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Unleash Protocol hacker moves stolen funds through Tornado Cash

  • Hacker Protocol drained 1,337 ETH via compromised Unleash multisig governance.
  • The stolen funds have been sent through Tornado Cash to obscure transaction trails.
  • The breach is limited to Unleash, and Story Protocol infrastructure is unaffected.

A hacker who recently exploited Unleash Protocol has begun laundering stolen funds through the Ethereum-based privacy service Tornado Cash, according to on-chain data and blockchain security firms.

The attacker is attempting to obscure the trail of roughly 1,337 ETH, valued at close to $4 million, drained from Unleash earlier this week.

Security companies PeckShield and CertiK have reported that the funds were transferred to Ethereum and broken into multiple batches, often around 100 ETH each, before being deposited into Tornado Cash, a well-known crypto mixing protocol.

Governance takeover led to the Unleash exploit

Unleash confirmed on Tuesday that it had suffered a significant security breach, resulting in approximately $3.9 million in losses.

The protocol has paused operations and launched a forensic investigation into the incident.

According to Unleash, preliminary findings indicate that an externally owned wallet gained unauthorised administrative control over the protocol via its multisignature (multisig) governance system.

The attacker then executed an unauthorised contract upgrade that enabled withdrawals of user funds without proper approvals.

“This upgrade enabled asset withdrawals that were not approved by the Unleash team and occurred outside our intended governance and operational procedures,” the team said in a statement posted on X.

Security analysts suggest the compromise may have been the result of phishing or another form of social engineering that allowed the attacker to gain control over governance keys, effectively bypassing standard safeguards.

The stolen assets bridged and mixed

The stolen assets reportedly included Wrapped IP (WIP), USDC, Wrapped Ether (WETH), stIP, and vIP tokens.

On-chain analysis shows that most of these assets were first bridged to Ethereum, then consolidated into ETH and routed through Tornado Cash, an approach commonly used by hackers to hinder tracking and recovery efforts.

CertiK said it initially detected suspicious withdrawals of WETH and IP-related tokens that were sent to an externally owned address created using Safe’s SafeProxyFactory, a popular smart contract framework for multisig wallets.

No broader ecosystem impact, says Unleash

Unleash emphasised that the breach was confined to its own governance and administrative contracts.

The Unleash team stated there is currently no evidence that Story Protocol, the Layer 1 blockchain Unleash is built on, was compromised.

“The impact appears limited to Unleash-specific contracts and administrative controls,” the Unleash team said, adding that Story Protocol’s validators, core infrastructure, and contracts remain unaffected.

Unleash is one of the higher-profile applications in the Story Protocol ecosystem, which focuses on tokenised intellectual property and on-chain IP management.

PIP Labs, the company behind Story Protocol, has raised around $140 million in funding from prominent investors.

Users warned as investigation continues

The Unleash team has urged users not to interact with the protocol while the investigation is ongoing and said it will provide updates on the incident and potential remediation measures as more verified information becomes available.

As of the time of writing, Unleash had not disclosed whether it plans to pursue fund recovery efforts or compensation for affected users, and the use of Tornado Cash by the hacker may significantly complicate any attempts to trace or reclaim the stolen assets.

The post Unleash Protocol hacker moves stolen funds through Tornado Cash appeared first on CoinJournal.

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China’s move to pay interest on e-CNY sparks US stablecoin debate

  • China will allow interest on digital yuan (e-CNY) holdings starting in 2026.
  • US banks and crypto firms clash over enforcing the GENIUS Act ban.
  • Coinbase executive warns stablecoin yield bans could weaken US global competitiveness.

China’s central bank, the People’s Bank of China (PBOC), announced earlier this week that it will allow commercial banks to pay interest on holdings of the digital yuan, also known as the e-CNY.

The new framework is scheduled to take effect on Jan. 1, 2026, and the PBOC Deputy Governor Lu Lei said the change will transform the e-CNY from a form of digital cash into what he described as a “digital deposit currency,” a shift designed to boost user adoption.

China has spent several years piloting the digital yuan across multiple cities and use cases, including retail payments and public services.

However, adoption has been slower than policymakers initially hoped.

Analysts say allowing interest payments could make the e-CNY more competitive with traditional bank deposits and private digital payment platforms, potentially accelerating its use domestically and, over time, in cross-border transactions.

In the United States, the debate centres on how the GENIUS Act’s prohibition on interest should be interpreted and enforced.

The law, which became effective in July, was designed to keep payment stablecoins focused on transactional use rather than savings or investment products.

Banking groups argue that allowing stablecoins to pay yield would blur the line between deposits and crypto assets, potentially threatening financial stability and drawing funds away from regulated banks.

Crypto industry groups strongly disagree.

In a Dec. 18 letter to lawmakers, the Blockchain Association and more than 125 industry participants urged Congress to resist expanding or aggressively enforcing the ban on stablecoin rewards.

The group said claims that stablecoin incentives pose a danger to community banks are not supported by evidence and warned that overly strict rules could push innovation offshore.

