Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Blockchain, Crypto, Digital Assets, Tokens, CBDCs, Stablecoins, Metaverse, NFTs
Fintech Can Combat Corporate Greenwashing
Greenwashing | Feb 13, 2024
Image: Unsplash/micheile henderson
Fintech's Role in Unveiling Greenwashing and Promoting True Sustainability
Greenwashing, the practice of making misleading or deceptive claims about a company's environmental impact, poses a significant threat to consumer trust and the credibility of sustainable finance. From Shell Canada's "Drive Carbon Neutral" program to Enbridge Gas's portrayal of natural gas as "clean energy," these cases reveal a concerning trend of companies overstating their environmental commitments. Such practices not only mislead consumers but also obscure the landscape for investors seeking genuine sustainable investment opportunities.
See: Climate Inflation Discussion for a Sustainable Future
The table below is some of the 'greenwashing' cases being investigated by the competition bureau for false advertising claims.
Recent Cases Being Investigated by the Bureau
| Company | Case | The Issue | Status | Fintech Solutions |
|---|---|---|---|---|
| Shell Canada | Drive Carbon Neutral Program | Misleading claims about achieving carbon neutrality through fuel purchases. | Shell Canada ended the program; emphasizes the need for transparent carbon offset claims. | Blockchain for tracking carbon credits; AI for verifying environmental impact claims. |
| Enbridge Gas | Natural Gas as Clean Energy | Advertised fossil fuel-derived natural gas as "clean energy" and "low carbon," misleading about its environmental impact. | Under investigation by the Competition Bureau. | Blockchain for lifecycle analysis transparency; AI for true environmental impact assessment. |
| Six oilsands companies | Net Zero Claims by Oilsands Companies | Claims of progressing toward net zero emissions, potentially overstating environmental efforts. | Under investigation by the Competition Bureau. | ESG scoring on investment platforms; machine learning for analyzing sustainability claims. |
| Lululemon | "Be Planet" Campaign | Alleged inconsistency between sustainability claims and actual environmental impact, particularly regarding fossil fuel-driven manufacturing. | Complaint not yet officially filed with the Competition Bureau as of the article's publication. | Supply chain transparency tools; platforms requiring evidence-based sustainability reporting. |
| Royal Bank of Canada (RBC) | Climate Blueprint | Marketed support for Paris Agreement and net-zero emissions by 2050, but financing of fossil fuels contradicts these claims. | Under investigation by the Competition Bureau since September 2022. | Enhanced ESG reporting and analysis platforms; fintech solutions for transparent and accountable sustainability and financing claims. |
Fintech's Transparency Solutions for Sustainable Finance
Fintech innovations offer powerful tools to peel back the layers of corporate greenwashing, providing a level of transparency previously unattainable.
See: McKinsey: Tech Trends 2023 That Every Fintech, Bank, or Financial Service Provider Must Consider
Blockchain technology, for example, can be utilized to create immutable records of a company's environmental impact claims, ensuring that any carbon offsetting or sustainability initiatives are accurately reported and verified. This technology can serve as a foundation for developing platforms that track and verify the authenticity of corporate environmental claims, offering a clear view of their actual sustainability practices.
By integrating ESG (Environmental, Social, and Governance) criteria into investment platforms, fintech can help investors make informed decisions based on comprehensive, verified data. Investment and dealroom platforms, for instance, can implement ESG scoring systems that rate projects and companies based on their genuine sustainability efforts, guiding investors towards truly green opportunities.
AI and machine learning algorithms can analyze vast amounts of data to identify inconsistencies in companies' environmental claims, flagging potential greenwashing for further investigation. This analytical capability is crucial for due diligence processes, ensuring that investments align with the values of sustainable finance.
Conclusion
See: Canadian Banks Face Scrutiny Over Sustainability Claims
The intersection of fintech and sustainable finance represents a frontier of opportunity to combat greenwashing, promote genuine sustainability efforts, and create foundational standards to support the advancement of greater ESG and responsible investing by all key stakeholders.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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CZs Sentencing Delayed to Late April, Fuelling Speculation
News | Feb 13, 2024
Image by Drazen Zigic on Freepik
Binance Founder, Changpeng Zhao (CZ), Sentencing has been Postponed to April 30, 2024
Changpeng Zhao (CZ), the founder of Binance, faces up to 18 months in prison over money laundering charges, according to a recent update. However, a filing by the prosecution indicated that he might face a harsher punishment than initially expected, with the possibility of any sentence up to the statutory maximum of ten years. The court has rescheduled CZ's sentencing which was originally scheduled for February 23 to April 30, 2024, extending the timeline for legal proceedings.
