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That’s because, aside from the cachet of working with a household-name bank, Barclays connected San Francisco-based Coinbase to the U.K. Faster Payments Scheme (FPS), enabling users to instantly withdraw and deposit British pounds at the exchange. The end of the relationship disrupted Coinbase’s access to FPS – which in turn slowed deposits and withdrawals in GBP for U.K. customers, which now take days to process.

The situation is temporary, though, thanks to Coinbase’s new relationship with ClearBank. One of the U.K. “challenger banks” that have sprouted up in recent years to compete with market incumbents, Clearbank is expected to restore Coinbase’s FPS access by the end of the third quarter.

Barclays, ClearBank and Coinbase all declined to comment.

Cold feet

Companies that handle cryptocurrency have a tough time getting banking partners, with almost all big-name banks eschewing that business.

Hence, when Coinbase obtained a bank account with Barclays in early 2018, the news was greeted with some fanfare. The exchange was also granted an e-money license by the U.K. Financial Conduct Authority (FCA) and was the first crypto firm to gain access to FPS.

Since then, word on the street is that Barclays got cold feet about crypto clients; people have varying opinions on why this might be the case, but nobody knows for sure.

“It is my understanding that Barclays’ risk appetite has contracted a little – I’m not sure exactly why or what’s been driving that, maybe there has been some activity they are not happy with. But it’s about Barclays’ comfort level with crypto as a whole,” said the CEO of a U.K. crypto company who chose to remain nameless.

Another source described the Coinbase-Barclays relationship as a pilot program that has simply run its course.

This source added that being banked by Barclays had probably held Coinbase back in terms of which coins and tokens the exchange wanted to list, and the time taken before the bank could feel comfortable with new assets being added.

‘Zero’ tolerance

That’s not to say ClearBank is giving Coinbase carte blanche.

Earlier this week, Coinbase de-listed zcash, the privacy-centric cryptocurrency, which uses a technology called zero-knowledge proofs to mask details of transactions from blockchain watchers. A person familiar with the decision said it was “completely to do with the new bank”; ClearBank was uncomfortable indirectly supporting a currency with features that make law enforcement’s job harder.

Coinbase was not the only crypto company to successfully woo Barclays. In 2016, the bank was perhaps more enthusiastic about the technology, Barclays said it was working with Circle Internet Financial, whose main offering at the time was Circle Pay, an FCA-regulated app that used bitcoin to help facilitate no-fee currency transfers. Customer deposits were held by Barclays.

Barclays said at that time: “We can confirm that Barclays Corporate Banking has been chosen as a financial partner by Circle, and we support the exploration of positive uses of blockchain that can benefit consumers and society.”

Both Barclays and Circle (which has since shifted its focus from retail payments to crypto trading) declined to comment on the status of their relationship.

In addition to working with Barclays, Coinbase has had a banking relationship with Estonia-based LHV Bank for a number of years. LHV has been working to offer access to Faster Payments in the U.K. but, according to industry sources, this might still be a ways off.

A spokeswoman for LHV told CoinDesk: “We have technically joined the Faster Payments scheme, but there are still some issues we have to work on and legal details to manage before we can start offering Faster Payments to our fintech clients.”

Other on-ramps

Elsewhere in the U.K., FCA-regulated crypto broker BCB Group is also working with ClearBank. The broker recently announced a deal to bring Luxembourg-based exchange BitStamp onto Faster Payments for GBP.

Oliver von Landsberg-Sadie, BCB’s founder and CEO, told CoinDesk: “All our clients’ GBP funds clear within 60 seconds both ways via FPS; Bitstamp is likely to be set up internally to pass that benefit on to their GBP customers (by processing payment information as fast as they receive it).”

Another popular route into Faster Payments is via FCA-regulated Enumis, which recently began working with Coinfloor, the U.K.’s oldest running exchange, to broker banking relationships for crypto companies.

Also acting as an Enumis intermediary is U.K.-based Cashaa, which is helping to get banking and FPS access to projects on Binance Chain, the blockchain created by the world’s largest crypto exchange.

Despite its de-risking of crypto, Barclays still offers operational banking services to Blockchain.info, the U.K. wallet provider which recently announced plans to move into the exchange space with its super-fast PIT trading service.

Blockchain.info did not say by press time if its Barclays account was the means by which the firm would bring Faster Payments to its new exchange business.

Enterprise-grade blockchain platform Nuls and cross-blockchain layer-2 network Aleph have jointly completed testing of a new staking service dubbed staked coin output (SCO), which applies a new type of reward model.

Per a press release published on Aug. 13, the new service allows community members to stake tokens to receive tokens from other projects building on the Nuls platform. Those who own NULS tokens can choose how they want to receive rewards earned for participating in consensus as validation nodes. The release explained: 

“Every NULS staker must hold 2,000 NULS because staking nodes validate blocks, while the NULS consensus nodes produce the blocks. When a staker delegates their node into a consensus node for an SCO project, such as Aleph, they can earn the alternative (Aleph) token instead of the NULS token as their consensus reward.”

During the trial, Aleph ostensibly secured over 2.1 million of staked NULS tokens, at a valuation of roughly $1.25 million.

In its latest rankings released in late July, the Chinese CCID Research Institute — an initiative of China’s Ministry of Industry and Information Technology that provides a monthly assessment of cryptocurrency projects — put Nuls in fourth place. The assessment considers crypto’s properties such as basic technology, applicability and innovation, which put together form a total value index.

As Cointelegraph reported in a dedicated analysis piece earlier this month, INDX, the Tokenized Masternode Investment Fund, calculated the top-10 proof-of-stake (PoS) blockchains based on the expected yield of their tokens. The company did this by quantifying the volatility, volume, liquidity, risk and integrity.

According to INDX, the top-10 projects were Pundi-X, IOStoken, Cosmos, Waves, Qtum, VeChain, Tron, NEM, Neo, and EOS. The tokens were ordered based on expected yield as predicted by INDX’s proprietary algorithm.

UPDATE (August 13, 2019 23:10 UTC): The SEC has obtained a temporary restraining order freezing the assets of Reggie Middleton and Veritaseum.

The order covers accounts at traditional financial institutions (Bank of America, Citi and JPMorgan Chase), cryptocurrency exchanges (Gemini and Kraken) and 15 addresses on the ethereum blockchain.

The U.S. Securities and Exchange Commission (SEC) is seeking to freeze the assets of Reggie Middleton, organizer of the $14.8 million Veritaseum (VERI) initial coin offering (ICO).

According to an emergency action filed Monday in the U.S. District Court for the Eastern District of New York, Middleton conducted a fraudulent and illegal ICO in 2017 and manipulated the securities’ value afterward.

A self-described “financial guru,” Middleton is accused of propagating false information about his businesses, as well as conducting trades in the open market that jacked up the price of VERI. The SEC further alleges he misappropriated at least $520,000 of investors’ money for personal use, as well as $600,000 to purchase precious metals to prop up another scam.

In addition to freezing Middleton’s assets, the SEC asked the court to prohibit him from destroying or altering documents and place a lifelong ban his ever operating a public company or participating in a digital asset securities offering.

According to the complaint, Middleton failed to register the VERI ICO with the SEC and claimed the coins were not securities, but investments in a technology platform or his personal brand. At several points, Middleton described VERI tokens as prepaid fees, software, or compared them to WalMart gift cards. This obfuscation, the SEC alleges, was an attempt to “skirt” the law.

The allegations of market manipulation stem in part from “Middleton plac[ing] a series of secret, manipulative trades in VERI … artificially increasing VERI’s price by approximately 315% during just one day of trading. He then touted these price increases and returns to VERI holders,” the SEC said.

Also, allegedly, yikes: manipulating unregistered tokens is going to be considered by the SEC as market manipulation per 15 U.S.C. § 78i, which is not something we've seen before in an unregistered ICO complaint as far as I can recall.https://t.co/mfoRqeywlZ pic.twitter.com/O6ZrGEIpOk

— Preston Byrne (@prestonjbyrne) August 13, 2019

‘Rap star net worth’

Investors purchased 51 million tokens during the 2017 ICO, for 69,000 ether (valued at $14.8 million at the time), and continued to buy in based on Middleton’s material deceptions, the SEC said.

As part of a misinformation campaign, Middleton said he had brokered deals with airlines, ultra-high net worth individuals, and “one of the largest stock exchanges in the Caribbean” to sell VERI for its various stated use cases, according to the SEC. In total, he claimed to have sold $35 million worth of tokens for institutional use.

In fact, by June 2018, only 75 of the roughly 2 million tokens were “exchanged for research or any other services.”

Middleton instead fabricated trading volume on the EtherDelta exchange to pump VERI’s price, the regulator said. He would then publicize the increasing volume or price to entice more investments.

The SEC quotes an email Middleton sent to an employee, detailing the first known instance of market manipulation: “The EtherDelta market is not accurate because of the very, very low volume. I will try to push more volume in… [t]his time next month, I’ll probably have all (as in every single) hip hop and rap star/producer beat in net worth.”

An additional $8 million of funds raised during the ICO are missing. In 2017, Middleton claimed hackers stole and liquidated the 36,000 tokens from company accounts.

In a separate document. SEC attorneys wrote:

And in just the last two weeks, after they learned that a Commission enforcement action against them was likely, Defendants transferred over $2 million of the remaining investor proceeds, at least in part to fund other endeavors.

Specifically, Middleton allegedly began transferring 10,000 ETH (worth about $2.3 million) of investor funds to “other digital asset addresses,” and another 750 ETH (about $172,500) to his personal account days after the SEC informed Middleton’s lawyers they would recommend an enforcement action.

Payment solution Flexa is going international with a Canadian market launch.

Flexa, which launched the U.S. edition of its SPEDN cryptocurrency wallet in mid-May, announced its Canadian expansion in an official blog post. Backed by cryptocurrency exchange Gemini, Flexa’s international movement is preceded by support for cryptocurrencies litecoin and zcash and the launch of an Android beta mobile app.

Functioning like a pipeline for commercial transactions, SPEDN processes regular purchases in cryptocurrencies like bitcoin, ethereum, bitcoin cash or native token flexacoin.

Today, SPEDN is now open to Canadians on both iOS and Android. The post claims 7,500 Canadian merchants will be on-boarded by early September.

With all funds insured and custodied by Gemini, Flexa says Canadian and U.S. users can use SPEDN in either country free of conversion fees or exchange rates issues.

Speaking with CoinDesk, Flexa co-founder Tyler Spalding said the payments processor plans on launching in a few more countries by the end of the year but cannot disclose the locations.

On-boarding additional coins is also in the works.

“Regarding the market, we anticipate considerable growth of ‘spendable cryptocurrencies’ like stable coins and loyalty coins over the next year that will drive consumer demand for spending,” Spalding said. “We are working with multiple projects and intend to launch many new coins on the network shortly. For now, we’ve been really impressed with the current communities and their repeated use of the SPEDN app, particularly litecoin.”

Canadian cryptocurrency exchange Coinsquare partnered with Flexa for the launch.

New Zealand’s Auckland Saving Bank (ASB) has invested in local blockchain startup TradeWindow. The funding, reported Aug. 13, should expedite the launch of the company’s distributed ledger technology (DLT) trade platform.

Applying blockchain to the global supply chain

TradeWindow CEO, AJ Smith, believes that this link-up represents one of the first times a New Zealand bank has directly invested in a technology company. The company offers a host of solutions aimed at the global trade and supply chain industry.

With 12,000 registered exporters in New Zealand alone, Smith says he is excited about the “\major market opportunity this offers.

Nigel Annett, Executive General Manager of Corporate Banking at ASB was equally effusive.

"TradeWindow has the potential to truly transform the way our customers experience the international trade process. They will be able to operate more efficiently with trust and security across the globe."

Filling a gap in the market

TradeWindow’s technology creates a single trading window during the transaction, accessible by all parties. Edits can only be made with network majority approval, significantly reducing the risk of fraud.

The platform allows all relevant documentation, from certificates to invoices, to be exchanged digitally using one touchpoint. This eliminates courier charges, which currently give rise to significant costs to the various parties involved.

TradeWindow has also signed exclusive partnerships with digital documentation service, Prodoc and New Zealand-based Independent Verification Services.

New Zealand becoming increasingly blockchain and Bitcoin friendly

Yesterday, Cointelegraph reported that the New Zealand tax office issued a ruling that cryptocurrency salaries being both legal and taxable.

Coupled with this investment by ASB, blockchain and cryptocurrency certainly seem to be becoming more mainstream in the country.

On Aug. 13, VentureBeat reported that the new venture — dubbed “Fight to Fame” — will use blockchain technology to underpin a new, multi-pronged platform that aims to catapult aspiring fighters to success via social media, reality TV, film, games, live matches and betting. 

“Wealth generation from the masses”

While Tyson will serve as the founder and chairman of the sports and competition committee for Fight to Fame, the project also counts Farzam Kamalabadi as its CEO, the two-time Emmy award winner Tim Smithe as its television producer and Stan Larimer as its cryptocurrency and blockchain expert. 

Tyson said in a statement that:

“As a seasoned fighter, I want to mentor future generations, especially future action stars and make sure there’s a path to career success and fair compensation. Building this global platform for them is a passion of mine.”

Fair compensation, according to Kamalabadi, is driven by a blockchain ecosystem that “solves the empowerment that didn’t exist in the internet era”:

“This is about wealth generation from the masses, but back to the masses through all the participants and stakeholders. So it is not just win-win. This is multiple wins for all the stakeholders.”

A fan token economy will be launched in order to drive engagement as well as to reap the project’s gains for the fighters, fans and company alike.

Kamalbadi and Smithe noted that in the case of industry titans such as the Ultimate Fighting Championship, fighters often walk away with just 15% of their take after fees.

Driving blockchain adoption

More details about Fight to Fame’s planned fan token offering are due to be released in the future; the tokens will apparently confer betting and voting rights on their holders and form part of a transparent blockchain-based economy for the entire ecosystem.

As previously reported, this winter the Litecoin Foundation partnered with premier kickboxing league Glory to become the official cryptocurrency for its online merchandise platform and international events. 

In fall 2018, French soccer club Paris Saint-Germain — which has been hailed as the country’s “most popular” team — had partnered with blockchain platform Socios.com to incentivize and monetize fan engagement and experiences via a token ecosystem.

Cryptocurrency payment processor BitPay is introducing new identity verification measures for certain high-value payments, refunds and payouts.

According to an Aug. 1 announcement from the United States-based firm, the new measures notably do not apply to person-to-person payments using the BitPay and Copay apps.

Photo ID, Social Security number

BitPay is rolling out its new ID verification flow as part of a new BitPay Dashboard, which will function as a personalized home page that provides access to users’ transaction histories and various payment features. 

With the launch of BitPay ID, users will be required to undergo a one-time verification process that requires the input of data such as their Social Security or passport number, as well as a photo ID.

The requirement applies in cases where users attempt to make a high-value payment of $3,000 or more to a BitPay merchant, to request a refund of $1,000 or more, to receive BitPay payouts or to get a BitPay prepaid product. The announcement notes that:

“This process helps us improve our identity verification efforts and reduce payment risk for BitPay's merchants. It's also a requirement for us to be able to offer verified users future services like Bitcoin payouts, or faster onboarding for people who want to get BitPay prepaid products.”

According to BitPay, thresholds for payments and ID requirements have been live as of Aug. 5.

Centralized data storage

While BitPay provides users with a link to its privacy policy, the new measures have been met with some scepticism given the resistance that many in the cryptocurrency community have toward seeing their personal data stored in centralized troves.

The developer of open-source BTCPay Server — which was launched as an alternative to BitPay and memorably vowed to make the latter obsolete — tweeted that he was “shocked! SHOCKED!” at the new measures’ introduction, to which one commentator responded:

“Imagine being Bitpay. Your investors deserted you, bitcoiners despise you, now bcasher as well while the regulators bully them everyday. I am almost feeling sad for them ... Almost.”

Many still remember the 2015 hack of the firm, with losses tallying 5,000 Bitcoin (BTC) worth over $1.8 million at the time.

Earlier this month, news surfaced of a possible hack involving the theft of a major swathe of a crypto exchange Binance’s Know Your Customer data (10,000+ personal photos).

The partnership means that Bantotal clients will be able to access Bitex services in a marketplace of other traditional financial services that Bantotal offers through its BDevelopers program.

“With this technology, banks can have access to an API and have control of the whole process of [cross-border] payment with visibility and reliability on the bitcoin blockchain,” said Beaudroit.

Calling it a “quantum leap” forward for local banks in Latin America, Beaudroit said that average fees associated with cross-border payments are up to five times cheaper using Bitex than international wire transfers.

What’s more, these transfers are significantly faster, according to Beaudroit, who said payment times for exporters between Argentina and Paraguay in one instance last February dropped from one month to one hour after switching to Bitex’s cross-border payment services.

The partnership in the eyes of competitors such as Stellar, which also specializes in cross-border payments leveraging its own blockchain network, is seen as a positive signal.

Lisa Nestor, the Stellar Development Foundation’s director of partnerships, told CoinDesk:

“We think this announcement further validates the value financial institutions are recognizing in digital assets and distributed ledger technology for executing core banking activities, like international payments. It’s also no coincidence these product partnerships are being launched in the [Latin American] market where cross-border payments, even in neighboring nations, can be slow and expensive.”

How Bitex works

Bitex essentially acts as a middleman for national and regional banks to convert fiat payments into bitcoin then back into fiat, as opposed to completing multiple fiat-to-fiat conversions.

“If I want to do a payment from Argentina to Chile, I don’t need to buy dollars with the Argentinian pesos then transfer the dollars to the U.S. then move the dollars to Chile and exchange them into Chilean pesos,” said Beaudroit. “I can just send a payment from Argentina to Chile directly [using bitcoin].”

Calling it a system of “peer-to-peer banking,” Beaudroit explained that Bitex handles the conversion of local currencies into and from bitcoin, as well as, its ultimate dispersion into regional or national bank accounts.

Normally, this process of transferring money across borders with local banks in Latin American can take anywhere from 48 to 96 hours depending on the specific bank branch and financial intermediaries used, according to Leo Elduayen, vice president of non-profit Bitcoin Argentina and founder of blockchain startup Koibanx.

Elduayen described the full process of cross-border payments using Bitex as an end-to-end solution for banks, saying:

“The purchase and [transfer] of bitcoin, Bitex does it all on your behalf. You as a user just send the money and Bitex takes care of the rest for you.”

‘A good first step’

With the Bantotal partnership, Elduayen suspects that accessibility to Bitex services for consumers in Latin American will dramatically increase though there are a number of hurdles still left “to get banks on board.”

To this, Olivera said that both know-your-customer (KYC) and anti-money laundering (AML) legislation is still a major issue for banks when it comes to using the bitcoin blockchain.

Federico Ast, CEO of Buenos Aires-based arbitration startup Kleros, agreed – adding that regulatory uncertainty and seeing cryptocurrencies “as a fad” are still major barriers to entry for Latin American banks.

“I have to be honest. I think this is just the first conversation,” said Olivera. “It’s too early to say whether banks will choose to operate with Bitex but it’s a good first step.”

Rebuilding trust

At the very least, both Ast and Olivera see this partnership between Bantotal and Bitex as an opportunity to expose consumers in Latin American to the benefits of blockchain technology and help rebuild consumer trust in existing financial institutions.

“Historically, Latin America has had weak financial systems,” said Ast. “There’s a history of bank runs with some sad highlights of confiscation of people’s saving (e.g., Argentina in 2001). … This agreement will lead to lower costs for consumers and higher financial inclusion.”

Bitex’s Beaudroit has high hopes this partnership will also contributed to increasing the national GDPs of Latin American countries by enabling more commerce to flow “in a peer-to-peer fashion.”

In this way, Santiago Siri, founder of digital governance startup Democracy Earth and advisor to Bitex, said the work of Bitex went far beyond simply being a crypto exchange platform.

Said Siri:

“It’s an ideal partner for banks to use bitcoin … as a way of connecting banks in a way that is not very common in the industry yet is fundamental for markets like Latin America.”

Poloniex is now crediting trading fees to lenders who lost funds in a May market crash involving the obscure cryptocurrency ClAMS.

According to an official blog posting, Circle’s Poloniex exchange will cover lost funds by covering trading fees back through June 6. Poloniex’s Clam margin trading market experience a flash-crash on May 26. A 2014 airdropped token credited to holders of bitcoin, litecoin and dogecoin, Poloniex allowed margin trading on the coin till a flash crash wiped out 1,800 bitcoins worth $13.5 million at the time.

The drop crashed Clam’s price 77 percent in just 45 minutes.

Poloniex socialized the lost coins to the exchanges bitcoin margin lending pool. A total of 0.4 percent of Poloniex users lost 16.2 percent of their funds held in the pool to cover the defaulted loans.

At the time, Poloniex blamed the flash crash on the velocity of sell orders along with a general lack of liquidity within Clam margin trading. Poloniex said it was pursuing borrowers who defaulted but the conclusion of the effort has yet to be disclosed.

On June 14, Poloniex began recrediting impacted accounts with 180 bitcoins distributed across 10% of those affected. Under a new policy, lost bitcoin funds will be returned by nixing exchange fees until fully repaid.

In response to the crash, Poloniex closed margin trading on BTS, CLAM, FCT, and MAID.

Blade’s funding and plans come by way of a Tech Crunch report on Aug. 12. The report notes that in particular, Blade is aiming to provide trading for cryptocurrency-based perpetual swap contracts with three new improvements.

First, the perpetuals contracts will be drawn up using standard, simple contracts. Second, the perpetuals will use Tether’s stablecoin USDT for settlement and margins. Third, trades can be leveraged up to 150 times their price for cryptocurrency trading pairs.

As explained in the report, crypto perpetuals allow traders to bet on the price of a cryptocurrency with respect to another currency. However, unlike futures, perpetuals do not have an expiration date. As indicated in the report, Blade currently provides a listing of their cryptocurrency pairs for perpetuals. At press time, the upcoming exchange lists seven different trading pairs.

Blade CEO Jeff Byun commented on the company’s aims for their derivatives platform, saying:

“In the long term, we want to be the CME of crypto [...] Coinbase and Binance are building this foundational structure for crypto, but I think we are too and in a sense that derivatives are at their core about risk transfer, we want to be building the foundational layer for risk transfer in the crypto markets.”

Derivatives at Bitfinex

As previously reported by Cointelegraph, the major cryptocurrency exchange Bitfinex recently hinted that they might be adding 100x leverage for derivatives trading. The company’s CTO,

Paolo Ardoino, suggested the figure in a non-committal Twitter post with a simple image and accompanying emojis. Ardoino also remarked in the comments that there are no planned changes for the company’s current margin trading, and such a high-end inclusion would be available separately.

Blockchain startup Colu is eliminating blockchain from its business plan.

Citing regulatory uncertainty, technical challenges and growth in non-blockchain related opportunities the company is concluding its blockchain project, the Colu Local Network (CLN), according to a statement.

As part of the scale down, the company will repurchase approximately 54 million tokens sold during its $17 million ICO from those that participated in the crowd-sale.

The CLN token, which ran on the Colu Local Network, was used as a means for retail payments and provided incentives for consumers to shop locally. The company aimed to mitigate the threats of the “retail apocalypse.” It also built an app to help small businesses manage paperless transactions and help locals discover local merchants.

The company launched the token project in four cities, including London, Liverpool and Tel Aviv. It received an additional $14.5 million from financial and insurance company IDB Group for the project.

Colu will repurchase the tokens in ether at the original crowd-sale ETH to CLN rate, which it notes “is higher than the current market exchange ratio.” The company has set a buy-back window of 90 days, after which the tokens will be burned.

The company plans to create a website dedicated for the repurchase. It also says holders in several companies will be excluded, including those in the United States and Canada. Additionally, only those who complete KYC and AML processes will receive repayment.

Culo recently launched the Belfast Coin, in partnership with Belfast City Council, and coin for use in the Municipality of Tel Aviv-Yafo. Neither project is blockchain-based and both will continue to operate.

“The Colu Group is also in talks with a number of other municipalities across the world, about introducing similar initiatives,” according to a statement.

Dan Ariely, professor of behavioral economics, told Crowdfund Insider:

“Colu DLT’s decision to purchase CLN tokens appears unprecedented in the industry. It demonstrates how the Colu Group’s core values guide its actions. The Colu Group is focused on fostering relations between municipalities, local businesses, residents, and other city stakeholders. These relationships rely on the very same kind of trust and consideration, which is now being shown towards CLN token holders. It is wonderful to see the Colu Group following their ethical standards not just in words but in action. Such acts of giving up profits for the benefits of customers, partners, and investors are crucial to this tech sector if we want it to continue to evolve and grow.”

