Proof of humanity protocol Worldcoin released its audit reports on July 28 as criticism of its data collection practices continues to mount. The new reports were conducted by security consulting firms Nethermind and Least Authority.
According to an accompanying announcement from Worldcoin, Nethermind found 26 security issues with the protocol, of which 24 were “identified as fixed” during the verification phase while one was mitigated and another was acknowledged.
Least Authority discovered three issues and made six suggestions, all of which “have been resolved or have planned resolutions,” the announcement stated.
Worldcoin first rose to prominence in 2021 when it announced that it would give away free tokens to any users who verify their humanness, which they could do by having their iris scanned by a device called an “Orb.” The project was co-founded by Sam Altman, the co-founder of AI developer OpenAI.
At the time, Altman and other team members argued that AI bots would become an increasing problem on the internet if people didn’t find a way to verify their humanness without giving up their privacy. According to the protocol’s documentation, The Orb produces a hash of the user’s iris scan but does not keep a copy of the iris scan.
Worldcoin initiated its public launch on July 25, after nearly two years of development and beta testing. But criticism of it erupted almost immediately. The United Kingdom’s Information Commissioner’s Office (ICO) reportedly said the government body was deciding whether to investigate the project for violating the country’s data protection laws. French data protection agency CNIL also questioned Worldcoin’s legality.
The crypto community was divided over the project’s launch, with some participants seeing it as the start of a dystopian future where privacy would be eliminated. In contrast, others saw it as a necessary step towards protecting humans against malicious AIs.
The new audit reports cover a wide variety of security topics, including resistance to DDoS attacks, case-specific implementation errors, key storage and proper management of encryption and signing of keys, data leaking and information integrity, and others. Some issues found were the result of dependencies on Semaphore and Ethereum, including “elliptic curve precompile support or Poseidon hash function configuration,” the announcement stated.
All issues except one were fixed, mitigated, or have planned fixes. The one security issue that was not fixed by the time of verification has a severity of “undetermined” and is listed as “acknowledged.”
The US House of Representatives has voted in favor of nullifying a rule that would have required decentralized finance (DeFi) protocols to report to the Internal Revenue Service.
On March 11, the House of Representatives voted 292 for and 132 against a motion to repeal the so-called IRS DeFi broker rule that aimed to expand existing IRS reporting requirements to crypto.
All 132 votes to keep the rule were Democrats. However, 76 of those in the party joined the Republican vote to repeal it.
This follows the US Senate’s March 4 vote on the motion to repeal, which saw it pass with a vote of 70 to 27.
The rule would force DeFi platforms, such as decentralized exchanges, to disclose gross proceeds from crypto sales, including information regarding taxpayers involved in the transactions.
Speaking after the vote, Republican Representative Mike Carey, who submitted the repeal motion, said, “The DeFi broker rule invades the privacy of tens of millions of Americans, hinders the development of an important new industry in the United States and would overwhelm the IRS.”
Congressman Mike Carey speaking after the vote. Source: Mike Carey
House Financial Services Committee Chairman French Hill also applauded the overturning of the rule, calling it “a clear example of government overreach that threatens to push American digital asset development overseas.”
The resolution will need to pass another Senate vote before being sent to President Donald Trump, who has signaled he’d support it.
Those opposing the rule repeal included Democrat Representative Lloyd Doggett, who said getting a “special interest exemption” from IRS disclosures “makes tax evasion and money laundering so much easier for wealthy Republican donors who have been using these decentralized exchanges.”
He claimed killing the rule would create a “loophole that would be exploited by wealthy tax cheats, drug traffickers and terrorist financiers.”
In early March, White House AI and crypto czar David Sacks said the administration would support congressional efforts to rescind the DeFi broker rule.
At the time, officials from the Office of Management and Budget wrote “This rule … would stifle American innovation and raise privacy concerns over the sharing of taxpayers’ personal information, while imposing an unprecedented compliance burden on American DeFi companies.”
Securities exchange Cboe BZX is seeking permission from US regulators to incorporate staking into Fidelity’s Ether exchange-traded fund (ETF), according to a March 11 filing.
The filing marks Cboe’s latest attempt to support staking for the Ether (ETH) funds traded on its US exchange.
Cboe’s proposed rule change would allow Fidelity Ethereum Fund (FETH) to “stake, or cause to be staked, all or a portion of the Trust’s ether through one or more trusted staking providers,” the filing said.
The Fidelity Ethereum Fund is among the most popular Ether ETFs, with nearly $1 billion in assets under management, according to data from VettaFi.
In February, Cboe asked permission to add staking to another Ether ETF, the 21Shares Core Ethereum ETF.
Staking Ether enhances returns and involves posting ETH as collateral with a validator in exchange for rewards.
As of March 11, staking Ether yields approximately 3.3% APR, denominated in ETH, according to Staking Rewards.
Other popular cryptocurrencies, including Solana (SOL), also feature staking mechanisms.
The US Securities and Exchange Commission must still approve Cboe’s proposed rule changes before staking can commence.
In February, the SEC acknowledged more than a dozen exchange filings related to cryptocurrency ETFs, according to records.
The SEC’s acknowledgments highlight how the agency has softened its stance on crypto since US President Donald Trump started his second term on Jan. 20.
In addition to staking, the filings, submitted by Cboe and other exchanges, addressed proposed rule changes concerning options, in-kind redemptions and new types of altcoin funds.
Cboe has also asked permission to list Canary and WisdomTree’s proposed XRP (XRP) ETFs and support in-kind creations and redemptions for Fidelity’s Bitcoin (BTC) and ETH ETFs, among other proposed changes.
A member of the Texas legislature has proposed a bill that could limit the amount local and state authorities invest in cryptocurrency as a reserve asset.
In a bill filed on March 10, Texas Representative Ron Reynolds proposed the state’s comptroller not be allowed to invest more than $250 million of its Economic Stabilization Fund — otherwise known as a “rainy day” fund — in Bitcoin (BTC) or other cryptocurrencies. The legislation also suggested that Texas municipalities or counties could not invest more than $10 million in crypto.
HB 4258, filed by Texas Representative Ron Reynolds. Source: Texas legislature
The proposed bill followed the Texas Senate passing legislation on March 6 to establish a strategic Bitcoin reserve in the state. The SB 21 bill seemingly could allow the Texas comptroller to have no limit on purchasing BTC for a reserve, based on the most recent draft.
The plan for a strategic Bitcoin reserve in Texas was one of many separate bills proposed in US state governments following the inauguration of President Donald Trump and Republican lawmakers winning control of the US House of Representatives and Senate. Texas Lieutenant Governor Dan Patrick said in January that the state’s legislative priorities for 2025 would include a proposal to establish a Texas Bitcoin Reserve.
Is there a partisan divide on state and federal crypto plans?
It’s unclear if Rep. Reynolds, a Democrat, intended to support the BTC reserve bill introduced by State Senator Charles Schwertner, a Republican, or propose restrictions in the event the legislation becomes law. If passed and signed by Governor Greg Abbott, the bill would take effect on Sept. 1. Cointelegraph reached out to Rep. Reynolds’ office for comment but did not receive a response at the time of publication.
Though Trump signed an executive order on March 7 to create a federal “Strategic Bitcoin Reserve” and “Digital Asset Stockpile,” many legal experts have questioned the US president’s authority to enact specific policies through EOs. Wyoming Senator Cynthia Lummis reintroduced legislation on March 11 to codify the proposed BTC reserve into law in the Senate.