See: Trust Fallacy: 75% of Payment Fraud in Crypto is Carried Out by KYC-verified Accounts
Former U.S. Securities and Exchange Commission official John Reed Stark suggested that Zhao could face a 12–18 month sentence at a minimum security prison under U.S. sentencing guidelines. Nonetheless, Zhao's legal team is expected to request no jail time or an alternative sentence, combining prison time with home detention and probation. Currently, Zhao is out on bail on a $175 million bond and resides in the U.S. awaiting his sentencing.
The specific reasons for the delay have not been publicly disclosed, but such postponements are not uncommon in complex legal cases involving financial regulations and international operations.
The case against Changpeng Zhao is part of a broader trend of increasing regulatory scrutiny on cryptocurrency exchanges and other digital asset service providers. Regulators worldwide are focusing on compliance with anti-money laundering (AML) standards, know your customer (KYC) procedures, and other regulatory mandates to ensure the integrity and stability of financial markets. The postponement and eventual outcome of CZ's sentencing are of great interest to investors, regulatory bodies, and other market participants.
See: The Vanguard of Decentralized Exchanges (DEX)
While the exact details of the potential punishment remain speculative until the court's final decision, the charges against Zhao could lead to significant legal repercussions and stiffer sentence. These may include hefty fines and possibly restrictions on his and Binance's operations, depending on the nature of the violations and the court's final judgment.
Outlook
This delay in sentencing allows for further speculation and preparation among stakeholders within the cryptocurrency industry. The outcome of this case could set important precedents for how digital asset companies operate and are regulated on a global scale.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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London Firms SR FINANZMANN and KoinKoin Acquire $2M in Private Funding
Feb 12, 2024
Image by rawpixel.com on Freepik
Financial technology has made business in the 21st century considerably easier, as it ensures secure financial transactions and the transfer of funds. The capability of the fintech industry is widespread and can be seen in many businesses, like hotels, online stores, Asian bookies, and others. Despite the usefulness of this technology, it has failed to fully penetrate the African continent. Some fintech firms trying to rectify this are SR FINANZMANN and KoinKoin, and they recently acquired private funding to this effect.
Who Are SR FINANZMANN and KoinKoin?
SR FINANZMANN is a finance consulting company in Nigeria and the United Kingdom. KoinKoin is a cryptocurrency exchange where Europeans and Africans can come to trade and purchase digital coins. These two firms were founded by the same person, Ola Atose.
Ola Atose is a former career banker who became enamored with the fintech future of cryptocurrency in 2015. At the time, he wanted to purchase Bitcoin online but discovered it involved very tiresome procedures.
From then on, he decided to create an easy way for others to access cryptocurrencies across multiple fiat currencies. KoinKoin was later established in 2017, providing a solution for many African firms facing problems with cross-border payments. SR FINANZMANN also came along to push the goal of delivering timely foreign exchange for corporations and institutions in emerging markets.
Why Did SR FINANZMANN and KoinKoin Pursue Funding?
Although SR FINANZMANN and KoinKoin have doubled their financial revenue, rising from £72 million to £150 million, this cannot fund their expansion plans. The growing African market is significant for these fintech companies, as they want to support retail consumers and corporations.
Hence, their desire for external funding and the plans they’ve mapped out for these funds include:
- Improving G3 Currency Availability in Africa
- Upgrading their financial technology
- Improving their technical foreign exchange
- Expanding their footprint across West Africa
So, this $2 million in private funding will go a long way toward fostering these ambitious growth plans. With SR FINANZMANN being recognized as a Nigerian-licenced Bureau de Change, it’ll be easier to secure a foothold in the region.
Both companies have also made changes to their customer onboarding process to make it more seamless and effective for new clients. This shows their commitment to thriving in the African market and fostering inclusive regional growth.
Who Is the New COO?
After careful consideration, SR FINANZMANN and KoinKoin have concluded that fresh leadership is needed to pioneer their expansion plans. So, they appointed Mimi Kufuor as the COO to drive this expansion.
The new Chief Operating Officer is hyped about all the moves made in 2024. She sees the investment as an opportunity to propel both firms to more significant growth and success.
It’s a known fact that foreign exchange has always been a fundamental issue in Africa. However, Mimi believes that SR FINANZMANN and KoinKoin have all it takes to serve retail and corporate African clients in this area.
