCA aims to update the EU's approach to digital finance and focuses on crypto-asset providers and stablecoin operators. MiCA's rules cover a broad category of companies called "crypto asset service providers" (CASP), which includes activities like operating trading platforms, offering custody services, and providing crypto advice. Under MiCA, CASPs planning to publicly offer a crypto-asset will need to produce a white paper that discloses detailed information about the asset, including the issuer, capital usage, attached rights or obligations, and underlying technology. The regulations introduce stricter and standardized requirements for white papers, which may discourage less reputable crypto asset issuers thus instilling more confidence among investors.
In addition, MiCA requires crypto firms such as wallet providers and exchanges to seek a license to operate, and stablecoin issuers to hold suitable reserves to ensure adequate backing to the stablecoin value. However, the new law will also require identification for all crypto transactions across the 27 EU member states, which sounded like the implementation of the Travel Rule in Malaysia. The implementation of the regulations will take up to 18 months if approved, and the European Securities and Markets Authority (ESMA) will be responsible for determining the details of MiCA's application.
While more should still be further discussed on balancing transparency and protecting user’s data privacy, I would still see this as a step forward towards setting up a crypto regulatory framework that doesn’t hinder crypto adoption & progress. A better way to satisfy both parties is to introduce self-sovereign identification with Zero Knowledge Proofs. This will ensure anyone can audit the minimum necessary details of the sender & receiver’s user information in a transaction without revealing any sensitive information. I covered this in detail in my previous article about Self-Sovereign Identities
Italy Central Bank Accepts a Tokenization Government Bond Proposal Created by Algorand
A popular twitter user in Algorand named Kyle Leese has confirmed that a proposed project for the creation of a government bond tokenization platform on the Algorand blockchain has been accepted by the central bank of Italy.
This project covers the management of the process of issuing bonds, placing them on the primary market & trading them on the secondary market, which will be regulated through smart contracts executed on the Algorand Virtual Machines in a secure, scalable and efficient way.
The platform manages privacy and security by integrating KYC and AML functions, portfolio management and asset management, for complete asset lifecycle management. Payments of Delivery-vs-Payment (DvP) operations on the platform are settled in real time through a proposed integration between the Algorand protocol and the pan-European platform TIPS (TARGET Instant Payment Settlement)
While I find no reliable source pointing to this announcement (he mentioned need to dig through the central bank docs to find the proposal), I will categorize this as “Huge If True” until more reliable sources suffice. This move will definitely streamline the integration of blockchain technology in Central Banks & legacy financial systems.
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