2020 has been quite a controversial year for the cryptocurrency industry. It started with a bearish sentiment that led to a market crash. The second half of the year, however, turned out to be positive as the lockdown caused by the COVID-19 pandemic sparked a great deal of interest in alternative means of storing value.
Although this year is generally considered bullish, the blockchain and cryptocurrency sectors have also experienced various problems. Among them there are countless hacks, problems with regulators, prohibitions, price volatility, and problems related to scalability. There were also events on the market that were directly related to cyber security, price manipulation, ICO dumping, or high transaction fees. In today’s article, we’ll take a look at the biggest challenges that the cryptocurrency industry had to face in 2020
Ripple is in serious trouble
Ripple has run into trouble with the US Securities and Exchange Commission (US SEC). All the confusion had dire consequences for the native XRP cryptocurrency. The company was brought to trial for violating consumer protection laws. According to the SEC, Ripple sold unregistered digital securities worth $ 1.3 billion in the form of XRP coins. Since that lawsuit was filed, the price of XRP has lost more than 70% of its value.
The aftermath of the lawsuit was the withdrawal of XRP from the market by the largest exchanges. The platforms thus tried to avoid the risk of receiving heavy fines from the SECu. Among the platforms that have withdrawn support for the native Ripple token there are, among others Coinbase, Binance US, Bitstamp and many more.
XRP has lost almost 70% of its value since the lawsuit was filed. The operation of the agency can weaken the general confidence in cryptocurrency. It would be a big loss for the entire digital asset industry.
In 2020, hackers targeted DeFi protocols and exchanges
Half of the hooks associated with digital currencies in 2020 were hacks on DeFi protocols and cryptocurrency exchanges. In the first and second quarter of this year, the DeFi sector accounted for approx. 45% of all thefts, frauds and cyber attacks. In the third and fourth quarters, this figure rose to 50%
In September this year, the KuCoin exchange fell victim to hackers. The attackers then stole over $ 281 million. The stock exchange has suspended its services. The resumption of deposits and withdrawals of all coins took place only in November. Some of the tokens – such as Ocean Protocol (OCEAN) – have been recovered and returned to KuCoin wallets.
In 2020, DeFi was responsible for almost 21 percent. the volume of cyber attacks and thefts. The number of cases of money laundering has also increased. The funds from the biggest attacks were illegally stolen and then washed away by protocols. The increase in the number of burglaries in the sector was probably due to the boom in decentralized finance and the fact that it is a relatively young invention. DeFi projects still have vulnerabilities that are regularly exploited by hackers.
In 2020, there were over 19 DeFi break-ins. The largest are bZx (954,000 + $ 8 million – hacked twice), dForce and Lendf. me ($ 25 million), Hegic ($ 48 million), Maker ($ 8 million), Harvest ($ 24 million), Argent, Bancor, Eminence ($ 15 million), SharkTron ($ 260 million), Balancer ($ 500,000 USD), Uniswap (USD 530,000), UniCats (USD 140,000), Opyn (USD 370,000), Lien, YAM (USD 750,000), Soft Yearn (USD 250,000), PercentFinance (USD 1 million ) and Akropolis ($ 2 million).
The loss of more than $ 50 million was mainly due to errors, extortion and break-ins. Even though many losses have been tracked and recovered, users of DeFi services need to exercise extreme caution.
UK FCA has banned offering cryptocurrency-based products to retail investors
Following a one-year review, the UK Financial Conduct Authority (FCA) forbade selling, promoting and trading certain cryptocurrency-based products for retail investors.
The FCA has revealed that unregulated digital currencies are “unsuitable” for retail investors for a number of reasons. Among them, the agency cited unexpected losses, price volatility, the lack of reliable valuation bases, the lack of clear reasons for the investment, and a lower or poor understanding of the cryptocurrency market.
The FCA has banned companies operating in the UK from selling, promoting and distributing products that control cryptocurrency prices. These products include CFDs, Futures, ETNs and Options. The ban came into force today, January 6, 2021. According to the FCA, thanks to the new regulations, retail investors will save up to USD 53 million.
On the other hand, it is a big blow to online trading platforms such as IG Group, Plus500, CMC Capital Markets, etc., which offered to trade cryptocurrencies and banned products. So far, following the FCA ban, the shares of the three above-mentioned platforms have lost 3% of their value each.
In 2020, the number of cryptocurrency SCAMs increased
Due to the Covid-19 pandemic, the cryptocurrency community has grown significantly. Bitcoin’s price increased by over 226% and Ethereum gained more than 250%. However, as the community grew and the number of fresh investors increased, more scams have emerged on the market. In 2020, an increase in the number of crypto scams – including fake ICOs, fake exchanges, and shady trading groups – made people lose their hard-earned money. BTC always attracts users of the “two sides of the barricade”, especially when the market is booming.