Conclusion
SR FINANZMANN and KoinKoin have big plans for Africa in 2024, so they pursued this $2 million funding. They hope to promote financial innovation in Africa, emphasizing the technical FX domain. There will also be moves made to make G3 currencies more accessible in the region while conveniently doubling company revenue.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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SEC Expands ‘Dealer’ Definition That Could Ensnare DeFi
Regulation | Feb 8, 2024
Image by Freepik
SEC Expands 'Dealer' Definition, Impacting DeFi and Markets
The U.S. Securities and Exchange Commission (SEC) has adopted new rules broadening the definition of a 'dealer,' which could now encompass significant participants in the decentralized finance (DeFi) sector. This regulatory shift mandates entities engaging in liquidity-providing roles to register as dealers, aligning with efforts to bolster market transparency, integrity, and investor safety. The move has sparked a mix of support and criticism, highlighting its potential wide-reaching implications.
- The SEC's rules, Exchange Act Rules 3a5-4 and 3a44-2, clarify activities that constitute as 'dealer' functions, requiring registration and compliance with federal securities laws.
- The rule as adopted states: "Any market participant that engages in activities as described in the rules would be a “dealer” or “government securities dealer” and, absent an exception or exemption, required to:
- Register with the Commission under Section 15(a) or Section 15C, as applicable;
- Become a member of an SRO; and
- Comply with federal securities laws and regulatory obligations, including as applicable, SEC, SRO, and Treasury rules and requirements."
- Affected market participants must register with the SEC, become members of a self-regulatory organization (SRO), and adhere to a comprehensive set of regulatory obligations.
See: Prometheum’s Controversial ETH Custody Launch
- The expanded definition raises concerns within the DeFi community about the feasibility of compliance, potentially stifling innovation and growth in the sector.
- Ongoing legal battles over the classification of cryptocurrencies as securities could further influence the regulatory landscape for DeFi and crypto-related activities.
Commissioner Peirce Criticizes Final Rule
Commissioner Peirce expresses her inability to support the final rule, criticizing it for perpetuating the proposal's fundamental flaw and for being inconsistent with the statutory framework. She believes the rule will distort market behavior and degrade market quality.
The rule is seen as turning traders, many of whom are customers, into dealers, which runs counter to the statute as interpreted by the Commission and market participants for decades. Peirce argues that this obliterates the long-standing dealer-trader distinction.
See: SEC’s Escalating Crypto Enforcement
Peirce warns that the rule penalizes liquidity provision, potentially leading to reduced market liquidity and driving competitors out of the markets. She highlights the rule's costly and ill-fitting regulatory regime for liquidity-providing market participants, which could deter them from activities that contribute positively to market liquidity. She suggests that the rule could lead to a more concentrated and homogenous group of liquidity providers, making both these firms and the market more fragile.
The rule's broad application could force entities that do not have characteristics of dealers under the current understanding to register as dealers. This includes entities executing common trading, investing, and risk management strategies that incidentally provide significant liquidity to the market.
Commissioner Mark Uyeda Disagrees Too
After the new rules were adopted, Commissioner Uyeda expressed a dissenting view, criticizing them for being unclear and problematic. He pointed out that the rules fail to clearly define dealer status, leading to potential broader interpretations beyond the Treasury market.
Commissioner Mark Uyeda disagrees with the decision:
“The lack of any limiting principle creates the potential for arbitrary and capricious government action. Further, today’s action may reduce liquidity in the Treasury markets, make them more volatile, reduce the number of liquidity providers, and increase debt costs to taxpayers.”
Why It's Important
By bringing more market participants under its regulatory umbrella, the SEC aims to enhance market integrity and protect investors. However, this move raises important questions about the balance between regulation and innovation, the practicality of compliance for decentralized entities, and the future of liquidity provision in the markets.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Prometheum’s Controversial ETH Custody Launch
Digital Assets | Release | Feb 8, 2024
Image by Freepik
Prometheum Launches Ethereum Custodial Services. A Controversial Step Towards Regulatory Clarity?
Prometheum Inc. officially announced the launch of custodial services for Ethereum's ether (ETH) token, on February 7, 2024, as a direct result of Prometheum's subsidiary, Prometheum Capital LLC, receiving approval from the Financial Industry Regulatory Authority (FINRA) as a Special Purpose Broker-Dealer (SPBD). This approval allows the firm to custody, clear, and settle digital asset securities, setting a new precedent for the digital asset sector in a manner that complies with U.S. financial regulations. This approval is a big deal because it shows that Prometheum is operating within the legal framework set by regulatory bodies, which is not always common in the crypto space.
See: Post-Merge Will Ether Be Closer to a Security?
- By opening up its services to institutional clients like asset management firms, hedge funds, and banks, Prometheum is paving the way for more significant investments in cryptocurrencies from these entities. Institutional investors have traditionally been cautious about entering the crypto market due to regulatory uncertainties and security concerns. Prometheum's regulated and compliant platform could encourage more institutional money into the crypto space, potentially increasing the market's stability and maturity. The service is set to launch in Q1 2024.