Colu DLT’s Chairman of the Board of Directors, Amos Meiri, said “blockchain may yet help to” build trust between people and foster local economies.

Hindenburg Research shared the SEC’s filing for a jury trial in a post on Aug. 12. According to the document, the commission is formally filing a complaint against Reginald Middleton, the New York company Veritaseum Inc. and the Delaware-based company Veritaseum LLC. 

Prayer for relief, escrow 

The SEC says that the defendants raised approximately $14.8 million in an ICO from late 2017 to early 2018 and alleges that material misrepresentations and omissions were made to investors.

Further, the SEC believes there are around $8 million in investor proceeds remaining from this ICO and are requesting an immediate prayer for relief in order to freeze the defendants’ assets. 

The commission is also requesting that the District Court provide an order to prevent the defendants from interfering with the SEC’s access to relevant documentation — for example, by destroying it — allow it take expedited discovery and escrow digital assets via a third party, among other requests.

As per the filing, the companies sold tokens called VERI, which were apparently issued on the Ethereum blockchain and pegged to Ether (ETH) at a 30:1 ratio. The defendants reportedly presented VERI as a utility token, saying that it could be redeemed for benefits such as consulting and advisory services and purportedly unlimited access to research.

SEC in the courtroom

As previously reported by Cointelegraph, the SEC has been involved in an ongoing legal battle with Kik Interactive over its Kin token offering. Most recently, Kik’s lawyers have blasted the commission for purportedly presenting a weak and misleading case, which Kik suggests it is doing because it simply does not have good evidence to back its allegations. In Kik’s most recent filing, the lawyers write:

“Indeed, apparently recognizing the weakness of its claim, the Commission has rejected its higher governmental duty to first and foremost seek justice, and has instead employed a strategy to twist the facts, creating a highly selective and misleading depiction of the record as set forth below.”

In a report published August 9, the legislators detailed the current state of energy consumption related to cryptocurrency mining, both nationally and internationally. They also explored possible ways to regulate the energy-intensive mining process and to integrate blockchain technology in current energy systems.

Some of the opportunities for blockchain include placing utility bill transactions on a smart grid, supporting electric vehicle charging infrastructure, and distributing energy resources.

“Traditionally electric utilities are vertically integrated. Blockchain could disrupt this convention by unbundling energy services along a distributed energy system,” according to the report. This could lead to greater industry transparency, efficiency, and competition among energy producers.

Additionally, blockchain could increase consumer choice in the energy market. For instance, the researchers cite the ability to purchase excess energy “produced by their neighbor’s solar panels.”

In April, the U.S. Department of Energy announced a $4.8 million funding grant for universities to research and develop blockchain use cases for the energy sector.

Costs of crypto mining

The agency calculated that nearly 1 percent of the country’s electricity generating capacity goes towards mining cryptocurrencies, a rate they observed increasing year over year. The researchers noted that crypto mining can burden a municipality’s power structure and increase consumer rates.

For instance, in Plattsburgh, New York, it was found that crypto mining “contributed to an increase of nearly $10 to monthly electricity bills in January 2018 for residential customers.” This surge in energy use contributed to an 18-month moratorium on any new cryptocurrency mining operations in the city.

Additionally, citing a study published in “Nature Climate Change, vol. 8,” the researchers claimed that “the associated energy consumption of Bitcoin usage could potentially produce enough CO2 emissions to lead to a 2 degree celsius increase in global mean average within 30 years.”

However, the researchers provided counter arguments that crypto mining will continue to increase at an unsustainable rate, and suggested crypto’s energy consumption may be a “temporary issue.”

According to the report:

“Some argue that sustainability concerns due to energy consumption are misplaced, and that the competitiveness of Bitcoin mining means that only miners with the most competitive mining hardware and the lowest electricity costs will persist over time,” the agency writes. Additionally, “Some anticipate that energy demands will diminish as the reward incentive shifts from discovering new Bitcoin to earning revenue through transaction fees.”

The researchers also argue that mining often occurs in locations with access to renewable sources of energy. Specifically, the state of Washington, provided between 15 and 30 percent of all Bitcoin mining operations globally in 2018 using hydroelectric sources of power. They also cite Mongolia, which gets 63 percent of its electric capacity from thermal power.

Conversely, 58 percent of mining pools are located in China, where many of the active sites are powered by coal. The researchers cite the China’s National Development and Reform Commission, which called mining a “wasteful and hazardous” activity.

Potential regulation

To combat rising energy usage, the researchers option the viability of policies like “minimum energy conservation standards, voluntary energy efficiency standards, and data center energy efficiency standards,” for the crypto industry.

While the country is currently a patchwork of different energy systems with equally varying regulations, Congress may pass unified legislation “to curb the energy intensity of the technology.” Some of the minimum standards considered may regulate ASIC chips or computer power usage generally.

Also floated  was extending the voluntary ENERGY STAR specifications to mining gear, or submitting mining farms to the standards put forward by the Data Center Optimization Initiative (DCOI) that oversees energy usage of data centers.

Additionally, the federal government may look to standards enacted at the state level, like those passed in March 2018, by the New York Public Service Commission, that ruled “municipal power authorities could issue a tariff on high-density-load customers—including cryptocurrency companies.”

Though bitcoin mining represents an energy intensive process, the researchers found that “less energy intensive, alternative algorithms exist, such as proof of stake and proof of authority.”

In August 2018, the U.S. Senate held a hearing to consider the energy efficiency of blockchain.

First revealed in an announcement on Bezant’s website, the terms of the deal were not disclosed.

Since April 2019, Bezant has been offering Blockchain-as-a-Service (BaaS) using Hyperledger Fabric technology. It also has a cryptocurrency of its own, BZNT, ranked about number 320 in terms of capitalization at about $8 million, according to data from CoinMarketCap. In 2018, Bezant achieved the fastest-growing ICO in Asia, selling out available tokens in less than an hour.

The company has signed a number of partnerships. It is working with Hanjudo, a South Korean fintech, Thailand’s Nova Learning, Chequer, a South Korean database management company, and Transwiz, a Thai peer-to-peer lender. In June, Bezant announced that it would be joining Binance, and its token started trading on Binance DEX on July 7.

Korea Prepaid Card is an end-to-end solution provider for pre-paid cards and other related services, such as vouchers, virtual cards, pin-code cards and barcode-based coupons. It handles publishing, distribution, payment and settlement and has been developing technology to link the various participants in the pre-paid value chain in real time.

Bezant already has a strong connection to South Korea. Its chief cryptocurrency officer is Daesik Kim, who is also co-founder of Bithumb, a South Korean exchange ranked 23rd in the world. The lead engineer for the company is Jeyce Jung, who was previously a lead software developer at KakaoPay specializing in fraud detection.

The ETFs, proposed earlier this year by asset managers Bitwise Asset Management, VanEck/SolidX and Wilshire Phoenix, and filed with exchanges NYSE Arca and Cboe BZX, are all seeking to become the first such investment vehicle based on bitcoin.

The filings were published in the Federal Register in February and June, kicking off the legally-mandated 240-day clock on a final decision.

Final decisions on the Bitwise and VanEck/SolidX proposals are expected by Oct. 13 and Oct. 18, respectively.

The next decision on the Wilshire Phoenix proposal is scheduled to occur by Sept. 29.

While a number of companies have proposed bitcoin ETFs in recent years, the regulatory agency has yet to approve any, citing concerns with market manipulation, market surveillance and a potential divergence with futures trading as some issues.

Bitwise has sought to alleviate these concerns, publishing multiple reports indicating that the actual bitcoin market is smaller, more regulated and much better surveilled than expected, and that it trades tightly with CME’s futures market.

The company maintains that the bitcoin market is “extremely efficient,” once wash trading and otherwise faked volume data is excluded.

Bitwise’s ETF proposal, one of the several under active consideration by the SEC, has received support from a number of individuals in the industry, including Blockchain Capital’s Spencer Bogart; Castle Island Ventures’ Matthew Walsh; Coinbase Custody’s Sam McIngvale; the Blockchain Association’s Kristin Smith; and more than 30 others.

Blade’s funding and plans come by way of a Tech Crunch report on Aug. 12. The report notes that in particular, Blade is aiming to provide trading for cryptocurrency-based perpetual swap contracts with three new improvements.

First, the perpetuals contracts will be drawn up using standard, simple contracts. Second, the perpetuals will use Tether’s stablecoin USDT for settlement and margins. Third, trades can be leveraged up to 150 times their price for cryptocurrency trading pairs.

As explained in the report, crypto perpetuals allow traders to bet on the price of a cryptocurrency with respect to another currency. However, unlike futures, perpetuals do not have an expiration date. As indicated in the report, Blade currently provides a listing of their cryptocurrency pairs for perpetuals. At press time, the upcoming exchange lists seven different trading pairs.

Blade CEO Jeff Byun commented on the company’s aims for their derivatives platform, saying:

“In the long term, we want to be the CME of crypto [...] Coinbase and Binance are building this foundational structure for crypto, but I think we are too and in a sense that derivatives are at their core about risk transfer, we want to be building the foundational layer for risk transfer in the crypto markets.”

Derivatives at Bitfinex

As previously reported by Cointelegraph, the major cryptocurrency exchange Bitfinex recently hinted that they might be adding 100x leverage for derivatives trading. The company’s CTO,

Paolo Ardoino, suggested the figure in a non-committal Twitter post with a simple image and accompanying emojis. Ardoino also remarked in the comments that there are no planned changes for the company’s current margin trading, and such a high-end inclusion would be available separately.

The United Kingdom pension and welfare agency has identified blockchain and distributed ledger technology (DLT) as technologies that could disrupt the payments industry.

In an Aug. 9 blog post, Richard Laycock, the deputy director of digital payments and banking systems at the Department of Work and Pensions (DWP) — an agency that manages the U.K.'s welfare and pension policies — said that the DWP is looking to transform its payments infrastructure.

In a bid to make its payment system “efficient, modern, fast, scalable, flexible, innovative and available 24/7,” the DWP is monitoring blockchain and DLT as possible disruptors to the payments system. Regarding DLT, Laycock further claimed:

“We are starting to see the first full production implementations, such as Santander’s One Pay FX. The benefits include reducing time, cost and failure rate associated with making transactions whilst data is stored on a secure immutable ledger.”

Among other options that could purportedly benefit the DWP’s payment system, Laycock also noted that open banking could enable new business models and products.

Earlier in August, the United States Federal Reserve Board revealed plans to release a real-time payments and settlements service in order to boost the payments infrastructure in the country. The agency is going to develop a new interbank real-time settlement service called FedNow to support faster payments in the U.S., which will purportedly launch in 2023 or 2024.

As Cointelegraph reported in a dedicated analysis, there is an emerging trend of utilizing hybrid systems in the payment sector that comprise both DLT and centralized systems.

In June, SWIFT announced plans to allow firms running DLT systems to use its global payments innovation platform. Visa also announced a new centralized payment network for business transactions that incorporates elements of decentralized technology.

Hedera claims its flavor of distributed ledger technology (DLT), which works differently than blockchains, can facilitate micropayments and distributed file storage, support smart contracts and will eventually allow private networks to plug into the public one to take advantage of its transaction ordering mechanism.

After three rounds of funding done through simple agreements for future tokens (SAFTs), Hedera has raised $124 million.

IBM is the first major tech company and Tata is the first Indian company to join the network. Some of the network’s other governing members include Japanese financial holding company Nomura,  Deutsche Telekom and law firm DLA Piper. At this point in the network’s lifecycle, council members are invited by Hedera to join and given fee income for running nodes.

Public-private partnership

IBM said it is most interested in how the public network interacts with private networks.

“The most exciting part is the proposed Hedera Consensus Service,” said Bryan Gross, principal offering manager of the IBM Blockchain Platform.  “It has the potential to provide the core innovation of proof-of-work blockchains, like bitcoin and ethereum, without the performance and privacy trade-offs that are typically associated with these networks.”

Since the Hedera Hashgraph is designed to unify public and private networks, IBM will use it to build trust in custom Hyperledger Fabric networks. (Big Blue contributed the Fabric platform to Hyperledger, an umbrella project for enterprise blockchains.)

“Hedera Consensus Service makes it possible for Hyperledger projects out there to use the service to put transactions in order and eliminate the need for them to stand up nodes for transaction ordering, and they get the trust model of a public network,” Harmon said.

Tata Communications, part of the Indian conglomerate Tata Group, could not be immediately reached for comment but said in a press release that it plans to use distributed ledger technology to improve operational efficiency.

Checks and balances

The addition of the two major firms will further decentralize Hedera’s governance, said Harmon.

That governance includes a system of checks and balances that are supposed to prevent power from being consolidated at the network.

Members of the council have equal say in approving updates to Hedera’s codebase and in setting policies for the network’s nodes.

Council members can serve a maximum of two consecutive three-year terms if two-thirds of the council agrees to let them continue.

Hedera’s source code is open for review, but patented – an arrangement intended to prevent forks.

Still unfamiliar with the technology, some $86 million in unpaid taxes on cryptocurrency trade earnings have piled up as banks refuse to touch deposits writes Israeli media Haaretz.

“The tax authority is aware of the problem, but they say the ball isn’t in their court. I’ve tried working with almost all the banks, but the minute they hear the word ‘Bitcoin’ they freeze up,” Gross told the Haaretz.

Gross said he has paid his tax bills to the Israeli Tax Authority consistently since 2011, but after 2017 things went sour with his bank. Israel currently taxes virtual currency profits at a capital gains rate of 25% rate for individuals and 47% for corporations.

The issue is not the tax authorities, however.

Another trader Haaretz spoke with said banks lock up funds due to anti-money laundering and know-your-customer concerns. Paying taxes with trading profits is made near impossible by banks not wanting to be mixed up in the emerging market.

In May, an Israeli court ruled that bitcoin is an asset and not a currency. The court ruled against the founder of DAV.Network Noam Copel saying cryptocurrencies count as taxable events. Copel said his bitcoin holdings were foreign currency and therefore non-taxable.

“Zero Crypto Tolerance”

Seemingly, the Israeli banking industry is taking a risk-averse position. Speaking with CoinDesk, the Israeli Bitcoin Association’s Legal Counsel Jonathan Klinger says all major banks operate under a tight cryptocurrency policy. Trading deposits are not permitted. Fintech firms working with cryptocurrencies are similarly blackballed.

For Israeli policy advocates, the core issue remains in question. While some blame policy, Klinger says its in bank’s interest to keep cryptocurrency at arms reach:

“[C]ooperation from banks seems almost impossible. These actions might have been made if the policy did not originate from concerns of money laundering, but in order to eliminate competition that the cryptocurrency world has with banks.”

Gidi Bar Zakay, former Deputy Commissioner of the Israeli Tax Authority and current Bittax CEO, says the banking industry’s pace is set by regulators. Without proper guidance, banks do not want the additional responsibility of anti-money laundering snafus.

“In the past, crypto-related capital could be transferred to some banks in some cases, but in recent years, the banks tightened their self-policy on businesses or individuals operating in the field,” Zakay told CoinDesk. “They are now waiting for guidelines from the Bank of Israel.”

Retail banks are hardly friendlier, with 20 percent holding a “zero crypto tolerance” policy per Bits of Gold’s Youvel Rouach. The remaining 80 percent make the process a headache.

For frustrated firms, most are taking their assets abroad. Even Zakay’s Bittax, a bitcoin tax firm, cannot open an account in the country. Zakay says many are sending assets to Switzerland.

In many respects, Israel’s private sector acceptance of cryptocurrencies mirrors the larger Middle East. Regulatory opinion has often been slow to date, involving governmental oversight like sandbox programs. Cryptocurrency exchange Rain, for example, launched last month in Dubai following a two-year program with the central bank.

These investigations are part of the association’s ongoing coordinated regulatory initiative called Operation Cryptosweep, which was launched in 2018. At that time, more than 40 state and provincial securities regulators in the United States and Canada launched their coordinated enforcement sweep of the ICO market.

NASAA noted that while some of the investigations involve suspected securities fraud, the regulators are also finding many other violations, including failure to register a product before it was offered to investors.

NASAA president Michael Pieciak said that Facebook’s plans to launch a digital currency that will allow its billions of users to make financial transactions across the globe is “creating an environment that attracts white-collar criminals, bad actors, and other promoters of illegal and fraudulent securities schemes.”

Crypto firms are moving to locations more welcoming

He added that “investors should be mindful of the hype and be aware of the risks when considering whether to jump into cryptocurrency-related investment products.”

NASAA also organized a task force to launch investigations into ICOs and cryptocurrency-related investment products. The task force found more than 30,000 crypto-related domain name registrations, the vast majority of which appeared in 2017 and 2018.

‎Confronted with North American watchdogs intensifying scrutiny of crypto fund-raising, many startups are moving their businesses to locations more welcoming such as Malta, Switzerland and Eastern Europe.

“As with any investment opportunity, be cautious when dealing with promoters who claim their offering does not have to be registered with securities regulators. Investigate independently before you invest and contact your state or provincial securities regulator with any concerns before parting with your hard-earned money,” added the NASAA chief.

Grayscale Investments, a digital assets investment firm that offers Bitcoin (BTC) trust shares, has published a case study on how BTC could be used as a hedge against financial instability. The firm used the case of trade tensions between the United States and China to make their point.

Grayscale Investments linked to its study in an official blog post on Aug. 8. According to Grayscale’s analysis, they believe that BTC’s store of value potential, its spending characteristics and its potential for growth with new technology poise the original cryptocurrency as an asset that is uniquely suited to strong performance during both normal economic cycles and liquidity crises.

As a result, Grayscale advises in the report that BTC is a beneficial asset to have in many long-term investment portfolios:

"With continued adoption, Bitcoin represents a transparent, immutable, and global form of liquidity that can provide both wealth preservation and growth opportunities. As a result, we believe it deserves a steady strategic position within many long-term investment portfolios.”

Like a number of other experts, Grayscale notes in the course of its study that BTC price is going up in the midst of the U.S.-China trade war, providing some data to support its theoretical arguments. The report notes:

“While the risk asset drawdown is still in its very early stages, Bitcoin is on the rise as these risks are just beginning to show up in other asset and currency prices. Since Trump first announced the tariff hike in May, Bitcoin has generated a cumulative return of 104.8% through August 7, versus an average of -0.5% for the twenty other asset classes, markets, and currencies below during the same period.”

The report also notes that the U.S. and China, as individual countries, have the largest economies in the world, composing approximately 40% of annual global economic output. 

A dissenting voice

Unlike Grayscale, BMO’s chief investment strategist recently went on record with CNN Business saying that he believes it’s too early to call BTC a safe haven. He argued:

“Bitcoin has been excessively volatile, especially the last couple of years. It’s the sexy kind of thing to go to now. I don’t base my investments on sex appeal. I base my investment on longer-term perspective. And I think the longer-term perspective, in terms of Bitcoin being that safe haven, I think it’s way too soon to call that.”

Multiple anonymous sources aware of the situation have confirmed this claim, according to a report by Bloomberg Law on Aug. 8. 

Zaidi has been the director of the CFTC’s DMO since January 2017. He is acknowledged as being responsible for creating Bitcoin (BTC) futures trading policy, as well as rewriting market regulations for over-the-counter swaps.

One source added that former DMO director Vincent McGonagle is expected to reprise his role as an acting director; McGonagle is the current deputy director of enforcement, as noted in the report.

Bitcoin Futures and the CFTC

As previously reported by Cointelegraph, the CFTC confirmed at the beginning of the month that it has not approved LedgerX’s physically-settled Bitcoin futures. This seems to contradict LedgerX’s previous announcement, in which the derivatives provider claimed that its trading service was live.

However, derivatives specialist Thomas G. Thompson remarked on Twitter that LedgerX might have just launched existing swaps on their latest platform. Moreover, even if LedgerX’s trading service had not gone live, this would still be a notable development. Thompson said:

”Still important development because now retail can trade bitcoin options and swaps.”

Virtual currency derivatives 

In May, the CFTC announced that they were attempting to provide regulatory clarity for virtual currency derivatives, in order to help out exchanges and clearing houses. The statement was issued jointly by the DMO and the Division of Clearing and Risk, and detailed the apparent necessity for providing additional market surveillance, coordination with CFTC staff, large trader reporting, and DCO risk management and governance.

Zaidi commented at the time:

“CFTC staff will seek to provide additional guidance to help market participants keep pace with innovation while complying with CFTC regulations.”

According to a statement published August 7, the New York-based Forex and Bitcoin Trader advertised 900 percent gains for two week investments. The firm stated a $2,000 investment in cryptocurrencies, foreign currencies, or commodity-based derivatives would see returns of $20,000, not including fees, through their guidance.

The firm also claimed to be a licensed broker-dealer with an insurance policy and sufficient capital to guarantee returns.

Investigators found the company is not registered as either a dealer or agent with the state’s Securities Commissioner. Additionally, the firm had not supplied information regarding its purported insurance policy.

The Securities Board first launched a regulatory sweep of the crypto industry amid the market exuberance of late 2017. Though the pace of emergency actions slowed in the following year, the watchdog has found “the number of suspect cryptocurrency offerings being promoted to Texas investors increase along with the run-up in the price of cryptocurrencies and volatility in the cryptocurrency markets.”

To date, the agency has filed 24  administrative orders involving 62 individuals and entities, including an Australia-based cloud mining firm, a faux crypto exchange, and a crypto promoter who duped investors with falsified endorsements from the likes of Jennifer Anniston, Prince Charles, and former Finland prime minister Matti Vanhanen.

According to a report published August 5 from Alston and Bird, an international law firm, any business that accepts fees for currency transmissions, or maintains control over virtual currencies for others will fall under the new law beginning January 1, 2020.

Part of Rhode Island’s licensure for crypto firms are strict compliance metrics, anti-money laundering and anti-fraud protocols, and security requirements. Firms must also demonstrate an operational ability to “protect the confidentiality, integrity, and availability of any non-public personal information or currency transmission it receives, maintains, or transmits.”

Many of these requirements are adaptations from the standing money transmission legislation in the state. What’s new is a firm must maintain holdings of cryptocurrencies in kind and quantity equal to amount being transmitter by clients.

In the bill, cryptocurrencies are defined as “a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and is not legal tender, whether or not denominated in legal tender.”

Outside the purview of the law are digital currencies that are not exchangeable for fiat, or that exist solely on a gaming or blockchain platform. This stands in line with U.S. Securities and Exchange Commission’s recent decision that enables an ERC-20 token to be legally sold on a gaming startup’s blockchain.

Additional licensing exemptions exist for “personal, family, or household” uses of virtual currencies, academic purposes, and certain escrow services, among others.

While the platform went live in January, only accredited investors – wealthy individuals and institutions – have been allowed to trade on it until now.

At the moment, only two tokens are available on this alternative trading system (ATS): tZERO’s own private equity token, TZEROP, which was issued in the STO; and Overstock’s digital voting series A-1 preferred stock, which was listed in June. The latter is the successor to the first-of-its-kind blockchain preferred stock the company issued in 2016.

To boost trading activity on tZERO, its parent company Overstock previously announced a plan to issue more of these digital shares to all its shareholders as a form of dividend over the next two months.

“It’s a nice bonus to our shareholders and it serves the purpose of getting a lot of adoption on the platform,” Noursalehi said, adding:

“There is a lot of focus on liquidity.”

He reiterated these comments on the company’s second-quarter earnings call Thursday, saying, “getting that initial adoption is key, as well as getting additional brokers to the table.”

$10 million Q2 loss

Overall, Overstock is slowing its expansion of Medici, the blockchain investment unit that includes tZERO and several other startups.

“We don’t expect to grow the keiretsu as aggressively as we have in the past,” Jonathan Johnson, president of Medici, said during Thursday’s earnings call. (Keiretsu is a Japanese word for a group of interlocking businesses.)

While Johnson highlighted a few companies during the earnings call, including Bitt, Voatz and Medici Land Governance, he said this did not indicate that the other businesses “aren’t making progress.”

Rather, the different portfolio companies have been working with each other, he said, adding:

“The symbiotic nature of the keiretsu model is really blossoming.”

According to Overstock’s quarterly filing, tZERO saw a net loss of $10 million, more than double the 2018 Q2 loss of $4.6 million.

tZERO is currently working to acquire one of the New York Department of Financial Services’ virtual currency licenses, Noursalehi said.

