3days ago, 5 Dec, Thursday
Tim Draper Calls For Ross Ulbricht’s Release: ‘We Need Entrepreneurs Like That Guy!’
One of the most successful investors in the world is calling for the release of convicted criminal Ross Ulbricht.
Following up on a September 21 tweet by Tim Draper that was completely sympathetic to the imprisoned Silk Road creator, Fred Schebesta of the Crypto Finder video podcast took a moment to ask the billionaire his latest feelings on the matter. Draper gave an effusive response:
Free Ross, baby! Get him out. We need entrepreneurs like that guy! Get him out of jail! Why do we put these really extraordinary people in jail? We need their minds, their energy, their life force. Get him free. Who knows what else he could’ve come up with?
Ulbricht is serving a life sentence for his role in creating and maintaining the notorious marketplace that operated on the dark web and used cryptocurrency transactions to let people buy and sell contraband. When the FBI shut the operation down, Draper famously bought the nearly 30,000 BTC that had been seized. It seems Ulbricht has been close to his mind ever since.
“I get that he’s got to be an example, and he stepped over the line,” Draper continued, “but he’s been in jail for a while. Get him out. I cry when my cat goes into a cage, it tears my heart out when these prisoners go into cages.”
Bitfinex Allows Lightning Network Shopping on Bitrefill with Bitcoin
Cryptocurrency exchange Bitfinex and crypto store Bitrefill partnered to allow the trading platform’s clients to shop with Bitcoin (BTC) over the Lightning Network.
According to a press release published on Dec. 4, Bitfinex users can instantly pay for a variety of services with Bitcoin that they hold on the exchange as of today.
A Lightning B2B settlement system
Per the press release, the companies attribute the development to the “world’s first dynamic B2B settlement process over the Lightning Network.” The announcement builds on recent news that Bitfinex enabled Bitcoin Lightning Network transactions and that those using it for deposits and withdrawals will pay almost no fees. The companies explained that setting up such a system required some tinkering:
“Bitfinex and Bitrefill utilize customized versions of Lightning to open large channels together, exceeding the default limits in place, but allowing better flow and reliability to users.”
The collaboration between the two firms will allow the exchange’s customers to buy over 2,000 different prepaid vouchers with Bitcoin. The vouchers can cover the costs of services and products relevant to gaming, dining, entertainment, travel and more.
Lightning adoption by exchanges is essential
When Bitfinex users buy products from Bitrefill, the system put in place by the two firms instantly settles the payments over Lightning Network. Bitrefill chief commercial officer John Carvalho explained why he believes Lightning adoption among exchanges is important and where he thinks it will lead:
“We believe that getting Bitcoin exchanges on to the Lightning Network early is integral to preparing for the next wave of adoption and building out a parallel economy for Bitcoin. [...] We will continue to work closely with Bitfinex and other businesses to develop Lightning solutions and products that make living on crypto a reality, eventually removing dependability on fiat rails.”
The Lightning Network sees increasing traction and adoption in the cryptocurrency space, with many placing high hopes on its potential to make Bitcoin a viable payment tool.
As Cointelegraph reported last month, bond market veteran Nik Bhatia says that Lightning Network convinced him of Bitcoin’s potential. Also in November, Bitcoin payments app Fold rolled out support for home-sharing giant Airbnb, effectively enabling to book stays included in the service with Lightning Network.
Bakkt CEO Kelly Loeffler Appointed to US Senate Seatreported on Dec. 4. A person familiar with the matter, shared Loeffler’s remarks with the publication, in which she ostensibly said:
“I haven’t spent my life trying to get to Washington. But here’s what folks are gonna find out about me: I’m a lifelong conservative. Pro-Second Amendment. Pro-military. Pro-wall. And pro-Trump. I make no apologies for my conservative values, and will proudly support President Trump’s conservative judges.”As previously reported by Cointelegraph, various party leaders, including President Donald Trump, reportedly pressed Kemp to choose U.S. representative Doug Collins instead, purportedly given his strong support for Trump, gun rights and anti-abortion efforts. The President and many among his followers are not sold on Loeffler, viewing her as too moderate. Previously, Kemp reportedly met with the President and Loeffler in a bid to obtain Trump’s approval of his pick for the Senate seat but to no avail.
Bakkt’s recent developmentsIn the meantime, Bitcoin futures open interest on the Bakkt platform hit a new all-time high of $6.5 million on Dec. 3. The reported open interest was a 42% increase from the previous day, which had been an all-time high as well. Also, Bakkt is planning to launch the first regulated options contract for Bitcoin futures on Dec. 9. The new options product is based on customer feedback, explained Loeffler, and is designed to hedge or gain bitcoin exposure. Bakkt added:
“ICE Futures U.S. has self-certified the contract with the CFTC and we’re excited to leverage the benchmark futures prices and institutional-grade custody to meet the needs for a regulated options contract.”
Former Morgan Stanley Developers Launch Crypto Derivatives Exchange
Eight former core developers from financial services company Morgan Stanley have launched Phemex, a new cryptocurrency derivatives trading platform, in Singapore.In a press release shared with Cointelegraph on Dec. 4, the former Morgan Stanley developers claim the platform is ten times faster than traditional crypto trading platforms, while offering 100x leverage to both retail and institutional investors in Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) perpetual contracts.
Exchange is “on par with Nasdaq”In the near future, these contracts will reportedly also be backed by traditional financial products, such as stock indexes, interest rates, foreign exchange, agricultural commodities, and metals and energy. Phemex co-founder Jack Tao said:
“We are the first exchange to truly bring Wall Street level sophistication to the worldwide crypto derivatives markets. Our matching engine, trading engine, and risk engine were six months in the making, putting the platform technically on par with Nasdaq.”Tao, who spent 11 years as an executive at Morgan Stanley, told Cointelegraph that the platform was looking to add options trading soon. In launching Phemex, Tao assembled a team of more than 30 senior developers. He explained:
“We’re not just providing the functionality for trading. As executives from Morgan Stanley, we know what kind of ways, what kind of direction, or what kind of architecture can support high-frequency trading, stability, and low latency. This is where Phemex excels — our expertise allows us to compete with and outperform existing platforms.”Tao told Cointelegraph that since the Nov. 25 launch, Phemex has seen volume of around 1000 BTC per day on BTC/USD contracts.
Singapore regulators take a closer look at crypto derivativesIn November, Singapore's central bank and financial regulator, the Monetary Authority of Singapore (MAS), proposed to bring crypto derivatives trading under its purview. The MAS’ proposal would make the trading of derivatives based on underlying assets like Bitcoin and Ether subject to the city-state’s Securities and Futures Act. For Phemex, a Singapore-domiciled company, the proposal by the MAS comes at a perfect time as it may soon allow cryptocurrency-based derivatives to be traded on regulated platforms.
Gemini Hires Former Starling Bank Exec for Push Into Europe
Gemini, the top global cryptocurrency exchange per CryptoCompare’s latest Exchange Benchmark, hired a former senior executive from United Kingdom-based Starling Bank.Julian Sawyer, a former CEO and co-founder at Starling, will now lead Gemini Europe — the European affiliate of Gemini Trust Company — as the managing director of the U.K. and Europe, the firm announced Dec. 4.
Over 20 years in high-growth financial services organizationsAccording to an announcement by Gemini president Cameron Winklevoss, Sawyer joins the major United States-based crypto exchange with a total of 20 years experience at growing financial services organizations. Prior to Starling, Sawyer founded Bluerock Consulting, a financial management consultancy, which he sold in 2012. Sawyer also worked as a management consultant at Big Four audit firm EY and Irish professional services company Accenture, the announcement says. At his new position at Gemini, Sawyer will be responsible for building the crypto exchange’s common strategy in the region. Alongside managing product development and operations, the new European exec will manage hiring in the U.K. and Europe, and will report directly to Cameron.
Europe and the United Kingdom’s concept of “thoughtful regulation”In the announcement, Tyler Winklevoss stated that Europe is the “birthplace of modern financial markets,” while the U.K. has been a major hub of global financial innovation for hundreds of years. Cameron also noted Europe and the U.K.’s “thoughtful regulation” in a blog post:
“The concept of thoughtful regulation itself was first developed out of the lessons learned in these markets over centuries. Our ethos — to ask permission, not forgiveness — was a first in the crypto industry and both honors and continues to build on Europe and the UK’s tradition of thoughtful regulation.”Gemini first eyed support for the U.K. last year, when it reportedly began hiring advisors to oversee its potential expansion into the country. Support for Australia followed in August 2019. According to its website, Gemini also operates in Hong Kong, Singapore, South Korea, and Canada.
4days ago, 4 Dec, Wednesday
Bitcoin No Longer Looks Like ‘Digital Gold’ by One Measure
fit the bill as well as it used to.
For most of the year, bitcoin's price showed a modestly negative correlation with the S&P 500. In other words, the world's largest cryptocurrency by market capitalization tended to rise on days when the bellwether stock-market index fell, and vice versa.
But since early October, that relationship has weakened, according to information provided by Digital Assets Data.
The correlation, once well into the negative 20-30 range, is now beginning to flatten towards a reading of around negative 10 percent, as shown in the chart below.
The closer to zero or a positive correlation with the stock market that bitcoin gets, the harder it is to paint the digital asset as a port in the storm.
“The negative correlation has supported the store of value/digital gold thesis for BTC as investors may have been moving into the asset as a hedge against global economic turmoil,” said Kevin Kaltenbacher, Data Scientist of Digital Assets Data. “These recent developments potentially present some challenges to that narrative.”
A major critic of the co-variance argument, Alex Kruger, a macro cryptocurrency analyst, took to Twitter to offer his sarcastic take, referring to both the stock and foreign exchange markets and their relationship with bitcoin.
“Now that the 'Stocks drive bitcoin higher' meme has been proven wrong once again, this is a good time for the 'CNH [Chinese Yuan Offshore] hedging drives bitcoin higher' meme to make it back to the stage,” Kruger said.
Bitcoin still up on the year
Safe haven or not, bitcoin's price remains significantly up since the year began.
Early Wednesday UTC time, it was up 94 percent up from the price of $3,689 witnessed Jan. 1, CoinDesk’s Bitcoin Price Index shows.
At press time, the cryptocurrency is changing hands for $7,140 and is down 48.5 percent from its 2019 high at $13,880, witnessed June 26.
So even if bitcoin may not qualify as digital gold, long-term holders have nothing to fear from the price volatility bitcoin is currently experiencing, said Eddie Alfred, co-founder of Digitial Assets Data.
This period is an anomaly, he said.
“Observing 29-day periods since the genesis of bitcoin, we have seen 195 days where BTC has been down 25 percent or more from its recent high. That means the market has faced similar conditions on about 5 percent of days in BTC’s history,” Alfred said.
Disclosure: The author holds no cryptocurrency at the time of writing.
Chinese Insurance Giant Ping An’s Blockchain Arm Reveals Terms for $468M IPO
According to an updated F-1 filing with the U.S. Securities and Exchange Commission (SEC) on Monday, the firm aims to raise between $432 million and $504 million via the offering of 36 million American depositary shares (ADSs) at a price of between $12 and $14. Each ADS represents three ordinary shares.
The target raise is much higher than when the firm's prospectus was first filed in mid November, when a figure of $100 million was proposed.
OneConnect plans to list on the NYSE with the ticker “OCFT” on Dec. 12, according to Nasdaq. The IPO’s underwriters include Morgan Stanley, Goldman Sachs, JPMorgan, HSBC and Bank of America.
The filing values the company at around $4.7–4.9 billion, down from a $7.5 billion valuation at the time of its last fundraise – a round backed by Japanese private equity giant SoftBank.
OneConnect reported revenue of $222 million and an operating loss of $160 million for the first nine months of 2019, according to Nasdaq.
Reuters reported in September that the firm had been seeking to go public in Hong Kong with a $1 billion target, but shifted to the U.S. hoping to raise a higher amount. It now seems OneConnect has settled for half that amount, if the report was correct.
Ethereum’s Proposed Hard Fork ‘Muir Glacier’ Would Delay Impending Ice Age
Ethereum developers have proposed a hard fork, named Muir Glacier, that should address the impending Ice Age, which could cause a significant slowdown on the Ethereum mainnet.
In an Ethereum improvement proposal at the end of November, Ethereum developer James Hancock wrote that the proposed Ethereum Muir Glacier hard fork would push back the mechanism, known as Ice Age.
Ice Age is unnecessarily complex and confusing
Ethereum’s Ice Age, also known as Difficulty Bomb, refers to the increasing hashing difficulty in the mining algorithm used to reward miners with Ether (ETH) on its blockchain. This piece of coding artificially slows down the production of blocks on Ethereum’s blockchain and therefore functions as a deterrent for miners who might choose to continue with proof of work (PoW) even after Ethereum has transitioned to proof of stake (PoS).
However, according to Hancock the existing implementation of Ice Age is unnecessarily complex and confusing to communicate to the community. He adds that any updates to the design should be able to model the effect on the network in a straightforward way that is easy to predict when it occurs. Currently, Hancock does not believe this is the case.
Hancock further points out that Ethereum’s upcoming hard fork would push back the mechanism “as far as is reasonable,” to give developers the time to decide whether to update Ice Age so that its behavior becomes predictable or to remove it entirely. He added:
“This fork would give us time to address the community to understand their priorities better as far as the intentions of the Ice Age, and give time for proposals for better mechanisms to achieve those goals.”
ETH block propagation at least twice as fastIn November, blockchain advisory and product development firm Akomba Labs conducted a test on the Ethereum network that showed it could make block propagation at least twice as fast. Test findings showed that the average block propagation performance dropped from 360 milliseconds without running BloXroute's Blockchain Distribution Network to 172 milliseconds with it.
Study: Blockchain to Save $450B in Supply Chain Costs in Western Europe
The implementation of blockchain technology in supply chains could save businesses in Western Europe $450 billion in logistics-related costs.
According to a new study from Cointelegraph Consulting and Swiss enterprise blockchain firm Insolar, blockchain technology can reduce supply chain-related costs for businesses between 0.4% and 0.8%.
While that may sound like a small figure, the sheer volume of the sector means that this percentage translates into a potential hundreds of billions in savings. Furthermore, the report claims that the technology will pay for itself:
“94% of supply chain leaders say digital transformation will fundamentally alter supply chain management. In the transition to industry 4.0, industrial business can expect a 25% gross increase in [Return on Capital Employed] by 2035.”
In the joint study, Cointelegraph Consulting and Insolar survey the problems that enterprise firms experience in managing their supply chains, stating that 60% of companies overpay their supply chain vendors. And 70% of firms have "visibility gaps" between the initial supplier and internal clients’ systems, making tracking of supply chain sources difficult or impossible.
Current tech cannot solve supply chain issues
Current technological solutions like enterprise resource planning and traditional databases are ill-equipped to address contemporary supply chain issues, according to the study. One reason: Nearly 80% of enterprise data is siloed and prone to reduced integrity. The study states:
“The database approach fails to provide an inherent share of data related to the supply chain, which is crucial for counterparties that do not trust each other to obtain information about a certain product, its price, delivery conditions, etc. The information is not always up to date from some parties, and some data may be hidden.”
Insolar's founder, Peter Fedchenkov, notes that blockchain adoption will not necessarily uproot current IT systems, stating that it can be applied in tandem with existing infrastructure. He told Cointelegraph:
“When people think about blockchain there is a misconception that it’s a new paradigm requiring a change in business entirely. We believe this is wrong though, and offer an approach to complement organizations existing IT infrastructures using our blockchain platform.”
Cointelegraph Consulting launched on Dec. 3 and aims to aid blockchain adoption among small and medium-sized businesses by matching them with enterprise blockchain solutions that are applicable to their operations.
Blockchain a boon for supply chains
Blockchain technology has seen widespread adoption across supply chains of various goods including diamonds, rare metals, fashion items and food. According to major American retail firm Walmart, distributed ledger technologies like blockchain make it easier for the firm to recall problematic medicine or food items should the need arise.
Last week, Big Four audit firm KPMG launched a blockchain-based track and trace platform in Australia, China and Japan.
Recently, retail giant Carrefour and Swiss food and drink conglomerate Nestlé joined IBM’s Food Trust platform to track the supply chain of milk-based formula for infants with blockchain tech.
In August, Cointelegraph reported that the second-largest Indian state of Maharashtra was preparing a regulatory sandbox to test blockchain in various applications including supply chains, agricultural marketing, vehicle registration and document management.
South Korean Startup Claims to Have Solved Blockchain’s Speed Problem
The South Korean-based firm Bloom Technology announced that they have created a new technology that is able to speed up transactions on the blockchain.