- One of the most controversial aspects of this announcement is the implication that ETH could be considered a security. If ETH is custodied under a FINRA member firm and an SEC-registered broker-dealer, it suggests a level of regulatory scrutiny and acceptance that could influence how cryptocurrencies, particularly Ethereum, are viewed and regulated in the future.
- A precedent could be set for other cryptocurrencies and digital assets, showing that it is possible to operate within the existing regulatory framework. This could lead to more crypto firms seeking regulatory approval and compliance, contributing to a more regulated and less volatile crypto market.
See: Ethereum’s Market Dynamics and Outlook in 2024
- Prometheum's plan to extend its services to include trading, clearing, and settlement for both retail and institutional clients indicates a move towards creating a comprehensive, blockchain-enabled market infrastructure. This could make digital asset trading more accessible and safer for a broader audience, further integrating cryptocurrencies into the mainstream financial ecosystem.
Cautious Optimism
This development, while seen as a pioneering effort to bridge the gap between traditional finance and the burgeoning world of cryptocurrencies, has also raised eyebrows and sparked debates across the industry about the classification of Ethereum as a security or a commodity. A clear stance from the Securities and Exchange Commission (SEC) on this matter, prompted by Prometheum's custodial services, could provide much-needed regulatory clarity for the industry.
Critics argue that by potentially classifying Ethereum as a security, Prometheum's actions could impose stringent regulatory burdens on the broader crypto industry, stifling innovation and limiting the decentralized ethos that cryptocurrencies were built upon. There is a fear that such a move could lead to increased regulatory scrutiny on other cryptocurrencies, altering the landscape of the crypto market in unpredictable ways.
See: SEC Greenlights Bitcoin ETFs. Is Ethereum Next?
The controversy also stems from concerns about the centralization of custodial services. By holding investors' digital assets, custodial services like those offered by Prometheum could concentrate power and control, moving away from the decentralized model that many in the crypto community advocate for.
Conclusion
Prometheum's launch of Ethereum custodial services is a watershed moment for the crypto industry. As the industry grapples with related issues, the launch could set important precedents for the future of cryptocurrency regulation and adoption. For stakeholders in the crypto and financial sectors, including members of the National Crowdfunding & Fintech Association (NCFA) of Canada, this development serves as a reminder of the challenges and opportunities that lie ahead.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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NBA in Legal Battle Over Crypto Marketing
News | Feb 8, 2024
Image: Freepik/Midjourney
NBA Faces Lawsuit for Alleged Negligence in Crypto Exchange Marketing Deals
The National Basketball Association (NBA) is currently embroiled in a significant legal challenge, accused of "gross negligence" for its marketing affiliations with the now-defunct crypto exchange Voyager Digital Holdings Inc.
- Investors have filed a lawsuit against the NBA, claiming the association was "grossly negligent" in its marketing agreement with Voyager Digital Holdings Inc., facilitated by Mark Cuban, the then-owner of the Dallas Mavericks.
- This partnership, formalized through a five-year deal making Voyager's token the official cryptocurrency of the Mavericks, is blamed for leading investors into what is described as "an unregulated and unsustainable fraud," culminating in $4.2 billion in losses. The situation was further complicated when Voyager filed for Chapter 11 protection from creditors in 2022, leading to a court-authorized liquidation of assets to repay a portion of the crypto held on its platform to customers.
See: Kim Kardashian Pays $1.26M to the SEC in Penalties for Unlawfully Touting Crypto
- In 2022, Mark Cuban faced legal action for his promotion of Voyager's offerings. The lawsuit accused him of endorsing Voyager's products, specifically the platform's Voyager Earn Program Accounts (EPAs), as viable investments, despite allegations that he was aware these were "unregistered securities."
- The lawsuit not only targets the NBA but also implicates Voyager's legal advisors, McCarter & English, accusing them of producing fraudulent legal opinions that contributed to the alleged conspiracy. This highlights the broader implications of the case, affecting various stakeholders within the crypto and legal sectors.
- The collapse of Voyager and similar crypto entities like FTX has spotlighted the influence of celebrity endorsements in the crypto market. High-profile figures, including sports stars and entertainers, have faced lawsuits for their promotional activities, emphasizing the legal risks associated with celebrity-driven marketing in high-risk financial products.
Why It's Important
This legal battle may set a precedent for how sports organizations approach partnerships with financial and tech companies, especially in emerging and volatile markets like cryptocurrency.