“The New York BitLicense is challenging to get, we are working on it, we’re hoping to get it in the next six months,” he said during the call. The company’s 10Q said tZERO’s wallet subsidiary Bitsy, which is being referred to as tZERO Crypto, is applying for money transmitter licenses in the U.S.

Traders in waiting

According to Noursalehi, tZERO is expecting up to 50,000 investors who previously bought Overstock’s shares to get on board with digital securities trading.

Although no sharp uptick in sign-ups has registered so far, the broker-dealer community got interested, Noursalehi said.

“We had a lot of broker-dealers, about 30 or 40, reach out to us that want to get involved in this ecosystem,” he told CoinDesk. “We’re working on these requests. Investors have been sending questions as well. They are excited and they are trying to understand it.”

Daily volume on tZERO has been fluctuating this summer from several thousand dollars to $245,547 at the peak on July 23, according to the website SecurityTokenCap. Tokens that were expected to be issued on tZERO by outside companies are not here yet.

Earlier-announced deals with prospective issuers like the Dubai-based real estate firm Emaar are still in negotiations, Noursalehi said, although tZERO recently announced it’s going to tokenize a movie by the Vision Tree company.

In the meantime, the company remains under investigation by the Securities and Exchange Commission (SEC) for tZERO’s STO. The SEC sent another request for information in the May-June time period, Noursalehi said, asking for “emails and content like that.”

The investigation, it was earlier revealed, has derailed the plans to sell Overstock’s flagship retail business, CEO Patrick Byrne told CNN. “That destroyed the auction. It’s awful hard to sell a company when you have any pending SEC matter,” he said.

Johnson addressed the investigation in response to a question during Thursday’s earnings call, saying the company regularly meets with the SEC, but he did not have a timeline on when the investigation might conclude.

“I have personally met with the SEC enforcement team. The SEC, good as it is engaging with regulator dialogue, will not put a shot clock on itself,” he said.

Wealthy businessman Eike Batista has been arrested by federal police on account of suspected money laundering, which they believe he achieved by trading Bitcoin (BTC) on his wife’s behalf.

The details of Batista’s arrest were reported by Cointelegraph Brasil on Aug. 8. Prosecutors reportedly found notes indicating that he had traded BTC for his wife, who is not currently being investigated. The Federal Prosecutor wrote:

"Although the suspect’s wife, Mrs. Flávia, is not being investigated, it is quite possible, given the evidence of such a usual means of money laundering that the suspect was using the wife's name and account to ensure concealment of the products or proceeds of crime.”

Batista was reportedly arrested in the course of Operation Midas Secret, which was apparently backed by the TAG Bank owner Eduardo Plass. Fernando Martins, Batista’s attorney, apparently considers this arrest to be illegal. 

The Federal Prosecution Service alleges that Batista and his employee Luiz Andrade Correia used one of Plass’s companies "to buy and sell shares in the domestic and international financial markets for the purpose of manipulating corporate assets." The two are also believed to have illegally traded on the Toronto Stock Exchange and committed fraud in relation to MMX, MPX and OGX stock trading.

The Attorney General’s Office further alleges that Batista and Correia illegally traded on underground stock exchanges, and the Brazilian Ministry of the Public said $800 million were transacted illegally.

Batista’s wealth 

According to the report, Batista was also arrested back in February 2017. Although he was released just two months later, Batista was accused of getting out of his 30 year prison sentence early by bribing former governor Sérgio Cabral in the amount of $16.5 million.

As noted in the report, Forbes previously listed Batista as the seventh-richest man in the world. In 2012, Forbes further named Batista as the richest person in Brazil, with an estimated net worth of a little under $15 billion. Batista apparently become wealthy in connection with oil, mining and energy operations, as per Cointelegraph’s report.

Money laundering through crypto

As previously reported by Cointelegraph, two men in the United States recently plead guilty to laundering millions of dollars through cryptocurrencies as well as Western Union payments. The two reportedly sold controlled substances through a darknet website in exchange for cryptocurrencies and Western Union payments, which were subsequently laundered and turned into cash.

The national carrier of the United Arab Emirates Etihad Airways has partnered with blockchain-based platform for the travel industry Winding Tree to explore how blockchain can aid in distribution.

Logistics see greater adoption of blockchain

As Reuters reported on Aug. 8, Etihad joined a range of other leading international airlines that already deploy the Winding Tree platform, including Air Canada, Air France-KLM, and Lufthansa. The product is set to reduce transaction costs for customers, as well as enable companies to publish inventory directly to their customers, among other services.

Tristan Thomas, director of digital and innovation at Etihad, told Reuters that “Winding Tree is obviously our distribution (platform) and that’s an opportunity for us to disrupt a traditionally siloed market dominated by major distribution systems.”

Pedro Anderson, Winding Tree’s chief operating officer and co-founder, also commented on the cooperation, saying:

“We have been doing experiments and new solutions on the platform. Ultimately, that benefits the consumer. When there’s innovation, you start to have disruption, you have competition which results in better prices for the consumer.”

Blockchain captivates the airline industry

As previously reported, Air Canada announced its participation in the Winding Tree platform last October. Keith Wallis, Director of Global Product Distribution for Air Canada, said then:

“Air Canada recognizes the importance of leveraging this next generation technology. We plan to integrate Air Canada's Direct Connect API with Winding Tree's public blockchain platform, giving blockchain-savvy users the ability to access our content directly from the source."

Other airlines around the world have also been integrating blockchain tech into their internal processes. Earlier this month, Hong Kong’s flagship airline Cathay Pacific introduced the first blockchain project to manage unit load devices. The project intends to eliminate paper-based processes by implementing a blockchain application that allows instant management of such devices through a smartphone.

Bitcoin rising along with gold during times of stress in the global markets indicates the top cryptocurrency is being accepted as a new safe haven, according to CNBC Host Ran NeuNer.

Further, the recent rise in the leading cryptocurrency coincided with a sharp uptick in the S&P VIX index – Wall Street’s fear gauge, as seen in the chart below.

VIX rose 10 percent on Aug. 1 and rose to a seven-month high of 24.81 on Monday. As of now, the fear gauge is seen at 17.75.

Bitcoin jumped from $9,900 to $12,325 in six days to Aug. 6. The rally seems to have stalled with the VIX index pulling back from seven-month highs.

Bitcoin does seem to have found some love as a safe haven if recent price action is anything to go by.

However, there is no long-run correlation between bitcoin, stocks and the US Dollar, as noted by prominent analyst Mati Greenspan.

In fact, gold and bitcoin have moved in opposite directions in the past.

For instance, BTC dived below the long-held support of $6,000 on Nov, 14, reviving the bear market which had come to a halt near that psychological support in five months to October. By mid-December, BTC was changing hands at 15-month lows near $3,100.

During the same time frame, gold went from $1,200 to $1,300 and further extended the rally to $1,346 (Feb. 20 high). Further, BTC remained in a bear market throughout 2018 despite the trade tensions between the US and China.

All-in-all, it is still too early to say that bitcoin has taken up the role of a safe-haven asset.

Major cryptocurrency exchange Coinbase has announced that it is now supporting Tezos (XTZ) trading on its site, as well as on Android and iOS versions of the Coinbase app. 

Expanded Coinbase Pro listing

Coinbase announced the new development in an official blog post on August 8. The news comes just days after Coinbase Pro launched XTZ trading on August 5. That announcement prompted a major rally in XTZ’s price at the time. 

According to CoinMarketCap, Tezos’s price has increased by 11.9% on the day as of press time, which may be a function of this new announcement. 

Chart courtesy of CoinMarketCap

Per the announcement, Coinbase customers will be able to buy, sell, convert, send, receive, or store XTZ freely, with the exception of customers based in New York State, which has proven to be a major site of crypto litigation. Earlier today, Coinbase Custory announced that they had added two new board members with experience in New York’s banking and financial ecosystem.

While Coinbase Pro is advertised as a platform designed for professional traders, Coinbase itself caters to a wider audience.

Expanding other options

Also on August 5, Coinbase announced that it is exploring support for eight other digital assets, including Algorand (ALGO), Cosmos (ATOM), Dash (DASH), Decred (DCR), Matic (MATIC), Harmony (ONE), Ontology (ONT) and Waves (WAVES). At the time, Coinbase was careful not to guarantee future support for any of the named assets in any particular jurisdiction.

South Korea’s state-backed financial IT firm Koscom will develop a blockchain-powered platform for trading unlisted securities.

Koscom to launch blockchain-based unlisted shares trading service in H2 2019

Launched by South Korea’s Ministry of Finance and primarily backed by the Korea Exchange, Koscom plans to launch its blockchain-based platform for unlisted securities in the second half of 2019, local newspaper The Chosun Ilbo reported on Aug. 6.

According to the report, the initiative six local companies and organizations are participating in the initiative, including Koscom, KEB Hana Bank, Hana Financial Investment, Daejeon Technopark, Amicus Lex, and a local association of accelerators. KEB Hana Bank and Hana Financial Investment are subsidiaries of Hana Financial Group, one of the largest bank holding companies in South Korea.

As said in the press release, the project intends to help small- and medium-sized venture companies expand their capabilities in securities trading by providing a cost-efficient, secure and accessible platform for trading unlisted securities.

The announcement follows Koscom's approval to build services for trading unlisted securities in May 2019, the report notes.

Recently, Koscom and KEB Hana Bank were reported to be participating in another blockchain-enabled initiative. Alongside tech giant Samsung Electronics, Woori Bank, mobile carriers SK Telecom, KT and LG UPlus, the companies combined forces to launch a blockchain-based mobile identification system in 2020.

In late July 2019, Sony Financial Ventures joined a $14.5 million funding round for Bitcoin (BTC) bank Bitwala. Back in 2017 and 2018, such a figure might not have made many headlines, as crypto startups were raking in hundreds of millions of dollars in initial coin offerings (ICOs).

The ICO boom has, however, stalled significantly, with fundraising figures for 2019 a far cry from the massive amounts earned by projects in the two years prior. Many of the tokens that came about during the ICO mania have also lost most of their post-offering value. Since the late 2017 crypto mania, there has been a considerable uptick in regulatory scrutiny of the industry as a whole.

While the ICO boom might have waned since the middle of 2018, there is still a lot of activity in the crypto fundraising space. The only difference is that, like much of the broader industry, the prevailing narrative appears to be taking on a paradigm shift — one that crypto proponents hope is tending toward making cryptocurrencies a more mature asset class.

Major ICOs of 2019

Data from ICO analytics firm ICOdata.io shows that token sales have raised more than $340 million in 2019 from 83 crypto fundraising events. Monthly figures for 2019 can be seen in the chart below.

To put the ICO decline in perspective, token sales raised more than $900 million in June 2018 alone. On the whole, 2018 saw ICOs raise more than $7.8 billion from a total of 1,253 projects. In the previous year, 853 projects collected over $6.2 billion from token sales. So far, only March and May 2019 have recorded more than $100 million in ICO sales. The following are some of the major ICOs in 2019.

Tron Game Global raised about $80 million in its ICO, which took place between mid-April and mid-June 2019. The project focuses on developing blockchain-based internet decentralization protocols.

Algorand managed to raise close to $60 million during its June 17 ICO. The crypto project seeks to utilize proof-of-stake (PoS) in ensuring instant and scalable transaction processing. Coinbase recently announced plans to list the token along with seven others as part of its catalog expansion.

Coti earned $15 million during its June 4 to July 3 ICO sale. The blockchain payment protocol is aiming to connect merchants, governments, stablecoin issuers, etc.

Reports also emerged that Telegram would be conducting the public phase of its billion-dollar ICO. Back in 2018, Telegram raised $1.7 billion for its Telegram Open Network (TON) project — the second-highest-grossing token sale behind EOS, which pulled in $4 billion.

Related: What to Expect From the Telegram Open Network: A Developer’s Perspective

In an email to Cointelegraph, Joe DiPasquale, CEO of BitBull Capital — a crypto and blockchain hedge fund firm — commented on the factors that contributed to the decline of ICOs. According to DiPasquale:

“The ICO market was largely driven by greed, as speculators scrambled, hoping to find the next ETH. Unfortunately, the space was rife with scams as people soon realized they could raise hundreds of thousands if not millions, with vague promises and plagiarized whitepapers. Without a solid foundation, the bubble was destined to pop, and it is unlikely we will return to the ICO hype of 2017 and 2018. Instead, however, we may see a more standardized approach to crowdfunding develop, as is the case with security token offerings, which are in the works.”

ICO alternatives taking center stage?

Within the current narrative of a decline in ICOs, some commentators believe that there is significant interest in the sale of cryptocurrency tokens as an investment in blockchain-based startups. In a private correspondence with Cointelegraph, Igor Chugunov, CEO of Credits — a blockchain startup that focuses on decentralized application (DApps) development — declared that there is a continued interest in ICOs.

For Chugunov, there are still individual and corporate investors looking to put up equity in emerging projects that aim to use put blockchain technology to innovative uses across several aspects of the global business process. Providing further commentary on the matter, the Credits CEO added in an email to Cointelegraph that ICOs are now evolving into security token offerings (STOs) and initial exchange offerings (IEOs), declaring:

“Yes, we have to admit that the volume of fund-raising through ICOs has declined significantly. But let's take into account that ICO is just a tool that is being improved and assumes new formats like STOs and IEOs. Innovative approaches to raising funds is an integral part of modern market realities. In my opinion, the decline in interest in such instruments like ICO is primarily associated with the strengthening positions of regulators in the market and the investor's transition to a new degree of his evolution in the areas of market research, risk management, and capital management.”

The current cryptocurrency investment climate

With ICOs experiencing a massive decline, the narrative has shifted to other fundraising methods for cryptocurrency startups. Back in mid-June, Cointelegraph reported on Fireblocks — a digital asset cybersecurity startup — raising about $16 million in a Series A funding round from venture capitalists (VCs).

Amid the ICO mania, there have also been companies that have steadily accrued capital funding via VCs. Some of the major crypto-businesses like Circle and Coinbase have received millions of dollars from VC investors at different points in time. Commenting on the VC approach to investing in the digital asset space, DiPasquale surmised:

“VCs and seasoned investors in the crypto space are not attracted to hype. They seek solid teams with sound ideas and take a milestone-based approach to investments. Even in private rounds, they seek early entries to ensure maximum ROI and low risk. The general narrative is to identify new protocols and services which allow interoperability between various blockchains and support building infrastructures on top of them.”

Despite the crypto winter of 2018 that saw prices of digital tokens plummet by more than 80% across the market, VCs continued to invest in cryptocurrency projects. VCs reported invested more than $2.85 billion in crypto and blockchain projects in 2018.

While this figure might seem significant, it pales in comparison to the total outlay of VC equity investments in businesses throughout 2018. Data from Crunchbase shows that VCs put up more than $350 billion in private funding rounds. Echoing DiPasquale’s sentiments, Chugunov provided further explanation as to why VC involvement in the crypto space is still relatively insignificant, opining:

“Venture capital has not lost its interest in investing in cryptocurrencies, but the requirements for projects, in particular for products, teams, economic models and adhering to the roadmaps have grown significantly.”

As reported by Cointelegraph, cryptocurrency lender BlockFi has received about $18 million in Series A funding from VCs led by Peter Thiel’s Valar. The growing pre-eminence of venture funding in the crypto space also lends itself to sensible investments in projects that could possibly turn out to be economically viable. According to a previous Cointelegraph report, BlockFi has more than $53 million in customer cryptocurrency assets under management.

This arguably sensible investment strategy is in stark contrast to the high yield investment product vibe of the ICO era. With only a white paper and a vague business plan, most been unable to live up to their lofty self-set goals.

In a report issued today, cybersecurity firm Carbon Black says a well-known 2018 monero crypto mining botnet contained a secondary component capable of seizing IP addresses, domain info, usernames, and passwords. Dubbed “Access Mining,” Carbon Black researchers Greg Foss and Marian Liang say the 2018 botnet campaign has been collecting secret data for the past two years, making millions in the process.

According to reports at the time, 500,000 machines were trojanized with a monero cryotojacking mining protocol, XMRig, collecting 8,900 monero.  Most infected machines resided in Russia, Eastern Europe, and Asian Pacific.

Unbeknownst at the time, the 500,000 computers were not only hacked with the ghost protocol but also data collection software. A patchwork of programs taken from open-source code on GitHub like Eternal Blue and Mimikatz implemented on XMRig helped the hackers innovate, the report states.

The hackers turned the security data into a secondary source of income. With one infected machine selling for an average of $6.75 on dark web markets, the 500,000 haul is worth $1.69 million. Infected machines can even be rented for 24 to 48 hours as a source of passive income for hackers. Depending on the machine’s location and owner, machine values can skyrocket.

At $9,000 per monero coin, the group’s assets sit near $3.29 million Carbon Black says.

Foss and Liang say Access Mining is more than likely the result of dropping monero prices following the 2018 bear market. Following their report, the firm issued a series of tips for addressing possible concerns.

Bloomberg reported the company’s finding in a report on Aug. 7. Coin Metrics co-founder Nic Carter additionally mentioned that some of the USDT whales include major crypto exchanges, such as Binance and Bitfinex.

The report additionally notes that this is staggeringly different from the distribution of Bitcoin (BTC), for which whales apparently hold only around 20% of the total token supply. Moreover, over 20,000 BTC addresses reportedly hold at least $1 million in equivalent assets.

However, despite Bitcoin being more evenly distributed among its user base, the USDT whales may be able to swing the Bitcoin price on their own, as suggested by University of Texas at Austin finance professor John Griffin:

“The concentration of Tether suggests that control of Tether is in the hands of a few central players who can swing Bitcoin prices, and have a vested interest in doing so [...] It also suggests that many exchange players have a vested interest in keeping the Tether game going."

According to the report, Griffin has purportedly linked USDT to market manipulation and its rally to an all-time high in 2017.  According to Sid Shekhar, the co-founder of market tracker TokenAnalyst, there are also market concerns related to volatility that come into play whenever a large sum of USDT is injected into the market.

Tether continues to grow

As previously reported by Cointelegraph, USDT is now being offered on Bitfinex via another blockchain protocol for Bitcoin — BlockStream’s Liquid Network sidechain. USDT has, in the past, been run on the Omni blockchain. Liquid is additionally planning to make Liquid-based USDT available on other crypto exchanges in the future, including OKEx, OKCoin, BTSE, BTCTrader/BtcTurk, RenrenBit and Sideshift AI

Coinone has signed deals with CertiK and Xangle to improve security and enhance disclosure, according to an announcement from the company.

The number three Korean crypto exchange says that it will be working with Xangle on investor protection and project transparency. With CertiK, it will be focused on the security of the code, technology verification, and project information security.

The moves come as crypto exchanges are the subject of heightened scrutiny in South Korea and globally. With concerns about money laundering and with FATF guidelines beginning to have an impact, banking relationships are being tested and financial institutions in Seoul are refining their KYC programs and processes.

Just today, it was reported that the Korean Financial Services Commission (FSC) is planning to directly supervise the exchanges.

With concerns about hacking on the rise, Korea’s Fair Trade Commission (FTC) in June called for a change in the terms and conditions of use for crypto exchanges, requiring the exchanges themselves to accept liability for any losses from theft. Bithumb, the second largest exchange in South Korea, suffered two hacks in one year, losing more than $50 million in the process. Coinone itself was raided in early 2018, along with Bithumb, by the South Korean tax authorities.

A report in the local Korea press says that one of the concerns for Coinone is the possibility that the coins themselves could introduce viruses into the exchange and allow for the hacking of it.

New York-based CertiK, founded in 2017, led by two academics and with investment from Binance Labs and Consensus Labs, specializes in the ‘verifying’ of blockchains and smart contracts. It says that what it does is beyond a simple audit. It is a formal verification, whereby programs are mathematically tested and proven.

CertiK is already quite active in South Korea. In June, it signed a deal with FLETA, a local blockchain platform. The goal of the partnership is to strengthen the company’s systems and help secure other elements of its ecosystem. CertiK also conducted an audit of Terra, publishing a report on the stablecoin on May 4.

Xangle is a Seoul-based crypto currency disclosure platform. It provides “tear-sheet”-style summaries of a token’s fundamentals and structure, including the formal name, registered address, key people, pricing and major milestones. It does so in both Korean and English.

Prior to publishing details about real Binance customers online Wednesday, a hacker operating under the pseudonym “Bnatov Platon” had a month-long conversation with CoinDesk reporters.

In the talks, Platon revealed how he allegedly hacked individuals behind an earlier hack in which 7,000 bitcoin was stolen from the world’s largest exchange.

Platon claimed his aims were altruistic, and that he simply wanted to bring the hackers’ identities to justice. However, it appears he also effectively asked for money in exchange for promises he would not release Binance’s customer data.

Platon and Binance would hold numerous talks, and reportedly struck a deal that was later aborted. CoinDesk has obtained full transcripts of these conversations.

In what appears to be an elaborate game of hackers hacking hackers, an individual operating under the pseudonym “Bnatov Platon” has provided CoinDesk with extensive information about their attempts to obtain millions of dollars in exchange for declining to release information about customers of one of the world’s largest cryptocurrency exchanges, Binance.

Information about the hack, gathered over a month-long interaction with the hacker, was pushed into the public eye today when Platon began posting what he alleged were images and information about real Binance customers, first on an open website and then on Telegram.

The idea customer information might not be safe on the world’s largest exchange was enough to immediately spark the attention of the industry, with major news websites and Twitter influencers swiftly broadcasting the news.

Yet, the full story was – and remains – more complicated than it first appeared.

First, it has deep roots, extending back to an incident in May when an outside group broke into Binance user accounts and stole 7,000 bitcoin. At the time, Binance was, as always, public about its problems, describing it as part of a “large-scale security breach” in which “hackers were able to obtain a large number of user API keys, 2FA codes and potentially other info.”

Unmentioned, however, was that identifying user information may have been leaked.

It’s during this event that Platon alleges the information they have obtained about Binance customers was produced, although in a twist, he says he was not the perpetrator of the hack, but that he hacked an exchange “insider” involved in the heist.

In another turn, Binance alleges the customer data was obtained from an unnamed third-party company it has contracted to conduct its know-your-customer (KYC) since February 2018.

Further, CoinDesk has confirmed at least two of the hundreds of profiles leaked belong to real customers who provided identifying information to the exchange. One of the images we analyzed seemed to have been doctored but the person whose identity appeared in the picture confirmed she had created a Binance account around the time of the leaks.

In conversations with CoinDesk, Platon has claimed they are a “white hat hacker” and, in a few comments, suggested they were asking Binance for a bug bounty for exposing the information. Negotiations broke down, however, and Platon and Binance representatives reported that he asked for 300 bitcoin in order to further expand on the data he held.

In a statement, Binance responded to the “fear, uncertainty, and doubt” cast by the news:

“We would like to inform you that an unidentified individual has threatened and harassed us, demanding 300 BTC in exchange for withholding 10,000 photos that bear similarity to Binance KYC data. We are still investigating this case for legitimacy and relevancy.”

We have contacted Binance for further comment.

Platon claims they have 60,000 pieces of KYC information in his collection.

What follows is what we know about the negotiations and their aftermath.

Moving Money

CoinDesk’s interaction with Platon first began in July, when we began reporting on the movement of bitcoins stolen in the May breach of Binance.

Binance responded to the hack at the time, saying malicious actors acquired customers’ APIs, two-factor codes, and “potentially other information.”

Platon’s take on the incident was different. They allege that an insider within the organization helped make a number of APIs public that allowed the hackers to directly access client accounts. Hackers stored lists of client API keys – the codes used to access their accounts remotely – in text files Platon claimed to be able to acquire. This allowed the hackers to access funds remotely.

The files also “contain extremely serious information” including customers’ email addresses and account passwords, Platon said. The customers at risk had opened Binance accounts between 2018 and 2019.

Using this personal information, the hackers wrote a malicious script that allowed them to instantly withdraw .002 BTC (roughly $23) at a time. The code placed a buy order for an obscure token called the BlockMason Credit Protocol and converted it to bitcoin. The code, which we have examined, could also perform a number of functions using API calls that are no longer open or public. When we tested one API call, however, a simple request for the server time, it was still open. It is unclear if the closed API endpoints were removed or simply hidden.

Platon alleges the stolen coins were held in a wallet hosted by bitcoin software wallet provider Blockchain, the maker of the recently launched PIT exchange.

By following a trail leading from this wallet, Platon discovered that the hackers had laundered 2,000 bitcoins though Bitmex, Yobit, KuCoin, and Huobi and were looking to convert as much as $1 million in bitcoin per day.

