Fintech Daily Digest

The Bermuda Monetary Authority (BMA) is inviting proposals for a collaborative pilot project aimed at testing embedded supervision practices within the context of decentralized finance (DeFi). Embedded supervision refers to the direct integration of regulatory oversight, compliance checks, and automated reporting into the technological foundation of a financial platform-particularly within its smart contracts, protocols, or data layers-so that supervisory requirements are inherently enforced in real-time with limited or delayed human intervention.

"The evolution of cash should provide each User with the ability to instantly authenticate a banknote at any time. To do this, it is necessary not only to develop the ability to conveniently, quickly and practically unnoticeably check banknotes for the User, but also to interest the entir e population of the country in regularly conducting such checks. Modernization of central bank cash with Blockchain technology is the optimal solution to this problem, which will allow the population of the country not only to check the legitimacy of each banknote, but also to carry out digital transactions using hybrid banknotes, during which the legitimacy of cash will always be checked in the background."

"In this 2024 paper we propose, implement, and evaluate two extensions to OpenCBDC, an open-source transaction processor designed for central bank digital currency. First, we enable the central bank to audit the monetary supply. This feature reduces the trust required in sentinels - the most exposed components of this architecture - so that it can in principle be outsourced to intermediaries. Second, we leverage Pedersen commitments and zero-knowledge range proofs to hide transaction amounts while maintaining auditability. This feature improves privacy beyond the level offered by the original OpenCBDC design. Performance measurements show that auditability and privacy reduce the throughput of the shards to 30 % of the original, but the scalability remains close-to-linear in the number of shards. For example, 8 shards can process peak loads of ≈135,000 transactions per second. By adjusting resources, CBDC operators can meet their throughput goals with auditability and privacy."

"This paper presents zkLedger, the first system to protect ledger participants' privacy and provide fast, provably correct auditing. Banks create digital asset transactions that are visible only to the organizations party to the transaction, but are publicly verifiable. An auditor sends queries to banks, for example "What is the outstanding amount of a certain digital asset on your balance sheet?" and gets a response and cryptographic assurance that the response is correct. zkLedger has two important benefits over previous work. First, zkLedger provides fast, rich auditing with a new proof scheme using Schnorr-type non-interactive zero-knowledge proofs. Unlike zk-SNARKs, our techniques do not require trusted setup and only rely on widely-used cryptographic assumptions. Second, zkLedger provides completeness; it uses a columnar ledger construction so that banks cannot hide transactions from the auditor, and participants can use rolling caches to produce and verify answers quickly. We implement a distributed version of zkLedger that can produce provably correct answers to auditor queries on a ledger with a hundred thousand transactions in less than 10 milliseconds."

The U.S. Securities and Exchange Commission (SEC) has dropped its investigation into Uniswap Labs, the Brooklyn-based company behind the decentralized protocol of the same name. The SEC's decision to close its investigation into Uniswap Labs is the latest in a wave of similarly-dropped investigations into crypto companies, including Robinhood Crypto and non-fungible token marketplace OpenSea. The SEC has also agreed to drop its case against Coinbase, pending approval from the agency's commissioners, according to the crypto exchange.

"In a shocking turn of events, Bybit, one of the largest crypto exchanges, was hacked for approximately $1.5B in ETH. This incident ranks among the largest crypto hacks of all time, eclipsing even the infamous Mt.Gox collapse and FTX implosion. While broader contagion has been contained, examining the series of events and its on-chain footprints can provide valuable context on the hack and its market impact."

"Elliptic has attributed the Bybit theft to North Korea's Lazarus Group, based on various factors, including our analysis of the laundering of the stolen cryptoassets. North Korea-linked actors have stolen over $6 billion in cryptoassets since 2017, with the proceeds reportedly spent on the country's ballistic missile program."

Chainalysis published an analysis of how the February 21, 2025 Bybit exploit occurred; the attackers' tactics, techniques, and procedures (TTPs) and their consistency with the Democratic People's Republic of Korea (DPRK); and how Chainalysis is collaborating with Bybit and law enforcement to help recover funds. This attack highlights a common playbook used by the DPRK: orchestrating social engineering attacks and employing intricate laundering methods in an attempt to move stolen funds undetected. Funds from the Bybit exploit have also consolidated in addresses holding funds from other known DPRK-linked attacks, providing further evidence that the nation state actors are behind this latest incident.

The Federal Reserve Board (FRB) published an article on crypto-asset censorship resistance, focusing on settlement layer cooperation by block proposers. It found that, although public permissionless blockchains are designed to be censorship resistant, even blockchains with broad user bases are not immune to the potential for certain transactions to be excluded due to external pressure. Further, concrete design features-such as financial incentives, which are intended to permit the expression of views, however controversial-do not appear to be effective in strengthening censorship resistance. However, system censorship resistance seems to be reinforced by the large players who value censorship resistance as a primitive feature.

U.S. Federal Reserve Board (FRB) Governor Christopher J. Waller spoke about the maturing stablecoin market and the potential challenges that could impede it from reaching its full potential. Stablecoins must demonstrate not only clear use cases, but also a clear commercial case to be economically viable. Plus, the public sector needs to set clear and targeted legal and regulatory frameworks and coordinate those frameworks across states and national boundaries to enable private sector innovation at a global scale.