See: FTX Fallout: Stephen Curry and Tom Brady Reportedly Under Investigation in Texas
This case could prompt stricter scrutiny and regulations on sports organizations' marketing deals, especially those involving financial products, to protect investors and maintain the integrity of the sports industry.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Stolen Crypto Funds Halve in 2023 Despite More Hack Attempts
Report | Feb 7, 2024
Image by macrovector on Freepik
Stolen Crypto Funds Drop Over 54.3% in 2023 Despite Persistent Threat of Hacking
The recent analysis by Chainalysis has provided the crypto community with a detailed examination of the hacking landscape in 2023, revealing trends that are both encouraging and concerning. The report, "Stolen Crypto Falls in 2023, but Hacking Remains a Threat," offers a comprehensive look at the state of cryptocurrency security, highlighting the significant decrease in stolen funds alongside an uptick in hacking incidents. Below are a few key findings.
See: Calgary Police and Chainanalysis Launch the Western Canada Cryptocurrency Investigations Centre
Chainalysis's comprehensive analysis reveals a notable decrease in the total value of stolen crypto, which fell by approximately 54.3% to $1.7 billion, down from 2022's record-breaking $3.7 billion. This decline is primarily attributed to a reduction in DeFi hacking incidents, which had previously been the main catalyst for the surge in crypto thefts.
Despite the encouraging decline in stolen funds, the report indicates a slight uptick in hacking activity, with the number of incidents rising from 219 in 2022 to 231 in 2023. This suggests that while the impact of individual hacks may be diminishing, the threat landscape remains active and evolving.
DeFi's Evolving Security Landscape
The report shows that there was $1.1 billion in total value stolen from DeFi platforms in 2023 which was a 63.7% decrease year over year. This reduction in DeFi protocol victimization marks a significant shift in the landscape of stolen funds.
See: How Permissioned DeFi Will Transform Global Payments
- Despite several large-scale hacks, such as the incidents involving Euler Finance flash loan attack and Curve Finance liquidity pool hack, there was overall decrease in median loss per DeFi hack by 7.4%
- Further, a 17.2% reduction in the number of DeFi-specific hacks suggest an improvement in security protocols and a heightened awareness of cybersecurity needs within the DeFi space.
DeFi Hack Types
As DeFi platforms continue to grow in popularity and complexity, they become attractive targets for cybercriminals. According to insights from Halborn, a security firm specializing in blockchain and web3 solutions, DeFi attack vectors can be broadly classified into two categories: on-chain and off-chain.
See: Consultation: OSC Wants to Increase Fees for Crypto Firms
On-chain attacks are those that exploit vulnerabilities in the blockchain components of a DeFi protocol, such as smart contracts. These do not stem from the blockchain technology itself but from the way DeFi protocols are implemented on the blockchain.
- Protocol Exploitation: This involves exploiting vulnerabilities in a protocol's blockchain components, such as validator nodes, the protocol’s virtual machine, or the mining layer.
- Contagion: This occurs when an attacker exploits vulnerabilities created by a hack in another protocol, including hacks closely related to other protocols.
- Price Manipulation Hack: This type of attack exploits smart contract vulnerabilities or flawed oracles that do not reflect accurate asset prices, allowing attackers to manipulate digital token prices.
- Smart Contract Exploitation: Attackers exploit vulnerabilities in smart contract code, granting them direct access to control mechanisms of a protocol and token transfers.
- Governance Attacks: These attacks involve manipulating a blockchain project with a decentralized governance structure by gaining enough influence or voting rights to enact malicious proposals.
See: CFTC Publishes DeFi Report for Policymakers and Industry
Off-chain attacks exploit vulnerabilities outside the blockchain, such as in the systems or processes that interact with the blockchain.
- Insider Attack: This occurs when someone inside the protocol, like a rogue developer, uses privileged information or keys to steal funds.
- Phishing: Attackers trick users into signing permissions by impersonating a legitimate protocol, allowing them to spend tokens on the users’ behalf or trick users into sending funds to malicious smart contracts.
- Compromised Server: An attacker compromises a server owned by a protocol, disrupting its normal workflow or gaining knowledge to further exploit the protocol.
- Wallet Hack: This involves exploiting a protocol that provides custodial/wallet services, subsequently acquiring information about the wallets' operation.
- Compromised Private Key: Attackers gain access to a user’s private key through leaks or failures in off-chain software.
- Third-Party Compromised: An attacker gains access to an off-chain third-party program used by a protocol, which can later be used for an exploit.
Looking Ahead
The decline in stolen crypto funds and advancements in DeFi security practices offer hope for a more secure future. However, the rise in hacking incidents and the sophistication of attacks present ongoing challenges that the crypto industry must address.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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