How It Worked

Of the 60,000 customer accounts Platon alleges were breached, he shared 636 files with CoinDesk. He hoped the media attention would spur Binance to announce the true extent of the hack, and bring the attackers to justice.

For its part, Binance announced the stolen bitcoin came only from their corporate accounts and did not affect consumers. At the time, the exchange also suspended deposits and withdrawals to protect users. However, the extent of leaked user information was kept secret.

In addition to images of passports, drivers licenses and actual headshots of users holding up their IDs, Platon also supplied a few examples of metadata associated with the images.

For example, this code suggests a user went through KYC on 03/20/2018:

"id": 1573211, "userId": "25276308", "front": "/IDS_IMG20180320/25276308_0_9416819.jpg", "back": "/IDS_IMG20180320/25276308_1_7376587.jpg", "hand": "/IDS_IMG20180320/25276308_2_4413070.jpg", "auditor": "chenxiaozi", "message": "", "status": 1, "createTime": "2018-03-20 08:12:33", "updateTime": "2018-03-21 01:48:33", "number": "s532557730580", "firstName": "m[REDACTED]", "lastName": "[REDACTED]", "type": 2, "sex": 1, "country": "United States of America (USA)（美国）", "email": "[REDACTED]@outlook.com", "version": 1

The KYC took place in China as suggested by the name of the auditor as well as the addition of the “美国” at the end of the country code. It is unclear what the other fields represent.

Further, Platon sent CoinDesk code that he described as accessing a back door placed in Binance servers by an “insider.” Analysis of the code suggests Platon is correct.

“This is highly likely to be an API key attack,” said Viktor Shpak, CTO at blockchain development firm VisibleMagic. “They harvested API keys from somewhere.”

API keys are used to authenticate services within exchanges and other applications and could allow a hacker to do anything from buy cryptocurrency on a victim’s behalf to actually moving cryptocurrency to an outside wallet.

Shpak said code in particular is suggestive of a back door within Binance although CoinDesk was not able to independently verify access via this function and the associated API key.

 public static String getApiKey(String uri, String userId) {        String time = "";            time = get("https://www.binance.com/api/v1/time");        Map<String, String> param = new HashMap<String, String>();        param.put("userIderId);        param.put("descpi" + JSON.parseObject(time).getString("serverTime"));        return post(uri + "/exchange/mgmt/account/getApiKey", param);    }

“Most likely an insider created a handler to get access to user API keys then they harvested those API keys and got access to user data and have built nice toolkit to work through this,” he said.

Though, when confronted with this information at the time, a Binance representative said, “As of the latest from the team, there is currently no evidence that these are KYC images from Binance and they are not watermarked per our system process.”

Platon’s motivation

While speaking with CoinDesk, Platon also contacted Binance’s chief growth officer (CGO), Ted Lin, as part of a multi-front effort to bring the hackers to justice (or so he alleges).

“I personally wanted to make Binance world’s first exchange that capture hackers. It will be extremely positive for Binance’s reputation,” Planton said, who added:

“I informed [Lin] that I have got insider information such as insider’s detail, insider’s communication details with outsiders and even insider’s photo. I informed him that I have details of hackers – server information, their identity, their phone numbers and etc.”

In a message from Lin that Platon shared with CoinDesk, the CGO was receptive to pay for information that could lead to the arrest of the hackers, insiders and recovery of funds.

However, in this same message, Lin rebuffed Platon for the “FUD campaign” he was running.

“As I said, we don’t react to extortions,” Lin said. In earlier conversations with CoinDesk, Platon claimed to be independently wealthy, and the operator of a crypto exchange he says is one-third the size of Binance.

He also said he wasn’t interested in financial remuneration. “When I require money, I can just hack out one exchange account balance (hacker’s). I could retrieve more than 600 or 700 coins easily by hacking hacker’s wallet,” Platon said.

“But I didn’t touch single penny while watching more and more coins are laundered out and moved around to remove track,” he said, claiming he didn’t want to tip the hackers off that he was on their trail.

Conversation breaks down

Despite Platon’s allegedly altruistic aims, CoinDesk later learned from Platon and Binance officials the supposed white hat hacker was requesting 300 bitcoin, about $3 million at July’s exchange rate, paid in 50 installments for his information.

Somewhere along the line, however, negotiations broke down. On July 22, just five days after they initially contacted CoinDesk, Platon said he had stopped negotiating with Binance.

“For about a month of negotiation, they didn’t pay a single penny,” Platon said. “My deal with Binance is broken.”

It was then that Platon’s conversations with Binance degenerated into a hostage negotiation, with Platon threatening to dump whatever customer information he had acquired.

Platon supplied the following alleged exchange with Ted Lin where the negotiations broke down:

Ted Lin, [20.07.19 19:54]
i see you already fed the info you have to the media

Ted Lin, [20.07.19 19:59]
given the damage from your FUD campaign is already done, whatever bounty you were asking for the information would be significantly less. As i said, we don’t react to extortions.  But we are willing to get more information relating to perpetrators if you have useful information that can enable us to put bad guys behind bars and recover funds.

Platon, [21.07.19 16:53]
as i said i don’t need your money

Platon, [21.07.19 16:53]
i am out of deal already

Platon, [21.07.19 16:54]
i am not expecting you to react either.

Platon, [21.07.19 16:59]
but i love to see insider’s and those hacker’s reaction when news is published. once again i am not interested in your reaction.

Ted Lin, [21.07.19 19:04]
I thought you want to see those hackers caught?

Platon, [21.07.19 19:11]
i wanted. but not now.

Platon, [21.07.19 19:12]
i rather step away and keep watching.

Ted Lin, [21.07.19 19:19]
We are still interested in paying for information that can lead to arrest of hackers, insiders, recovery of funds.

Ted Lin, [21.07.19 19:19]
Let us know if you have more info that can achieve those.

Ted Lin, [21.07.19 19:20]
We were going through verification of the type of info you have before you decided not to talk.

Ted Lin, [21.07.19 19:21]
Let me know if you change your mind and want to continue.

Ted Lin, [21.07.19 19:21]
Thanks for your help.

Platon, [21.07.19 19:28]
Then pay me.

“My decision for negotiation with Binance was wrong,” he said, “They are not the right people… so I will just publish all data to its customers.”

Indeed, speaking with a Binance representative on July 22 Platon said, a “current interest of mine is those hackers and insider in your company. Would love to see their reaction when the news is published.”

On August 5, Platon’s threats became a reality, as he uploaded a document dump containing a total of 500 photos for 166 people’s KYC to an open file sharing site, under the pseudonym “Guardian M.”

This was followed up by a second dump containing hundreds of images of individuals holding their IDs, to a Telegram group on Wednesday morning.

Platon’s explanation is simple: they think they are doing the right thing.

“People keep asking, ‘Why are you releasing those KYC photos?,’ ‘How did you get them?’ The reason I am releasing those KYC is simple: To warn you people who are dealing on Binance,” they wrote. “If I needed money, I would sell it underground, not to publish it.”

Image via Twitter. Header image and internal images via CoinDesk.

Platon has not responded to requests for further comment and has not indicated if they will be posting more. We have contacted Binance for comment. John Biggs has supplied marketing and business assistance to Viktor Shpak of VisibleMagic, the developer who analyzed the Binance code.

Dharma announced their decision in a series of official Twitter posts on Aug. 7. Their second tweet in the series reads:

“For now, we're pausing new deposits and loans in Dharma. If you have an existing deposit or loan with Dharma, you'll still be able to access your account and will have the option to withdraw any funds that are not currently locked up.”

While not appearing to offer any further details, Dharma assured the public in the rest of their posts that they were “hard at work” and that the “next chapter of this story is going to be exciting.”

The launch of Dharma

Dharma is a relatively young company. In February, the firm raised $7 million from investors such as Coinbase Ventures. The Block Crypto additionally specified that the funds would go toward Lever, it’s platform designed to support instant margin loans for crypto traders and high-volume investors.

The head of the Dharma Labs’ marketing team, Max Bronstein, reportedly the claimed advantages of Lever as follows:

“Investors can take out loans against a number of different assets in sheer minutes, counter-party risk can be eliminated by smart contracts, borrowers can freely move their principal anywhere they’d like, and most importantly, all of this can be done at almost half of the cost offered by traditional lenders.”

As previously reported by Cointelegraph, Dharma launched its public-facing lending service in April. In the announcement, Dharma said that its service was compatible with any wallet, but that only Ether (ETH) and the stablecoin DAI were currently available. At the end of May, Dharma announced that it added support for the dollar-backed stablecoin USDC.

ShapeShift responded to an alleged vulnerability submitted through its responsible disclosure program in a Medium post published on Aug. 4. Per the announcement, the firm received a vulnerability report through the program on May 1, which described what the researchers believed to be a hardware vulnerability.

The purported vulnerability would allow an attacker to read what was on the wallet’s screen by monitoring power fluctuations to the display in what is known as a side-channel attack. If attackers were monitoring the power levels while sensitive information was displayed on-screen, this would ostensibly give them the opportunity to steal funds from the device.

The “vulnerability” is impractical

ShapeShift notes that, to obtain access to sensitive information displayed on-screen, an attacker would need to have physical access to the device and accurately monitor the KeepKey’s energy consumption with an oscillometer (or a similar instrument) as the information is displayed.

ShapeShift explains that, since this alleged vulnerability would require physical access, there would be a simpler way to acquire the information:

“By comparison, it would be far easier to steal someone’s Recovery Phrase by simply looking over their shoulder while they set up their KeepKey or installing a hidden camera in the room in which it was being initialized.”

ShapeShift states that a side-channel attack would require physical access, specialized equipment, hardware skills and statistical analysis of the data to derive the contents displayed based from only the display’s energy consumption. Furthermore, it claims that, even if all of those requirements were met, it would still be highly difficult to interpret the data:

“Due to the larger display in KeepKey, multiple Recovery Phrase words are displayed at once. This makes it much more difficult to identify individual words (and the order of words) based off the power used by the screen.”

As Cointelegraph reported in March, major hardware wallet manufacturer Ledger has unveiled vulnerabilities in its direct competitor Trezor’s devices. Trezor responded by claiming that none of the weaknesses revealed by Ledger in its report are critical.

Authorities raided Bitcoin (BTC) mining operations in Malaysia after finding that they were stealing electricity resulting in a loss of 3.2 million Malaysian ringgit ($760,736) to the utility company.

33 facilities illegally mining Bitcoin

Malaysian major electric utility Tenaga Nasional Bhd (TNB) fell victim to an illegal cryptocurrency mining operation, which resulted in a $760,736 loss, local media organization Malay Mail reported on Aug. 7. After revealing the malpractice, the company raided 33 premises located near the state capital of Pahang, Kuantan.

Distributing network general manager Siti Sarah Johana Mohd said that the facilities had been mining Bitcoin for six months:

“TNB collected evidence that 23 premises were running Bitcoin mining activities while the other 10 premises were aware of our raid this time around and destroyed the evidence.”

The mining equipment deployed electric power directly from the distribution board passing the meter. “The metered 3 Amp was used only for one lamp and a suction fan. They paid a bill of only 219 Malaysian ringgit ($52) whereas they should have been billed 108,000 Malaysian ringgit ($25,674) a month for the unmetered 1,500 Amp,” Mohd explained.

The government’s positive outlook

While digital currency exchanges and blockchain-based companies in Malaysia previously faced some testing times following regulatory changes in the country, the Malaysian government expressed positive sentiments toward cryptocurrencies and blockchain technology, even though they have classified all cryptocurrencies as securities.

According to Finance Minister Lim Guan Eng, the Malaysian government sees the potential of cryptocurrencies and blockchain to improve a number of sectors of its economy:

“The Ministry of Finance views digital assets, as well as its underlying blockchain technologies, as having the potential to bring about innovation in both old and new industries. In particular, we believe digital assets have a role to play as an alternative fundraising avenue for entrepreneurs and new businesses, and an alternate asset class for investors.”

Meanwhile, Malaysia allows Bitcoin mining and trading with no restrictions. However, the Central Bank of Malaysia issued a statement that Bitcoin is not considered to be legal tender and its users are poorly protected from fraudulent schemes and operational risks.

New Jersey’s Bureau of Securities has announced enforcement action against two state-based initial coin offerings.

Today, Canadian and American regulators coordinated under the North American Securities Administrators Association (NASAA) and executed by New Jersey officials have issued emergency orders against Zoptax and UNOcall, two NJ-based ICOs.

Part of “Operation Cryptosweep,” the Bureau of Securities alleges both ICOs were offering fraudulent securities offerings. Zoptax was seeking between $500,000 and $3.4 million for its Zoptax Coins while UNOcall was issuing tokens and investments in its staking protocol which offered daily interest returns between 0.18%  – 0.88%.

New Jersey’s Attorney General’s Office says the nature of issuance, the purpose of the investments, and misleading consumer information was behind the decision. A full stop on issuance was ordered.

In a statement, New Jersey Attorney General Gurbir S. Grewal said that market rules apply to all businesses, regardless of the medium they exist on:

“[The] Bureau of Securities stands ready to enforce our investor protection laws in cases involving initial coin offerings and cryptocurrency-related investment schemes. As innovation in the online cryptocurrency-related investment market continues, market players need to understand that the rules still apply to them.”

Since January 2019, Operation Cryptosweep has 85 pending or completed cases, 330 inquiries or investigations, and eight enforcement actions, including Zoptax and UNOcall.

Initial coin offerings have come into increased scrutiny following a 2017 breakout and subsequent 2018 collapse. Larger regulatory bodies like the CFTC and SEC have recently gone after ICOs as well. Earlier this week, ICO Kik released a 130-page summary rebuttal against the SEC’s recent enforcement action against it.

Major Chinese city Shenzhen has issued nearly six million blockchain-based invoices in a year since their inception in Aug. 2018.

Shenzhen processed around $550 million through blockchain invoices in a year

According to a report by state news agency Xinhua on Aug. 6, more than 5,300 local companies in 113 sectors have joined Shenzhen’s blockchain invoice program so far.

As reported by Shenzhen Municipal Taxation Bureau, the average daily issuance of the invoice is estimated to account for 44,000, while the total value of the invoices has amounted to 3.9 billion Chinese yuan ($553 million).

First blockchain invoice issued by a local restaurant in Aug. 2018

Shenzhen, a city in Guangdong province and the first economic special zone in China, piloted its first blockchain-powered invoice on Aug. 10, 2018, when the invoice was issued by a local Shenzhen restaurant. As previously reported, Shenzhen’s blockchain invoice system was developed by Chinese internet giant Tencent — the developer of the social media platform WeChat — together with the tax bureau of Shenzhen.

Since the project was launched, the use of blockchain-based invoices has been gaining momentum in a number of industries in Shenzhen, including finance, retailing, catering and hospitality, the new report says. In March 2019, local media reported that Shenzhen issued the country’s first blockchain invoice for a subway ticket.

Recently, Cointelegraph reported on London-based bank Standard Chartered completing its first blockchain-based supply chain financing transaction within Digital Guangdong project, which is a joint initiative between Tencent, China Unicom, China Telecom and China Mobile.

— CZ Binance (@cz_binance) August 7, 2019

The Binance security team states in a blog post that an unnamed individual has allegedly been “threatening and harassing” the exchange. The unidentified person(s) are demanding a Bitcoin ransom worth $3.6 million in exchange for 10,000 customer photos they claim they’ve obtained.

Currently, the Binance team is investigating the hacker’s claims for “legitimacy and relevancy.” The exchange’s management says that the individual has refused to cooperate and is distributing the data to the public and various news media outlets. 

However, the Binance security team clarifies,

“There are inconsistencies when comparing this data to the data in our system. [At present,] no evidence has been supplied that indicates any KYC images have been obtained from Binance, as these images do not contain the digital watermark imprinted by our system.” 

The shared images appear to be the same ones reported in a news article previously published by Decrypt in January and appear to have been taken in February 2018 when Binance reportedly contracted a third-party company to handle KYC checks. The Malta-based crypto exchange says it’s investigating the alleged data leak with cooperation from the third-party firm.

The hacker also claims to have obtained KYC information from several other digital asset exchanges. 

One Reddit user speculates that the hack could be the result of some type of phishing attack or “scam email” that derailed customers and led them to a fake Binance site where they were then instructed to resubmit their credentials to regain access to their locked accounts.

When asked to verify the source of the data, the individual “refused to provide irrefutable evidence of their findings,” according to Binance. The bad actor is now demanding 300 BTC in exchange for the KYC data.

Binance’s management has contacted the appropriate law enforcement agencies and is working with several organizations to further investigate the incident.

Notably, the Binance team is offering a 25 BTC reward (roughly $300,000) to anyone who can provide any information that would help identify the individual(s) and allow the exchange to take legal action against them. The requested information can be submitted by opening a support ticket.

A Canadian Bitcoin (BTC) educator has scammed a crypto scammer and subsequently donated the money to charity.

As the Canadian Broadcasting Corporation reported on Aug. 7, Ben Perrin — a YouTuber who runs an education channel about cryptocurrencies and a marketing director at a Bitcoin exchange — received a scam message offering an investment scheme that would supposedly double his Bitcoin investment every 24 hours. Perrin told CBC News:

"I've come across a lot of these people before, they make ridiculous claims. In this case, every 24 hours, they guaranteed me a doubling of my Bitcoin, and said that if I would just send them some Bitcoin I could start seeing returns."

Perrin decided to outfox the swindler by pretending to be a newcomer to Bitcoin, not understanding what was happening. He faked a Bitcoin wallet statement and said that he had already received a better offer from someone else:

"I said that I would gladly invest $20,000 with them if they would simply send me $100 back, I could then return it to them, just to ensure that everything was legit."

As a result, the scammer sent $50 to Perrin, which the YouTuber further transferred to a philanthropic organization that helps people in Venezuela purchase food with digital currency. 

New crypto scam schemes are on the rise

According to a recent report from computer security firm Skybox Security, cryptocurrency ransomware, botnets and backdoors seem to have replaced cryptocurrency mining malware as the tool of choice for cybercriminals. The report notes:

“Vulnerabilities in container software have increased by 46% in the first half of 2019 compared to the same period in 2018. Looking at the two year trend of container vulnerabilities published in first halves, container vulnerabilities have increased by 240%.”

In June, Cointelegraph reported that attackers reportedly had been exploiting a vulnerability in the Oracle WebLogic server to install Monero (XMR) mining malware, while using certificate files as an obfuscation trick.

A tax bill aimed at refining the Internal Revenue Service’s treatment of cryptocurrencies has moved to the U.S. House of Representatives Ways & Means Committee.

The Virtual Value Tax Fix Act, first legislators first proposed last Congressional session, has been reintroduced by North Carolina’s Rep. Ted Budd (R) on July 25. In what Budd calls a national security issue, the bill would effectively end the double taxation on cryptocurrency transactions by amending 1986’s Internal Revenue Code.

Under the 1986 Code, gains and losses in transactions of real property of like-kind remain unrecognized. As Rep. Budd stated before an introduction of the bill in June, the code places a 40 percent tax rate on transactions. Budd says tax concerns and transaction record-keeping act as a deterrent to adoption.

“The use of digital assets is already treated as a sale of the asset, even though the economic reality of the transaction is a purchase of a simple consumer good,” Budd said.

If passed, the act would free cryptocurrency transactions from double taxation and record-keeping immediately.

Budd’s newest bill adds to other cryptocurrency legislation before Congress. In early July, Rep. Tom Emmer (MN-R) reintroduced the “Safe Harbor for Tax Payers with Forked Assets Act of 2019.” Emmer says the bill will bring clarity on taxable events following cryptocurrency forks and airdrops.

Rep. Budd’s legislation joins fellow North Carolina Representative Patrick Henry’s enthusiasm for cryptocurrency, particularly bitcoin. “I think there’s no capacity to kill Bitcoin,” Henry said speaking in preparation for Facebook’s Libra hearings prior to the U.S. House and Senate Committees,

Jabari and Saudia Monson are required to forfeit an undisclosed sum of bitcoin and bitcoin cash they acquired from selling illicit goods on Dream Market, a prominent anonymized marketplace.

Between July 2018 through January 2019 the couple operated vendor accounts named “Best Buy Meds,” “Trap Mart” and “House Of Dank” to distribute cocaine, cocaine base, methamphetamine, and marijuana.

Following an investigation conducted by the Homeland Security Investigation, the Federal Bureau of Investigation, the Drug Enforcement Administration, and the U.S. Postal Inspection Service, Jabari Monson pleaded guilty to conspiring to distribute controlled substances. He faces a maximum sentence of 40 years and a $5 million fine.

Saudia Monson pleaded guilty to violating the Travel Act and using the mail and internet to distribute controlled substances. She faces a maximum of 5 years in prison and a $250,000 fine.

A sentencing hearing is scheduled for November 19, where U.S. District Judge John A. Mendez will preside.

This week, the bank also completed its first joint supply chain financing transaction with Linklogis for Digital Guangdong – a joint venture between Tencent, China Unicom, China Telecom and China Mobile – aimed to bring digital government services to residents of China’s Guangdong province.

The Seattle-based e-commerce giant is looking for a senior software engineer to join its “Advertising FinTech team focused on a Blockchain ledger,” according to a recent job posting.

This new team, based in Boulder, Colorado, will be focused on billing and reconciliation systems to provide transparency on trans-national financial data, says the job description, adding:

“This is an opportunity to define a technology architectural direction of a greenfield area for Amazon’s advertising business using Blockchain technology.”

When asked for further details, a spokesperson for Amazon said the team “doesn’t have anything to share at this time.”

It is not clear what kind of blockchain Amazon intends to use for advertising. Previously, the blockchain team at Amazon Web Services, the company’s cloud business, built a proprietary blockchain known as the Quantum Ledger Database (QLDB), and AWS’ Managed Blockchain service connects with ethereum and Hyperledger Fabric.

Follow the money

Amazon is joining a number of companies that have tried to use blockchain to simplify the opaque and convoluted value chain in adtech. The general idea is that a distributed ledger can get everyone on the same page about where advertising dollars are going and avoid discrepancies.

Just as a cryptocurrency blockchain shows which addresses sent or received money, how much, and when, an adtech ledger could track how much advertising is being placed and which middlemen are taking a cut, the thinking goes.

It remains to be seen whether Amazon will roll out its blockchain-based advertising reconciliation platform for wider industry use. However, the company has a track record of developing solutions internally which are then offered more broadly.

An example is AWS’ QLDB, a centrally administered immutable data ledger now available in limited preview.

“We have a very long and healthy tradition of bringing forward internally developed projects at Amazon,” Rahul Pathak, general manager of AWS Managed Blockchain, said at CoinDesk’s Consensus 2019 in May.

CEO Ted Livingston told CoinDesk the SEC was “playing dirty” in its June complaint by trying to “simply make [Kik] look bad,” adding:

“What really surprised us is just what lengths the SEC went to twist the facts. They cut quotes and [took them out of context] and that’s something we didn’t expect from the SEC.”

The SEC’s complaint alleges that Toronto-based Kik offered unregistered securities in the form of kin tokens to U.S. investors in an attempt to keep the messaging platform going when revenue failed to materialize.

Kik maintains that its public offering of kin was not a securities sale. In the response, Kik’s attorneys wrote that the SEC recognized its claim was weak and therefore created a “highly selective and misleading” picture of the circumstances of the sale.

The plaintiffs and defendants have met with a judge in the U.S. Court for the Southern District of New York to work out a timeline for going to trial, Livingston said. Kik has asked for a May 2020 trial date, while the SEC has reportedly asked for a date later in the year.

“We wanted this to be resolved as fast as possible,” he said. The judge did not pick a trial date, but, apparently chose Kik’s timetable on discovery, which will conclude by November 2019. Livingston added:

“We’re very confident in our case.”

Out of context

The SEC’s complaint included a number of quotes from Kik board members and executives purporting to show that the company needed to conduct a token sale as a potential securities offering.

The most seemingly damning comment was from an unidentified board member, who apparently referred to the token sale as a “hail Mary,” a term for acts of desperation. However, Kik says that while the board member did write this phrase in an email, its board and executive team did not see the project as “a … final attempt to save a dying company.”

Another board member, “consistent with the Board and Executive Team’s view at the time,” went so far as to write:

“The more I think about it, I think this is a great idea. People call it a hail Mary but to me that is a longshot and I really do not think it is a long shot.”

Livingston told CoinDesk that the quote came from a private email provided to the SEC as part of the discovery process.