On Dec. 3, United Press International reported that Bloom Technology’s CEO, Lee Sang-yoon, said that the company's Lotus Chain technology has been able to reduce blockchain transaction processing times to fractions of a second.
One single blockchain transaction takes less than 0.23 seconds
The company reportedly conducted a public test with 635 participating nodes to reveal the transaction speed of the Lotus Chain technology. The results showed that a single blockchain transaction took between 0.13-0.23 seconds. Korea Blockchain Association Vice Chairman Moon Young-bae commented on the tests:
"Locus Chain is still under development to become a complete version. But I believe that the technology is already commercially viable [...] I think it is a real deal."
Lee further hinted at the importance of faster blockchain transactions by pointing out that transactions at present often take “more than 10 minutes for cryptocurrencies and even longer than an hour for Bitcoin.”
South Korea to provide a legal basis for crypto
In November, South Korea’s National Assembly national policy committee passed a bill designed to provide a legal basis for crypto in the country and bring regulatory clarity and transparency to crypto markets in South Korea. The bill still needs to be approved by the judiciary committee, but, if approved, the law would come into force in 2020.This is not the first attempt by South Korean authorities to provide more regulatory clarity to crypto markets. In early 2018, South Korean regulators banned anonymous trading on crypto exchanges in line with anti-money laundering and identification efforts in the country.
China's Great Firewall Blocks Popular ETH Block Browser Etherscan
China's Great Firewall, a tool used to ban Chinese citizens from using sites like Google and Facebook, has listed a major explorer for Ethereum’s (ETH) blockchain.According to data from non-profit monitoring organization GreatFire, China allegedly blocked one of the most popular ETH block browsers, Etherscan, in October 2019. As of Dec. 3, Etherscan’s domain remained inaccessible from IP addresses inside mainland China, as reported by crypto publication Coindesk on Dec. 3.
Etherscan is aware of the block, firm’s CEO saysWhile the Etherscan’s blockage was largely unnoticed, the firm’s CEO Matthew Tan reportedly said that Etherscan noticed the action “within the last 3 months,” Coindesk reports. Cointelegraph contacted Etherscan’s team to confirm the information but the firm hadn’t responded as of publication.
The block’s timelineAccording to GreatFire, which collects a database of websites blocked by the Great Firewall, Etherscan was purportedly still intact with "no censorship detected" as of Aug. 17, 2019. The Ethereum block browser was fully blocked by Oct. 29, 2019, while the exact time of the block is not reported by GreatFire.
Other ETH blockchain explorers still accessible in ChinaMeanwhile, other Ethereum block explorers are still intact in China. As reported by Coindesk, a localized version of the browser, cn.etherscan.com, is accessible to Chinese users as of press time. A block explorer is a website or a tool that allows users to track blocks, wallet addresses, network hashrate, transaction data and other key data on a certain blockchain, like the Bitcoin (BTC) blockchain, the Litecoin (LTC) blockchain, or the Ethereum blockchain. For Bitcoin, there are a number of block explorers, including Blockchain.com, Blockexplorer.com, or Btc.com. Meanwhile, Etherscan is just one of a number of block explorers such as Etherchain.org and Ethplorer.io. In March 2019, major Ethereum wallet supplier MyEtherWallet announced the launch of the alpha version of its new open-source Ethereum blockchain explorer, EthVM.
State Street Slashes DLT Developer Team as Bank Rethinks Blockchain Strategy
The focus is now more on digital assets such as tokenized stocks and bonds through to cryptocurrencies, rather than the heavy lifting work of re-plumbing front to back office with distributed ledger technology (DLT).
Because of various cost pressures weighing on the Boston-based bank, there has been a dramatic streamlining of the global blockchain team in the past few weeks. A former State Street engineer, who wanted to remain nameless, said the cuts numbered over 100 blockchain developers.
A second person familiar with the situation said “most of the blockchain team had gone,” and that the number let go was “upwards of 100.” There are now “only a few token people left” from the team, this person said, meaning “token” as in perfunctory, not in the crypto sense.
(All told, State Street has 39,407 employees worldwide, according to its latest quarterly filing with the Securities and Exchange Commission).
“They are moving away from this giant in-house DLT initiative,” the source said of State Street. “They are more focused on digital assets, stablecoins, custody, and the USC initiative [the Utility Settlement Coin being developed by bank consortium Fnality].”
Ralph Achkar, managing director of digital products at State Street in London, acknowledged that it had “streamlined some of the people in those teams,” declining to give exact numbers of those let go.
But that streamlining should not be taken to mean “we are not focused on distributed ledger,” he said. “That is absolutely not the case.”
Previously, a large DLT team at State Street had been working with the Hyperledger Fabric open-source permissioned blockchain software.
The aim was to create a single book of record, which could run State Street’s investment book at the front end, an accounting book of record for the middleware and a custody book of record on the back end. This new DLT system would remove the need to reconcile between hundreds of databases, involving hundreds of man-hours each day.
Now, however, the bank is now describing its approach as “ledger-agnostic,” and relying more on outside providers.
“If something is Fabric-related we still have some Fabric engineers on board,” said Achkar, who runs a digital asset product development and innovation team in London, complemented by similar teams in the U.S. and Singapore. But his objective is to identify the best business cases, rather than the best protocol, he said.
“I think the choice in approaching that space was, do we need to have all of these resources internally, or can we actually build partnerships and work with other providers in the market?” he said.
Most big banks face the same issues as State Street in grappling with how best to upgrade legacy systems. When the system in question controls over $30 trillion in asset movements, digital transformation is not going to happen overnight.
“There is an innovator’s dilemma,” said Achkar, using a well-known term for the challenge to large incumbent players of adopting technologies that would disrupt their business models. “What we recognize is that some of the processes that might appear to be inefficient in the market today are there for a reason.”
Market rules and market structure have been put in place to ensure bad behaviors can be detected early on, or prevented altogether, he said. “We don’t believe that you are going to throw everything you have done away and replace it with new tech and everything is resolved. It's hard to imagine it happening that way.”
New kid on the block
In any case, State Street’s loss has turned out to be a gain for others.
Moiz Kohari, the former global chief technology architect at State Street, who left the bank in April to co-found DLT-based data privacy startup Manetu, has been busy hiring.
According to its website, Manetu has so far hired former State Street senior vice president Greg Haskins, as chief technology officer; former SVP of enterprise data Conor Allen as head of product; and former managing director Binh Nguyen as chief scientist.
“I on-boarded some of the big names to my Manetu team on Nov. 5,” said Kohari. “There are others from the bank behind them who I’m not going to name; multiple maintainers on the Hyperledger project.”
Court Backs Nordea Bank Bid to Block Staff From Trading Crypto
Bloomberg reported Tuesday that a Danish court had ruled that the northern European bank is justified in the ban due to the risks associated with cryptocurrencies.
The case was brought against Nordea by a financial industry union in Denmark, claiming a crypto ban would interfere with the personal lives of staff.
“We filed suit because of the principle that everyone obviously has a private life and the right to act as a private individual,” union chairman Kent Petersen said in a statement. “It was important for us and our members to establish what rights managers have. In this case, it was more far-reaching than what we find to be appropriate.”
Expressing concerns over harm to the reputation of the bank and its clients, Nordea had warned its employees in early 2018 against crypto trading because “the risks were too high.” The bank cited a lack of regulation and connections to criminal activity such as money laundering to back up its case, Bloomberg writes.
Staff would still be allowed to invest in financial instruments tied to cryptocurrencies and were not prohibited from holding cryptos purchased before the ban.
Some commentators are pointing out on crypto Twitter that the staff ban is perhaps ironic, as Nordea itself has been accused of money laundering.
Reuters reported in March that Finnish broadcaster Yle said leaked documents showed the financial group had allegedly handled €700 million euros ($775 million) in suspicious transactions between 2005 and 2017 that were linked to Russia. In its defense, the bank said it had reported suspicious behavior to relevant authorities.
Then, in June, the bank's offices were searched by the Danish state prosecutor as part of a criminal investigation into money laundering.
Sweden's financial watchdog also warned the firm in 2018 over deficiencies in how it followed anti-money laundering rules, according to another Bloomberg piece at the time.
5days ago, 3 Dec, Tuesday
The SEC Has a New Chief Crypto Cop
Taking over from Robert A. Cohen, who left the post for a position in the private sector in August, Kristina Littman will be the agency's new chief of the Division of Enforcement’s Cyber Unit, according to an SEC announcement on Monday.
Joining the SEC as a staff attorney in 2010, Littman rose in the ranks to become a senior advisor to SEC Chairman Jay Clayton in the summer of 2017. In that role, she has advised Clayton on regulatory and policy relating to cryptocurrencies and digital assets, as well as international affairs, trading and markets, the SEC said.
“Kristy’s innovative thinking and extensive experience within the Commission have made her an invaluable advisor and, most importantly, a tireless defender of America’s investors,” said Clayton. “She will be an excellent leader for the Cyber Unit as it continues its work in this critical and continually evolving area.”
The Cyber Unit was founded in 2017 as a way to tackle cybersecurity issues and protect investors against wayward members of the developing blockchain and crypto industry.
Under Robert Cohen, the unit pursued actions against initial coin offerings the agency considered fraudulent. Littman will inherit notable ongoing crypto lawsuits, including one against Kik Interactive for allegedly engaging in an unregistered $100-million securities offering. Telegram is also fighting a similar SEC-brought case over its gram token.
Cohen left the SEC for a partner position at corporate law firm Davis Polk & Wardwell LLP – a company that has represented crypto firms including Coinbase, as well as major financial institutions.
With a J.D. and an M.B.A. from the School of Law at Rutgers University, Littman had practiced at a law firm specializing in corporate and securities litigation prior to joining the SEC.
Littman's varied experience "as an investigator, a trial lawyer, and a senior advisor – have prepared her well to lead the Cyber Unit,” said Steven Peikin, co-director of the Division of Enforcement.
Ripple Transfers 1 Billion XRP Tokens From Escrow Wallet and Back Again
Whale Alert, the ever-vigilant live tracker for cryptocurrency transactions, noted that Ripple transferred a total of 1 billion XRP tokens from its escrow wallet on Dec. 2.
The blockchain-based payments firm moved the massive amount of tokens in two separate transactions, worth around $219 million in total as of press time. Interestingly, the company transferred the exact same amount of tokens back into escrow only seven minutes later, this time in three separate transactions.
Is Ripple crashing the token’s price?
This isn’t the first time that Ripple has executed such enormous transactions. The practice has raised concerns among the XRP community, as some of its members fear that Ripple is dumping XRP and crashing the token's price.
In August, a Change.org petition entitled “Stop Ripple dumping,” was launched, followed by a more sarcastic petition in September, urging Ripple to increase the dumping of XRP and “unleash the utility!”
The XRP community previously threatened the company’s execs with staging a takeover if they do not start to pay attention to these concerns. However, the company insists that it is selling XRP to invest in firms that could help its ecosystem grow and to fund its own operations.
Multiple partnerships have no effect on XRP’s price
XRP’s price has been steadily declining over the past few months, although several new partnerships have been established. Just recently, major money transmission network MoneyGram announced that the San Francisco-based company Ripple had completed its original commitment with a final $20 million investment.
The two companies entered into a 2-year-strategic partnership to collaborate on cross-border payments and foreign exchange settlements with digital assets. As part of the agreement, MoneyGram would be able to draw up to $50 million dollars from Ripple in exchange for equity.However, XRP — the third-largest coin by market capitalization — was not able to cash-in on the news. The coin is looking weak, as it trading just above a yearly low at $0.219, with one trader going as far as predicting that the coin could hit zero by February 2020.
A Plan to Decentralize Bitcoin Mining Again Is Gaining Ground
The spec, Stratum V2, could significantly change how bitcoin mining functions and would add security and efficiency to mining pools, the entities that organize miners spread across the world.
Although it aims to improve bitcoin mining pools in a number of ways, the primary benefit comes from a component that reduces one of the most pressing problems in bitcoin: mining pool centralization.
"If this protocol does everything it promises, 'mining centralization' as an argument will be completely dead," bitcoin developer and educator Jimmy Song said.
Meanwhile, Square bitcoin developer Matt Corallo, one of the designers of the protocol, wrote in a recent Reddit AMA: "This is huge for mining centralization. Instead of being focused on the centralization of pools (which is the world we're in today), we can focus on the centralization of actual miners [and] farm owners!"
Last year, Corallo revealed BetterHash, a plan to combat the centralization problem in mining pools. Now Braiins and Corallo are pooling their work to build one protocol that fixes a number of current mining pool issues.
Mining has long been a difficult proposition for individual miners. In the early days to bitcoin, miners from around the world began connecting to so-called mining pools to earn a more consistent paycheck. All of the miners worked in tandem and when one member of the pool got lucky, the thinking went, the entire pool benefited.
In time, weighted mining pools emerged as a safer, more profitable way of mining by taking in all of the bitcoin earned by their miners and redistributing them based on mining power contributed. Unfortunately, according to recent data from Blockchain.info, only three mining pools control over 50% of bitcoin's mining power, thereby centralizing the mining power in a few hands.
This is a problem. When one of the miners in a mining pool wins a block and rakes in the 12.5 bitcoin reward, the mining pool decides which transactions go into that block. Bitcoin experts worry that these centralized entities could use this power to censor transactions they don't like.
To prevent this, Stratum V2 supports "job negotiation" modeled off of Corallo's BetterHash. This changes the relationship between the miner and the mining pool. Instead of mining pools deciding what transactions go into blocks, miners decide which ones to include.
"[If] there are cases of transaction censorship in the future, we have a security measure in the protocol that miners can use to circumvent the censorship," Capek said.
This also means that miners, not mining pools, will be able to vote on protocol upgrades to bitcoin if Stratum V2 is adopted by mining pools.
"With the job negotiation protocol, miners can also choose their block header version field. This allows them freedom in any potential voting via BIP8/BIP9 style mechanism," Capek said.
All that said, Capek stressed that the new specification is not necessarily a "silver bullet" for mining centralization. He pointed out that the mining pools that want to censor bitcoin transactions could simply opt-out of adopting the protocol.
"At the same time it's important to mention that a pool that would 'intentionally' perform such censorship would not allow its users to negotiate their jobs," he said.
Meanwhile, Luke Dashjr, veteran bitcoin coder, argued on Twitter that there are other aspects of mining centralization that still need to be addressed. For example, the fact that only a handful of companies produce mining hardware, the computers made specifically for producing bitcoin, is also a grave threat to decentralization.
Decentralization isn't the only draw in Stratum V2. Mining pools will have an incentive to adopt the new protocol because it will save them money and prevent attacks that could cause them to lose rewards. First, it makes transferring data back and forth more efficient. It could also make stealing mining pool hash power much harder.
"Last but not least, we have addressed the security aspects by allowing fully encrypted and authenticated communication using the current state of the art technology called 'Noise Protocol Framework,'" Capek said.
This peer-reviewed technique is the same technology used by the mobile messenger WhatsApp and bitcoin's lightning network.
Braiins is still finalizing a few features in the specification, such as deciding which encryption algorithm to use for hiding data from snoops, Capek said. But a version is available to test and most of the Stratum V2 specification draft is now up for review.
Capek expects it to take at least 12 months for mining pools to adopt the protocol.
"Getting everybody on board is a matter of realizing the benefits on the security and efficiency side, which in turn leads to saving some operational costs," he said.
Former CFTC Chair to Remain Focused on Crypto and Blockchain at New Law Firm
Former United States Commodity Futures Trading Commission (CFTC) chairman Chris Giancarlo was hired as senior counsel at the New York-based law firm Willkie Farr & Gallagher.
Digitize the dollar and take power away from central banks
On Dec. 2, Reuters reported that Giancarlo in his new role at Willkie Farr & Gallagher will continue to focus on digital innovation in areas such as cryptocurrencies and blockchain. Giancarlo, also known as “Crypto Dad,” commented on his new role:
“I will divide my time between assisting Willkie clients in their worldwide commercial ventures and focusing on key issues of public interest...Among other things, I will continue to advocate the development of a blockchain-based digital dollar and a new American lending benchmark to replace Libor.”
Giancarlo became a well-known leading advocate for innovative technologies such as blockchain and something of a Twitter celebrity when he said that governments must digitize the dollar and take power away from central banks.
Another well-received comment by Giancarlo was that blockchain technology would have allowed for a “far faster, better-informed, and more calibrated regulatory intervention” in response to the 2008 financial crisis.
While Giancarlo was chairman of the CFTC, the first Bitcoin (BTC) futures products were allowed in the U.S. He also expressed his belief that Ether (ETH) is a commodity and that ETH futures trading will become a reality.
