“The credibly neutral networks did nothing despite the scale of the theft and the bearer assets remain stolen.”
Hi {{first_name|there}}, it's Marc.
Welcome to the Monday edition of the 51 Insights digital asset newsletter.
On Friday we reported on how the $6.3B Binance hack went down. Over the weekend Binance paid customers and reopened. The FBI blames North Korea.
Here's what matters this week:
Let’s unpack. 👇
THE BIG STORY / EXCHANGE RISK
Binance paid. The bitcoin is still gone.
What's going on here?
Binance reopened withdrawals on Sunday, two and a half days after thieves emptied its hot wallets. As a result, customers took out $4.65 billion and paid in $1.01 billion in the first nine and a half hours. Net, $3.64 billion left: that’s only 2.1% of the $171 billion Binance held before the hack. Binance says it has replaced about 95% of the stolen assets with its own money. On Saturday the FBI named North Korea and published 628 addresses for exchanges to block.
What does this mean?
Binance hasn’t passed the security test. Elliptic's final count: $6.43 billion stolen, $2.85 billion frozen, almost all of it USDT and USDC. Not one stolen bitcoin was stopped, and the thief is now spreading $3.24 billion across 12,000 wallets. And frozen is not returned: issuers can reissue the coins only once a court or the issuer decides who owns them, lawyers told CoinDesk. Binance is fronting about $3 billion it may wait years to see.
“Your funds are safe” means something. The emptied wallet was Binance's. If you deposit on an exchange and the exchange owns the coins; you hold a claim on its pool, a Binance spokesperson confirmed to Eleanor Terrett. But the only thing between customers and a haircut was Binance's balance sheet.
Meanwhile, Binance still hasn't said how the attacker got in. Co-CEO Richard Teng says the delegation that emptied the main wallet “did not pass through our normal approval controls” and promises a post-mortem.
Why should I care?
If your firm keeps money on an exchange, you own a claim on the exchange, not the coins. Ask three things this week:
1) Can you settle off-exchange, through Ceffu, Copper's ClearLoop or a bank custodian, so the venue never holds the money?
2) Which of your coins has an issuer that can freeze it? Those saved 44% here; bitcoin saved nothing.
3) And how big can any one hot wallet get?
What I'm watching: Binance's post-mortem, and whether $2.85 billion frozen ever becomes $2.85 billion returned.
Full Pro story: Inside Binance's record $6.3 billion hack
Since Friday
Fifty companies now say no to OKXICE. The venue's October 30 notice lists 50 issuers objecting to tokens of their shares, up from 38 on Wednesday. Nvidia, Nike, Costco and Reddit joined. The other lane grew today: Broadridge will run voting and share records for NYSE's platform, where companies tokenize their own stock.
Standard Chartered's deposits go on-chain. Its corporate clients in Hong Kong can now hold and move tokenised deposits on the bank's own chain, settled between banks in central bank money on the HKMA's EnsembleTX, which now runs around the clock. Last week HSBC's RedCoin couldn't leave HSBC's apps. StanChart's token can reach another bank. HSBC's chief, by the way, says RedCoin has 50,000 users after ten days.
Coinbase's quarter, then a downgrade. Revenue fell 35% on the year to $1.22 billion, while USDC held in Coinbase products hit a record $22 billion, 30% of all USDC. This morning Morgan Stanley cut the stock to Underweight, target $120 from $258.
The week ahead
Tuesday, November 3 · Midterms and a deadline. Americans vote; the result sets the odds for the Clarity Act, still stuck in the Senate. Comments close on the SEC's transfer agent rules, the record-keeping behind tokenised stock. Devcon opens in Mumbai, and Tempo's T13 upgrade goes live at 15:00 UTC.
Wednesday, November 4 · Circle reports. Circle at 8 a.m. ET: the first numbers since OpenUSD launched against USDC, and the first call since it froze 823 million USDC in a night. Hut 8 and Riot report the same morning. Treasury's refunding statement at 8:30 a.m. ET comes with guidance on buyback sizes.
Thursday, November 5 · The Bank of England decides. Rates and the Monetary Policy Report at noon UK time.
Friday, November 6 · US jobs report. At 8:30 a.m. ET. Fed Vice Chair Bowman speaks on supervision at 12:15 p.m.
Saturday, November 7 · Canton upgrades. The network moves to protocol version 36 at 14:00 UTC.
Monday, November 9 · Custody and miners report. BitGo after the close; listen for off-exchange demand. MARA the same evening, SharpLink in the morning. The ECB's digital euro innovation call closes.
👉Follow all the stories on 51insights.xyz
One useful read
Learning the Hard Way: What the Binance Hack Teaches Us About Regulation · Amanda Fischer, Better Markets. The case that neither GENIUS nor Clarity would have stopped Thursday night, from one of crypto's sharpest critics. Know the argument before Tuesday's vote. Free.
My question for the week: if Tether can freeze $1.2 billion in 37 minutes for Binance, what would it take to do that for you?
That’s all for now, folks.
Take care
– Marc & Team
PS: Your next client could be reading this.
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