In its complaint, the SEC also said a consultant warned Kik that “the Kin offering was, potentially, an offering of securities that needed to be registered,” but Kik’s response says that this, too, was taken out of context.

The consultant’s full remarks added that “in the case of a community currency, there is a good basis to argue that this is not a security.”

A third example from the complaint indicated that Kik told its potential customers the company could ensure Kin’s success on its own, which would suggest that there was an expectation of profit from “the efforts of others,” one of the prongs of the so-called Howey test for determining whether something is a security.

Kik’s response says the next line emphasized that kin’s success would depend on “how many other people can we get excited to compete with us, to join us, to work with us and to build this together.”

Two sales

Kik also emphasizes that it did not conduct a single sale for the Kin token, but rather two sales: a private SAFT (Simple Agreement for Future Tokens) and a public token sale. The SEC conflated the two, undermining its case, the company said.

The SAFT was limited to accredited investors and conducted under an SEC Regulation D filing, meaning Kik believed it fell under certain exemptions to federal registration requirements. The second round was public and saw Kin tokens being sold for ether, according to the filing.

The company says it raised about $50 million in U.S. dollars during the pre-sale. Another $50 million was raised in ether from the general public, with 10,000 purchasers, roughly one-third of whom lived in the U.S., participating.

“The SEC seems to be grouping [the sales together],” Livingston said. “I think what’s important in the response is to be very clear about what facts you agree with and what facts you disagree with.”

Elsewhere in the filing, Kik pushes back against the idea that the token sales were a last-ditch effort to generate revenue.

Kik acknowledged that it had hired an investment bank to look into potentially selling the company, but said it had already started looking into “pursuing a cryptocurrency project” before seven potential buyers declined to acquire or merge with it. Livingston had, according to the filing, been looking into a potential cryptocurrency project as far back as 2012.

Moreover, while the SEC complaint claims that the Ontario Securities Commission (OSC) warned Kik that kin might be a securities offering, the response claims that, as far as Kik is aware, the Canadian regulator did not make a final determination.

The OSC told Kik that the Howey framework, which has been one way of assessing whether an asset is a security, might not be applicable to kin, which Kik, in turn, relayed to the SEC, according to the filing.

Broader impact

The SEC’s actions have taken some toll on Kik, Livingston said.

Among the “detrimental impacts” the lawsuit has had include the monetary cost ($6 million to date, according to Livingston), as well as the time Kik has spent compiling documents for discovery and testifying in Washington, which could instead be spent continuing to build the kin ecosystem.

Kik has provided the SEC with more than 50,000 emails and 200 hours of filmed testimony as part of discovery, he said.

Kin’s price has also suffered, with the token tanking the day the lawsuit was filed, falling from $0.000036 to $0.000025.

The cryptocurrency’s price has continued to decline in the months since, trading around $0.000017 as of press time.

Kik has long said that the outcome of its fight with the SEC – regardless of whether kin is deemed to be a security or not – will result in increased clarity over token sales and how securities laws might apply.

Livingston reiterated the hope to CoinDesk, concluding:

“I think this industry is less concerned about what the guidance is and more just that we have it.”

The Global Markets report revealed losses suffered by major digital assets in July, with Ethereum leading the way with a depreciation of about 29.87 percent. EOS also significantly lost its valuation, falling down the rankings from 4th to 8th on the back of a repeated collapse.

The report also touched upon other aspects, including Binance’s busy development and the listing of new coins on its exchange. The most notable one was Binance’s GBP-backed stablecoin, which was established with an objective to “diversify” stablecoin usage in the cryptospace.

Binance DEX, which is developed on top of the Binance Chain, was a popular target and received a count of 151 listing proposals. The list of new pairs added to the DEX in July also remained relatively high with 41 new pairs.

Source: Binance Research

Binance.com, the parent chain of Binance DEX, has higher liquidity than the DEX. However, Binance DEX recorded an average daily volume of $7.4 million in July, despite market volatility. As a result, it became the most used decentralized exchange in terms of trading volume, with a total volume of $229 million.

Other than the DEX, Binance.com also added 4 new assets to their margin trading platform, which included EOS, ChainLink, Ontology, and Cardano. Binance coin [BNB] was also competent as a borrowable asset at press time, which opened new trade possibilities for investors and traders.

Source: Binance Research

Following its eligibility as a borrowable asset, Binance Coin was also the most borrowed asset in the space, with an annualized rate fluctuating between 7.57 percent and 11.57 percent. However, DeFi rates were significantly higher with DAI’s stability fee set at around 20.5 percent.

Research conducted by the University College London centre for blockchain and retail blockchain consortium and published on Aug. 4 shows that the grocery industry has the highest number of DLT-based supply chain tracking projects. Per the report, nearly half of all the projects analyzed operate within the grocery sector, while about 15% respectively operate in the healthcare and fashion industries.

Lastly, about 39% operate in other, unspecified areas. Among these, the researchers found many non-sector specific projects which either relate to functional specializations (such as logistics or supply chain) or industry-agnostic projects which are focused on a use case capable of application across multiple industries.

71% of focused projects working in grocery

Of the 105 projects studied by the researchers, 49 were focused on a given industry, with 71%, 35% and 43% concentrating only in their operating sectors in the Grocery, Fashion and Healthcare arenas respectively.

Number of DLT supply chain tracking projects | Source: UCL

As Cointelegraph reported yesterday, automaker Volvo Cars, owned by Chinese automotive group Geely, has produced electric cars with cobalt mapped on a blockchain.

At the end of June, Walmart China announced that the company was planning to use blockchain to track food through the supply chain to ensure freshness in perishable groceries.

Ripple, a cryptocurrency founded on the need to offer real-time, instant and cross-border payments, is a no-ordinary asset. The coin’s consensus ledger is unique and a lot different from a majority of the digital currencies because it essentially requires no confirmation. Its original objective of being an alternative for banks and financial institutions to settle payments transparently and at a much lower cost is alive.

As for XRP, the project’s native cryptocurrency, the fact that it’s been doing quite well, according to Coinmarketcap, is a testament to how exciting Ripple is. XRP has been hovering around $0.30 lately, constantly exhibiting bullish signals that favor buyers. And this is partly linked to the recent happenings in the coin’s demand – an influx of XRP users.

Over the past few days, xRapid, a liquidity platform dedicated to banks that use Ripple, has been experiencing an unprecedented increase in traffic. According to the senior vice president of product management at Ripple, Asheesh Birla, the phenomenon is attributed to a massive user increase.

It is safe to say xRapid is Ripple’s most vibrant project right now. It has been active before, but not as alive with multiple banking institutions and other mainstream cash transfer entities as it is right now. It has been so buzzing lately that it is only recently that MoneyGram finally joined the clique of companies relying on it.

MoneyGram Inc, the world’s second-biggest financial transfer firm, chose xRapid for the cross-border transactions and payments. Besides the efficiency guaranteed, the decision is largely attributed to the platform’s surging number of customers.

ILP Connector Implementation Slated for Next Year

The platform’s newly acquired fame hasn’t been without questions, especially on Twitter. A user named Michael iPinky7 sought to know whether xRapid employed the ILP conductor functionality.

ILP connector is designed to address different network hosts and also guarantee swift completion of payments sent across various, independent ledgers. One of its core uses is to safely allow routing of disbursements across digital asset ledgers while eliminating any risk of intermediary failures between the two parties.

In response to the question, therefore, Asheesh Birla was categorical in her answer. First, xRapid, according to her, works as an ILP connector. She, however, said they are still working towards making it a fully-fledged one, a project they expect to complete in early 2020.

Launched in 2018, the Shanghai Wine and Liquor Blockchain Alliance has sought to improve the logistics and quality standards for the growing industry, as middle-class Chinese consumers develop a taste for the supple intoxicant. However, as consumption grows, so does counterfeiting. In a 5 month stint, Chinese authorities reportedly seized nearly 65,000 counterfeit Penfolds bottles, worth upwards of $4 million.

VET price over the last week via Coinbase data.

As a means of combating the illicit Chinese wine trade, Shanghai Waigaoqiao Direct Imported Goods Co (D.I.G.), a major importer in the region, partnered with the public blockchain project VeChainThor to develop an authenticating system for luxury wines. The latest wine registered is the Australian cabernet sauvignon Penfolds Bin 407, which retails at around $60 according to Vivino.

The blockchain-strapped bottles are equipped with a near-field communication (NFC) chip to track the vintage’s provenance. Additionally, the wine traceability platform is overseen by two governmental bodies, and the information stored on the blockchain is independently verified by auditors like DNV GL.

D.I.G. reports a 10 percent increase in sales for vintages tracked by the authenticating platform since launch.

This is in line with sales of other blockchain-enabled foodstuffs. The French supermarket chain Carrefour’s reported a jump in sales after tracking the production of their Mousline potato puree with Nestle’s blockchain technology.

When announced, the wine traceability system was expected to expand to over 500 retail stores within Shanghai. Currently, three stores carry VeChainThor-enabled Penfolds Bin-407 bottles.

The enterprise-focused VeChain ecosystem aims to improve supply chain management. Several firms such as automobile manufacturers BMW and Renault, and global quality registrar DNV GL, use the management system to track products throughout their manufacturing lifecycle.

The United States Federal Reserve Board is planning to release a real-time payments and settlements service in order to boost the payments infrastructure in the country.

A press release published on Aug. 5 reads that the Board of Governors of the Federal Reserve System has requested that Federal Reserve Banks develop a new interbank real-time settlement service to support faster payments in the U.S. The payment system is called FedNow and will purportedly launch in 2023 or 2024.

By launching FedNow, the Fed aims to modernize the country's payment system with a real-time service that can transfer funds around the clock and on weekends and weekdays. The service will purportedly be available to both businesses and the general public.

The Fed believes that such a system will allow consumers to more flexibly manage their money and make time-sensitive payments and is requesting comment on the possible design and functionality of the new service. Commenting on the issue, Federal Reserve Board Governor Lael Brainard said:

"Everyone deserves the same ability to make and receive payments immediately and securely, and every bank deserves the same opportunity to offer that service to its community. FedNow will permit banks of every size in every community across the country to provide real-time payments to their customers."

Reaction from the community

Some members of the cryptocurrency community are nonplussed by the Fed’s plans to launch its own real-time payment system. Anthony Pompliano — co-founder of crypto asset management firm Morgan Creek Digital Assets —  tweeted, “Bitcoin is already available.”

Others were more diplomatic with their response. Gabor Gurbacs, director of digital assets strategy at MV Index Solutions, a subsidiary of investment management firm VanEck, tweeted:

“Great that the @federalreserve is taking a forward looking and intelligent stance regarding innovation in #DigitalAssets and #payments. I recommend considering the benefits of #Bitcoin, a functioning, reliable, trust-minimized base-layer for sound money.”

Other crypto-related companies are positioned to make a contribution to the project. In June, Ripple Labs was elected to the Federal Reserve’s Faster Payments Task Force Steering Committee. The initiative intends to build “fast, safe and ubiquitous payments network in the U.S.”

The Federal Reserve cut interest rates last week, a move which some experts say could be partially responsible for Bitcoin’s (BTC) recent price rally. Fundstrat Global Advisors co-founder Tom Lee said:

“Bitcoin’s becoming increasingly a macrohedge for investors against things that could go wrong. Rate cuts are adding liquidity. Liquidity is pushing money into all these risk assets and also hedges, which is helping Bitcoin.”

Bitcoin price against British pound (GBP) via CoinDesk data.

The source pointed out that it would be very difficult to provide ten years’ worth of information for any platform, adding:

“If they [HMRC] do only go back two or three years, I think the interesting thing here is, that the individuals who went into crypto very early on in 2012-13 will not be affected. The ones who probably made the largest gains won’t be affected, it will be the people who came in around the time crypto peaked.”

In response to a Freedom of Information (FOI) Request submitted by CoinDesk, HMRC said it was withholding details about its demands for information since disclosing them could jeopardize the assessment or collection of tax.

But the agency confirmed such demands are within its remit, saying:

“These exchanges can retain information on their clients and the transactions that they have completed. These transactions may result in potential tax charges and HMRC has the power to issue notices requiring exchanges to provide this information.”

HMRC’s move is following a pattern set by the U.S. Internal Revenue Service (IRS) and other governments.

Last month, the IRS began sending warning letters to over 10,000 Americans who it says participated in virtual currency transactions but did not report them properly.

In the past, Coinbase has fought against what is known as a “John Doe” summons; an attempt by government agencies to gather hitherto unknown customer information, including taxpayer ID, name, birth date, address, and historical transaction records.

In December 2016, the Internal Revenue Service issued the summons demanding that Coinbase produce a wide range of records relating to approximately 500,000 exchange customers. In a partial victory for the company, a court order compelled it to produce records for only 13,000.

Web3 Foundation (W3F) director Ryan Zurrer has announced that he is stepping down from his role at the decentralized web-focused nonprofit to pursue his interest in investments and decentralized autonomous organizations (DAOs).

Zurrer expounded on his departure in a series of Twitter posts on Aug. 5. Zurrer explained that he will be gradually removing himself from the organization, partially in light of its current success. In June, W3F managed the token sale of blockchain interoperability protocol Polkadot (DOT). Zurrer said:

“With the success of the DOTs sale, the success of the @web3summit & the Foundation in a strong position organizationally, I will gradually step away at the end of this year and go back to what my primary passion is — deploying capital and helping early-stage teams build.”

Zurrer also emphasized the high value he places on pursuing successful DAOs, remarking:

“The dream of a sustainable decentralized organization that attracts and filters for great talent, supports genuine innovation and meaningful experimentation, and delivers outlier value to its members is really the most compelling project in my humble opinion.”

DAOs are a special type of organization that is autonomous and managed by smart contracts on a blockchain, not people.

The soon-to-be-former director additionally teased that he has some upcoming surprises to unveil alongside additional details on new DAO ideas at the upcoming Web3 Summit 2019.

According to his LinkedIn profile, Zurrer worked as principal and venture partner at blockchain firm Polychain Capital for two years, before switching to his position at the W3F for a similar amount of time.

DAOs on the rise

As previously reported by Cointelegraph, the law firm Gravel & Sheathe announced that it had helped the developer cooperative dOrg to create a DAO endowed with legal status. The firm moreover believes that this DAO is the first legal entity of its kind within the United States. This DAO reportedly runs on the Ethereum blockchain and is licensed in Vermont under the title “dOrg LLC.”

In June, cryptocurrency exchange Ethfinex, the sister exchange of Bitfinex, launched a DAO. The DAO will purportedly act as a test for how the exchange can decentralize its operations. The DAO was built by DAOstack and is known as efxDAO, with an initial funding budget of $5,000.

As Bloomberg reports on Aug. 5, Seiberg also added that Walmart’s crypto may have a demographic appeal to Democratic legislators who are keen to find an alternative financial infrastructure for people who do not regularly use banks.

According to Seiberg, Libra and Walmart’s crypto proposal differ in scale. Seiberg comments that Facebook has global intentions which do not appear to be shared by Walmart. 

Possible regulatory hangups

However, Seiberg noted that Walmart’s proposal will not likely get automatic approval from Congress. He pointed out that, for instance, Walmart’s coin could be viewed as a threat to small banks and credit unions. Ultimately, though, Seiberg believes that lawmakers would eventually approve Walmart’s proposal.

Regarding the details of Walmart’s proposed currency, Seiberg wrote to clients on Monday that the currency may come in the form of a stored value card that is pegged to the U.S. dollar, somewhat like a rechargeable gift card.

Bloomberg reports that Walmart is not moving to roll out its cryptocurrency in the near future. According to the report, a Walmart spokesperson said on Friday that it is not planning to immediately take advantage of its newly-filed patent.

Walmart’s digital currency patent

As previously reported by Cointelegraph, Walmart filed for a patent for a “System and Method for Digital Currency via Blockchain” that was published on Aug. 1. As outlined in the patent, Walmart appears to be filing for a standard, fiat-pegged stablecoin as outlined in the following passage:

“Generating one digital currency unit by tying the one digital currency unit to a regular currency; storing information of the one digital currency unit into a block of a blockchain; buying or paying the one digital currency unit.”

Co-founders of Israeli blockchain firm Orbs are being sued by former partner Elad Arad following the dissolution of his shares in a failed joint venture, Cointree Capital.

According to Israeli business media Globes, Arad is suing partners and brothers Uriel and Daniel Peled, Orbs, Cointree Management Microverse, Hexa Labs, and Hexa Solutions following a failed 18-month mediation in a Tel Aviv court. Arad claims the brothers committed “conspiracy, deceit and serious fraud, as well as unlawful enrichment.” The official report accuses the brothers of breach of fiduciary duty, oppression of a minority shareholder, breach of contract and breach of commitments, theft of commercial secrets, and negligence.

Initial reports suggest that the lawsuit could reach into the tens of millions of dollars as Arad is demanding a settlement from the Elad brothers’ 12 separate digital currency offerings including Leadcoin, Kin, Orbs, Sirin, and Stox.

Arad claims the brothers allocated his Cointree Capital shares towards Hexa, a non-profit blockchain foundation. From the lawsuit:

“The respondents (the Peled brothers) exploited Cointree Capital’s business opportunities to set up new companies based upon new opportunities in the new world of virtual currencies, as well as ideas and plans of Cointree Capital.”

Orbs first launched in 2017 with an initial coin offering following in May 2018. It raised $118 million. A $15 million investment followed in December from Korean firm Kakao Investments. 

Interestingly, transactions between Orbs and two recent and large ICO’s Kik and Sirin Labs are listed. Arad claims he was the contact point between Kik and the Peled brothers before they cut him off. Currently, Kik is under fire from the SEC for an unregistered securities offering. Earlier this year, Sirin Labs CEO Moshe Hogeg was given two months by an Israeli judge to settle an investment misappropriation charge by a Chinese investor. The current connection between Kik, Sirin Labs, and Orbs is unspecified.

Responding to the suit, Orbs says the claimant’s demands are unremarkable. “We have not yet managed to study the claim documents, which were sent to us at the same time as they were distributed to the press and media,” they wrote. “Unfortunately, the statement of claim did not surprise us, and follows previous attempts and threats on the part of the claimant.”

As initially reported by CoinDesk in July, Orbs was tapped by the White House to build out a blockchain-based peace plan for ongoing hostilities between Palestine and Israel. Dubbed “Peace to Prosperity,” the proposal would have required Orbs to build out a blockchain land registry.

The United States Federal Reserve Board is planning to release a real-time payments and settlements service in order to boost the payments infrastructure in the country.

A press release published on Aug. 5 reads that the Board of Governors of the Federal Reserve System has requested that Federal Reserve Banks develop a new interbank real-time settlement service to support faster payments in the U.S. The payment system is called FedNow and will purportedly launch in 2023 or 2024.

By launching FedNow, the Fed aims to modernize the country's payment system with a real-time service that can transfer funds around the clock and on weekends and weekdays. The service will purportedly be available to both businesses and the general public.

The Fed believes that such a system will allow consumers to more flexibly manage their money and make time-sensitive payments and is requesting comment on the possible design and functionality of the new service. Commenting on the issue, Federal Reserve Board Governor Lael Brainard said:

"Everyone deserves the same ability to make and receive payments immediately and securely, and every bank deserves the same opportunity to offer that service to its community. FedNow will permit banks of every size in every community across the country to provide real-time payments to their customers."

Reaction from the community

Some members of the cryptocurrency community are nonplussed by the Fed’s plans to launch its own real-time payment system. Anthony Pompliano — co-founder of crypto asset management firm Morgan Creek Digital Assets —  tweeted, “Bitcoin is already available.”

Others were more diplomatic with their response. Gabor Gurbacs, director of digital assets strategy at MV Index Solutions, a subsidiary of investment management firm VanEck, tweeted:

“Great that the @federalreserve is taking a forward looking and intelligent stance regarding innovation in #DigitalAssets and #payments. I recommend considering the benefits of #Bitcoin, a functioning, reliable, trust-minimized base-layer for sound money.”

Other crypto-related companies are positioned to make a contribution to the project. In June, Ripple Labs was elected to the Federal Reserve’s Faster Payments Task Force Steering Committee. The initiative intends to build “fast, safe and ubiquitous payments network in the U.S.”

The Federal Reserve cut interest rates last week, a move which some experts say could be partially responsible for Bitcoin’s (BTC) recent price rally. Fundstrat Global Advisors co-founder Tom Lee said:

“Bitcoin’s becoming increasingly a macrohedge for investors against things that could go wrong. Rate cuts are adding liquidity. Liquidity is pushing money into all these risk assets and also hedges, which is helping Bitcoin.”

During the recently held meetup in London, Binance’s CEO, Changpeng Zhao (CZ), dropped a hint that lending services tied to the exchange’s margin trading may be launched this month. Last month, Binance noted that the addition of margin trading was an “effort to push the industry forward and towards the freedom of money.”

While responding to questions asked during an AMA session, Zhao said:

“We’re launching quite a number of other things. Binance Jersey will ramp up its service in Europe. We just launched margin trading. We are about to launch Binance Futures, but before that, around mid-August, we’re going to launch lending.”

Interestingly, Binance users lending their coins for margin trading will also be able to lend “other users money for many purposes.” Lenders will get the interest paid by the borrowers “for that kind of loan. So we expect to bring a lot more custodians onto Binance.com,” CZ added.

Unfortunately, with Binance approaching the United States market with caution, US citizens may not be able to enjoy the new product. For example, a Redditor said:

“It really sucks to be a US citizen. They do not want us to have money. They only want us as fodder to future wars.”

It’s More Profitable to Dominate than to Scam

Fortunately, while appreciating the move by Zhao to introduce lending and more custodians, saiiboost, a Redditor, said:

“CZ has already stated that he strongly believes in producing the best possible product. Why? Well, look at how massive Binance has become being the top dog. CZ sees it in his best interest to keep Binance legit and successful; it’s far more profitable to dominate the (crypto) scene rather than to scam it. This space is just starting off. Imagine what Binance will be when we get into multiple trillions. Binance may rival Amazon in value.”

Plans to introduce lending hence more coin custodians come just weeks after Binance launched its margin trading platform.

In July, the exchange launched version 2.0 of its platform effectively activating margin trading. However, although the exchange indicated that it would enable a 20X leverage, it started with a X3 leverage.

Yi He, Binance’s co-founder, noted that:

“Though the current cryptocurrency market and legacy platforms for margin trading pose greater risks and benefits at the same time, we are confident that its development coupled with more knowledge on proper risk management will help realize greater benefits in the long run.”

Crypto Custodians Help Reduce the Gap between Crypto and Fiat Exchanges

Nonetheless, according to Tim Enneking, Managing Director, Digital Capital Management, the introduction of custodians is intended to put cryptocurrency exchanges at par with fiat currency exchanges.

While speaking to Forbes, Enneking said:

“Crypto is working towards the same desired end-state of where we are today with fiat exchanges. The market is forming the same separations of parties to create the triumvirate of broker dealers, qualified custodians, and (crypto) exchanges working together.”

At the moment, details about the lending features have not been released to the public. Therefore, cryptocurrency enthusiasts are unsure of the process to vet trustworthy borrowers. For example, some suggest that Binance should have “some sort of history to show how they [borrowers] have paid off debts in time in the past.”

Others took to Reddit to express their thoughts. One Redditor questioned:

“If they don’t pay, who should we use to go after them? Should we get a bunch of us together to form a group to lend lots of money out?”

Samsung is adding to its blockchain dapp arsenal by including over a dozen new apps in its Blockchain Keystore online app market.

Launched in March 2019, Samsung’s online dapp store, Blockchain Keystore, has grown from an initial four applications to a total of seventeen. The four original dapps included a password wallet, a game, a social media app, and a billing app while new dapps include an assortment of products from social media app Anpan to entertainment app The Hunters, per CoinDesk Korea.

Samsung is steaming ahead in the space. It is one of the first large companies to develop crypto-centric products with the release of the Galaxy S10 this year.

“Although other companies have not done so yet, we have already made a blockchain wallet and released it,” Samsung said in a statement.

The tech giant is building up its wallet’s features in preparation for market competition. Samsung’s wallet system only allows for storage of Ethereum based ERC-20 tokens and protocols.

The number one competitor on the list is Apple who has yet to release a wallet, said CoinDesk Korea. In June, Apple released a ‘CryptoKit’ for iOS 13, showing adoption may not be far off for the Cupertino giant.

Early last month, LG trademarked “ThinQ Wallet,” a product that market insiders believe is the foundation for a crypto wallet and ecosystem. The trademark states the ThinQ Wallet will offer transaction, settlement, and e-money services. 