The American Bankers Association, in a separate letter sent the same day, called for a firm application of the GENIUS Act.

The group argued that some crypto firms are attempting to circumvent the spirit of the law by offering reward-like incentives that function similarly to interest, potentially undermining traditional banking activities.

Coinbase executive warns China could dethrone the US

A senior executive at Coinbase has warned that the United States could undermine its own position in the future of digital finance if lawmakers prohibit interest-bearing stablecoins, just as China moves to make its central bank digital currency (CBDC) more attractive by allowing it to pay interest.

Faryar Shirzad, Coinbase’s chief policy officer, said this week that restricting rewards on US-issued dollar stablecoins could hand a competitive edge to foreign rivals, particularly China.

Shirzad’s comments come amid growing debate in Washington over the implementation of the recently passed GENIUS Act, which bars US dollar payment stablecoins from paying interest or yield directly to users.

In a post on X, Shirzad argued that global competition over digital money is intensifying.

He pointed to China’s latest policy shift as evidence that incentives matter in driving adoption of new forms of money.

According to Shirzad, the US risks weakening the global role of the dollar if it limits the functionality of dollar-backed stablecoins while other jurisdictions move more aggressively.

Shirzad said the GENIUS Act was intended to ensure that US-regulated, dollar-backed stablecoins become the primary settlement tools in a tokenised global economy.

Mishandling the question of rewards, he warned, could give non-US stablecoins and CBDCs an advantage at a critical moment.

The post China’s move to pay interest on e-CNY sparks US stablecoin debate appeared first on CoinJournal.

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Bitwise seeks SEC approval for 11 crypto ETFs covering Bittensor, Tron and DeFi tokens

  • Bitwise filed for 11 crypto strategy ETFs with mixed direct and indirect exposure.
  • The proposed ETFs target assets like TAO, TRX, UNI, ZEC, Aave, and other tokens.
  • Bitwise remains bullish, citing ETF demand, institutions, and easing cycles.

Crypto asset manager Bitwise has taken another step toward expanding investors’ access to digital assets, filing applications with the US Securities and Exchange Commission (SEC) for 11 new cryptocurrency exchange-traded funds (ETFs).

According to regulatory filings submitted this week, the proposed products are structured as “crypto strategy” ETFs.

Unlike pure spot ETFs, each fund would combine direct exposure to a specific cryptocurrency with indirect exposure through other exchange-traded products and financial instruments.

Bitwise said that each ETF could allocate up to 60% of its assets directly into the underlying token, with the remaining portion invested in related exchange-traded products, derivatives, or other instruments designed to track the asset’s performance.

The filing also notes that the funds may use derivatives such as futures contracts and swap agreements, a structure that could allow for greater flexibility in managing exposure while operating within current regulatory constraints.

The 11 crypto ETFs targeted by Bitwise

The proposed crypto ETFs span a wide range of blockchain ecosystems and decentralised finance (DeFi) projects.

Assets named in the filing include Aave, Ethena (ENA), Hyperliquid (HYPE), NEAR, Starknet (STRK), Sui, Bittensor (TAO), Tron (TRX), Uniswap (UNI), Zcash (ZEC), and Canton (CC).

If approved, the lineup would give US investors ETF-based exposure to tokens tied to smart contract platforms, privacy-focused networks, and DeFi protocols, areas that have traditionally been harder to access through regulated investment vehicles.

The rising demand for crypto ETFs

Bitwise’s move comes amid growing demand for crypto-linked ETFs following the strong inflows into the XRP ETFs.

Those products marked a turning point for the industry, opening the door for traditional investors to gain exposure to digital assets through familiar market structures.

Building on that momentum, Bitwise has been active in rolling out new offerings.

The firm launched a spot Solana ETF in the US in October, followed by ETFs linked to XRP and Dogecoin.

It has also filed an S-1 registration statement for a spot Sui ETF and submitted an amended filing related to a Hyperliquid ETF, signalling continued efforts to broaden its crypto product suite.

Bitwise’s bullish outlook despite market volatility

The filings come after a volatile period for digital assets, with BTC and the broader crypto market experiencing weakness toward the end of last year.

But despite this, Bitwise executives have maintained a constructive long-term outlook.

Earlier this month, Bitwise Chief Investment Officer Matt Hougan said he expects Bitcoin to break from its traditional four-year market cycle and reach new all-time highs in 2026, citing factors such as the declining impact of bitcoin halving events, expectations of lower interest rates, and fewer leverage-driven market collapses.

Hougan has also suggested that institutional participation will continue to grow, supported by clearer regulation and the expanding availability of regulated investment products like ETFs.

He added that Bitcoin’s correlation with equities could decline over time, with crypto-specific drivers, such as regulatory progress and institutional inflows, helping to support digital assets even if traditional markets face pressure.

The post Bitwise seeks SEC approval for 11 crypto ETFs covering Bittensor, Tron and DeFi tokens appeared first on CoinJournal.