CFTC does not want to snuff out innovation
The current chairman of the CFTC, Heath Tarbert, has called for “principles-based regulation” for cryptocurrencies. According to the chairman, regulators should first fully understand the outcomes and potential risks of digital assets before enforcing their rules. “What we don’t want to do is take a heavy hand and snuff out innovation altogether,” Tarbert argued. The executive added that the CFTC’s willingness to allow innovation to develop should not be confused with a tolerance for fraudulent behavior or a so-called light-touch approach.
Singaporean Gov’t Blockchain Platform Facilitates $15.7 Million in Fundraising
The Singaporean government-backed blockchain platform Tribe has helped raise another $15.7 million for participating companies through its ecosystem.
In a press release shared with Cointelegraph on Dec. 2, Tribe Accelerator revealed that a total of $28 million had been raised to date to support start-ups from around the world attempting to solve real-world problems with blockchain technology.
The first group of startups reportedly raised over $12.2 million within three months. Managing partner of Tribe Accelerator Ng Yi Ming commented:
“Another successful round of fundraising underscores the relevance of blockchain technology in solving real-world problems. Every idea or solution shared during the Demo day has the potential to revolutionise the way the linked industry works in the present. We will continue to harbour companies with transformative innovations, that can change the face of the blockchain industry and benefit the end-user — making the technology more mainstream.”
Major corporate backing
Tribe, which helps blockchain startups in their growth stage by connecting them with major corporations, was launched in December 2018 and is the brainchild of Tri5 Ventures, a venture capital firm aiming to support later-stage startups.
Since its launch, Tribe Accelerator has received support from government and corporate partners including big four accounting giant PwC, South Korean blockchain network Icon Foundation, BMW Group Asia and Intel, among others.
More recently, IBM, Citibank and video game giant Ubisoft joined as corporate partners for the second edition of Tribe's four-month program.
Tezos partners with Tribe to launch training program
On Nov. 21, Tezos’s non-profit arm Tezos Southeast Asia (TSA) announced its collaboration with Tribe to jointly launch a training program for developers on the Tezos blockchain. Tezos also hopes to attract more developers to create Tezos blockchain-based solutions for real-world applications. President of TSA Caleb Kow said at the time:
“By enabling trainers with a good knowledge of Tezos blockchain technology, they will be able to amplify the impact in their respective teams through the continual transfer and sharing of knowledge to new learners.”
6days ago, 2 Dec, Monday
Huobi Says It’s Joining a Chinese Government-Led Blockchain Alliance
The Chinese branch of Huobi Group announced its membership in the Blockchain-Based Services Network (BSN) Development Alliance at its launch on Sunday in Hangzhou of Southern China, the company told CoinDesk.
Led by State Information Center (SIC), a think tank affiliated with the National Development and Research Commision, China’s highest central planning agency, the network is planning to offer infrastructure services for any Chinese or international entity that uses blockchain.
BSN was originally created by six institutions, including SIC and state-owned tech giants China Mobile and China UnionPay, the country’s answer to VISA and Mastercard.
The network would be tested in 54 cities across the country as well as Hong Kong and Singapore for projects such as smart city management, Wenchao Shi, president of China UnionPay said in October at the test announcement.
“When developing an app, people would think about Android and IOS systems,” Shi said. “We hope BSN would be the first thing that people would think whenever they want to develop their own blockchain technologies.”
Huobi China has been trying to steer away from crypto trading in the country and establish itself as a blockchain services provider since the 2017 crackdown on crypto exchanges.
In the same year, the company kicked off its global expansion and transferred its trading businesses to Singapore, Japan and South Korea with local operations in each country, according to a timeline provided on its website.
Headquartered in Hainan province, one of the southernmost parts of China, Huobi China firmed up its relationship with the Chinese government by establishing a Communist Party of China branch in its local blockchain subsidiary Beijing Lianhuo Information Services LLC in November 2018.
Bullish Bitcoin Chart Pattern Still Intact Despite 7% Price Drop
- Bitcoin has erased more than 45 percent of last week's rally, but the outlook remains bullish with prices holding above three-day chart support at $6,847.
- A re-test of trendline resistance at $7,665 looks likely. A violation there would expose Friday's high of $7,870.
- Acceptance below $6,847 would invalidate a bullish reversal pattern on the three-day chart and expose the recent low of $6,515. That looks unlikely, though, with the MACD histogram turning bullish above zero.
Bitcoin has pulled back sharply over the last 48 hours, but is holding well above support near $6,850 keeping the short-term bullish bias intact.
The top cryptocurrency is currently trading near $7,330, representing a 7.3 percent drop from the high of $7,870 registered on Friday.
With the pullback, bitcoin has erased more than 45 percent of the corrective rally from the six-month low of $6,515 hit on Nov. 25.
As a result, many in the investor community, including the likes of popular trader and analyst Josh Rager, believe the relief rally has ended and the overall bearish trend, as represented by the drop from $10,000 to $6,500, has likely resumed.
That argument appears logical with the daily chart reporting a fresh lower-high pattern.
Daily chart and 8-hour charts
Bitcoin jumped to $7,800 on Friday, as expected, but faced rejection at the resistance of a trendline sloping downwards through Oct. 26 and Nov. 15 highs.
The cryptocurrency also failed to close (UTC) above $7,775 – the 38.2 percent Fibonacci retracement of the drop from $10,350 to $6,511.
In effect, the bulls could not preserve the upside momentum after Friday's rejection at key levels and the cryptocurrency has faced selling pressure ever since.
Bitcoin has now established a "bearish lower high" at the falling trendline resistance.
Further, the 8-hour chart is now reporting a flag breakdown, which implies a resumption of the sell-off from recent highs near $10,350.
All that said, a bullish reversal pattern confirmed last week on the three-day chart is still valid.
BTC created a hammer candle in the three days to Nov. 26, signaling seller exhaustion following a notable sell-off.
More importantly, the cryptocurrency rallied 8 percent in the three days to Nov. 29 and found acceptance above the hammer candle's high of $7,380, marking a strong follow-through to the hammer candle and confirming a short-term bearish-to-bullish trend change.
The bullish pattern would be invalidated if and when bitcoin find acceptance under $6,847 – the low of the green candle.
Hourly and daily charts
The pullback from $7,870 lacks substance, with trading volumes dropping over the last 48 hours. A low-volume pullback is often short-lived.
Meanwhile, the daily chart MACD histogram, an indicator used to identify trend changes and gauge the strength, is offering a bullish signal with an above-zero reading.
As a result, bitcoin looks unlikely to violate support at $6,847 and may rise back to the falling trendline resistance, currently at $7,665.
The short-term bullish case would strengthen if prices manage to clear the lower high at $7,870 established over the weekend.
It's worth noting that, as per technical analysis theory, setups on longer time frames take precedence over intraday charts. So, while bitcoin is looking heavy on the 8-hour and daily charts, the pattern on the three-day chart warrants caution on the part of the sellers.
US Lawmakers Want to Brand Libra a Security, Association Disagrees
A couple of United States lawmakers are looking to classify stablecoins as securities. With Libra considering adopting fiat-pegged stablecoins rather than a single token supported by a basket of national currencies, the proposed crypto project might be facing yet another regulatory hurdle.
Meanwhile, lawmakers sponsoring the bill say stablecoins should be classified as securities to protect U.S. consumers. If passed, stablecoin projects like Libra will potentially fall under the purview of stringent U.S. securities regulations.
Critics of the move remark that such measures only serve to further dampen the country’s position in the emerging digital landscape. Some commentators have long accused regulators of chilling innovation in the U.S. crypto and blockchain space.
Libra maintains that its proposed stablecoin project is a commodity. The association is also moving forward with developing the payment system, recently releasing updates on the state of its testnet and detailing the number of transactions carried out so far.
U.S. lawmakers want “managed stablecoins” classified as a security
As previously reported by Cointelegraph, two Texas representatives — Lance Gooden and Sylvia Garcia — have proposed a piece of legislation that will classify stablecoins as securities. Named as the “Managed Stablecoins are Securities Act of 2019,” the bill, which is sponsored by representatives from both sides of the aisle, could place an even greater regulatory burden on stablecoin projects like Libra. In a statement quoted by The Hill, Rep. Garcia remarked:
“Managed stablecoins, such as the proposed Libra, are clearly securities under existing law. This legislation simply clarifies the statute to remove any ambiguity.”
A co-sponsor of the bill, Rep. Gooden, also echoed the sentiment that Congress should take the lead in shaping the legal landscape for cryptos and the digital space at large. According to Gooden, “It’s the responsibility of Congress to clarify the regulatory framework that will apply to stablecoins, especially now that mainstream institutions are offering them to consumers.”
It appears that consumer protection concerns are at the heart of lawmaker endeavors to put stablecoins under the security token paradigm. However, such a move increases the regulatory burden on stablecoins, as U.S. securities laws contain a litany of reporting and compliance requirements.
Cointelegraph reached out to the Libra Association for comments about the proposed bill. In its email response, Dante Disparte, the association’s head of policy and communications, remarked:
“We maintain that responsible financial services innovation and regulatory oversight are not in contest. The Libra payment system is designed from the ground up to serve as a payment infrastructure that can empower billions of people left on the margins of today’s networks. The Libra Coin is simply a proxy for an instantaneous payment system that is low friction and high trust.”
With Libra yet to launch, it remains unclear exactly what type of token the project will utilize. In October 2019, the association hinted that it might abandon its original plan of creating a single token supported by a basket of national currencies in favor of a fiat-pegged stablecoin.
The bill before Congress represents another development in the emerging trend of government authorities in Western countries looking to place stringent regulatory hurdles along the path of stablecoin projects. Several regulatory agencies in the U.S. as well as international organizations like the G-20 have expressed concerns about stablecoins.
Another potential regulatory hurdle for Libra
If passed, the bill could potentially serve as another regulatory impediment on the path of the Libra project in the U.S. In an email to Cointelegraph, crypto and blockchain legal expert Max Ambrose highlighted how much of a burden the proposed bill could have on Libra:
“It will require Libra to follow substantial regulatory requirements imposed by the SEC that they are hoping to avoid altogether. These regulatory requirements increase legal costs and will tie Libra’s hands on numerous investment-related issues, requiring them to operate within specific bounds which the SEC and lawmakers can carve out.”
The added compliance burden for Libra would be to such an extent that, as Ambrose remarked, “The bill may entirely prevent Libra from operating in the US,” but the likelihood of such will depend on whether the association chooses to follow local regulations. He added:
“Libra’s argument that it is not a security is further evidence of the hardships they will face if they are subjected to US securities laws and regulations.”
Joe DiPasquale, CEO of BitBull Capital — a crypto and blockchain hedge fund firm, echoed similar sentiments declaring that stablecoins being classified as securities in the U.S. could hurt Libra’s operation in the country. Writing to Cointelegraph, DiPasquale declared that classifying Libra as a security would limit the flexibility of the project’s operation in the U.S.
A security token designation might not be the only worry for Libra in the U.S.: Earlier in November, Kenneth Blanco, director of the U.S. Financial Crimes Enforcement Network, declared that businesses that conduct stablecoin transactions must register as money services businesses.
Since the release of the project’s white paper, Libra has been facing criticism from several regulatory stakeholders both within and outside the U.S. While much of the initial objection to the project appeared to stem from Facebook’s involvement in the Libra Association, recent events seem to point toward governments wanting to stake a firm stance against the project as a whole.
Are stablecoins securities?
With the bill already before Congress, part of the developing conversation is circling around whether stablecoins are securities. In the U.S., the Howey Test is the standard for classifying investment instruments as securities.
So far, the U.S. Securities and Exchange Commission has elected to utilize the Howey Test rather than create another standard specifically for crypto. According to Ambrose, Congress reserves the right to create a legal framework for determining whether crypto tokens should be seen as securities. As part of his email to Cointelegraph, Ambrose said:
“The legal basis to classify a cryptocurrency as a security is up to lawmakers (e.g., Congress) and regulatory agencies (e.g., the Securities Exchange Commission, aka SEC), so if this bill passes, Congress is effectively creating the legal basis for the classification. It becomes irrelevant whether Libra is or is not a security under current law, because it would be classified as a security under the new law.”
In summary, the Howey Test classifies an investment instrument as a security if it:
- Involves monetary investment.
- The investment is in a common enterprise.
- There is an expectation of profit from the investment.
- There is an expectation of profit due to the efforts of the promoter or third-party.
Sponsors of the bill argue that managed stablecoins constitute investment contracts and are therefore securities under the paradigm of the Securities Act of 1933. Earlier in November 2019, the International Organization of Securities Commission declared that some stablecoins might be securities.
According to the IOSCO, some stablecoin implementations possess certain features typical of securities. Thus, the international securities regulator maintains that regulators would be correct in classifying some stablecoins as securities.
However, the Libra Association maintains that while regulators and lawmakers have to consider consumer protection laws, the steps they take should not inhibit the growth of the digital asset space. Disparte remarked to Cointelegraph:
“We recognize that stablecoins are an emerging technology, and that policymakers must carefully consider how this fits into their financial system policies. However, we believe that it is important to regulate activities and not technologies, allowing for responsible innovation to flourish.”
It could be better...
Some U.S. crypto and blockchain stakeholders have lamented the current state of regulations governing the country’s digital asset space. Earlier in 2019, Jeremy Allaire, the CEO of Goldman Sachs-backed Circle — a crypto payments firm — declared that unclear U.S. crypto regulations were forcing companies to move their projects to other countries.Indeed, during hisrecent appearance before Congress, Facebook CEO Mark Zuckerberg sounded a note of caution against stringent digital regulations in the U.S. According to the Facebook chief, such measures are handing over control of the emerging digital economy to China.
Blockchain, Power and Politics: How Decentralization Engenders Freedom
The 21st century world is connected, but not centered. These are both good things. Connections link people, cultures and ideas. Indeed, all the great advances in human history have been the result of social and economic networks.
Without the trade routes of the Indian Ocean, the Islamic world would never have acquired the numerals of India that now form the foundation of our mathematics of science. Without the coffeehouses of 17th and 18th century Britain, the Enlightenment probably wouldn’t have materialized. Genius dies in isolation; connection is the engine that drives human progress.
By contrast, the centralization of power is highly correlated with disaster and suffering. Some say that this is the iron law of oligarchy — i.e., as any institution, private or public, becomes larger and more complex, power will inevitably become concentrated in the hands of a small elite. It’s also inevitable that we’ll experience earthquakes and hurricanes, but this doesn’t stop us from trying to mitigate the damage of such natural disasters.The incentives of our traditional economies have made oligarchies a practical certainty. We are now at a technological crossroads, however, which will allow us to change these incentives, keeping power in the hands of the people. And blockchain could be a key component of this process.
Blockchain should be anti-bloc. What does this mean? Simply put, that a truly decentralized blockchain will, by its very nature, resist the centralizing and homogenizing forces that tend to form into power blocs. We must not forget that blockchain is also a means to an idealistic end. When Satoshi Nakamoto mined the Bitcoin genesis block, he embedded a reference to an article in London’s newspaper The Times about the 2008 financial crash. The gesture was not subtle: Satoshi believed that centralized banks and central governments had failed their constituents.
It’s increasingly difficult to distinguish between our “online” and “offline” lives, so it’s hardly a surprise that regimes that wish to control their citizens — or even transform their citizens into “subjects” — do so by controlling the internet. It’s a scandal that even a single country is unfree, but across the world, governments are growing more restrictive and more repressive. These regimes actively ban services, put up firewalls, gather data, monitor critics and mass-produce lies.
Blockchain represents an alternative to this shift toward authoritarianism by enabling ad-hoc, censorship-resistant, peer-to-peer connections. An authoritarian state cannot seize a blockchain’s distributed P2P servers, nor can it flood the market with counterfeit cryptocurrency. The perfect blockchain doesn’t destroy economic, political or financial power, it merely distributes that power by using consensus to hold each other accountable to the truth of history.
We shouldn’t assume that all political power is wielded by explicitly political entities. Some of the largest blocs today are major tech companies and other multinational corporations, which often rival nation-states in influence and power. Where does their power come from? In many cases, it depends on the user data stored in their central servers, as well as the analysis of that data. Privacy and data-gathering scandals have been near-weekly occurrences for the past several years, and they show no signs of stopping.
After all, the biggest companies have more knowledge of their users than ever before. Google already has staggering amounts of personal data for most of its billions of users; after spending billions to acquire Fitbit, it will soon have even more. Netflix doesn’t just track what its viewers watch, it even auto-generates content thumbnails for individual users. Facebook is perhaps the most controversial data-gatherer: Mark Zuckerberg and his associates have received congressional summons to discuss just how grievously the company has abused public trust.