China’s Huawei, another of Samsung’s competitors, has not developed a cryptographic wallet too date. Speaking with CoinDesk Korea in May, Huawei said they “have no plans to put a password wallet on its smartphone because the Chinese government has not authorized it.” 

Samsung’s efforts are, arguably, off to a slow start. There are only 30 reviews for dapp products exist on Samsung’s Blockchain Keystore compared to the thousands available on the Google Play Store.

Breitman, one of the co-founders of the Tezos blockchain, has signed a binding commitment with Founders Pledge to donate a portion of her initial coin offering (ICO) proceeds. Tezos raised $232 million in mid-2017 in what was the largest ICO at the time. Breitman says she’s in no rush to cash out. Her eventual gifts should amount to millions of dollars, though, that depends on how Tezos and crypto perform in the next few years.

“I haven’t exercised the put option for Tezos yet, but I have signed the pledge,” Breitman told CoinDesk. “I think a lot more founders in the space should consider doing this.”

The price of XTZ over the last week via Coinbase data.

How lucrative the pledge may end up being is still to be determined, however.

Per the terms of the Tezos fundraising documents, the Tezos Foundation has committed to acquire the company that Breitman owns in part, Dynamic Ledger Solutions (DLS), though it will not pay the full price till a full four years have passed and the Tezos blockchain has met certain performance criteria.

If the acquisition had simply happened on the day the sale closed, the Breitmans would have earned approximately $17.7 million from the proceeds alone, plus roughly 68 million XTZ, which would be worth approximately $97 million at today’s prices. The Breitmans own 90 percent of DLS, Kathleen told CoinDesk.

It is not known whether the contract calls for them to be paid in a percentage of the bitcoin and ether from the sale or in the spot value of those assets in dollars. As of now, Kathleen is the only member of the Breitman family that has made a commitment to Founders Pledge.

Regardless, Breitman has committed to giving 15 percent of her earnings from that sale.

“I also liked the idea of credible commitments, because that’s part of why blockchains are powerful,” she said.

Breitman’s causes

Founders Pledge aims to get as many entrepreneurs as possible to commit a part of their potential exit winnings to charitable purposes.

Late last year, forecasters projected that 2019 alone could see $200 billion in initial public offerings.

“We’re thrilled about Kathleen making this meaningful commitment to do good and joining the Founders Pledge community,” Founders Pledge President Matt Hunter told CoinDesk. “We’re currently working on some big things for crypto investors and entrepreneurs which we can’t talk about just yet, but we’re very excited.”

Breitman tells CoinDesk she has appreciated joining the community of founders who have also taken the pledge. She likes the way fellow founders think about engaging with social change.

“Obviously you start a company because you want to solve a problem,” Breitman explained. “That attitude carrying over to a charitable environment makes for really compelling conversations.”

She’s still thinking about where she might put her commitment. “I don’t have to decide until I actually do it,” Breitman said. She says she volunteered at youth services non-profit Covenant House in college and she still values their work.

“I [also] think there’s a lot of interesting progress going on in different disease categories,” she added.

More crypto donors

CoinDesk has also confirmed that Joey Krug, one of the key creators of Augur, now at Pantera Capital, has also signed the Founders Pledge.

Krug’s commitment is a little more open-ended. He plans to give 5 percent of his next exit on whatever the next company he founds ends up being. It’s not clear what that will be or when, however. “It’s kind of just a no-brainer,” Krug told CoinDesk.

As a member of the team at Pantera, he’s also helped Founders Pledge get introduced to the new startup leaders he’s backed. Kathleen noted that there’s been talk of social good efforts in crypto, but it still tends to be a bit inwardly focused.

“I think a lot of the cryptocurrency stuff is more centered around making cryptocurrencies an action of charity,” Breitman said. “I think for efficacy, my personal philosophy would be like: Hey, to whom much is given, it’s better to do something more helpful in the short term”

Breitman said that she wants to “target things where money can be spent more immediately and less moonshot-y stuff, since that is how I would define my day job.”

Krug is following a fairly similar approach. He expects he’ll give about half of his eventual exit to known non-profits with a good track record of preventing death, disease or disability (such as the Malaria Foundation). He’ll probably also give half to some kind of neglected basic research.

For example, Krug noted that every time the energy density of batteries leaps forward, it has broad ramifications for social good, but not a lot of people invest in fundamental battery research.

“That kind of stuff I think is interesting to me, things that people are overlooking,” Krug said.

Krug is currently the co-chief investment officer at Pantera Capital.

Since finishing her efforts to help the Tezos Foundation launch the blockchain, Breitman has been at work on a gaming company that will use Tezos infrastructure.

Coinbase co-founder Brian Armstrong has also signed the Giving Pledge, a similar commitment but for billionaires such as Warren Buffett, MacKenzie Bezos and Pierre Omidyar.

The CEO of crypto payments firm Circle, Jeremy Allaire, suggested that macroeconomic turmoil is responsible for Bitcoin’s (BTC) recent growth.

During the interview with CNBC on Aug. 5, Allaire suggested that Bitcoin has become a safe haven used to store wealth in times of geopolitical and macroeconomic turmoil. Allaire stated that there is a correlation between the recent coin’s gains and the devaluation of the Chinese yuan that just touched its 11-year low, stating:

“You can very clearly see some macro correlation there. I think the broader theme of, you know, Bitcoin specifically, crypto more broadly participating in these global macro forces is becoming more and more clear. Rising nationalism, rising amounts of currency conflict, trade wars, these all obviously are supportive of a non-sovereign, highly secure digital store of value.”

China softening its stance on crypto?

The interviewer also asked Allaire whether he believes the growth was caused by an inflow of Chinese capital or just investors trying to capitalize on the anticipation of this inflow, given that Bitcoin is not easily purchasable in China. 

Allaire answered that China is a significant participant in the cryptocurrency market through offshore firms, and that the government is softening its stance towards Bitcoin.

The Circle CEO cited how, in July, the Bank of China, one of the four biggest state-owned commercial banks in the country, released an infographic on its website, illustrating what Bitcoin is and how it has been legally recognized as property in the country’s courts. 

Lastly, Allaire noted that major cryptocurrency exchange Huobi has created a Communist Party branch as part of its legal obligations, signalling that it is developing closer ties with the Chinese state. Under Chinese law, any company with more than three Communist Party member employees must set up its own branch.

As Cointelegraph reported in April, Allaire stated that the crypto and blockchain industry is a fundamental redesign of the basics of how civic society will ultimately function. At a panel dubbed “Money and Payments in the Digital Age,” Allaire said that blockchain and crypto are more than just payments instruments, but also a fundamental new system for record-keeping.

According to the data compiled by TokenAnalyst, the outflow of funds on the derivatives exchange remained on the upper side than inflows. However, last month, this figure skyrocketed from below $100 million in the previous month.

On the contrary, last year despite the dominance of bear on the crypto trading market, the exchange brought in $1.3 billion in funds and the inflow of funds was always greater than the outflow from the exchange.

Doom of a mammoth?

Seychelles-registered BitMEX is one of the largest crypto derivatives platforms, onboarding traders mostly from Asian markets. It offers leverage up to 100x for its futures contracts. According to its website, the platform handled $5.32 billion worth futures contracts trades in the last 24 hours, while the figure for the last 30 days is $136.63 billion.

The exchange, however, is not allowed to offer its services in the United States as it requires a license from the Commodities and Futures Commission (CFTC) to operate in the country.

Last month, Bloomberg revealed that the US futures market watchdog is investigating on the exchange under the suspicion of the availability of its services to the US-based clients.

This might be one of the key factors behind the massive increase of the outgoing funds from the exchange.

However, the nature of the investigation is not yet known as neither CFTC nor BitMEX revealed anything officially.

Earlier this year, Arther Hayes, the co-founder and CEO of BitMEX, revealed that the exchange is considering to expand its services by launching a cryptocurrency options platform.

Galaxy Digital CEO Mike Novogratz says that Bitcoin’s 2019 rally could have “real legs” given today’s turbulent macroeconomic and geopolitical landscape. 

In a tweet posted on Aug. 5, Novgoratz remarked that:

“With the yuan over 7.0, an FX war, instability in HKG and the beginnings of capital flight, $Btc rally could have real legs.”

‘May you live in interesting times’

Amid a protracted trade war with the United States, China has this week redoubled its own antagonistic policies in response to recent fresh tariff threats from U.S. President Donald Trump: first, by allowing the yuan to sink to its lowest levels in almost a decade and second, by demanding that all state-owned firms suspend imports of U.S. agricultural products.

In response, stocks and currencies from emerging markets teetered, while safe-haven assets such as the Japanese yen, U.S. Treasuries and gold saw an uptick, as Bloomberg has reported. 

The bookies are meanwhile raising their bets on more interest-rate cuts from the U.S. Federal Reserve as the trade war escalates. 

All this appears to be spurring Bitcoin’s uptrend as an emerging safe-haven asset of the digital era — the coin has today surged almost 9% to trade above $11,700 by press time. 

As Morgan Creek Digital Assets Anthony Pompliano tweeted:

“UPDATE: Bitcoin is performing as designed during times of global instability.”

Hong Kong has seen over 500 arrests since early June, as the Guardian reports live today, with chief executive Carrie Lam declaring this morning that the city-wide strikes and protests have pushed the Hong Kong to “to the verge of a very dangerous situation.”

“Bitcoin could easily continue to surpass expectations”

Meanwhile, popular crypto market analyst and trader Filb Filb told Cointelegraph that Bitcoin’s currency price action underscores its value proposition of digital scarcity. He explained: 

"The market response to the depreciation of the yuan and capital flight controls imposed on Chinese citizens really emphasizes the value proposition of Bitcoin and what an increase in demand can do to price when there is such a limited supply on offer to the market [...] Bitcoin could easily continue to surpass expectations for the remainder of 2019."

A fresh report from Delphi Digital has argued that macroeconomic factors are creating the “perfect storm” to ignite Bitcoin’s price appreciation, underscoring that the faltering world economy is consolidating the cryptocurrency’s position as “digital gold.” 

Ahead of his latest comments, Pompliano had for his part stated that the European Central Bank’s expected dovish turn will be “rocket fuel” for Bitcoin. 

The head of global fundamental credit strategy at Deutsche Bank has also remarked that central banks’ dovish policies are positively impacting “alternative” currencies such as Bitcoin while hurting investment banks.

However, according to fTLD director of compliance and policy, Heather Diaz, told Mashable:

“More recently, as the financial services arena has evolved, particularly as it relates to fintechs offering financial products/services (e.g., P2P payment providers, cryptocurrency companies), we have found that some prospective Registrants were seeking domains to enhance their legitimacy to market to regulated entities and/or consumers.”

By reinstating the old restrictions, fLTD is trying to “further secure these trusted spaces,” she said. Oddly, Diaz also said the registry has never accepted a crypto company’s application for a .bank domain name.

The name costs approximately $1,000 to host per year.

Included in this potential freeze are P2P payment providers, money transfer businesses, and microloan providers. The company hasn’t formally enacted the restrictions, and has opened the decision to public comment until August 24.

In July, competing registrar EnCirca, launched an ethereum naming service (ENS) to provide domain names at .eth locations. EnCirca currently hosts 61 percent of the .bank domain names registered, according to fTLD data.

Regulatory frameworks for Bitcoin (BTC) and other cryptocurrencies have developed differently around the globe, ranging from outright bans to so-called “crypto-friendly” legislation. Despite being an economic leader, many within the crypto industry argue that the United States in particular has not yet gained a leading position among governments actively working to regulate this new technology. 

We asked the U.S. Chamber of Commerce’s Julie Stitzel, the Commodity Future and Trading Commission’s (CFTC) Heath P. Tarbert, NYU Blockchain’s Timothy Paolini and other industry experts to comment on the current situation with regulation U.S. regulation of crypto and blockchain.

The U.S. — the economic powerhouse home to Wall Street and Silicon Valley — faces some challenges in creating a cohesive regulatory landscape for cryptocurrency. Various U.S. regulatory agencies have different stances toward crypto. Back in 2013, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) classified Bitcoin as “an example of a decentralized virtual currency.” The following year, the Internal Revenue Service (IRS) proposed treating Bitcoin and other digital currencies “as property for U.S. federal tax purposes,” and in 2015, the U.S. Commodity Futures Trading Commission (CFTC) considered digital currencies as commodities. 

Earlier this summer, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) had jointly outlined regulatory compliance issues for cryptocurrency custodians and had not discovered those circumstances in which crypto could comply with the SEC’s Customer Protection Rule. 

Resulting from complex legal and tax requirements imposed by several U.S. regulatory agencies, some of which has been named above, the U.S. still does not have a clear regulatory framework for the crypto industry at the federal level. 

Why has the U.S. not yet become a leader in crypto regulation?

“The United States’ history of adopting and amending legal frameworks in the financial sector have resulted in a robust regulatory structure that enables market stability and effectively manages risk. Although the digital assets market is still nascent, there is a risk and concern that the United States may be left behind — missing an opportunity to cultivate innovation, create jobs and grow the economy by leveraging the emerging technology. 

“As the largest economy in the world, the United States must think differently about how we apply existing regulatory and supervisory principles to digital assets—including cryptocurrency. Appropriately classifying digital assets and determining the federal entity with the jurisdiction to regulate and supervise them is one way to provide regulatory clarity for innovators and signal that the United States is a leader in the digital asset space.”

— Julie Stitzel, Vice president, U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness

“U.S. markets are the global standard with respect to their breadth, depth, and integrity.  This is the result of a careful balance of innovation, well-calibrated regulation, and a pro-business environment.  While the U.S. regulatory landscape is by no means perfect, there are always tradeoffs with any system. U.S. regulators have been careful not to stifle innovation during the development of this nascent space. 

“As we move forward, applying solid, principles-based regulations that appreciate the transformational potential of new technologies—such as crypto assets and other 21st century commodities—will be key to ensuring America’s free enterprise system remains the envy of the world.” 

— Heath P. Tarbert, Chairman of the U.S. Commodity Futures Trading Commission

“Regulatory authority in the U.S. is split among too many diverse agencies, and they all have their missions and their interests to assert. In addition to FInCEN, the SEC, the CFTC, and the IRS all chiming in on how to categorize and treat cryptoassets, you have 50 state governments to think about as well.  In the hurry to assert authority, many of these over regulated, based on what they thought they understood. So we are stuck with thinking about cryptocurrency as if all crypto was the same kind of interest, and could be regulated monolithically by each agency. Congress cannot fix the situation because Congress is too busy being divided along party lines. States cannot fix it because they simply do not agree on how to address the myriad issues that genuinely are posed by cryptoassets.

“Our regulatory scheme is split among too many diverse agencies and authorities, and tends to be too monolithic is its approach and too slow to react to the rapidly developing new technology.”

— Carol Goforth, Professor of Law at the University of Arkansas, Former Arkansas Bar Foundation Professor of Law

“Who said that the U.S. isn’t the leader in crypto regulation? On the contrary, from an anti-money laundering (AML) regulatory perspective, the U.S. is certainly the leader. The U.S. provided formal guidance on how crypto exchanges should be regulated as far back as 2013. Last year, I coauthored a study with Tom Robinson of Elliptic where we analyzed Bitcoin transaction data from various Bitcoin conversion services around the world. We found that the proportion of illicit bitcoins going into exchanges coming from darknet markets and mixers was much lower in North America compared to Europe. The likely reason: U.S. Treasury’s FinCEN – the organization that enforces AML regulations—had provided much clearer guidance than you had in Europe. 

“Another example of U.S. leadership in crypto AML regulation is how the Financial Action Task Force, the global body that sets standards for AML and counter-terrorist financing, recently provided guidance for regulating digital assets. This guidance was driven by the U.S. and largely reflects the framework already enforced by FinCEN.”

— Yaya J. Fanusie, Adjunct fellow at the Foundation for Defense of Democracies, Chief Strategist for Cryptocurrency AML Strategies, LLC

“One issue in the US is that this asset class falls on the borderlines of multiple regulatory agencies so jurisdiction has caused uncertainty. The SEC has stepped up as the primary regulator and is taking decisive action when it comes to enforcement but a more measured approach when it comes to actual regulation. There are many that feel the existing laws on the books are sufficient. This has caused many in the industry to look to Congress (despite significant hurdles there) for rules. 

“In addition to the above, many in the US feel that we already have robust capital markets and opportunities for innovation and don’t have the same incentives as other jurisdictions that may be using this new industry to spur their economies. We, however, do not think this is the right approach for the US.”

— Georgia Quinn, General counsel of CoinList, Counsel at the Ellenoff, Grossman & Schole

“For the most part, U.S. governmental entities are allowing cryptocurrency regulation to evolve incrementally from existing laws, some of which have been in place for eighty or more years, rather than proposing a new regulatory framework.  The advantage of this approach is that the government is allowing guidelines over the development and use of the technology to develop organically rather than establishing premature oversight which could inadvertently stifle a technology that is still in its infancy.

“The disadvantage is that the lack of regulatory oversight makes it difficult for cryptocurrencies and related businesses to operate in the US without bright-line rules. A number of foreign countries (e.g. Switzerland, Gibraltar and Bermuda) have taken the opposite approach in an effort to establish cryptocurrency governance frameworks to lure investment.

“By allowing crypto regulation to evolve organically rather than developing a new framework to accommodate it, the U.S. is deliberately taking a wait and see approach on crypto. While there are undisputed advantages to blockchain technology that are being explored throughout government and the private sector, the advent of cryptocurrencies threatens to disrupt the way the U.S. has traditionally regulated securities and commodities.  As important, some cryptocurrencies allow a simple by-pass of the myriad regulations promulgated under the Bank Secrecy Act and the Investment Advisors Act that are designed to protect consumers and prevent financial crimes such as money laundering. Those complexities, combined with the challenge of addressing issues that fall under the jurisdiction several different regulatory authorities, are key factors preventing the U.S. from becoming a world leader in crypto regulation.”

— John S. Wagster, Co-chair of Frost Brown Todd blockchain and digital currency industry team

“Regulatory uncertainty is one of the biggest obstacles to advancing blockchain technology. Specific to the U.S., the sheer number of regulatory bodies and variety of interpretations has made it difficult for U.S. firms to operate. 

“Until the U.S. can articulate a single set of standards to govern the industry we expect to see more innovations coming from other regions, which is why we established Bittrex International—to advance our mission of fostering blockchain innovation on a secure and reliable platform—while continuing our active dialogue with the appropriate U.S. regulators.”

— Bill Shihara, Co-founder and CEO at Bittrex

“When new technologies are introduced, regulators are often faced with a similar set of key challenges: how to best protect consumers while fostering innovation, promoting competition, enforcing legacy regulations and resisting the urge to overregulate.  

“With respect to blockchain, policymakers have been hesitant to introduce specific regulations for a variety of hurdles.

“First off, blockchain-enabled digital assets are not a homogeneous asset class—they may feature characteristics of securities, commodities, currency units, or a combination thereof—and affect markets that cross national borders.  In the U.S., we have various agencies exercising overlapping authority; for example, the Commodity Futures Trading Commission, the Financial “Crimes Enforcement Network, the Federal Trade Commission, the Internal Revenue Service and the Securities and Exchange Commission may have concurrent or overlapping jurisdiction over a particular blockchain-related matter. 

“Secondly, while the standard policy cycle often takes several years, emerging companies often develop disruptive technologies with global reach in just a few months. And history has taught us that regulations that are too fast can be just as bad as regulations that are too slow.

“Despite these challenges, U.S. policymakers are calling for action and are showing a strong effort to engage with participants in the blockchain space – a crucial step on the path toward meaningful regulation and guidance.”

— Dario de Martino, Partner in the Corporate Department of Morrison & Foerster, Co-chair of MoFo’s Blockchain + Smart Contracts Group

"The U.S. Financial Crimes Enforcement Network issued its first guidance addressing cryptocurrency companies in 2013, and since then regulatory action for digital assets has been slow to develop but has picked up in the past few years as an increasing number of federal and state agencies see the unique opportunities and risks associated with the sector. 

“Crafting sensible regulations to provide a stable regulatory framework for digital assets without choking their innovativeness is a difficult task and not one a federal or state agency should undertake without a solid foundation of experience with digital assets.  

“There is a growing buzz complaining that the lack of regulations has impeded progress for digital assets, but it would quickly become a loud scream if regulations were issued in a way that missed the mark altogether.  

“The slow, deliberative nature of the regulatory process in the U.S. can be frustrating to be sure, but it reduces the type of big swings and misses risked by reactionary and under-informed regulations." 

— Michael Nonaka, Partner and a co-chair of the Financial Services Group at Covington & Burling LLP, Member of the American Bar Association and Banking Law Committee

“In my 8+ years of dealing with the government, I can tell you that there is significantly more red tape, formalities, and bureaucracy than you can imagine to deal with prior to getting anything done in DC. Even bringing up issues for discussion takes immense effort as there is always a never ending barrage of topics competing for attention. 

“Also, probably the biggest contributing factor is the huge educational gap that currently exists in DC. Many of the regulators are only now trying to wrap their heads around crypto and blockchain. Thankfully we have people like Kristin Smith and her team at the Blockchain Association to help educate DC and speed up the process towards much needed regulatory clarity.

“Washington is also notoriously reactive. We saw this in the case with Facebook’s Libra initiative, which caught regulators completely off guard and led to a scramble of fact-finding hearings. That all being said, I do have confidence that the US government will eventually figure it out and do so smartly so as to not stifle innovation and to [hopefully] position the US as the standard setter for crypto regulation.”

— Timothy Paolini, Board Member, NYU Blockchain

Regulatory frameworks for Bitcoin (BTC) and other cryptocurrencies have developed differently around the globe, ranging from outright bans to so-called “crypto-friendly” legislation. Despite being an economic leader, many within the crypto industry argue that the United States in particular has not yet gained a leading position among governments actively working to regulate this new technology. 

We asked the U.S. Chamber of Commerce’s Julie Stitzel, the Commodity Future and Trading Commission’s (CFTC) Heath P. Tarbert, NYU Blockchain’s Timothy Paolini and other industry experts to comment on the current situation with regulation U.S. regulation of crypto and blockchain.

The U.S. — the economic powerhouse home to Wall Street and Silicon Valley — faces some challenges in creating a cohesive regulatory landscape for cryptocurrency. Various U.S. regulatory agencies have different stances toward crypto. Back in 2013, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) classified Bitcoin as “an example of a decentralized virtual currency.” The following year, the Internal Revenue Service (IRS) proposed treating Bitcoin and other digital currencies “as property for U.S. federal tax purposes,” and in 2015, the U.S. Commodity Futures Trading Commission (CFTC) considered digital currencies as commodities. 

Earlier this summer, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) had jointly outlined regulatory compliance issues for cryptocurrency custodians and had not discovered those circumstances in which crypto could comply with the SEC’s Customer Protection Rule. 

Resulting from complex legal and tax requirements imposed by several U.S. regulatory agencies, some of which has been named above, the U.S. still does not have a clear regulatory framework for the crypto industry at the federal level. 

Why has the U.S. not yet become a leader in crypto regulation?

“The United States’ history of adopting and amending legal frameworks in the financial sector have resulted in a robust regulatory structure that enables market stability and effectively manages risk. Although the digital assets market is still nascent, there is a risk and concern that the United States may be left behind — missing an opportunity to cultivate innovation, create jobs and grow the economy by leveraging the emerging technology. 

“As the largest economy in the world, the United States must think differently about how we apply existing regulatory and supervisory principles to digital assets—including cryptocurrency. Appropriately classifying digital assets and determining the federal entity with the jurisdiction to regulate and supervise them is one way to provide regulatory clarity for innovators and signal that the United States is a leader in the digital asset space.”

— Julie Stitzel, Vice president, U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness

“U.S. markets are the global standard with respect to their breadth, depth, and integrity.  This is the result of a careful balance of innovation, well-calibrated regulation, and a pro-business environment.  While the U.S. regulatory landscape is by no means perfect, there are always tradeoffs with any system. U.S. regulators have been careful not to stifle innovation during the development of this nascent space. 

“As we move forward, applying solid, principles-based regulations that appreciate the transformational potential of new technologies—such as crypto assets and other 21st century commodities—will be key to ensuring America’s free enterprise system remains the envy of the world.” 