The U.S. Securities and Exchange Commission (SEC) will not be taking enforcement action against Robinhood Crypto. This follows the SEC issuing a Wells Notice last year warning of impending legal action relating to crypto custody, cryptocurrency listings and platform operations. Under acting SEC Chair Mark Uyeda, several crypto related cases have been dropped or paused. It recently dropped the investigation into NFT platform OpenSea and on Friday Coinbase said its SEC court case would end, subject to Commissioner approval. Earlier this month the SEC paused its case against Binance. Plus, it withdrew its appeal in its attempt to expand the definition of brokers to include liquidity providers.

"Blockchain technology is powerful but has a fundamental limitation: it cannot access real-world data on its own. Smart contracts, essential to many blockchains and decentralized finance applications, rely on external data to function. This is where "oracle networks" like Chainlink come in. Oracles enable smart contracts to securely pull data from a wide range of information sources, instead of relying on a single provider. Over 14 blockchain ecosystems are compatible with Chainlink, including Ethereum, Avalanche, Polygon, and BNB Chain. Through these integrations, over 1,600 projects are using Chainlink's technology as of 2025."

Figure Markets has launched YLDS, a public blockchain-based interest-bearing stablecoin that is reportedly registered as a public security with the U.S. Securities and Exchange Commission (SEC). YLDS accrues interest daily based on the U.S. Federal Reserve's Secured Overnight Financing Rate (SOFR) minus 0.50% with a 0.00% minimum, and pays monthly in USD or YLDS. YLDS is backed by the same securities that prime money market funds hold, which are riskier than securities that money market funds hold, because 'Prime' means including private assets such as asset backed securities, not just government securities. Also, YLDS' assets are not ringfenced: "Figure Certificates are unsecured and solely backed by the assets of Figure Certificate Company (FCC), who is the issuer of the Certificates".

Ulrich Bindseil (European Central Bank) and Omid Malekan (Columbia University Business School) posted a paper that discusses the properties of blockchain technology and how they can enable time structures and novel financial products that cannot exist in traditional financial architecture. The specific features described are streaming payments, omni-asset settlement, programmability, and financial architecture flattening (disintermediation). They provide examples of the unique products they enable, some of which might disrupt today's dominant payment and capital market solutions in the future. The authors also discuss the utility of blockchain technology in private (permissioned) networks, and the risks of public distributed ledger technology (DLT) networks and their mitigants.

Bybit has returned to a 1:1 backing of client assets and has fully closed the "ether gap" it faced after an unprecedented $1.4 billion hack hit the exchange on February 21, 2025. The exchange has received 446,870 ether (ETH), worth $1.23 billion at current prices, through loans, large deposits, and ether purchases in the past two days. Address activity suggests more than $400 million were purchased through over-the-counter trading, with another $300 million brought directly from exchanges. Nearly $300 million were sought as loans; the rest are from addresses apparently belonging to crypto funds.

"Crypto stolen from the massive $1.4 billion hack of the Bybit crypto exchange is likely to be laundered through mixers as the hackers continue to attempt to obfuscate the transaction trail. If previous laundering patterns are followed, we might expect to see the use of mixers next, reported blockchain security firm Elliptic, which attributed the theft to North Korea's Lazarus Group. However, this may prove challenging due to the sheer volume of stolen assets."

"In 2021, El Salvador declared bitcoin legal tender. According to President Nayib Bukele, the measure was intended to expand access to financial services in a country with a high proportion of unbanked people and to cheapen and ease remittance flows for migrants and their families. In this article, we inquire about the use of bitcoin as a tool for financial inclusion and contend that this policy needs to be seen in the broader context of democratic backsliding. We show that bitcoin has not translated into financial inclusion, but instead, the bitcoin law serves as a public relations tool to capture new support from like-minded constituencies, build closer relations with them, and empower international "crypto-bros." On the other hand, this is a tool to benefit a close circle close to the president with the use of public funds, as part of a broader historical shift of elites in El Salvador."

The IMF published a paper that uses a comprehensive dataset to investigate the emergence and spread of fintech in a diverse panel of 98 countries over the period 2012-2020. This empirical analysis shows that financial factors-ranging from overall financial development to the prevalence of ATMs and commercial bank branches and the availability of credit registries tend to be associated with higher levels of fintech. Demographic forces including population growth, urbanization and a young population composition make a significant contribution to the development of fintech. In addition, the technological infrastructure-as measured by mobile phone and broadband internet subscriptions and the number of secure internet servers-is positively and decisively associated with faster-growing fintech, which tends to be more dependent on information and telecommunication technologies and also vulnerable to cybersecurity risks.

Binance.US has seen its US dollar fiat services restored, after the firm's ability to handle USD deposits and withdrawals was choked off under the Biden administration. Users will be able to deposit and withdraw USD with zero fees using bank transfer (ACH) and continue buying, selling, converting and trading cryptocurrencies on the exchange.

The World Bank published a paper that examines the use of open-source software (OSS) in the context of fast payment systems (FPSs), as well as relevant implementation models, risks, benefits, and costs. It identified only one live FPS using OSS for core functionalities, but interest is growing among payment system operators, particularly in initiatives such as Mojaloop. Moreover, some FPS operators may choose to use OSS for non-core components, making it crucial for both operators and regulators to be aware of the potential impacts that OSS may have, both positive and negative, on the overall efficiency and resilience of FPSs. While OSS offers advantages, such as cost savings from reduced licensing fees and the flexibility to customize systems, it also presents challenges. For example, institutions need significant in-house expertise for customization, maintenance, and operation and must align their long-term FPS goals with the chosen open-source solutions to ensure adaptability and scalability.