Although blockchain has genuine political potential, truly decentralized blockchains will require deviation from today’s practices. When the first Bitcoin (BTC) was mined in 2009 and 2010, just about any internet-ready computer could participate. The first Bitcoin found its way into dorm room laptops, aging internet cafe machines and PCs in rented studios. Anyone, anywhere — provided they were online — could mine Bitcoin.
As difficulty increased and Bitcoin’s value appreciated, however, centralization became a fact of mining. No longer could anyone with a computer successfully mine. Now, the miners were specialized machines in anonymous server farms clustered near cheap power sources. The technology became ever more powerful, but decentralization broke down.
Let me be clear: Bitcoin still has a vital role to play in bringing blockchain technology to the masses. And the work it has done in providing a currency to people afflicted by authoritarian oppression and hyperinflation cannot be understated. But the limitations described above are real nonetheless, and future entries into the crypto landscape must strive to overcome them.Blockchain and decentralization can serve as essential countermeasures to growing political and corporate authoritarianism. In countries that are already free, decentralizing tools grant greater freedom. They permit their users to opt out of systems that they believe are unjust — or even merely inconvenient. In authoritarian regimes, blockchain and related technology provide a way to evade injustice and to organize against it. These are the first steps in reclaiming the freedom that has degraded since the dawn of the 21st century. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Tomer Afek is the CEO and co-founder of Spacemesh, a fair and distributed blockmesh operating system powered by a unique proof-of-space-time consensus protocol. A serial entrepreneur, Tomer has more than 20 years of experience across the tech, digital and finance industries, having co-founded and held C-level roles with ShowBox, ConvertMedia and Sanctum Inc. With Spacemesh, Tomer is on a mission to build the fairest possible decentralized economic infrastructure.
1week ago, 1 Dec, Sunday
Russian Central Bank Says It Would Support Crypto Ban
When asked by state-operated news agency RIA, the central bank offered the opinion that "private cryptocurrencies cannot be equated with fiat money and cannot be legal tender."
"If it is decided to ban cryptocurrencies as a means of payment at the legislative level, we consider it appropriate to support this position,” the banking authority said.
Legislation clarifying the legal status of cryptocurrencies, including mining and token sales, was reported to be passing through the State Duma by the end of the last summer session, but has seen delays. Two of three planned bills were passed in 2018, however, one regarding digital rights and the other covering crowdfunding, RIA says.
The Bank of Russia justified its support of a possible ban, saying:
"We continue to believe that cryptocurrencies carry significant risks, including in the field of laundering of proceeds from crime and financing of terrorism, as well as in conducting exchange transactions due to sharp exchange rate fluctuations."
Recently, the institution's chairperson, Elvira Nabiullina, said that, after research, the bank sees no strong reason to launch a national cryptocurrency that would override the potential risks.
Nabiullina has also warned of the risks of crypto investment, compared it with gambling at a casino, according to RIA. In October, she said, "“There is a worldly wisdom that free cheese is only in a mousetrap: easily earned money quickly leaves."
1week ago, 29 Nov, Friday
A Third of Crypto Exchanges Have Little or No KYC, Says CipherTrace
Blockchain compliance solutions provider CipherTrace says in its Q3 Cryptocurrency Anti-Money Laundering (AML) Report, published Wednesday, that around one third of the top 120 exchanges are "weak" when it comes to know-your-customer (KYC) verification, while fully two-thirds "lack strong KYC policies."
The FATF guidance, which is more or less obligatory for its 39 member nations and jurisdictions to adopt in regulation, stipulates that exchanges, or virtual asset providers (VASPS), must obtain, store and be able to pass on data on their users when transactions worth $1,000 or over are made. This provides a digital paper trail that can be followed in order to prevent financial crimes such as money laundering or terrorism financing.
CipherTrace says there's now just seven months left for the members to align legislation with the guidance, and VASPs to set up solutions in order to remain in compliance. However, it says, some 65 percent of exchanges are not yet able "to handle basic KYC, let alone comply with the stringent new funds 'Travel Rule'."
The firm's researchers found that they were able to transact 0.25 bitcoin daily with little or no KYC at 35 percent of exchanges tested, described as "weak" AML protections in the report. Forty-one percent were "porous," CipherTrace found, with "some sort of ID verification process," while just 35 percent had "strong" KYC, with multiple levels of verification, including a proof-of-address requirement and perhaps video or telephone calls.
CipherTrace further says that the Travel Rule is "problematic" for so-called privacy coins, cryptocurrencies that offer features that can obfuscate a transactor's data. Such features put these cryptos at odd with FATF's guidance, making exchanges unable to comply with the Travel Rule.
However, the report says that the researchers found 32 percent of exchanges, including some with less-then-strong KYC, still list privacy coins.
The firm states, though:
"Although the report does punctuate a concern for privacy coins that have no compliance strategy, CipherTrace affirms that recent reports of the death of privacy coins have been greatly exaggerated. In fact, many of the top privacy coin developers have already released statements ... on how they could comply with the Travel Rule.
Indeed, a planned suspension of zcash and dash trading support by OKEx Korea was put under review in October, partly thanks to efforts by the Electric Coin Company – the co-developer of zcash – to assuage the exchange's fears.
Josh Swihart, the Electric Coin Company's VP of marketing and business development told CoinDesk at the time, “Zcash is entirely compatible with all FATF recommendations including the travel rule."
It should be noted that CipherTrace, as well as other blockchain analytics firms, is offering paid-for solutions said to help exchanges comply with FATF guidance.
ECB Official Says Digital Currency Could Be an Alternative to Cash
A digital currency could ensure that citizens remain able to use central bank money even if cash is eventually no longer used, a European central banker said.
Speaking at a joint conference held by the European Central Bank and the National Bank of Belgium, outgoing executive board member Benoît Cœuré said the bank will examine the potential influences of digital currencies over the existing financial system.
“A digital currency of this sort could take a variety of forms, the benefits and costs of which the ECB and other central banks are currently investigating, being mindful of their broader consequences on financial intermediation.” Cœuré said.
However, he advocated for private companies to continue their own work in the space.
“But potential central bank initiatives should not discourage or crowd out private market-led solutions for fast and efficient retail payments in the euro area,” he said.
The speech came on the heels of Cœuré’s appointment as head of the newly established Innovation Hub at the Bank for International Settlements this month.
Effective on Jan. 1 2020, he will lead the institution’s effort to help central banks explore the benefits of financial technologies such as a digital currency.
European central banks in general have been speaking out about cryptocurrencies recently.
French central bank first deputy governor Denis Beau said last week the eurozone would consider building a blockchain-based settlement system for the euro and potential a digital currency to address payment issues between institutions in the area.
However, the ECB has struck down a proposed cryptocurrency proposed by Estonia in September 2017, stressing the euro is the only valid money in the European area.
In this vein, Cœuré said, the bank is not “ignoring” the development of cryptocurrencies, but simply does not think it as a risk to the bank of the euro.
Robinhood Withdraws Bank Charter Application Due to Regulatory Challenges
Stock and cryptocurrency trading platform Robinhood has withdrawn its bank charter application with the Office of the Comptroller of the Currency.
As CNBC reported on Nov. 27, Robinhood voluntarily decided to withdraw its application with the regulator due to the challenges the company could face in receiving a charter. A spokesperson said that “Robinhood will continue to focus on increasing participation in the financial system and challenging the industry to better serve everyone.”
Robinhood applied for a bank charter with the United States Office of the Comptroller of the Currency in April, asserting that it would be the first step towards being able to offer traditional banking products and services.
The full-service bank would have operated alongside the mobile-focused trading arm, which enables users to trade crypto, funds and options on their phones and desktops.
Regulatory scrutiny and latest developments
Previously, Robinhood faced regulatory scrutiny after it rebranded the service’s name to “cash management” and removed references to deposit protection. U.S. politicians reportedly accused the company of failing to offer full transparency its 850,000+ consumers.
Linkedln recently ranked the startup 7th on the “The 50 hottest U.S. companies to work for” list, after it received regulatory approval from Britain’s Financial Conduct Authority, and raised $323 million in a funding round run in August.
Bank licenses issued to crypto businesses
In late October, Swiss-based cryptocurrency bank Sygnum — which gained a Swiss banking license in August 2019 — received the go-ahead to offer banking services in Singapore in the form of a capital markets services license from the Monetary Authority of Singapore, the Asian city-state’s central bank.In April, Puerto Rico-based cryptocurrency trading platform San Juan Mercantile Exchange (SJMX) launched banking operations for institutional clients.
EToro: Facebook Should Drop Libra and Support Third-Party Stablecoins
Blockchain researchers at online brokerage eToro have argued that Facebook should look to support third-party stablecoins, not Libra.According to a Nov. 28 report from Finextra, eToro’s blockchain research unit eToroX Labs believes that while Facebook’s crypto project offers a “trailblazing opportunity” to disrupt financial services worldwide, the social media giant needs to change its strategy to assure success.
Facebook should focus on wallet infrastructureDistrust and forceful opposition have plagued Facebook’s project since its inception — prompting American politicians to recast Libra derisively as “ZuckBucks.” Yet eToroX Labs’ researchers argue that there is still something to fight for in realizing the company’s ambitious aim of embedding a peer-to-peer payment network that could purportedly improve financial inclusion globally. Facebook could solve its problems by delegating asset issuance to regulated third-party partners, they say. According to eToro, independent, multiple fiat-backed stablecoins would remove the task of currency control from Facebook, which could instead focus on building its Calibra wallet infrastructure and rolling it out for the estimated 2.7 billion users worldwide across its platforms. EToro is itself notably an issuer of a range of stablecoins, backed by the U.S. dollar, pound sterling and euro. The firm’s CEO and founder Yoni Assia said that the Libra Association should lobby lawmakers to provide harmonized and streamlined regulatory frameworks that would cover “the governance of the third parties using the Libra chain for executing payments," arguing that:
“The regulatory burden and associated compliance costs would befall those who use the ledger for their own gains, be it in the issuance of collateralized stablecoins, commodities or other financial instruments, effectively removing Libra from the money trail altogether.”
Proliferating optionsEarlier this week, David Rutter, the CEO of enterprise software firm R3, ridiculed Facebook’s Libra announcement this summer as naive and “ridiculously stupid.” As Libra continues to divide global opinion, the Libra Association is proceeding with development, reportedly logging over 30 projects and 51,000 transactions on the Libra network during the past two months of testing. Facebook has meanwhile just announced the launch of a new fiat payment system, Facebook Pay, designed to facilitate payments across Facebook, Messenger, Instagram and WhatsApp. In October, United States Representative Warren Davidson had argued that Facebook adding Bitcoin (BTC) to its Calibra wallet would be a “way better idea” than creating a new currency.
US Fed Weighs Up Potential CBDC as Countermove Against China
Where just a handful of years ago, the idea would have been immediately dismissed or even met with ridicule, the United States Federal Reserve is now taking the concept of an official dollar stablecoin seriously.
Markets have heard more frequent guidance from the Fed on cryptocurrencies in recent years, and thanks to two curious U.S. representatives — French Hill and Bill Foster — this guidance now includes an enlightening response from Fed Chairman Jay Powell to their letter on a central bank digital currency, or CBDC.
Evolving trends force regulators’ hands
The infiltration of blockchain into our global financial sector is nothing new, but a few trends have seen these experimental decentralized solutions tackled head-on by authorities. One of the most significant events to bring about this pivot is that the first major economy has emerged as a proponent of government-issued stablecoins.
China’s announcement that it will launch a digital currency reveals the country’s direction, andother federal banks must now consider doing the same, especially during the ongoing trade war that is testing the standalone strength of individual economies and their monetary policy.
Facebook’s Libra is another sign that cannot go ignored, and though theLibra Foundation just experienced an exodus of backers, its underlying idea is enough to represent a bucket of cold water tossed on slumbering regulators and policymakers.
If governments don’t move first to permit immutable cryptocurrency transactions for their own digital coins, private corporations are ready to pounce. Likely on high alert thanks to China’s abrupt change in stance on cryptocurrencies, Powell provided fresh, tangible insights on how the U.S. regards this developing movement in his recent letter.
“The Fed has realized that cryptocurrencies, in one form or another, are here to stay,” says Saga’s chief economist, Barry Topf — a consultant for the International Monetary Fund and former central banker. He told Cointelegraph that Powell’s answer reveals there are “far-reaching implications for monetary policy, currency regimes and central banks themselves.” He went on to add that:
“Federal bankers have been slow on the uptake, but now realize they must evaluate and assess developments and possible implications. Otherwise, they risk being surprised and unprepared for a changing environment which may include China as a dominant force. A CBDC issued by China would be a major extension of China’s influence in the world economy.”
Topf continued by saying that the implications of such a move by China must be carefully weighed, “Mark Zuckerberg told Congress this directly when he said, ‘While we debate these issues, the rest of the world isn’t waiting.’”
The Powell letter is revealing
Compelled by concerned lawmakers to indicate which way the Fed is leaning when it comes to its own stablecoin, Powell underlined that the agency currently has no plans to develop a central bank digital currency. However, it has discussed the idea at length and continues to assess potential pros and cons of such an idea. According to Powell:
“Issuing a central bank digital currency for general use would raise important legal, monetary policy, payments policy, financial stability, supervision and operational questions that need to be considered more carefully.”
A Fed-backed digital currency could bring significant advantages to the way money is settled currently, offering consumers a way to transact without fees and without middlemen such as smaller banks, but this would have several implications that Powell considers in his letter.
By operating a digital ledger, the Fed would technically be responsible for transaction metadata, and it is not outfitted to protect personal information — nor does it want to be. Interestingly enough, the chairman also seems to indicate that the current system’s illiquidity and cost inefficiency are preferable due to the way it obstructs capital flight and “runs from private markets” during stress episodes.
Other documents from the Fed published in November also claim that market runs could occur if stablecoin operations were to break it down, causing a loss of faith.
Stablecoins support Powell’s theories
The logic contained in Powell’s letter rings true if one is familiar with the fundamental concept of stablecoins. A national stablecoin would be a token based on a blockchain, where each once would be backed by $1 from the Fed.
The theory goes that eventually, other assets and currencies will be “tokenized” as well, reducing speed and cost as variables in any transaction. However, there are some weak claims made in the letter, such as the notion that, "To date, our observation is that many of the challenges they [CBDCs] hope to address do not apply to the U.S.” Powell is arguably correct that if the U.S. economy did switch to dollar tokens overnight, there would be issues.
Unpredictable market dynamics would cause turbulence, and if unaddressed beforehand, they would indeed be an enormous risk. For example, one will be able to convert their entire savings account from a dollar stablecoin to a euro stablecoin, without the settlement costs imposed in today’s ecosystem. Once people are allowed to mobilize their dollars without the obstacles they’re used to, this nimbleness could boost volatility and impact general economic health.
However, another notion cleverly hidden in the letter is that the Fed considers terms and conditions like interest rates (and likely fees) as something to be imposed on its hypothetical digital money. How this would work was left unsaid in the letter.
Economies step into the great unknown
Clearly, regulators are still juggling multiple fundamental problems and technical realities that are involved in the provision of stablecoins, but they’re now doing so at odds with competitors likeChina, which has already entered the “race.”
The winning prize and whether the race is even worth entering is still unknown. There are some guesses, and the fact that some governments are willing to try regardless of potential chaos has lit a fire under noncompetitors.
Many are falling over themselves in the race to be the first “de-facto government-backed stablecoin for traders around the world,” as head of operations at the OKEx exchange, Andy Cheung, told Cointelegraph:
“If the US were to issue a digital dollar, it would certainly have far-reaching impacts on the global markets.”
Cheng believes that crypto exchanges need to prepare for this to meet the needs of new and old users alike, but that the overall impact from such a move would be positive for both crypto and traditional economies:
“The issuance of a digital dollar by the government would actually prompt the growth of both ecosystems and spur other participants to be more innovative and compliant with a global standard. Competition brings out excellence. Whoever executes it properly, would ultimately earn the same type of digital faith and volume that exists for the US dollar in its fiat form.”
Samuel Lim, chief compliance officer at Binance, also sees this as a positive beacon for adoption of cryptocurrencies as a concept, telling Cointelegraph that it would grant greater legitimacy to the crypto space and increase the level of interest form institutions:
“This would likely directly or indirectly have a positive impact on trading volumes with the entry of the big monies. This would also allow more people (the public) to learn about digital assets/currencies which is a positive thing altogether. We do believe that there is certainly sufficient room for public and private digital assets to co-exist.”
Governments must be conscientious custodians
A big issue with a potential government-backed stablecoin is that if the Fed were to impose rules that infringed upon blockchain’s basest advantages, people may be more willing and able to put their money into decentralized blockchains instead.