— Heath P. Tarbert, Chairman of the U.S. Commodity Futures Trading Commission

“Regulatory authority in the U.S. is split among too many diverse agencies, and they all have their missions and their interests to assert. In addition to FInCEN, the SEC, the CFTC, and the IRS all chiming in on how to categorize and treat cryptoassets, you have 50 state governments to think about as well.  In the hurry to assert authority, many of these over regulated, based on what they thought they understood. So we are stuck with thinking about cryptocurrency as if all crypto was the same kind of interest, and could be regulated monolithically by each agency. Congress cannot fix the situation because Congress is too busy being divided along party lines. States cannot fix it because they simply do not agree on how to address the myriad issues that genuinely are posed by cryptoassets.

“Our regulatory scheme is split among too many diverse agencies and authorities, and tends to be too monolithic is its approach and too slow to react to the rapidly developing new technology.”

— Carol Goforth, Professor of Law at the University of Arkansas, Former Arkansas Bar Foundation Professor of Law

“Who said that the U.S. isn’t the leader in crypto regulation? On the contrary, from an anti-money laundering (AML) regulatory perspective, the U.S. is certainly the leader. The U.S. provided formal guidance on how crypto exchanges should be regulated as far back as 2013. Last year, I coauthored a study with Tom Robinson of Elliptic where we analyzed Bitcoin transaction data from various Bitcoin conversion services around the world. We found that the proportion of illicit bitcoins going into exchanges coming from darknet markets and mixers was much lower in North America compared to Europe. The likely reason: U.S. Treasury’s FinCEN – the organization that enforces AML regulations—had provided much clearer guidance than you had in Europe. 

“Another example of U.S. leadership in crypto AML regulation is how the Financial Action Task Force, the global body that sets standards for AML and counter-terrorist financing, recently provided guidance for regulating digital assets. This guidance was driven by the U.S. and largely reflects the framework already enforced by FinCEN.”

— Yaya J. Fanusie, Adjunct fellow at the Foundation for Defense of Democracies, Chief Strategist for Cryptocurrency AML Strategies, LLC

“One issue in the US is that this asset class falls on the borderlines of multiple regulatory agencies so jurisdiction has caused uncertainty. The SEC has stepped up as the primary regulator and is taking decisive action when it comes to enforcement but a more measured approach when it comes to actual regulation. There are many that feel the existing laws on the books are sufficient. This has caused many in the industry to look to Congress (despite significant hurdles there) for rules. 

“In addition to the above, many in the US feel that we already have robust capital markets and opportunities for innovation and don’t have the same incentives as other jurisdictions that may be using this new industry to spur their economies. We, however, do not think this is the right approach for the US.”

— Georgia Quinn, General counsel of CoinList, Counsel at the Ellenoff, Grossman & Schole

“For the most part, U.S. governmental entities are allowing cryptocurrency regulation to evolve incrementally from existing laws, some of which have been in place for eighty or more years, rather than proposing a new regulatory framework.  The advantage of this approach is that the government is allowing guidelines over the development and use of the technology to develop organically rather than establishing premature oversight which could inadvertently stifle a technology that is still in its infancy.

“The disadvantage is that the lack of regulatory oversight makes it difficult for cryptocurrencies and related businesses to operate in the US without bright-line rules. A number of foreign countries (e.g. Switzerland, Gibraltar and Bermuda) have taken the opposite approach in an effort to establish cryptocurrency governance frameworks to lure investment.

“By allowing crypto regulation to evolve organically rather than developing a new framework to accommodate it, the U.S. is deliberately taking a wait and see approach on crypto. While there are undisputed advantages to blockchain technology that are being explored throughout government and the private sector, the advent of cryptocurrencies threatens to disrupt the way the U.S. has traditionally regulated securities and commodities.  As important, some cryptocurrencies allow a simple by-pass of the myriad regulations promulgated under the Bank Secrecy Act and the Investment Advisors Act that are designed to protect consumers and prevent financial crimes such as money laundering. Those complexities, combined with the challenge of addressing issues that fall under the jurisdiction several different regulatory authorities, are key factors preventing the U.S. from becoming a world leader in crypto regulation.”

— John S. Wagster, Co-chair of Frost Brown Todd blockchain and digital currency industry team

“Regulatory uncertainty is one of the biggest obstacles to advancing blockchain technology. Specific to the U.S., the sheer number of regulatory bodies and variety of interpretations has made it difficult for U.S. firms to operate. 

“Until the U.S. can articulate a single set of standards to govern the industry we expect to see more innovations coming from other regions, which is why we established Bittrex International—to advance our mission of fostering blockchain innovation on a secure and reliable platform—while continuing our active dialogue with the appropriate U.S. regulators.”

— Bill Shihara, Co-founder and CEO at Bittrex

“When new technologies are introduced, regulators are often faced with a similar set of key challenges: how to best protect consumers while fostering innovation, promoting competition, enforcing legacy regulations and resisting the urge to overregulate.  

“With respect to blockchain, policymakers have been hesitant to introduce specific regulations for a variety of hurdles.

“First off, blockchain-enabled digital assets are not a homogeneous asset class—they may feature characteristics of securities, commodities, currency units, or a combination thereof—and affect markets that cross national borders.  In the U.S., we have various agencies exercising overlapping authority; for example, the Commodity Futures Trading Commission, the Financial “Crimes Enforcement Network, the Federal Trade Commission, the Internal Revenue Service and the Securities and Exchange Commission may have concurrent or overlapping jurisdiction over a particular blockchain-related matter. 

“Secondly, while the standard policy cycle often takes several years, emerging companies often develop disruptive technologies with global reach in just a few months. And history has taught us that regulations that are too fast can be just as bad as regulations that are too slow.

“Despite these challenges, U.S. policymakers are calling for action and are showing a strong effort to engage with participants in the blockchain space – a crucial step on the path toward meaningful regulation and guidance.”

— Dario de Martino, Partner in the Corporate Department of Morrison & Foerster, Co-chair of MoFo’s Blockchain + Smart Contracts Group

"The U.S. Financial Crimes Enforcement Network issued its first guidance addressing cryptocurrency companies in 2013, and since then regulatory action for digital assets has been slow to develop but has picked up in the past few years as an increasing number of federal and state agencies see the unique opportunities and risks associated with the sector. 

“Crafting sensible regulations to provide a stable regulatory framework for digital assets without choking their innovativeness is a difficult task and not one a federal or state agency should undertake without a solid foundation of experience with digital assets.  

“There is a growing buzz complaining that the lack of regulations has impeded progress for digital assets, but it would quickly become a loud scream if regulations were issued in a way that missed the mark altogether.  

“The slow, deliberative nature of the regulatory process in the U.S. can be frustrating to be sure, but it reduces the type of big swings and misses risked by reactionary and under-informed regulations." 

— Michael Nonaka, Partner and a co-chair of the Financial Services Group at Covington & Burling LLP, Member of the American Bar Association and Banking Law Committee

“In my 8+ years of dealing with the government, I can tell you that there is significantly more red tape, formalities, and bureaucracy than you can imagine to deal with prior to getting anything done in DC. Even bringing up issues for discussion takes immense effort as there is always a never ending barrage of topics competing for attention. 

“Also, probably the biggest contributing factor is the huge educational gap that currently exists in DC. Many of the regulators are only now trying to wrap their heads around crypto and blockchain. Thankfully we have people like Kristin Smith and her team at the Blockchain Association to help educate DC and speed up the process towards much needed regulatory clarity.

“Washington is also notoriously reactive. We saw this in the case with Facebook’s Libra initiative, which caught regulators completely off guard and led to a scramble of fact-finding hearings. That all being said, I do have confidence that the US government will eventually figure it out and do so smartly so as to not stifle innovation and to [hopefully] position the US as the standard setter for crypto regulation.”

— Timothy Paolini, Board Member, NYU Blockchain

Regulatory frameworks for Bitcoin (BTC) and other cryptocurrencies have developed differently around the globe, ranging from outright bans to so-called “crypto-friendly” legislation. Despite being an economic leader, many within the crypto industry argue that the United States in particular has not yet gained a leading position among governments actively working to regulate this new technology. 

We asked the U.S. Chamber of Commerce’s Julie Stitzel, the Commodity Future and Trading Commission’s (CFTC) Heath P. Tarbert, NYU Blockchain’s Timothy Paolini and other industry experts to comment on the current situation with regulation U.S. regulation of crypto and blockchain.

The U.S. — the economic powerhouse home to Wall Street and Silicon Valley — faces some challenges in creating a cohesive regulatory landscape for cryptocurrency. Various U.S. regulatory agencies have different stances toward crypto. Back in 2013, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) classified Bitcoin as “an example of a decentralized virtual currency.” The following year, the Internal Revenue Service (IRS) proposed treating Bitcoin and other digital currencies “as property for U.S. federal tax purposes,” and in 2015, the U.S. Commodity Futures Trading Commission (CFTC) considered digital currencies as commodities. 

Earlier this summer, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) had jointly outlined regulatory compliance issues for cryptocurrency custodians and had not discovered those circumstances in which crypto could comply with the SEC’s Customer Protection Rule. 

Resulting from complex legal and tax requirements imposed by several U.S. regulatory agencies, some of which has been named above, the U.S. still does not have a clear regulatory framework for the crypto industry at the federal level. 

Why has the U.S. not yet become a leader in crypto regulation?

“The United States’ history of adopting and amending legal frameworks in the financial sector have resulted in a robust regulatory structure that enables market stability and effectively manages risk. Although the digital assets market is still nascent, there is a risk and concern that the United States may be left behind — missing an opportunity to cultivate innovation, create jobs and grow the economy by leveraging the emerging technology. 

“As the largest economy in the world, the United States must think differently about how we apply existing regulatory and supervisory principles to digital assets—including cryptocurrency. Appropriately classifying digital assets and determining the federal entity with the jurisdiction to regulate and supervise them is one way to provide regulatory clarity for innovators and signal that the United States is a leader in the digital asset space.”

— Julie Stitzel, Vice president, U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness

“U.S. markets are the global standard with respect to their breadth, depth, and integrity.  This is the result of a careful balance of innovation, well-calibrated regulation, and a pro-business environment.  While the U.S. regulatory landscape is by no means perfect, there are always tradeoffs with any system. U.S. regulators have been careful not to stifle innovation during the development of this nascent space. 

“As we move forward, applying solid, principles-based regulations that appreciate the transformational potential of new technologies—such as crypto assets and other 21st century commodities—will be key to ensuring America’s free enterprise system remains the envy of the world.” 

— Heath P. Tarbert, Chairman of the U.S. Commodity Futures Trading Commission

“Regulatory authority in the U.S. is split among too many diverse agencies, and they all have their missions and their interests to assert. In addition to FInCEN, the SEC, the CFTC, and the IRS all chiming in on how to categorize and treat cryptoassets, you have 50 state governments to think about as well.  In the hurry to assert authority, many of these over regulated, based on what they thought they understood. So we are stuck with thinking about cryptocurrency as if all crypto was the same kind of interest, and could be regulated monolithically by each agency. Congress cannot fix the situation because Congress is too busy being divided along party lines. States cannot fix it because they simply do not agree on how to address the myriad issues that genuinely are posed by cryptoassets.

“Our regulatory scheme is split among too many diverse agencies and authorities, and tends to be too monolithic is its approach and too slow to react to the rapidly developing new technology.”

— Carol Goforth, Professor of Law at the University of Arkansas, Former Arkansas Bar Foundation Professor of Law

“Who said that the U.S. isn’t the leader in crypto regulation? On the contrary, from an anti-money laundering (AML) regulatory perspective, the U.S. is certainly the leader. The U.S. provided formal guidance on how crypto exchanges should be regulated as far back as 2013. Last year, I coauthored a study with Tom Robinson of Elliptic where we analyzed Bitcoin transaction data from various Bitcoin conversion services around the world. We found that the proportion of illicit bitcoins going into exchanges coming from darknet markets and mixers was much lower in North America compared to Europe. The likely reason: U.S. Treasury’s FinCEN – the organization that enforces AML regulations—had provided much clearer guidance than you had in Europe. 

“Another example of U.S. leadership in crypto AML regulation is how the Financial Action Task Force, the global body that sets standards for AML and counter-terrorist financing, recently provided guidance for regulating digital assets. This guidance was driven by the U.S. and largely reflects the framework already enforced by FinCEN.”

— Yaya J. Fanusie, Adjunct fellow at the Foundation for Defense of Democracies, Chief Strategist for Cryptocurrency AML Strategies, LLC

“One issue in the US is that this asset class falls on the borderlines of multiple regulatory agencies so jurisdiction has caused uncertainty. The SEC has stepped up as the primary regulator and is taking decisive action when it comes to enforcement but a more measured approach when it comes to actual regulation. There are many that feel the existing laws on the books are sufficient. This has caused many in the industry to look to Congress (despite significant hurdles there) for rules. 

“In addition to the above, many in the US feel that we already have robust capital markets and opportunities for innovation and don’t have the same incentives as other jurisdictions that may be using this new industry to spur their economies. We, however, do not think this is the right approach for the US.”

— Georgia Quinn, General counsel of CoinList, Counsel at the Ellenoff, Grossman & Schole

“For the most part, U.S. governmental entities are allowing cryptocurrency regulation to evolve incrementally from existing laws, some of which have been in place for eighty or more years, rather than proposing a new regulatory framework.  The advantage of this approach is that the government is allowing guidelines over the development and use of the technology to develop organically rather than establishing premature oversight which could inadvertently stifle a technology that is still in its infancy.

“The disadvantage is that the lack of regulatory oversight makes it difficult for cryptocurrencies and related businesses to operate in the US without bright-line rules. A number of foreign countries (e.g. Switzerland, Gibraltar and Bermuda) have taken the opposite approach in an effort to establish cryptocurrency governance frameworks to lure investment.

“By allowing crypto regulation to evolve organically rather than developing a new framework to accommodate it, the U.S. is deliberately taking a wait and see approach on crypto. While there are undisputed advantages to blockchain technology that are being explored throughout government and the private sector, the advent of cryptocurrencies threatens to disrupt the way the U.S. has traditionally regulated securities and commodities.  As important, some cryptocurrencies allow a simple by-pass of the myriad regulations promulgated under the Bank Secrecy Act and the Investment Advisors Act that are designed to protect consumers and prevent financial crimes such as money laundering. Those complexities, combined with the challenge of addressing issues that fall under the jurisdiction several different regulatory authorities, are key factors preventing the U.S. from becoming a world leader in crypto regulation.”

— John S. Wagster, Co-chair of Frost Brown Todd blockchain and digital currency industry team

“Regulatory uncertainty is one of the biggest obstacles to advancing blockchain technology. Specific to the U.S., the sheer number of regulatory bodies and variety of interpretations has made it difficult for U.S. firms to operate. 

“Until the U.S. can articulate a single set of standards to govern the industry we expect to see more innovations coming from other regions, which is why we established Bittrex International—to advance our mission of fostering blockchain innovation on a secure and reliable platform—while continuing our active dialogue with the appropriate U.S. regulators.”

— Bill Shihara, Co-founder and CEO at Bittrex

“When new technologies are introduced, regulators are often faced with a similar set of key challenges: how to best protect consumers while fostering innovation, promoting competition, enforcing legacy regulations and resisting the urge to overregulate.  

“With respect to blockchain, policymakers have been hesitant to introduce specific regulations for a variety of hurdles.

“First off, blockchain-enabled digital assets are not a homogeneous asset class—they may feature characteristics of securities, commodities, currency units, or a combination thereof—and affect markets that cross national borders.  In the U.S., we have various agencies exercising overlapping authority; for example, the Commodity Futures Trading Commission, the Financial “Crimes Enforcement Network, the Federal Trade Commission, the Internal Revenue Service and the Securities and Exchange Commission may have concurrent or overlapping jurisdiction over a particular blockchain-related matter. 

“Secondly, while the standard policy cycle often takes several years, emerging companies often develop disruptive technologies with global reach in just a few months. And history has taught us that regulations that are too fast can be just as bad as regulations that are too slow.

“Despite these challenges, U.S. policymakers are calling for action and are showing a strong effort to engage with participants in the blockchain space – a crucial step on the path toward meaningful regulation and guidance.”

— Dario de Martino, Partner in the Corporate Department of Morrison & Foerster, Co-chair of MoFo’s Blockchain + Smart Contracts Group

"The U.S. Financial Crimes Enforcement Network issued its first guidance addressing cryptocurrency companies in 2013, and since then regulatory action for digital assets has been slow to develop but has picked up in the past few years as an increasing number of federal and state agencies see the unique opportunities and risks associated with the sector. 

“Crafting sensible regulations to provide a stable regulatory framework for digital assets without choking their innovativeness is a difficult task and not one a federal or state agency should undertake without a solid foundation of experience with digital assets.  

“There is a growing buzz complaining that the lack of regulations has impeded progress for digital assets, but it would quickly become a loud scream if regulations were issued in a way that missed the mark altogether.  

“The slow, deliberative nature of the regulatory process in the U.S. can be frustrating to be sure, but it reduces the type of big swings and misses risked by reactionary and under-informed regulations." 

— Michael Nonaka, Partner and a co-chair of the Financial Services Group at Covington & Burling LLP, Member of the American Bar Association and Banking Law Committee

“In my 8+ years of dealing with the government, I can tell you that there is significantly more red tape, formalities, and bureaucracy than you can imagine to deal with prior to getting anything done in DC. Even bringing up issues for discussion takes immense effort as there is always a never ending barrage of topics competing for attention. 

“Also, probably the biggest contributing factor is the huge educational gap that currently exists in DC. Many of the regulators are only now trying to wrap their heads around crypto and blockchain. Thankfully we have people like Kristin Smith and her team at the Blockchain Association to help educate DC and speed up the process towards much needed regulatory clarity.

“Washington is also notoriously reactive. We saw this in the case with Facebook’s Libra initiative, which caught regulators completely off guard and led to a scramble of fact-finding hearings. That all being said, I do have confidence that the US government will eventually figure it out and do so smartly so as to not stifle innovation and to [hopefully] position the US as the standard setter for crypto regulation.”

— Timothy Paolini, Board Member, NYU Blockchain

Regulatory frameworks for Bitcoin (BTC) and other cryptocurrencies have developed differently around the globe, ranging from outright bans to so-called “crypto-friendly” legislation. Despite being an economic leader, many within the crypto industry argue that the United States in particular has not yet gained a leading position among governments actively working to regulate this new technology. 

We asked the U.S. Chamber of Commerce’s Julie Stitzel, the Commodity Future and Trading Commission’s (CFTC) Heath P. Tarbert, NYU Blockchain’s Timothy Paolini and other industry experts to comment on the current situation with regulation U.S. regulation of crypto and blockchain.

The U.S. — the economic powerhouse home to Wall Street and Silicon Valley — faces some challenges in creating a cohesive regulatory landscape for cryptocurrency. Various U.S. regulatory agencies have different stances toward crypto. Back in 2013, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) classified Bitcoin as “an example of a decentralized virtual currency.” The following year, the Internal Revenue Service (IRS) proposed treating Bitcoin and other digital currencies “as property for U.S. federal tax purposes,” and in 2015, the U.S. Commodity Futures Trading Commission (CFTC) considered digital currencies as commodities. 

Earlier this summer, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) had jointly outlined regulatory compliance issues for cryptocurrency custodians and had not discovered those circumstances in which crypto could comply with the SEC’s Customer Protection Rule. 

Resulting from complex legal and tax requirements imposed by several U.S. regulatory agencies, some of which has been named above, the U.S. still does not have a clear regulatory framework for the crypto industry at the federal level. 

Why has the U.S. not yet become a leader in crypto regulation?

“The United States’ history of adopting and amending legal frameworks in the financial sector have resulted in a robust regulatory structure that enables market stability and effectively manages risk. Although the digital assets market is still nascent, there is a risk and concern that the United States may be left behind — missing an opportunity to cultivate innovation, create jobs and grow the economy by leveraging the emerging technology. 

“As the largest economy in the world, the United States must think differently about how we apply existing regulatory and supervisory principles to digital assets—including cryptocurrency. Appropriately classifying digital assets and determining the federal entity with the jurisdiction to regulate and supervise them is one way to provide regulatory clarity for innovators and signal that the United States is a leader in the digital asset space.”

— Julie Stitzel, Vice president, U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness

“U.S. markets are the global standard with respect to their breadth, depth, and integrity.  This is the result of a careful balance of innovation, well-calibrated regulation, and a pro-business environment.  While the U.S. regulatory landscape is by no means perfect, there are always tradeoffs with any system. U.S. regulators have been careful not to stifle innovation during the development of this nascent space. 

“As we move forward, applying solid, principles-based regulations that appreciate the transformational potential of new technologies—such as crypto assets and other 21st century commodities—will be key to ensuring America’s free enterprise system remains the envy of the world.” 

— Heath P. Tarbert, Chairman of the U.S. Commodity Futures Trading Commission

“Regulatory authority in the U.S. is split among too many diverse agencies, and they all have their missions and their interests to assert. In addition to FInCEN, the SEC, the CFTC, and the IRS all chiming in on how to categorize and treat cryptoassets, you have 50 state governments to think about as well.  In the hurry to assert authority, many of these over regulated, based on what they thought they understood. So we are stuck with thinking about cryptocurrency as if all crypto was the same kind of interest, and could be regulated monolithically by each agency. Congress cannot fix the situation because Congress is too busy being divided along party lines. States cannot fix it because they simply do not agree on how to address the myriad issues that genuinely are posed by cryptoassets.

“Our regulatory scheme is split among too many diverse agencies and authorities, and tends to be too monolithic is its approach and too slow to react to the rapidly developing new technology.”

— Carol Goforth, Professor of Law at the University of Arkansas, Former Arkansas Bar Foundation Professor of Law

“Who said that the U.S. isn’t the leader in crypto regulation? On the contrary, from an anti-money laundering (AML) regulatory perspective, the U.S. is certainly the leader. The U.S. provided formal guidance on how crypto exchanges should be regulated as far back as 2013. Last year, I coauthored a study with Tom Robinson of Elliptic where we analyzed Bitcoin transaction data from various Bitcoin conversion services around the world. We found that the proportion of illicit bitcoins going into exchanges coming from darknet markets and mixers was much lower in North America compared to Europe. The likely reason: U.S. Treasury’s FinCEN – the organization that enforces AML regulations—had provided much clearer guidance than you had in Europe. 

“Another example of U.S. leadership in crypto AML regulation is how the Financial Action Task Force, the global body that sets standards for AML and counter-terrorist financing, recently provided guidance for regulating digital assets. This guidance was driven by the U.S. and largely reflects the framework already enforced by FinCEN.”

— Yaya J. Fanusie, Adjunct fellow at the Foundation for Defense of Democracies, Chief Strategist for Cryptocurrency AML Strategies, LLC

“One issue in the US is that this asset class falls on the borderlines of multiple regulatory agencies so jurisdiction has caused uncertainty. The SEC has stepped up as the primary regulator and is taking decisive action when it comes to enforcement but a more measured approach when it comes to actual regulation. There are many that feel the existing laws on the books are sufficient. This has caused many in the industry to look to Congress (despite significant hurdles there) for rules. 

“In addition to the above, many in the US feel that we already have robust capital markets and opportunities for innovation and don’t have the same incentives as other jurisdictions that may be using this new industry to spur their economies. We, however, do not think this is the right approach for the US.”

— Georgia Quinn, General counsel of CoinList, Counsel at the Ellenoff, Grossman & Schole

“For the most part, U.S. governmental entities are allowing cryptocurrency regulation to evolve incrementally from existing laws, some of which have been in place for eighty or more years, rather than proposing a new regulatory framework.  The advantage of this approach is that the government is allowing guidelines over the development and use of the technology to develop organically rather than establishing premature oversight which could inadvertently stifle a technology that is still in its infancy.

“The disadvantage is that the lack of regulatory oversight makes it difficult for cryptocurrencies and related businesses to operate in the US without bright-line rules. A number of foreign countries (e.g. Switzerland, Gibraltar and Bermuda) have taken the opposite approach in an effort to establish cryptocurrency governance frameworks to lure investment.

“By allowing crypto regulation to evolve organically rather than developing a new framework to accommodate it, the U.S. is deliberately taking a wait and see approach on crypto. While there are undisputed advantages to blockchain technology that are being explored throughout government and the private sector, the advent of cryptocurrencies threatens to disrupt the way the U.S. has traditionally regulated securities and commodities.  As important, some cryptocurrencies allow a simple by-pass of the myriad regulations promulgated under the Bank Secrecy Act and the Investment Advisors Act that are designed to protect consumers and prevent financial crimes such as money laundering. Those complexities, combined with the challenge of addressing issues that fall under the jurisdiction several different regulatory authorities, are key factors preventing the U.S. from becoming a world leader in crypto regulation.”

— John S. Wagster, Co-chair of Frost Brown Todd blockchain and digital currency industry team

“Regulatory uncertainty is one of the biggest obstacles to advancing blockchain technology. Specific to the U.S., the sheer number of regulatory bodies and variety of interpretations has made it difficult for U.S. firms to operate. 

“Until the U.S. can articulate a single set of standards to govern the industry we expect to see more innovations coming from other regions, which is why we established Bittrex International—to advance our mission of fostering blockchain innovation on a secure and reliable platform—while continuing our active dialogue with the appropriate U.S. regulators.”

— Bill Shihara, Co-founder and CEO at Bittrex

“When new technologies are introduced, regulators are often faced with a similar set of key challenges: how to best protect consumers while fostering innovation, promoting competition, enforcing legacy regulations and resisting the urge to overregulate.  

“With respect to blockchain, policymakers have been hesitant to introduce specific regulations for a variety of hurdles.

“First off, blockchain-enabled digital assets are not a homogeneous asset class—they may feature characteristics of securities, commodities, currency units, or a combination thereof—and affect markets that cross national borders.  In the U.S., we have various agencies exercising overlapping authority; for example, the Commodity Futures Trading Commission, the Financial “Crimes Enforcement Network, the Federal Trade Commission, the Internal Revenue Service and the Securities and Exchange Commission may have concurrent or overlapping jurisdiction over a particular blockchain-related matter. 

“Secondly, while the standard policy cycle often takes several years, emerging companies often develop disruptive technologies with global reach in just a few months. And history has taught us that regulations that are too fast can be just as bad as regulations that are too slow.

“Despite these challenges, U.S. policymakers are calling for action and are showing a strong effort to engage with participants in the blockchain space – a crucial step on the path toward meaningful regulation and guidance.”

— Dario de Martino, Partner in the Corporate Department of Morrison & Foerster, Co-chair of MoFo’s Blockchain + Smart Contracts Group

"The U.S. Financial Crimes Enforcement Network issued its first guidance addressing cryptocurrency companies in 2013, and since then regulatory action for digital assets has been slow to develop but has picked up in the past few years as an increasing number of federal and state agencies see the unique opportunities and risks associated with the sector. 

“Crafting sensible regulations to provide a stable regulatory framework for digital assets without choking their innovativeness is a difficult task and not one a federal or state agency should undertake without a solid foundation of experience with digital assets.  

“There is a growing buzz complaining that the lack of regulations has impeded progress for digital assets, but it would quickly become a loud scream if regulations were issued in a way that missed the mark altogether.  

“The slow, deliberative nature of the regulatory process in the U.S. can be frustrating to be sure, but it reduces the type of big swings and misses risked by reactionary and under-informed regulations." 

— Michael Nonaka, Partner and a co-chair of the Financial Services Group at Covington & Burling LLP, Member of the American Bar Association and Banking Law Committee

“In my 8+ years of dealing with the government, I can tell you that there is significantly more red tape, formalities, and bureaucracy than you can imagine to deal with prior to getting anything done in DC. Even bringing up issues for discussion takes immense effort as there is always a never ending barrage of topics competing for attention. 

“Also, probably the biggest contributing factor is the huge educational gap that currently exists in DC. Many of the regulators are only now trying to wrap their heads around crypto and blockchain. Thankfully we have people like Kristin Smith and her team at the Blockchain Association to help educate DC and speed up the process towards much needed regulatory clarity.

“Washington is also notoriously reactive. We saw this in the case with Facebook’s Libra initiative, which caught regulators completely off guard and led to a scramble of fact-finding hearings. That all being said, I do have confidence that the US government will eventually figure it out and do so smartly so as to not stifle innovation and to [hopefully] position the US as the standard setter for crypto regulation.”

— Timothy Paolini, Board Member, NYU Blockchain

Regulatory frameworks for Bitcoin (BTC) and other cryptocurrencies have developed differently around the globe, ranging from outright bans to so-called “crypto-friendly” legislation. Despite being an economic leader, many within the crypto industry argue that the United States in particular has not yet gained a leading position among governments actively working to regulate this new technology. 

We asked the U.S. Chamber of Commerce’s Julie Stitzel, the Commodity Future and Trading Commission’s (CFTC) Heath P. Tarbert, NYU Blockchain’s Timothy Paolini and other industry experts to comment on the current situation with regulation U.S. regulation of crypto and blockchain.

The U.S. — the economic powerhouse home to Wall Street and Silicon Valley — faces some challenges in creating a cohesive regulatory landscape for cryptocurrency. Various U.S. regulatory agencies have different stances toward crypto. Back in 2013, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) classified Bitcoin as “an example of a decentralized virtual currency.” The following year, the Internal Revenue Service (IRS) proposed treating Bitcoin and other digital currencies “as property for U.S. federal tax purposes,” and in 2015, the U.S. Commodity Futures Trading Commission (CFTC) considered digital currencies as commodities. 

Earlier this summer, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) had jointly outlined regulatory compliance issues for cryptocurrency custodians and had not discovered those circumstances in which crypto could comply with the SEC’s Customer Protection Rule. 

Resulting from complex legal and tax requirements imposed by several U.S. regulatory agencies, some of which has been named above, the U.S. still does not have a clear regulatory framework for the crypto industry at the federal level. 

Why has the U.S. not yet become a leader in crypto regulation?

“The United States’ history of adopting and amending legal frameworks in the financial sector have resulted in a robust regulatory structure that enables market stability and effectively manages risk. Although the digital assets market is still nascent, there is a risk and concern that the United States may be left behind — missing an opportunity to cultivate innovation, create jobs and grow the economy by leveraging the emerging technology. 

“As the largest economy in the world, the United States must think differently about how we apply existing regulatory and supervisory principles to digital assets—including cryptocurrency. Appropriately classifying digital assets and determining the federal entity with the jurisdiction to regulate and supervise them is one way to provide regulatory clarity for innovators and signal that the United States is a leader in the digital asset space.”

— Julie Stitzel, Vice president, U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness

“U.S. markets are the global standard with respect to their breadth, depth, and integrity.  This is the result of a careful balance of innovation, well-calibrated regulation, and a pro-business environment.  While the U.S. regulatory landscape is by no means perfect, there are always tradeoffs with any system. U.S. regulators have been careful not to stifle innovation during the development of this nascent space. 

“As we move forward, applying solid, principles-based regulations that appreciate the transformational potential of new technologies—such as crypto assets and other 21st century commodities—will be key to ensuring America’s free enterprise system remains the envy of the world.” 

— Heath P. Tarbert, Chairman of the U.S. Commodity Futures Trading Commission

“Regulatory authority in the U.S. is split among too many diverse agencies, and they all have their missions and their interests to assert. In addition to FInCEN, the SEC, the CFTC, and the IRS all chiming in on how to categorize and treat cryptoassets, you have 50 state governments to think about as well.  In the hurry to assert authority, many of these over regulated, based on what they thought they understood. So we are stuck with thinking about cryptocurrency as if all crypto was the same kind of interest, and could be regulated monolithically by each agency. Congress cannot fix the situation because Congress is too busy being divided along party lines. States cannot fix it because they simply do not agree on how to address the myriad issues that genuinely are posed by cryptoassets.

“Our regulatory scheme is split among too many diverse agencies and authorities, and tends to be too monolithic is its approach and too slow to react to the rapidly developing new technology.”

— Carol Goforth, Professor of Law at the University of Arkansas, Former Arkansas Bar Foundation Professor of Law

“Who said that the U.S. isn’t the leader in crypto regulation? On the contrary, from an anti-money laundering (AML) regulatory perspective, the U.S. is certainly the leader. The U.S. provided formal guidance on how crypto exchanges should be regulated as far back as 2013. Last year, I coauthored a study with Tom Robinson of Elliptic where we analyzed Bitcoin transaction data from various Bitcoin conversion services around the world. We found that the proportion of illicit bitcoins going into exchanges coming from darknet markets and mixers was much lower in North America compared to Europe. The likely reason: U.S. Treasury’s FinCEN – the organization that enforces AML regulations—had provided much clearer guidance than you had in Europe. 

“Another example of U.S. leadership in crypto AML regulation is how the Financial Action Task Force, the global body that sets standards for AML and counter-terrorist financing, recently provided guidance for regulating digital assets. This guidance was driven by the U.S. and largely reflects the framework already enforced by FinCEN.”

— Yaya J. Fanusie, Adjunct fellow at the Foundation for Defense of Democracies, Chief Strategist for Cryptocurrency AML Strategies, LLC

“One issue in the US is that this asset class falls on the borderlines of multiple regulatory agencies so jurisdiction has caused uncertainty. The SEC has stepped up as the primary regulator and is taking decisive action when it comes to enforcement but a more measured approach when it comes to actual regulation. There are many that feel the existing laws on the books are sufficient. This has caused many in the industry to look to Congress (despite significant hurdles there) for rules. 

“In addition to the above, many in the US feel that we already have robust capital markets and opportunities for innovation and don’t have the same incentives as other jurisdictions that may be using this new industry to spur their economies. We, however, do not think this is the right approach for the US.”

— Georgia Quinn, General counsel of CoinList, Counsel at the Ellenoff, Grossman & Schole

“For the most part, U.S. governmental entities are allowing cryptocurrency regulation to evolve incrementally from existing laws, some of which have been in place for eighty or more years, rather than proposing a new regulatory framework.  The advantage of this approach is that the government is allowing guidelines over the development and use of the technology to develop organically rather than establishing premature oversight which could inadvertently stifle a technology that is still in its infancy.

“The disadvantage is that the lack of regulatory oversight makes it difficult for cryptocurrencies and related businesses to operate in the US without bright-line rules. A number of foreign countries (e.g. Switzerland, Gibraltar and Bermuda) have taken the opposite approach in an effort to establish cryptocurrency governance frameworks to lure investment.

“By allowing crypto regulation to evolve organically rather than developing a new framework to accommodate it, the U.S. is deliberately taking a wait and see approach on crypto. While there are undisputed advantages to blockchain technology that are being explored throughout government and the private sector, the advent of cryptocurrencies threatens to disrupt the way the U.S. has traditionally regulated securities and commodities.  As important, some cryptocurrencies allow a simple by-pass of the myriad regulations promulgated under the Bank Secrecy Act and the Investment Advisors Act that are designed to protect consumers and prevent financial crimes such as money laundering. Those complexities, combined with the challenge of addressing issues that fall under the jurisdiction several different regulatory authorities, are key factors preventing the U.S. from becoming a world leader in crypto regulation.”

— John S. Wagster, Co-chair of Frost Brown Todd blockchain and digital currency industry team

“Regulatory uncertainty is one of the biggest obstacles to advancing blockchain technology. Specific to the U.S., the sheer number of regulatory bodies and variety of interpretations has made it difficult for U.S. firms to operate. 

“Until the U.S. can articulate a single set of standards to govern the industry we expect to see more innovations coming from other regions, which is why we established Bittrex International—to advance our mission of fostering blockchain innovation on a secure and reliable platform—while continuing our active dialogue with the appropriate U.S. regulators.”

— Bill Shihara, Co-founder and CEO at Bittrex

“When new technologies are introduced, regulators are often faced with a similar set of key challenges: how to best protect consumers while fostering innovation, promoting competition, enforcing legacy regulations and resisting the urge to overregulate.  

“With respect to blockchain, policymakers have been hesitant to introduce specific regulations for a variety of hurdles.

“First off, blockchain-enabled digital assets are not a homogeneous asset class—they may feature characteristics of securities, commodities, currency units, or a combination thereof—and affect markets that cross national borders.  In the U.S., we have various agencies exercising overlapping authority; for example, the Commodity Futures Trading Commission, the Financial “Crimes Enforcement Network, the Federal Trade Commission, the Internal Revenue Service and the Securities and Exchange Commission may have concurrent or overlapping jurisdiction over a particular blockchain-related matter. 

“Secondly, while the standard policy cycle often takes several years, emerging companies often develop disruptive technologies with global reach in just a few months. And history has taught us that regulations that are too fast can be just as bad as regulations that are too slow.

“Despite these challenges, U.S. policymakers are calling for action and are showing a strong effort to engage with participants in the blockchain space – a crucial step on the path toward meaningful regulation and guidance.”

— Dario de Martino, Partner in the Corporate Department of Morrison & Foerster, Co-chair of MoFo’s Blockchain + Smart Contracts Group

"The U.S. Financial Crimes Enforcement Network issued its first guidance addressing cryptocurrency companies in 2013, and since then regulatory action for digital assets has been slow to develop but has picked up in the past few years as an increasing number of federal and state agencies see the unique opportunities and risks associated with the sector. 

“Crafting sensible regulations to provide a stable regulatory framework for digital assets without choking their innovativeness is a difficult task and not one a federal or state agency should undertake without a solid foundation of experience with digital assets.  

“There is a growing buzz complaining that the lack of regulations has impeded progress for digital assets, but it would quickly become a loud scream if regulations were issued in a way that missed the mark altogether.  

“The slow, deliberative nature of the regulatory process in the U.S. can be frustrating to be sure, but it reduces the type of big swings and misses risked by reactionary and under-informed regulations." 

— Michael Nonaka, Partner and a co-chair of the Financial Services Group at Covington & Burling LLP, Member of the American Bar Association and Banking Law Committee

“In my 8+ years of dealing with the government, I can tell you that there is significantly more red tape, formalities, and bureaucracy than you can imagine to deal with prior to getting anything done in DC. Even bringing up issues for discussion takes immense effort as there is always a never ending barrage of topics competing for attention. 

“Also, probably the biggest contributing factor is the huge educational gap that currently exists in DC. Many of the regulators are only now trying to wrap their heads around crypto and blockchain. Thankfully we have people like Kristin Smith and her team at the Blockchain Association to help educate DC and speed up the process towards much needed regulatory clarity.

“Washington is also notoriously reactive. We saw this in the case with Facebook’s Libra initiative, which caught regulators completely off guard and led to a scramble of fact-finding hearings. That all being said, I do have confidence that the US government will eventually figure it out and do so smartly so as to not stifle innovation and to [hopefully] position the US as the standard setter for crypto regulation.”

— Timothy Paolini, Board Member, NYU Blockchain

Regulatory frameworks for Bitcoin (BTC) and other cryptocurrencies have developed differently around the globe, ranging from outright bans to so-called “crypto-friendly” legislation. Despite being an economic leader, many within the crypto industry argue that the United States in particular has not yet gained a leading position among governments actively working to regulate this new technology. 

We asked the U.S. Chamber of Commerce’s Julie Stitzel, the Commodity Future and Trading Commission’s (CFTC) Heath P. Tarbert, NYU Blockchain’s Timothy Paolini and other industry experts to comment on the current situation with regulation U.S. regulation of crypto and blockchain.

The U.S. — the economic powerhouse home to Wall Street and Silicon Valley — faces some challenges in creating a cohesive regulatory landscape for cryptocurrency. Various U.S. regulatory agencies have different stances toward crypto. Back in 2013, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) classified Bitcoin as “an example of a decentralized virtual currency.” The following year, the Internal Revenue Service (IRS) proposed treating Bitcoin and other digital currencies “as property for U.S. federal tax purposes,” and in 2015, the U.S. Commodity Futures Trading Commission (CFTC) considered digital currencies as commodities. 

Earlier this summer, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) had jointly outlined regulatory compliance issues for cryptocurrency custodians and had not discovered those circumstances in which crypto could comply with the SEC’s Customer Protection Rule. 

Resulting from complex legal and tax requirements imposed by several U.S. regulatory agencies, some of which has been named above, the U.S. still does not have a clear regulatory framework for the crypto industry at the federal level. 

Why has the U.S. not yet become a leader in crypto regulation?

“The United States’ history of adopting and amending legal frameworks in the financial sector have resulted in a robust regulatory structure that enables market stability and effectively manages risk. Although the digital assets market is still nascent, there is a risk and concern that the United States may be left behind — missing an opportunity to cultivate innovation, create jobs and grow the economy by leveraging the emerging technology. 

“As the largest economy in the world, the United States must think differently about how we apply existing regulatory and supervisory principles to digital assets—including cryptocurrency. Appropriately classifying digital assets and determining the federal entity with the jurisdiction to regulate and supervise them is one way to provide regulatory clarity for innovators and signal that the United States is a leader in the digital asset space.”

— Julie Stitzel, Vice president, U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness

“U.S. markets are the global standard with respect to their breadth, depth, and integrity.  This is the result of a careful balance of innovation, well-calibrated regulation, and a pro-business environment.  While the U.S. regulatory landscape is by no means perfect, there are always tradeoffs with any system. U.S. regulators have been careful not to stifle innovation during the development of this nascent space. 

“As we move forward, applying solid, principles-based regulations that appreciate the transformational potential of new technologies—such as crypto assets and other 21st century commodities—will be key to ensuring America’s free enterprise system remains the envy of the world.” 

— Heath P. Tarbert, Chairman of the U.S. Commodity Futures Trading Commission

“Regulatory authority in the U.S. is split among too many diverse agencies, and they all have their missions and their interests to assert. In addition to FInCEN, the SEC, the CFTC, and the IRS all chiming in on how to categorize and treat cryptoassets, you have 50 state governments to think about as well.  In the hurry to assert authority, many of these over regulated, based on what they thought they understood. So we are stuck with thinking about cryptocurrency as if all crypto was the same kind of interest, and could be regulated monolithically by each agency. Congress cannot fix the situation because Congress is too busy being divided along party lines. States cannot fix it because they simply do not agree on how to address the myriad issues that genuinely are posed by cryptoassets.

“Our regulatory scheme is split among too many diverse agencies and authorities, and tends to be too monolithic is its approach and too slow to react to the rapidly developing new technology.”

— Carol Goforth, Professor of Law at the University of Arkansas, Former Arkansas Bar Foundation Professor of Law

“Who said that the U.S. isn’t the leader in crypto regulation? On the contrary, from an anti-money laundering (AML) regulatory perspective, the U.S. is certainly the leader. The U.S. provided formal guidance on how crypto exchanges should be regulated as far back as 2013. Last year, I coauthored a study with Tom Robinson of Elliptic where we analyzed Bitcoin transaction data from various Bitcoin conversion services around the world. We found that the proportion of illicit bitcoins going into exchanges coming from darknet markets and mixers was much lower in North America compared to Europe. The likely reason: U.S. Treasury’s FinCEN – the organization that enforces AML regulations—had provided much clearer guidance than you had in Europe. 

“Another example of U.S. leadership in crypto AML regulation is how the Financial Action Task Force, the global body that sets standards for AML and counter-terrorist financing, recently provided guidance for regulating digital assets. This guidance was driven by the U.S. and largely reflects the framework already enforced by FinCEN.”

— Yaya J. Fanusie, Adjunct fellow at the Foundation for Defense of Democracies, Chief Strategist for Cryptocurrency AML Strategies, LLC

“One issue in the US is that this asset class falls on the borderlines of multiple regulatory agencies so jurisdiction has caused uncertainty. The SEC has stepped up as the primary regulator and is taking decisive action when it comes to enforcement but a more measured approach when it comes to actual regulation. There are many that feel the existing laws on the books are sufficient. This has caused many in the industry to look to Congress (despite significant hurdles there) for rules. 

“In addition to the above, many in the US feel that we already have robust capital markets and opportunities for innovation and don’t have the same incentives as other jurisdictions that may be using this new industry to spur their economies. We, however, do not think this is the right approach for the US.”

— Georgia Quinn, General counsel of CoinList, Counsel at the Ellenoff, Grossman & Schole

“For the most part, U.S. governmental entities are allowing cryptocurrency regulation to evolve incrementally from existing laws, some of which have been in place for eighty or more years, rather than proposing a new regulatory framework.  The advantage of this approach is that the government is allowing guidelines over the development and use of the technology to develop organically rather than establishing premature oversight which could inadvertently stifle a technology that is still in its infancy.

“The disadvantage is that the lack of regulatory oversight makes it difficult for cryptocurrencies and related businesses to operate in the US without bright-line rules. A number of foreign countries (e.g. Switzerland, Gibraltar and Bermuda) have taken the opposite approach in an effort to establish cryptocurrency governance frameworks to lure investment.

“By allowing crypto regulation to evolve organically rather than developing a new framework to accommodate it, the U.S. is deliberately taking a wait and see approach on crypto. While there are undisputed advantages to blockchain technology that are being explored throughout government and the private sector, the advent of cryptocurrencies threatens to disrupt the way the U.S. has traditionally regulated securities and commodities.  As important, some cryptocurrencies allow a simple by-pass of the myriad regulations promulgated under the Bank Secrecy Act and the Investment Advisors Act that are designed to protect consumers and prevent financial crimes such as money laundering. Those complexities, combined with the challenge of addressing issues that fall under the jurisdiction several different regulatory authorities, are key factors preventing the U.S. from becoming a world leader in crypto regulation.”

— John S. Wagster, Co-chair of Frost Brown Todd blockchain and digital currency industry team

“Regulatory uncertainty is one of the biggest obstacles to advancing blockchain technology. Specific to the U.S., the sheer number of regulatory bodies and variety of interpretations has made it difficult for U.S. firms to operate. 

“Until the U.S. can articulate a single set of standards to govern the industry we expect to see more innovations coming from other regions, which is why we established Bittrex International—to advance our mission of fostering blockchain innovation on a secure and reliable platform—while continuing our active dialogue with the appropriate U.S. regulators.”

— Bill Shihara, Co-founder and CEO at Bittrex

“When new technologies are introduced, regulators are often faced with a similar set of key challenges: how to best protect consumers while fostering innovation, promoting competition, enforcing legacy regulations and resisting the urge to overregulate.  

“With respect to blockchain, policymakers have been hesitant to introduce specific regulations for a variety of hurdles.

“First off, blockchain-enabled digital assets are not a homogeneous asset class—they may feature characteristics of securities, commodities, currency units, or a combination thereof—and affect markets that cross national borders.  In the U.S., we have various agencies exercising overlapping authority; for example, the Commodity Futures Trading Commission, the Financial “Crimes Enforcement Network, the Federal Trade Commission, the Internal Revenue Service and the Securities and Exchange Commission may have concurrent or overlapping jurisdiction over a particular blockchain-related matter. 

“Secondly, while the standard policy cycle often takes several years, emerging companies often develop disruptive technologies with global reach in just a few months. And history has taught us that regulations that are too fast can be just as bad as regulations that are too slow.

“Despite these challenges, U.S. policymakers are calling for action and are showing a strong effort to engage with participants in the blockchain space – a crucial step on the path toward meaningful regulation and guidance.”

— Dario de Martino, Partner in the Corporate Department of Morrison & Foerster, Co-chair of MoFo’s Blockchain + Smart Contracts Group

"The U.S. Financial Crimes Enforcement Network issued its first guidance addressing cryptocurrency companies in 2013, and since then regulatory action for digital assets has been slow to develop but has picked up in the past few years as an increasing number of federal and state agencies see the unique opportunities and risks associated with the sector. 

“Crafting sensible regulations to provide a stable regulatory framework for digital assets without choking their innovativeness is a difficult task and not one a federal or state agency should undertake without a solid foundation of experience with digital assets.  

“There is a growing buzz complaining that the lack of regulations has impeded progress for digital assets, but it would quickly become a loud scream if regulations were issued in a way that missed the mark altogether.  

“The slow, deliberative nature of the regulatory process in the U.S. can be frustrating to be sure, but it reduces the type of big swings and misses risked by reactionary and under-informed regulations." 

— Michael Nonaka, Partner and a co-chair of the Financial Services Group at Covington & Burling LLP, Member of the American Bar Association and Banking Law Committee

“In my 8+ years of dealing with the government, I can tell you that there is significantly more red tape, formalities, and bureaucracy than you can imagine to deal with prior to getting anything done in DC. Even bringing up issues for discussion takes immense effort as there is always a never ending barrage of topics competing for attention. 

“Also, probably the biggest contributing factor is the huge educational gap that currently exists in DC. Many of the regulators are only now trying to wrap their heads around crypto and blockchain. Thankfully we have people like Kristin Smith and her team at the Blockchain Association to help educate DC and speed up the process towards much needed regulatory clarity.

“Washington is also notoriously reactive. We saw this in the case with Facebook’s Libra initiative, which caught regulators completely off guard and led to a scramble of fact-finding hearings. That all being said, I do have confidence that the US government will eventually figure it out and do so smartly so as to not stifle innovation and to [hopefully] position the US as the standard setter for crypto regulation.”

— Timothy Paolini, Board Member, NYU Blockchain