A question would then be if the government could somehow shut those blockchains down for being a digital equivalent or a counterfeit. “Obviously, governments have to guarantee execution and enforcement and it goes without saying that there should be appropriate government institutions to do so,” Grigory Rybalchenko, co-founder and CEO of Emirex — a digital asset exchange based in the Middle East — told Cointelegraph.
Rybalchenko is of the opinion that it would be the job of the government to strike the right balance between the number of centralized and decentralized solutions in order to promote financial freedom and allow people to make a choice, adding that:
“The current operating model of governments doesn’t look compatible with decentralized blockchain nor have they given confidence in their ability to transition from centralized to decentralized. It must occur, however, because honestly speaking, centralized blockchains don’t seem to have value beyond mimicking a database.”
Alex Kravets, U.S. head of cryptocurrency exchange CEX.IO, also told Cointelegraph that any platform deemed capable of impacting government sovereignty and their national currencies is likely to see barriers put up against it:
“Having the federal reserve create a digital dollar could be a double edged sword. On one hand it would be the most dominant and secure stablecoin which could be the greatest catalyst to push mass adoption on a global scale. But on the other hand, the government would have control of the blockchain and perhaps could in real time determine which transactions are sanctioned or prohibited.”
CEO of trading platform StormGain Alex Althausen concurs, telling Cointelegraph that governments have never had any intention of letting concepts like decentralized governance get in the way of their total control, adding that:
“Governments will no doubt consider any pegged or backed stablecoins as centralized assets no different than the dollars they already have, just more agile. Accordingly, any decentralized exchange, cryptocurrency or blockchain project will be considered as a competitor and not a cooperator, and they’ll be treated as threats much like what’s happening with Libra and TON now.”
The race is on regardless
Managing director at Bithumb Global, Javier Sim, has already seen evidence of the worldwide governmental race toward blockchain, with both Sweden and Estonia having developed various plans to digitize assets and identity systems. Sim continued by saying:
“Blockchain’s use here is largely for fraud prevention, and it’s interesting to see how governments have dismissed the decentralized debate as nothing more than an argument on data storage.”
The coming years will see central banks around the world make moves toward digital currency in close succession — if not for the immense opportunities the system provides, then simply because China and Libra have changed the aging perception that it cannot be attempted.
Some have seen this revolution as inevitable, even before China put itself in the ring. Mark Zuckerberg argued in his hearing before Congress that any hesitation would result in China beating them to the punch with a digital yuan — and in no time, he was proven right. The starting gun has been sounded, and it’s only a matter of time until we’re all racing toward our unidentified destination.
Coinbase Secures Patent for System to Identify Non-Compliant AccountsMajor American cryptocurrency exchange Coinbase has been awarded a patent for a system that identifies and flags non-compliant accounts. A filing with the United States Patent and Trademark Office on Nov. 19 details a system containing a scoring model that “determines a compliance score for each one of the accounts based on the respective factors associated with the respective account.” The system then compares the compliance score for each account to detect those accounts that fail compliance standards.
Eliminating non-compliant accountsAfter a flagging unit identifies purportedly non-compliant accounts, the system assesses whether they are good or bad, enters the determination into a feedback system and decides whether or not to close the account. The filing stated: “An investigator may be able to determine whether an account is being used for illicit activities by doing research on the parties of the transaction who receive or send payment and determining whether such parties are regularly involved in illicit activities. It may for example be relatively easy to determine that a party sending or receiving payment is in the business of conducting online services that may be illegal.” According to CipherTrace’s report for the third quarter of 2019, the total volume of cryptocurrency-related fraud and theft resulted in losses worth $4.4 billion in 2019. CipherTrace delved into the 120 most popular cryptocurrency exchanges’ Know Your Customer (KYC) and Anti-Money Laundering compliance requirements and analyzed patterns in crypto-related crimes. Earlier in November, a lawyer and general counsel at decentralized finance startup Compound Finance, Jake Chervinsky, raised the question of whether exposing the public to data risks that KYC requirements entail is worth it. He explained that KYC helps law enforcement to track illegal transactions, but also exposes the public to hacking, phishing and identity theft.
KPMG Launches DLT Supply Chain Tool in Australia, China and Japan
Author: Helen Partz
Big Four audit firm KPMG has officially launched a blockchain-based track and trace platform in Australia, China and Japan. Dubbed KPMG Origins, the tool is designed to increase transparency and traceability of processes in multiple industries such as agriculture, manufacturing and financial services, the firm announced on Nov. 28.
The official launch of KPMG Origins in Australia, China and Japan comes after successful pilot implementations with clients in those countries, the press release notes.
Trial participants include Cane Growers and SunRice
Incorporating a number of emerging technologies like blockchain and the Internet of Things, KPMG Origin intends to improve supply chain processes. The platform enables trading partners to communicate product data across their supply chains to end users while reducing operational complexities, KPMG stated.
KPMG Origins’ trial participants include the SunRice, one of Australia’s largest branded food exporters, Canegrowers, a peak body for Australian sugarcane growers, and vineyard Mitchell Wines.
Blockchain tech to help meet the increasing demand for sustainability
Matt Kealley, senior manager at membership engagement and innovation at Canegrowers, noted that blockchain technology has the potential to help meet the increasing demand on farmers to demonstrate their sustainability practices:
“A blockchain solution, such as KPMG Origins, could provide a platform which will enable end-users to capture the sustainability credentials of the product directly from the grower to customer.”
Conversely, an agribusiness exec at PwC recently argued that blockchain gives an illusion of traceability to supermarket chains and consumers, noting that physical points of entry are not necessarily foolproof.
Big Four auditors have expressed strong interest in blockchain
As previously reported, all the Big Four companies — Deloitte, PwC, EY and KPMG — have expressed strong interest in blockchain technology implementations. As the firms’ public and private audits have reportedly accounted for more than 50% global audits in 2018, the Big Four’s activity in crypto and blockchain could indicate the state of global blockchain adoption.
As such, one of the most recent blockchain implementations among the firms is EY’s blockchain platform for public funds, which launched in mid-October. Previously, PwC partnered with ConsenSys-backed identity management protocol uPort to develop blockchain-based identity management in the United Kingdom's financial sector.
1week ago, 28 Nov, Thursday
A Product Development Team Just Made ETH Block Production Twice As Fast
Blockchain advisory and product development firm Akomba Labs conducted a test on the Ethereum network that shows it can make block propagation at least twice as fast.
Coindesk reported on Nov. 27 that Akomba Labs — in collaboration with the scalability-focused blockchain startup BloXroute — ran a two-week test measuring the results of running BloXroute's Blockchain Distribution Network (BDN) on the Ethereum network.
Test findings showed that the average block propagation performance significantly improved, dropping from 360 milliseconds without the BDN to 172 milliseconds with it.
The test results further indicate that BDN could potentially present itself as a solution to Ethereum’s scalability debacle. BloXroute CEO Uri Klarman commented:
“Ethereum feels the burn of the scalability bottleneck more than any other blockchain out there [...] It's losing momentum, it's losing market share. They feel the problem. most others don't.”
Klarman added that BDN is already running in some of the mining pools and that it will be gradually introduced to more larger pools. Klarman said on Twitter that it is “not just about making the network faster, it is about making it bigger, without making it slower.”
BitTorrent creator calls out Ethereum’s co-founder Vitalik Buterin
Bran Cohen, best known as the creator of BitTorrent, recently explained why he considers many of Vitalik’s opinions addressing the so-called “hard problems in cryptocurrency,” to be “wrong-headed.”Cohen first took a few stabs at Vitalik’s views on sharding and blockchain scalability, just before he made it abundantly clear that he is no fan of Vitalik’s ASIC-resistant proof of work (PoW) algorithm, calling it a “pipe dream and a bad idea.”
Former UBS Executive Establishes Digital Securities Insurance PlatformA former executive of investment bank UBS has established a United States-based digital securities platform. According to a press release on Nov. 27, Claude Waelchli — who served over 12 years at UBS in various executive positions — launched the Tokenyz platform for issuing digital securities. Waelchli states that the financial industry can benefit from digital securities as they can automate manual processes, streamline settlements, create liquidity, and lower minimum trade size. Eventually, Waelchli intends to connect “tech companies with immense tokenization capability but little financial acumen, and financial services companies locked into their traditional business models.” Waelchli said, “It is our firm belief that the digitization of traditional securities will create exponential growth opportunities in the years ahead.”
Other recent developments in digital securitiesIn late August, the U.S. Securities and Exchange Commission registered Securitize, a digital securities platform backed by crypto exchange Coinbase. The registration enabled Securitize to operate as an official keeper of records about changes of ownership in securities. Recently, Deutsche Börse Venture Network (DBVN) partnered with German fintech company Cashlink, allowing institutional investors to obtain digital securities. DBVN director Peter Fricke commented, “With this new offering from our partner, we are able to simplify the process of raising capital for startups on our network, and all within an existing regulatory framework.”
Indian Government to Issue National Blockchain Strategy
As the India Times reported on Nov. 27, India’s Ministry of Electronics and Information Technology (MeitY) said that it recognizes the potential of blockchain technology and the need for the development of a shared infrastructure to carry out related use cases. The Ministry added that it is working on the “National Level Blockchain Framework.”
The Minister of State for Human Resource Development, Communications and Electronics and IT, Sanjay Dhotre, noted blockchain’s capability and potential in sectors such as governance, banking, finance and cybersecurity, among others.
Indian states are already developing blockchain policies
Cointelegraph previously reported that the Indian state of Tamil Nadu was working on a state-level policy for blockchain technology and artificial intelligence. Tamil Nadu’s blockchain and AI policies are expected to establish ground rules on how the state government can apply the emerging technologies for service delivery and solving governance issues.
Earlier this year, the Southern Indian state of Telangana also released a draft blockchain policy initiative, which aimed to establish an ecosystem for blockchain startups and research institutes. The initiative reportedly has a particular focus on projects working to develop blockchain applications for the banking and financial sector, pharmaceuticals, logistics and solutions for government sectors.
India’s stance towards cryptoWhile India may be pro-blockchain, its stance toward cryptocurrencies is decidedly hostile. In July, the Indian government proposed a draft bill entitled “Banning of Cryptocurrency & Regulation of Official Digital Currencies,” that intended to not only impose a complete ban on the use of crypto in India but also to introduce a “Digital Rupee” issued by the country’s central bank, the Reserve Bank of India.
Keep Calm and HODL On? 3 Reasons to Look Past Bitcoin’s Price Rout
That's the message to anyone spooked by bitcoin's brutal sell-off from several bullish experts interviewed by CoinDesk.
The bellwether cryptocurrency has tumbled 11.5 percent in the last week or so, likely due to a lack of positive catalysts entering the picture and China's latest crackdown on digital asset trading. It briefly dipped below the psychological level of $7,000 and as of this writing is trading around $7,117. But zooming out the lens a bit and taking a macro perspective, experts note at least three plausible reasons to think this may be just a hiccup for bitcoin.
On the demand side, institutional trading platforms like Bakkt and Fidelity Digital Asset Services (FDAS) are starting to see uptake. Retail bitcoin purchases are on the rise at the popular consumer app Square as well. And all else equal, the expected halving of mining rewards next year bodes well on the supply side since it will reduce the amount of new bitcoin regularly injected into the market.
“While the latest drop in price is a short-term cause for concern, the fundamentals around BTC and increasing institutional adoption continue up and to the right,” said Jehan Chu, Co-Founder and Managing Partner at Kenetic, a venture capital and trading firm based in Hong Kong.
Bakkt to business
After a disappointing start in September, the Bakkt futures market has started to ramp up in earnest, hitting an all-time high on Nov. 22, with 2,728 contracts traded. That was a 68 percent increase on the day prior while open interest was up 29 percent on the day. Open interest refers to the total number of outstanding derivative contracts that have not yet been settled.
A subsidiary of Intercontinental Exchange (ICE, which also owns the New York Stock Exchange), Bakkt is a regulated platform and exchange for the purchase, sale and storage of crypto assets aimed at institutional traders and companies.
Its role has been to increase confidence and trust within the crypto-sphere amongst larger funds by offering more sophisticated trading instruments such as futures contracts that can be utilized to hedge against risk.
“It's actually good that it's going to take longer for bitcoin to hit the next all-time high because it shows how the market is maturing and with more institutions jumping in,” said Josh Rager, an analyst and co-founder at Blockroots, an education platform for trading focused on the BTC market and crypto-assets.
Similarly, platforms targeting large investors, such as FDAS, launched earlier this year by mutual-fund powerhouse Fidelity Investments, provide a vital service for those larger funds seeking a safer avenue to enter crypto without having to rely on exchanges to store their crypto. They are likely boosting long-term sentiment by providing custody options for digital assets, experts told CoinDesk.
Fidelity Digital Assets, the nascent cryptocurrency trading business servicing institutional investors, also features an onboarding service with dedicated client support that makes the process of entering the space more convenient and legit from a large investor’s perspective.
Institutional adoption continues at a “rapid pace," said Gabor Gubacs, director of digital assets strategy at asset management firm VanEck.
“Lower BTC prices are more accessible and healthier entry points for new BTC allocators,” said Gubacs.
To be sure, it's not as accessible as some may have hoped. Gurbacs' firm, for example, withdrew a proposed bitcoin exchange-traded fund (ETF) from consideration by the U.S. Securities and Exchange Commission (SEC) in September, after the regulator signaled it was in no hurry to approve any such vehicle for retail investors. Instead, VanEck is selling shares in an ETF-like bitcoin fund strictly to institutions.
Another encouraging sign for the bulls is the fact that first-time buyers of bitcoin through Square's Cash app have roughly doubled, with the company's bitcoin revenue climbing 244 percent year-over-year to $1.27 billion in the third quarter.
Admittedly, Square only started offering bitcoin purchases in November 2017 (near the peak of the last bull market), so that triple-digit growth is from a small base. Also, the company's profits from bitcoin sales have been comparatively tiny, in the low seven figures.
Still, for Chu, the data bolsters the case for optimism, when combined with the developments on the institutional side.
"Bakkt trading volumes are steadily increasing, retail purchases on Square are at high levels, and platforms like Fidelity continue to create comprehensive access to Bitcoin for their customers – all of which are bullish long-term signs for bitcoin," Chu said.
'Fundamentals are different'
Then there are the key metrics about the asset itself. Rager noted that the hash rate, a measure of how much computing power is being devoted to the bitcoin network, has tripled since the previous all-time price high of $20,000 December 2017.
In his interpretation, institutions are selling to force weaker hands to capitulate, so the larger funds can accumulate BTC at lower prices ahead of the halving expected in May 2020.
Jonny Moe, a crypto day trader and analyst, agreed that the halving was the single biggest factor relating to the bullish long-term case and that BTC itself is a deflationary currency whose purchasing power should grow over time.
“To this point, all the evidence we have is that price has respected this disinflation in supply,” Moe said. “Until we see it stop following this four-year cycle, the most simplistic long term view is to just respect it and let it continue.”
But bear in mind that this point is up for debate. Some traders aren't sure history will repeat itself. Previously, those buying bitcoin in anticipation of the halving had the wind at their back, in the form of an already-bullish market, crypto trader Willy Woo noted recently.
"Well this time around, we have gone $14k->$7.5k and that's killing off weak miners who are dumping and dying," Woo tweeted. "This adds to the already bearish action, so no happy front running 6-months out due to sell pressure. You can't draw repeat fractals, the fundamentals are different."
Disclosure: This author holds no cryptocurrency at the time of writing.
HSBC to Digitize Private Placement Records to Track $20B in 2020
Author: Helen Partz
British banking giant HSBC plans to move $20 billion worth of assets to Digital Vault, a new blockchain-based custody platform by March 2020. By deploying the platform, the global investment bank aims to digitize paper-based records of private placements in order to increase standardization and speed up processes in the growing industry, Reuters reports Nov. 27.
HSBC reportedly expects the global volumes of private placements to surge 60% from 2017 to hit $7.7 trillion by 2022. The bank could not estimate how much the platform will save for the company or its clients, Reuters states.
HSBC to help investors track securities on private markets in real-time
Specifically, the Digital Vault platform will purportedly allow investors to track securities bought on private markets in real-time.
As private placements are usually conducted on paper, its processes are often associated with a lack of standardization, while access to documentation can be complicated and time-consuming. By deploying blockchain, the company hopes to reduce the time needed to make queries on holdings by investors.
No major savings in the first 18 months
While HSBC has not provided any estimations for the potential outcomes of adopting the platform, an independent blockchain expert suggested major savings would be unlikely during the first stages of the project.
Windsor Holden, an independent consultant who tracks blockchain and cryptocurrencies, told Reuters that he does not expect to see savings from increased efficiency in the first year to 18 months.
Private placement in the crypto and blockchain industries
Private placements are funding rounds of securities which are sold not through a public offering, but through a private offering. Private placement is considered to be an option to an initial public offering for a company looking to raise capital for expansion.
In July 2019, American digital asset management fund Grayscale Investments resumed private placement of Grayscale Bitcoin Trust shares, allowing investors to put money in Bitcoin (BTC) using a traditional investment structure.The Trust private placement is offered on a periodic basis throughout the year to accredited investors for daily subscription. Previously, South Korea’s messaging app operator Kakao Corp. revealed its plans to offer a private placement to attract investors to develop their blockchain subsidiary.
Judge Preserves SEC Motion to Strike Telegram’s Void for Vagueness DefenseA United States federal judge has preserved the Securities and Exchange Commission’s (SEC) move to strike Telegram’s “void for vagueness/lack of notice” defense. According to a letter dated Nov. 25, the SEC moved to strike Telegram’s proposed defense as being insufficient under federal law. On Nov. 26, Judge P. Kevin Castel ordered the motion to be preserved for 14 days until after the discovery period of the proceedings has ended. In early October, the SEC claimed that Telegram’s $1.7 billion Gram (GRAM) token sale was illegal under U.S. securities laws. On Nov. 12, Telegram filed a claim with the U.S. District Court of the Southern District of New York, asking the court to dismiss the SEC’s case against the encrypted messaging firm. Telegram stated that the SEC: “...failed to provide clear guidance and fair notice of its views as to what conduct constitutes a violation of the federal securities laws, and has now adopted an ad hoc legal position that is contrary to judicial precedent and the publicly expressed views of its own high-ranking officials.” As such, Telegram said that the definition of an “investment contract” — in this case, represented by its Gram tokens — was not sufficiently defined by law, giving the firm cause for relief.
Motion to strike by the SECIn seeking to strike Telegram’s void for vagueness defense from the proceedings, the SEC aimed to show that Telegram’s defense is insufficient, as the Howey decision and subsequent case law have adequately explained what constitutes an investment contract. Andrew Rossow, an internet attorney and anti-cyberbullying advocate, told Cointelegraph: “In its letter to the Court, the SEC has asked Judge Castel to preserve its Motion to Strike, so as to document on the record the SEC’s continuous assertion that the Defendant’s particular ‘claim’ is not a claim and therefore doesn’t belong in the pleadings (or in the case at all).” As a result of Judge Castel’s preservation order, Rossow explained that the SEC will not “need to continue writing and/or filing documents asserting that Defendants’ claim is not a sufficient claim in the proceedings—as it is documented as if the SEC were continuously bringing it up.”
Durov to give a deposition in the new yearOn Nov. 25, the court ordered Telegram’s founder Pavel Durov to give a deposition regarding the Gram token sale on Jan. 7 or 8, 2020. Two other Telegram employees — Ilya Perekopsky, vice-president of Telegram, and Shyam Parekh, an employee engaged in the Gram sale — will also give separate depositions on different dates. The SEC’s claim that Telegram violated federal law effectively halted the planned launch of the Telegram Open Network (TON) on Oct. 31. Purchase agreements for Gram token investors stated that, should the network fail to launch by that date, they could vote to receive a refund. Eventually, investors in TON and the GRAM token sale voted against a refund, which pushed back the tentative launch date to April 2020.
Swiss Government Moves to Remove Legal Barriers for Blockchain Development
At a meeting on Nov. 27, the Federal Council – the executive body that constitutes the federal government – adopted a proposal to improve the legislative framework for the nascent technology. According to a notice from Switzerland's federal finance department, the move is aimed at "increasing legal certainty, removing barriers for applications based on distributed ledger technology (DLT) and reducing the risk of abuse."
The legislation, developed as a "blanket framework," proposes amendments to nine federal acts across civil and financial market law, according to the announcement.
The nation is already known as one that is crypto and blockchain friendly, with its Zug region playing host to a large number of industry firms. Facebook also chose to incorporate the Libra Association in Switzerland.
In 2018, the Federal Council issued a report saying that it would regulate crypto and blockchain largely under existing financial laws, though an amendment to securities laws was also propose to increase the legal certainty of crypto tokens. The same year, the Financial Market Supervisory Authority introduced a new fintech license with “relaxed” requirements that could be applied to blockchain and cryptocurrency firms.
In today's announcement, the Federal Council said the 2018 report had demonstrated that Switzerland's existing legal framework is "well suited" for new technologies such as DLT. However, it also showed that there's room for improvement in some areas.
To address those, the Federal Council opened up a number of proposed amendments to existing laws for consultation in March. Following around 80 responses, the amendments have been further revised and, now, adopted by the council.
The proposed legislation is expected to be examined by the Swiss parliament in early 2020.
2weeks ago, 27 Nov, Wednesday
Ethereum Scaling Fix Cuts Time to Create a Block in Half, Test Finds
Blockchain advisory firm Akomba Labs ran bloXroute's "Blockchain Distribution Network" (BDN) on an Ethereum node in Singapore between Nov. 11 and Nov. 27, finding that average block propagation time – the time a block needs to be produced and shared throughout a blockchain – dropped to 172 milliseconds, less than half the current average time of 360 milliseconds.
Akomba utilized data from a Chinese mining pool as part of the two-week test.
Akomba’s results indicate BDN could have a modest but potentially cascading effect on block propagation in the Ethereum mainnet, one of the largest public blockchains and one of the more expensive to transact on, with gas prices around 20 cents. It is also a frequent target in the scalability debate.
“Ethereum feels the burn of the scalability bottleneck more than any other blockchain out there,” said Uri Klarman, bloXroute CEO. “It's losing momentum, it's losing market share. They feel the problem. Most others don't.”
BloXroute’s approach is a layer 0 solution that reduces transaction size and thus speeds up block propagation time. BDN could broadcast 4 bytes for a 500 byte transaction, for example.
“We don't send the entire block because if the other gateways know the transaction out of there, you don't need to send the actual data itself – only pointers saying which transactions are there” said Klarman.
BloXroute had previously tested BDN on the ethereum mainnet in September to similar results. At the time, it clocked about 25 percent reduction in block propagation time.
Klarman said that BDN is already running in some large mining pools and will continue to be gradually introduced to larger pools. Once it does, he says block capacity will increase and fees could fall – if, that is, the added capacity outstrips network demand.
In September, ethereum miners voted to raise the GAS limit to 10 million, up 25 percent from the previous ceiling. That move was made to combat network congestion, and Klarman said demand immediately ate the extra space up.
“We know there is demand for these transactions, which lead us to where we are right now,” he said.
Elliptic Brings AML Compliance to the Zilliqa Blockchain
The partnership, announced Wednesday, means the London-based Elliptic will monitor transactions passing through Zilliqa, including those in Zilliqa’s ZIL crypto and in the upcoming Singaporean dollar-pegged stablecoin XSGD, set for release in December, according to a press release.
Their goal: shield Zilliqa from risk by proving to governments and regulators around the world that Zilliqa users are not trafficking across their network with potentially illicit funds.
Tom Robinson, Elliptic's chief scientist, told CoinDesk through a spokesperson that the company provides tools allowing exchanges and other companies to identify funds being laundered by tracking transactions.
"Our tools enable these services to identify whether funds are being laundered through their businesses, by tracing each crypto-asset transaction all the way through the blockchain, to its source," he said. "If this source is one of the illicit wallets we have previously identified, the business is alerted and can take steps to prevent the money laundering from taking place."
The announcement comes at a time of increasing pressure from such regulators. In June, the Financial Action Task Force unveiled its “Travel Rule” guidelines upping compliance steps for crypto exchanges.
And though XSGD will be a Singaporean-pegged stablecoin, its launch coincides with governments’ close scrutinization of stablecoin regimes, including in the US.
Elliptic already has experience routing out such activity. One of the early startups to provide crypto transaction tracking services, the firm issued a report last week tying $400 million in XRP to illicit activities like ponzi schemes.
“While the promise of the digital economy is a truly exciting one, it is also imperative that established standards around security and compliance remain uncompromised,” Amrit Kumar, president at Zilliqa, said in a statement.AML oversight adds another layer to the Zilliqa blockchain. In June it announced smart contract support.
Bittrex Exchange Denies It Sought to Collaborate With Ukrainian Government
A Ukrainian government official said that United States cryptocurrency exchange Bittrex sought to collaborate with the Ukrainian government on developing the country’s cryptocurrency industry.
In a Nov. 20 interview with domestic blockchain media outlet ForkLog,. Deputy Minister of Digital Transformation Alexander Bornyakov claimed that Bittrex contacted the Ukrainian government to this end.
Referring to Ukraine’s recent memorandum of understanding with Binance to collaborate on creating crypto legislation in the country, Bornyakov said, “After we announced it, we began receiving requests from Bittrex, from Coinbase."
Bittrex did not contact the Ukrainian government
Bornyakov’s statement was soon reported by local publications, interpreting it as Coinbase and Bittrex seeking to open offices in Ukraine. Cointelegraph contacted both exchanges for clarification, and a Bittrex spokesperson denied Bornyakov’s statement, saying, “We would like to confirm that no one from Bittrex Global has been in contact with an official of the Ukrainian government.” Another spokesperson added:
“Bittrex is committed to helping foster innovation of blockchain technology around the world. However, Bittrex has not reached out to Ukraine’s Deputy Minister of Digital Transformation to partner with them.”
At press time, both Coinbase and Bornyakov have not responded to Cointelegraph’s request for comment. This story will be updated with their comments should they respond.
Cointelegraph previously reported that the Ukrainian government and Binance are forming a working group focused on creating “new virtual assets and a virtual currencies market in Ukraine.”
Binance CEO Changpeng Zhao said that the legalization of cryptocurrencies and the adoption of progressive legislation can play a key role in bringing positive growth to the economy, as well as attract further investment.
Blockchain and crypto lobbying firms increase in number
Crypto and blockchain companies are beginning to work more closely with governments on developing regulations for the industry. At the end of 2017, there were only 12 entities in Washington, D.C. lobbying on issues related to blockchain technology. One year later the number tripled to 33. By May 2019, it had increased to 40.
Lobbyists’ specific interests vary across organizations, yet a search of the Lobbying Disclosure Act Database reveals that the biggest interests include cryptocurrency taxation, standardizing concepts and definitions, and Anti-Money Laundering provisions.
Along with major industry leaders like Digital Currency Group and Polychain Capital, Coinbase formed purportedly the first supposed lobbying group representing the blockchain industry in Washington, D.C., in September 2018.
Can Crypto Platforms Help Loyalty Schemes in Shops Make a Comeback?
Retailers have been offering loyalty schemes for decades — but ensuring they are attractive enough to generate repeat customers is easier said than done.
Bond’s Loyalty Report, which surveyed 55,000 consumers in 2019, exposed these challenges in a stark way. Although 73% of those polled said they were more likely to recommend a brand with a good loyalty program, personalization is proving crucial for keeping these shoppers engaged — and just 22% are very satisfied that the rewards they are offered are matched to their individual interests.
Overall, retail initiatives are failing to keep up with customer demand. Just 44% are very satisfied with the programs they use. There are recurring issues that even the biggest companies are failing to address. Sometimes, their schemes are simply too complicated for users to get their heads around, leaving them unsure about what the points they have accrued are actually worth. In other cases, shoppers abandon programs because the returns are disappointing. With hundreds and even thousands of brands offering their own cards and accounts, the process of registering for each one individually and remembering to use them all can be overwhelming. And, on top of all this, too many retailers are failing to reach their target market on smartphones — either through instant messaging, social media or custom-built apps.
This led professional services firm KPMG to release a report calling for loyalty schemes to be given a wide-reaching rethink. Almost two-fifths of consumers polled encountered a problem with a loyalty program they used over a six-month period. But here’s the thing: Businesses can hit a lucrative sweet spot if they get their proposition right. KPMG’s research also revealed that 2 in 3 shoppers end up making special trips to earn a reward on a compelling loyalty program — and better still, 3 in 5 shoppers would actually be prepared to pay a little more for goods and services if they had the chance to accrue points, discounts or free products.
Transforming the loyalty market
What’s the solution for giving consumers what they want and ensuring that loyalty programs are viable for businesses? Well, with crypto and blockchain already upending countless other industries, it seems inevitable that this one would be ripe for disruption too.
Digital tokens are beginning to gain momentum, attracting younger audiences who may not be interested or engaged with credit-card loyalty programs or frequent-flyer initiatives. Plus, given how many schemes in the fiat world offer rewards that end up expiring all of a sudden, cryptocurrencies have the benefit of being more permanent. Major players such as Rakuten are exploring this potential, developing a coin that loyal users could convert into cold, hard cash if they wanted to. Other brands are building platforms where customers are rewarded for frequent purchases with points that can be exchanged for Bitcoin.
Businesses are starting to get fed up with investing so much in offering loyalty schemes that end up inactive. Retailers and merchants are paying tens of billions of dollars a year to companies that provide the infrastructure for such initiatives — and research suggests that blockchain could slash these costs dramatically.
For many crypto-based loyalty scheme providers, it’s also about placing the power back in the hands of consumers. Attitudes are beginning to change. Back in the day, it used to be the case that points accrued from a coffee shop would have to be spent at that same chain. But now, multiple brands are coming together under one roof — enabling them to attract a wider audience and welcome shoppers through their doors who may not have made a purchase before.
“A token of discovery”
One company that’s making a foray into the crypto-focused loyalty market is MozoX, which bills itself as a “token of discovery.”
Although its concept is firmly rooted in the future, the company has taken a novel approach by blending the realms of e-commerce and brick-and-mortar retail. It is aiming to motivate shoppers to return to offline stores — driving footfall in malls. The platform’s vision is to entice the public by enabling them to receive MozoX tokens through airdrops established by participating retail outlets, malls and venues simply by visiting their offline locations or by making a purchase. Over time, these tokens can be accrued and redeemed against products and services at any of these venues — “giving shoppers choice, flexibility and convenience,” according to the company.
MozoX says that its cryptocurrency will be easy to transfer and trade on major exchanges, storable in major wallets and purchasable using fiat currencies, including U.S., Hong Kong and Singapore dollars. The company estimates that the worldwide loyalty market is worth a cool $300 billion, with 91 million stores using loyalty schemes to some extent. Executives say they have already signed memorandums of understanding to roll out its technology in 90,000 stores over the next three years — potentially reaching 13 million shoppers — and that its app value proposition to merchants compared favorably to the likes of Facebook and Uber Eats because MozoX guarantees foot traffic.
Round one of an initial exchange offering is set to take place on the LAToken platform from Nov. 25 to Dec. 25, and MozoX tokens can be purchased using Bitcoin, Ether or Tether.
Former PBoC Head: China’s Digital Yuan Will Favor Payments and Retail
China’s digital currency approach will be favoring international payments and domestic retail system, a former senior official said.Zhou Xiaochuan, the president of the Chinese Finance Association and former governor of the People’s Bank of China (PBoC), outlined two types of implementations of central bank digital currencies (CBDCs) speaking at the 2019 Caixin Hengqin Forum, local publication Caixin reports Nov. 26. The first type is an electronic payment-oriented domestic retail system, while the second is international remittances for settlements between financial institutions.
China will continue to focus on digital yuan, Zhou saysZhou — the longest-serving head of PBoC and one of the most influential financial experts in China — hinted that China will continue along the established path for its own digital yuan, dedicated to domestic retail system and payment. The famous Chinese banker emphasized risks associated with CBDCs. Outlining that a fiat currency serves as a “symbol of national sovereignty,” Zhou said that central banks, especially those of the “super sovereign power,” should be very careful when choosing their direction. The wrong choice could even lead to a credit crisis, the expert noted.
PBoC continues CBDC research while cracking down BitcoinThe news comes after China was reported to have completed its CBDC project in August 2019. Subsequently, the PBoC clarified that the bank had no specific launch date for its digital currency, reportedly claiming that the financial institution needs time to research and evaluate the initiative. In late October, an executive at Chinese economics think tank China Center for International Economic Exchanges said that he believes that the PBoC will be the first to launch a digital currency successfully. While apparently continuing to develop its digital yaun initiative, the PBoC recently enhanced its crackdown on cryptocurrency-related operations in the country. In a statement on Nov. 21, the bank warned that it was taking action against entities involved in trading cryptocurrencies like Bitcoin (BTC), which hit the crypto markets hard.
Ripple-Backed Rental Firm Omni Shutting Down With Coinbase Snapping Up Dev Team: Report
According to a report from Tech Crunch, a company spokesperson said: "We’ll be winding down operations at Omni and closing the platform by the end of this year." Omni has made no announcement on Twitter, however, and its blog site is not operational at press time.
It was reported in October that Coinbase was in talks to acquire Omni's engineering team to further development of its educational project Coinbase Earn. That news came as Omni was reportedly laying off staff as it struggled to make profits after selling its physical storage business in May, TechCrunch says.
Coinbase has now taken on the dev team, according to the report, with a spokesperson saying:
"Coinbase has reached an agreement with Omni to hire members of its engineering team. We’re always looking for top-tier engineering talent and look forward to welcoming these new team members to Coinbase.”
Last year, Omni raised $25 million in a funding round led by Ripple executives Stefan Thomas and Chris Larsen, who invested directly with the XRP cryptocurrency. The firm has reportedly raised $35 million all told.
The company had started off as a kind of Uber for personal storage, collecting items from users' residences and holding them in a warehouse until needed again. Its low fees proved to be too low for a viable business, though, the report says.
It then moved on to offering a platform for users to rent out items they were not using, before morphing the service again into a similar rental service for stores, but those too failed to bring in sufficient revenue, according to TechCrunch.
US CFTC Obtains Over $1.3B in Administrative Penalties in 2019
The United States Commodity Futures Trading Commission (CFTC) has obtained over $1.3 billion in administrative penalties in the fiscal year 2019, which included funds collected from cryptocurrency operators.According to the CFTC’s annual report for the 2019 financial year, the regulator obtained monetary relief in its enforcement actions — including in the form of civil monetary penalties, disgorgement, and restitution — totaling $1,321,046,710. The figure is 39% higher than that of the previous fiscal year.
Notable crypto fraud casesWhile the CFTC did not specify the exact amount of regulatory penalties obtained from digital currency-related companies, it pointed out several charges involving Bitcoin (BTC) fraud. The CFTC noted the $147 million crypto scheme Control-Finance Ltd, which defrauded more than 1,000 investors to launder at least 22,858 BTC. The CFTC also mentioned a civil case against Jon Barry Thompson, who was accused of a $7 million BTC-related fraud, and Joseph Kim, who was accused of misappropriating Bitcoin and Litecoin (LTC) from several people and fined $1.1 million. The document continued:
“The Division successfully litigated the cases involving digital assets it had previously charged, obtaining, among other things, rulings affirming the Commission’s authority to prosecute fraud and manipulation involving digital assets that satisfy the statutory definition of a commodity.”The CFTC filed 69 enforcement actions, which was slightly higher than the five-year average of 67.5.
New CFTC chairman calls for a principled approach toward cryptoEarlier in November, CFTC chairman Heath Tarbert called for “principles-based regulation” for cryptocurrencies. The chairman said that such an approach involves moving away from detailed rules to relying more on high-level and “broadly-stated principles” to define standards for regulated firms and products. In late October 2019, the commission granted its fintech research unit LabCFTC status as an independent operating office. Following the elevation, the CFTC’s fintech hub started reporting directly to Tarbert. In the announcement, Tarbert noted:
“Blockchain, digital assets, and other developments hold great promise for our economy. Now is the time for LabCFTC to play an even greater role as we work to develop and write the rules for these transformative new products.”
2weeks ago, 26 Nov, Tuesday
Another Class Lawsuit Claims Bitfinex, Tether Manipulated Bitcoin Market
A new class-action suit, filed by Eric Young and Adam Kurtz at the district court in the Western District of Washington on Nov. 22, draws heavily from details that emerged in the case brought by the New York attorney general in April against the same two firms.
It's also the second class action to have been brought in recent months relying on the New York case, which is still ongoing as the defendants appeal over whether they must continue to produce documentation. The attorney general claims, among other things, that that the tether (USDT) stablecoin was not fully backed by U.S. dollars.
In a lengthy list of claims, Young and Kurtz specifically allege that Bitfinex and Tether "monopolized and conspired to monopolize the Bitcoin market," as well as manipulated the market, manipulated information or made inaccurate claims.
Further, "Defendants’ misconduct caused prices of Bitcoin futures, and the prices of Bitcoin underlying the Bitcoin futures, to be artificial during the Class Period [Oct. 1, 2014 to present]," Young and Kurtz say, adding:
"Defendants' control of USD₮ issuances and Bitfinex permitted Defendants and their co-conspirators to coordinate purchases and sales with rising and falling Bitcoin prices. When Bitcoin prices were falling, Defendants and their co-conspirators printed USD₮s and artificially increased the price of Bitcoin. Once Defendants and their co-conspirators artificially inflated the price of Bitcoin, Defendants and their co-conspirators then converted the Bitcoin back into USD₮s to replenish Tether's reserves."
Both lawsuits also cite a study authored by professors at the University of Texas at Austin claiming that a single Bitfinex account used USDT to inflate the price of bitcoin in the lead up to its 2017 all-time high of around $20,000.
While the case has been brought at the federal court in Washington State, Young and Kurtz are based in Pennsylvania and New York, respectively. Both say they are bitcoin traders who traded at artificial prices due to the alleged actions of the defendants.
"At all relevant times, Defendants, including the employees that conducted Defendants’ affairs through illegal acts, knowingly and intentionally made false statements to U.S. Bitcoin investors and the public for the purpose of concealing Defendants’ scheme," the suit states, further alleging that the defendants profited at plaintiffs' expense.
Bitfinex took to its blog Sunday to call the Washington case "mercenary and baseless," and suggest that such lawsuits "are a continuing affront to the efforts and dedication of Bitfinex's customers and all participants in the digital currency ecosystem."
"As we predicted last month, mercenary lawyers continue to try to use Bitfinex and Tether to obtain a payday. To be clear, there will be no nuisance settlements or settlements of any kind reached. Instead, all claims raised across both actions will be vigorously contested and ultimately disposed of in due course," the exchange wrote.
The U.S. Department of Justice has reportedly looking into the allegations of market manipulation for some time, but has not yet made any conclusions public.
The Case for a Bitcoin ETF
Issuers have submitted proposal after proposal for a bitcoin-based exchange-traded fund (ETF), and the SEC has delayed or rejected each one. It’s time, however, to ask why and if the SEC’s frustration over not having jurisdiction over cryptocurrencies is clouding their judgment. In my opinion, the answer might well be yes.
To start, it is important to recognize that there is a lot of investor interest in bitcoin as well as other digital assets. Nothing the SEC can do will diminish that, so the only relevant question is if a bitcoin ETF meets the standards for such a product and is consistent with other approved ETFs. That said, the SEC argues that bitcoin, despite having multiple markets that meet a reasonable standard for displayed price discovery, does not meet that standard.
From the disapproval ruling:
“Because, among other things, the Sponsor has asserted that 95% of the bitcoin spot market consists of fake and non-economic activity, but has not established that it has in fact identified the “real” bitcoin market, or that the “real” bitcoin market is isolated from the fraudulent and manipulative activity, we find, in each case, that NYSE Arca has not met its burden to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), and therefore the Commission disapproves this proposed rule change.”
Why not bitcoin?
This analysis has three main flaws: First, there are a number of bitcoin “exchanges” (1) that are subject to money center or trust bank regulation with transparent order books and matching methodologies. There is no proof of “fake” trades at those exchanges and they comprise enough liquidity to be meaningful for the purpose of price discovery, as will be discussed later.
Second, ETFs have been approved for gold, silver and other precious metals where the underlying spot markets are demonstrably inferior to bitcoin. The precious metals spot market is almost completely negotiated. As a result, in the case of approved precious metals ETFs, the futures markets are the sole basis for price discovery of the ETF itself. Since there are now multiple regulated futures markets for bitcoin in the U.S., however, it is hard to understand the SEC’s logic in stating that there is insufficient price discovery from those futures markets.
Delving into the comparison deeper, it is important to recognize that the SEC has approved ETFs for gold, silver, platinum, oil and other commodities whose spot market is much more opaque than the market for bitcoin and whose markets are also susceptible to manipulation.
Unlike gold, where spot prices are loosely provided on disconnected websites and transactions happen on a negotiated (almost completely manual) basis, bitcoin pricing is provided by many markets running electronically available order books that are subject to various regulators. As a result, the spot crypto markets are far more transparent than those of spot commodities, with far more liquidity available at tighter spreads.
To put this into context, I checked several leading websites for buying or selling gold coins or rounds and the average spread between buying and selling was over 4%. It is certainly possible that for larger-sized orders that the spreads might have been smaller, but it seems unlikely to have been much tighter. That contrasts with a bid-offer spread, inclusive of retail exchange fees for bitcoin that average well under 1%, even for order sizes as large as 500-1000 bitcoin (larger than an ETF creation or redemption unit). For example, as I write this, the per-coin cost to buy 500 bitcoin across regulated exchanges, net of (retail level) fees, is $8,491 (calculated using CoinRoutes software), while the per-coin cost to sell 500, net of the same fees, is $8,438 (2). Using our patent-pending RealPrice mechanism, we could stream the price to redeem or create a full bitcoin ETF in real time, which is a level of transparency well beyond many underlying assets who have approved ETFs.
The third flaw in the analysis is that there have been many allegations of manipulation related to other commodities that already have ETFs, so it seems like the SEC is holding bitcoin to a much higher standard. It is particularly ironic that the SEC cited the possibility of manipulation in the commodity, considering the recent RICO case against precious metals traders. We must recognize that there is always the potential for manipulation, but the question the SEC should ask is if bitcoin is more subject to such behavior and if its markets are harder to surveil than other approved underlying assets. Once again, the answer is no.
Bitcoin has multiple regulated futures markets in the U.S., giving the CFTC similar jurisdiction as they have in precious metals, and, unlike precious metals, the spot markets have significant electronic (and therefore auditable) data on buyers and sellers. These markets represent a critical mass of transparent, displayed liquidity, which should be the defining characteristic for this decision. It ensures that there would be available data for the CFTC to utilize when there are allegations of manipulation.
Before concluding, I would like to make two other points. First, it should not matter if the SEC is skeptical about bitcoin, or if they are worried that it will go to zero. The agency should not be determining what investments are good or bad, but rather if the information made available to investors, including market data, is accurate and fairly provided.
Second, despite the SEC’s insistence that it is protecting investors by rejecting these applications, the result is harmful. Retail investors that want to invest in bitcoin are driven towards fund products that have significant premiums to their net asset value. Such premiums could, of course, evaporate and hand investors larger losses than had they purchased an ETF. In addition, unsophisticated investors are using a variety of retail platforms to buy bitcoin that charge significantly higher fees or spreads that would likely be offered via an ETF, and feature weaker investor protection regulation by a wide margin.
Finally, it is important to address the SEC’s contention that “fake” or manipulated markets outside of the U.S. represent a problem for a bitcoin ETF. This is simply wrong. The markets they reference can be excluded from calculations of available liquidity and price. In fact, many commodities trade at different prices in other parts of the world, but those prices are ignored by U.S.-issued ETFs.
In conclusion, I believe that the SEC, perhaps due to its bias against the asset itself, is improperly delaying an ETF approval. Considering the availability of real-time, fully priced liquidity, using only markets that are regulated in the U.S., as well as the existence of multiple CFTC-regulated futures markets – the time is now.
(1) The markets call themselves exchanges, but they are not exchanges in the SEC definition of the term.
(2) Using CoinRoutes' cost calculator and retail fee tiers at all exchanges accepting US clients. Exchanges used in this example were Coinbase Pro, Kraken, Bitstamp, itBit, SeedCX, ErisX, Bittrex, Binance.US and Gemini.
25,000 Blockchain Firms in China Tried to Issue Cryptos, Senior Official Claims
Led by the Chinese central bank, five financial and technology authorities jointly published the Bluebook of Blockchain on Thursday, outlining illegal and fraudulent schemes in the blockchain industry.
Approximately 89 percent of blockchain firms in China – some 25,000 – might have tried to create and issue their own tokens, while only 4,000 are fully focused on blockchain applications, Yedong Zhu, president of the government-backed nonprofit Beijing Blockchain Application Association, said in an interview with Chinese state media CCTV at the report’s launch.
The most common crypto issuance process, the ICO, has been deemed illegal by the Chinese government after its 2017 crackdown. However, it still allows crypto mining operations and possession of crypto assets in the country.
The findings come amid the Chinese government’s most recent crackdown on barred financial operations related to ICOs and crypto trading. Major Chinese cities, such as Beijing and Shanghai, have rolled out inspection plans with a view to shutting down any remaining crypto exchanges.
The authorities have gone so far as to close any marketing firms that promote crypto companies and those that masqueraded as blockchain companies to launch ICOs.
According to the report, more than half of the 28,000 blockchain companies are based in the Guangdong province of southern China, next to the Chinese Silicon Valley Shenzhen, while the rest generally run their operations from Beijing and Shanghai.
“We need to make sure the blockchain firms that illegally raise funds and commit financial frauds are not included in the government blockchain support programs,” Zhu said
The report is one of the three “bluebooks” that guides Chinese authorities on how to regulate the emerging fintech industry. The other two reports focus on technologies used by regulators and financial technologies.
Ripple Completes Promised $50 M Investment in MoneyGram With Final $20 M
Major money transmission network MoneyGram has announced that blockchain-based payments firmRipple has completed its original commitment with a final $20 million investment.
In a Nov. 25 press release, MoneyGram announced that Ripple Labs Inc. has made a final $20 million equity investment in MoneyGram as part of Ripple's original $50 million equity investment commitment.
A total investment of $50 million
In June, the two companies entered into a 2-year-strategic partnership to collaborate in cross-border payments and foreign exchange settlements with digital assets. As part of the agreement, MoneyGram would be able to draw up to $50 million dollars from Ripple in exchange for equity.
MoneyGram will reportedly use Ripple’s xRapid liquidity product to allow for money to be sent in one currency and instantly settled in the destination currency. By using Ripple’s XRP token for such transfers, xRapid can purportedly settle such transactions faster than with fiat currencies or other major digital assets. Ripple's CEO Brad Garlinghouse commented on the latest investment:
"Last month, we announced that MoneyGram began using On-Demand Liquidity for payments to the Philippines, and we're excited to support MoneyGram's further expansion into Europe and Australia. Digital assets and blockchain technology have the potential to make a tremendous impact on cross-border payments — MoneyGram and Ripple is an example of that [...] In June, we announced this partnership, and it's encouraging to see the rapid growth and benefits come to life."
Ripple purchased the equity from MoneyGram at $4.10 per share and will now own reportedly 9.95% of MoneyGram’s common stock.
Majority of crypto will probably go to zero
At the beginning of November, Garlinghouse claimed that there are too many cryptocurrencies so far, forecasting that only 1% of the total are here to stay and that this small number of crypto projects will be game-changing and grow significantly in coming decades since they will be focused on solving real problems for real customers.
He hinted that very few will actually be able to meet customer needs, arguing that the vast majority of them “probably goes to zero.” He stated:
“Anytime there is a new market, there are a lot of people that run into that market and try to show that they can solve a problem, they can deliver a customer need.”
JPMorgan Tests Private Blockchain to Track Auto Dealer Inventory
Every car sold in the U.S. has an individual vehicle identity number (VIN). The bank reckons that these can be anchored to a blockchain, assisted by a range of other telematic and geolocation sensors, which can remove inefficient manual pain points around auditing inventory on the dealership floor.
“The floorplan lending process involves periodically doing a physical inspection or audit of all the inventory on the dealership's lot," said Kevin Point, head of research and development at Chase Auto. "That means that a human being actually travels to the dealership, identifies the vehicles and then reconciles that inventory, if the loan's outstanding, on both the dealer's and the bank's accounting system.”
Banks like JPMorgan, which have been busy testing and heads-down building blockchain systems for the last several years, are now clearly looking for practical opportunities that will see their bottom line improved by the tech.
About 17 million new cars are sold each year in the U.S, said Point, and when you add in used vehicles there are many millions sitting on floorplan lines of credit. Tracking them on a distributed ledger “will achieve cost savings over time. We believe these could be significant on an industry-wide basis,” he said.
The move is a slight departure for the Quorum blockchain, a private variant of ethereum developed by JPM. Previously, Quorum was used solely for abstract financial operations, issuing debt or linking payment networks of correspondent banks and such like. By contrast, the new Chase Network of Assets involves verifying physical objects.
Christine Moy, blockchain lead at JPMorgan, described it as a pilot in that it’s being tested with real dealership partners, but not in production yet. She also said Network of Assets could be applied more broadly, adding that JPMorgan is speaking to automakers about the blockchain system, but was not at liberty to say which ones at this time.
“Not only is JPMorgan and Chase Auto seeking to solve its own problem, basically it will benefit the vehicular and equipment industry at large," Moy said. "The Network of Assets is the foundation for this particular application and use case, but can also be the foundational piece for many other value-added applications and services for auto manufacturers, other banks and finance companies, and dealerships, related to devices with telematics connectivity."
As well as allowing much more in the way of real-time risk management, the DLT system is designed to prevent a practice known as “double flooring."
"This is when accidentally (or fraudulently) a dealership may pledge one vehicle as collateral for one floorplan contract to one bank, but also pledge the same collateral for another floorplan contract with another bank," Moy said.
JPMorgan's idea is not entirely novel. For instance, Tata Consultancy Services, part of the Indian multinational group, has also been looking at blockchain for floorplan financing.
However, JPMorgan’s Quorum efforts are well established with a vibrant community around the tech, and it also provides the potential interoperability with tokenized payment systems such as the bank's embryonic JPMCoin in a next-generation blockchain world.
For now, wholesale auto financing is a solid start, said Point.
“Because of the unique identifiers, telematics, the auto industry and its counterparties are a great way to get adoption out there quickly and that will drive efficiencies into different areas of finance,” he said.
RSK Expands Globally and Moves Into Southeast Asia
Cointelegraph en Español spoke with Henry Sraigman, South-East Asia Regional Director of RSK, during the Asia 2019 Blockshow in Singapore. We covered the expansion of IOV Labs and RSK, the company’s present and future in Asia, and the prospects for Taringa! after its purchase."RSK is a project that was born around 2015 trying to create the first smart contracts platform secured by the Bitcoin network," recalled Sraigman. "That implies that the miners of Bitcoin can mine on another network with all the same infrastructure — in this case the RSK network," he said. So about four years ago they began to travel to Asia, where almost all the miners were, especially in China. "Now they are also moving to Korea, Singapore, and other markets such as Georgia, Russia, Mongolia, Finland, Canada,” Sraigman remarked. “There are different markets where they settled, looking for tax benefits, energy, low rates, dams, etc. So they were trying to make conversations with mining pools, seeking support for the project, not only with the mining part, but also bringing value and building on the Bitcoin network.” When asked about the decision to expand to other markets, Sraigman said that "after building the ecosystem in Latin America, trying to have collaborations with partners in Europe and the United States and little by little in Asia as well, the idea was to make the decision to expand globally and come to Asia to try to explain what we were building. "Southeast Asia is a very important market for us. There are similarities and differences with the Latin American market. It is a much more agile ecosystem than we are accustomed to in Latin America," he said, noting the existence of alternative payments, neobanking, virtual wallets in the Asian continent. "It's super interesting. There are conditions and good regulations for the adoption of technology." "They are also very eager for new business and emerging technologies. And within that decision to expand, it is that we made different strategic alliances with strong players of the ecosystem, as an official accelerator of the Government of Singapore. It's something we're trying to replicate in different markets," he said. In this scenario, they are setting up the operation in Southeast Asia. "I am in Singapore monitoring the whole operation, and we have a person who is for dissemination tasks, with workshops, education, the internal assembly of tools to improve the usability of the technology. Then, in the East there are marketing people in China and Korea, and we have some openings for what is commercial development, partnerships, etc.," he said.
A new investment fundSraigman said that this same year they launched an investment fund that operates from San Francisco,California but is actually global. "Any project that is being built on blockchain technology, the world of RSK, Ethereum, can be applied from anywhere. The idea is to find disruptive technology projects that can be used at the end of the day. There are projects linked to infrastructures, wallets, DeFi," he said. And he also invited other projects that want to join.
New strategic focusSraigman says the company has its sights set on different strategic focuses: "This is where the development of technology is going a little bit. Just as the ICO or STO were two or three years ago, today the thematic axes become DeFi. Bitcoin in its nature is decentralized finance. Everything we are seeing about Bitcoin, Ethereum, the idea is to replicate it. And another angle is sharing economies. And it's the strategy Taringa! brings. See how we compensate users, who today are selflessly and without incentives creating content or collaborating with others. The idea is to support initiatives. There are more than 1000 communities within Taringa! creating content.” On the other hand, he said that Facebook, JPMorgan and Tencent, with their own initiatives, are going to bring people into the ecosystem. "We're probably about a year away from strong mass adoptions, and Taringa! has potential, with 30 million connected users who could have wallets and receive tokens in their wallets," he said. Reflecting on the big picture, Sraigman said we are still at a very early stage in some aspects and more developed in others. "But regarding the conquest of traditional industries, we are still in a transition that combines digital crypto and non-crypto, fiat money, and credit cards. We need people who provide liquidity at both ends. In that context, we are still in transition. There's still a little bit of intermediation," he acknowledged. In thinking about the immediate future, he said that 2019 and 2020 “will be for industry in general and for us in particular, the period of real adoption of reaching the end user, of being able to generate a transformation in how the user relates to value.”
IOV Labs, the company behind RSK, and the purchase of Taringa!Cointelegraph reported last September that the Argentina-born social network Taringa! was sold to IOV Labs, the company behind RSK. In this regard, IOV Labs CEO Diego Gutiérrez Zaldivar spoke on that occasion about the expectations: "Taringa!, with 30 million registered users, is the leading social network of Spanish-speaking users. Having access to Taringa's user base will provide invaluable information and data for testing and distributing new decentralized infrastructures and applications powered by the RSK platform and the RIF token on a large scale. "We see Taringa as the first step toward mass adoption of the RSK and RIF platforms, and a big step forward for our long-term vision of empowering people through decentralization," he said. "Together with Taringa's leadership, and using RSK's decentralized infrastructure, we plan to develop innovative consumer products and services for their communities.” Considering that Taringa! has about 30 million users and that it is an important database, the CEO of IOV Labs spoke about users: "We are already building our first tool to enable Taringa users to be rewarded for actively participating in their communities. Once this is in place, we plan to add more features, including peer-to-peer token exchanges and a market for dApps to start offering products and services to our users. Our ultimate goal is to create a new open, decentralized Internet that respects people's freedom of expression and privacy.”
What’s Really Private in Crypto? Research on Grin Raises Questions
Grin, launched in January 2019, is one such privacy initiative facing tough questions as the excitement around its Mimblewimble adaptation has not lived up to recent empirical scrutiny.
Ivan Bogatyy, researcher at investment fund Dragonfly Capital, dropped a Medium bombshell last Monday, disclosing an “attack” capable of identifying 96 percent of the active senders and receivers on the grin network through the employment of “sniffer nodes.”
As the smoke cleared, one question emerged: What is privacy in crypto, anyway?
Gathering praise from the likes of ethereum co-founder Vitalik Buterin, litecoin creator Charlie Lee and others, Bogatyy detailed grin’s structural issues – issues, he claims, stemming from Mimblewimble itself.
Dreams of anonymity
Mimblewimble – the much-heralded privacy protocol created in 2016 – anonymizes transactions through batching inputs per block, like a CoinJoin. After mixing the numbers associated with a sender in a pool of similar transactions, equivalent values are spit out on the other side as unidentifiable outputs.
Styled a confidential transaction (CT), this process typically works pretty well once it scales to a large enough anonymity set, wherein the sheer number of inputs shields the knowledge about the outputs after a mixing. In CT, the amount and public addresses are never exposed, mainly because addresses don’t exist in the Mimblewimble universe, just transaction inputs and outputs.
The first two cryptocurrencies based on Mimblewimble launched in January 2019: grin and beam. But, for both coins, "transaction graphing" remains a problem.
A well-connected sniffer node can sit on either side of the CoinJoin in what is called “linking.” Built on the same peer-to-peer (P2P) network as bitcoin, nodes communicate changes to the ledger from one to another and a sniffer can pick out how transactions move by being well-connected to its peers. In fact, Bogatyy said it only took 200 of the 3,000 current peers on the grin blockchain to flesh out 96 percent of transaction sender and receiver addresses at the small cost of a $60 per week subscription to Amazon Web Services.
This issue was well known beforehand, however.
The Grin Foundation’s Open Research Problems page on GitHub publicly cited the problem as a point for future research along with analysis from Token Daily’s Mohamed Fouda over a year ago. Moreover, grin has never promised full anonymity, but only CT with the possibility of adding anonymity features down the road.
So what’s all the fuss about?
To Bogatyy, the research is about correcting public misunderstandings about privacy coins. But to Mimblewimble developers, the piece amounted to a smear.
“While some technical experts guessed that the vulnerability likely exists, I don't think anyone knew the extent,” Bogatyy said in an email. “Before I ran the experiments, I couldn't know myself it would be 96 percent.”
He said the goal of his research is to make the “technical knowledge more accessible.”
“I think Grin devs are very competent and don't overpromise, but the public perception diverged from the technical fundamentals and followed the legend a little too much,” Bogatyy said.
The promise of privacy coins
All privacy coins aren't created equal. Rather, a privacy coin is one iteration of a subjective vision of privacy externally limited by what distributed protocols are physically capable of accomplishing.
In the case of Mimblewimble, CT is not much more than bitcoin with throw-away public addresses plus hidden transaction amounts, according to zcash co-founder and cryptographer Ian Miers.
“But we all know intuitively what privacy means: if you pay your psychiatrist or purchase a series of banned books from an online market, no one learns you saw a doctor and no one is going to kick down your door and search your house for illicit books,” Miers said in an email.
But in the world of public blockchains, where transaction data can be viewed and verified by all participants, there's a catch.
“Because we all know cryptocurrency has a privacy issue, outsiders latch onto anything and hype it out of proportion,” Miers said.
Grin’s version of Mimblewimble is joined by others, namely beam, which Bogatyy also addressed in his research.
Noting the trouble with transaction graphing long ago, beam developers have implemented numerous amendments to Mimblewimble, including decoy outputs to break linkability, according to beam developer Guy Corem.
That’s why he’s taking issue with Bogatyy’s research.
“Beam and Grin developers were aware of transactions linkability from way before mainnets launched,” Corem said in a Telegram message. “[Bogatyy] didn't look at Beam's implementation. For example, in his technical write-up, he wrongfully stated that the decoys aren't being spent.”
Decoy improvements or not, Bogatyy remains unimpressed. Following transactions through whisper nodes remains too easy even with the added protections, Bogatyy said.
To grin developers, Bogatyy’s views are far off the mark.
Writing in a Medium post, grin developer Daniel Lehnberg said Bogatyy confused basic points such as transaction outputs versus addresses in the Mimblewimble system, misstated grin’s original privacy claims and did not contact grin developers while saying he did.
As it relates to transaction graphing, Lehnberg called the 96 percent figure irrelevant.
“Other than that 'Output A spends to Output B', it’s less clear what exactly is being identified here or what else the author is able to accomplish with this information," Lehnberg wrote. "While it would be desirable to avoid leaking the transaction graph, the graph alone doesn’t necessarily reveal sender and receiver outputs."
But, as Miers points out, you can still trace grin transactions regardless if they have addresses or not.
“It’s like you have a map of some part of New York City but you just don’t which part because all the street names are missing. But the moment someone tells you the name of one intersection on the map, you can work out the rest,” Miers said. “The attack on Grin created this map with blank streets. You need one more step to give out the names, but that is the easy part.”
Furthermore, once you know a transaction’s beginning and end points, it doesn’t matter to anyone how much you spent, just that you spent it somewhere.
“So the world will learn you paid Pornhub or bought a lambo, but they won't directly know for how much,” said Miers. “It isn't useful unless it's combined with much stronger privacy technology.”
As ethereum's Buterin noted on Twitter, privacy depends on the number of users in an anonymity set: The more users mixing funds, the safer the funds pulled from the pool.
But it's different for grin due to the nature of its protocol, which natively doesn’t have addresses like bitcoin to match transactions to, grin's Lehnberg wrote on Medium:
"Grin is still very young and has yet to reach its full potential. Eleven months into mainnet, there is low network usage. In the last 1000 blocks, 22% contained only a single tx (and 30% contained no tx), meaning their inputs and outputs are trivially linkable. This won’t change until there’s greater network usage, but it still does not imply that sender and receiver identities are revealed."
Reviewing Bogatyy’s research, Lehnberg said he is skeptical of how he was able to “uncover who paid who in the Grin network,” as Bogatyy claimed on GitHub. Grin’s development team has only gone so far as to say the issue could reveal “entities,” not individuals.
“It's one thing to say, ‘oh this theoretical attack is really straightforward and easy to carry out,’ it's another to actually do it,” Lehnberg said on Telegram.
While the two sides may disagree over the technicals, Miers remains positive about Mimblewimble but characterizes grin as only a footnote in privacy coins' history.
“Grin is a project that shows a lot of promise, but right now it isn’t accurate to call it a privacy coin or even a privacy project,” Miers said.
Israeli Firm Behind DX.Exchange Goes Bankrupt Following Staff Petition
The firm behind a purportedly Estonia-based cryptocurrency exchange DX.Exchange is ceasing operations following a petition filed by employees.CX Technologies, the Israeli company operating DX.Exchange, entered bankruptcy after 78 of its employees filed a petition against the company with an Israeli court, the Times of Israel reported on Nov. 24. The petition specifically alleged that DX.Exchange’s website stated that the exchange had been owned by an Estonia-registered company, while in fact it was operated by CX Technologies.
Binary options scam and relations with the ruling eliteEmployees also claimed that CX Technologies is a successor to SpotOption, formerly a software firm allegedly involved in a multibillion-dollar binary options scam, which was eventually raided by the United States Federal Bureau of Investigation and Israeli police, and was banned in the country in January 2018. In the petition, the employees also claimed that CX Technologies had not paid their salaries for September or October 2019, when the petition was filed to the court. The petition also reveals that CX Technologies executive Miriam Mileikowsky is related by marriage to Israeli Prime Minister Benjamin Netanyahu — being the wife of Ory Mileikowsky, the prime minister’s first cousin. The Marker reported that Ory himself nearly went bankrupt after losing 90% of the funds of investors he had advised.
Suspension of activities due to a mergerAs Cointelegraph reported earlier in November, DX.Exchange temporarily shut down as it pursued a merger or outright sale. At the time, DX.Exchange stated that “the costs of providing the required level of security, support and technology is not economically feasible on our own.” While pledging to release further information in due course, DX.Exchange revealed:
“The board [of directors] believes this is the best opportunity for DX.Exchange to achieve success for its shareholders and compete in this challenging market. In the event a merger or sell is not completed in a timely matter then the exchange may not resume operations and take appropriate action.”
Crypto Booking Firm Travala Partners with Travel Giant Booking.com
Travala, a service that allows its users to pay for hotel stays with cryptocurrency, will now let its customers reserve any hotel that is bookable through Booking.com.Travala announced in a press release on Nov. 25 that it has already integrated Booking’s accommodations to its platform. The new feature will purportedly allow users to book 90,000 different destinations using cryptocurrencies.
Pay for your stay with cryptoTravala’s customers can pay with its proprietary AVA token and 20 major crypto assets including Bitcoin (BTC), Ether (ETH), Dash (DASH), Bitcoin Cash (BCH), Litecoin (LTC), EOS, Stellar (XLM), Cardano (ADA), Binance Chain (BNB), Monero (XMR), Tron (TRX), XRP and Dai (DAI). The firm’s CEO Matt Luczynski commented:
“This partnership allows our users to access Booking.com’s accommodation listings, as well as the listings from several other leading travel suppliers, which is a fantastic use case for our own AVA token and another huge step towards mass cryptocurrency adoption.”Also on Nov. 25, Travala announced that its proprietary token was listed on the decentralized exchange Binance DEX and is currently trading against Binance Coin on the platform.
Crytpo expands into tourismDifferent travel and tourism companies worldwide have begun adding support for cryptocurrencies as payment options. Earlier this month, Alternative Airlines, a travel company based in the United Kingdom, partnered with cryptocurrency service Utrust to facilitate payments with crypto. Earlier this summer, the co-founders of Scandinavian air carrier Norwegian Air announced plans to launch their own cryptocurrency exchange, which will subsequently facilitate the airline’s acceptance of cryptocurrency payments.
2weeks ago, 25 Nov, Monday
Waves and the Tricky Task of Being a Russian Crypto BrandWhat if your biggest client is your biggest reputation risk? When Vostok, the enterprise branch of Waves, a blockchain startup, launched last year, it was proud to showcase its Russian connections. It debuted with the news of a partnership with Rostec, a state-owned mega-corporation with ties to many hi-tech industries. But the Russian links have been a double-edged sword. While the Rostec tie-up earns legitimacy at home, it complicates things abroad. Rostec was sanctioned by the U.S. in 2014 following Russia’s annexation of Crimea and the war in Ukraine. “There were risks for promoting our brand on the West,” said CEO Sasha Ivanov in an interview. So Waves decided to distance itself from Vostok’s brand — though not completely. “We can’t totally separate from our Russian roots, even if they might impede the business a bit,” Ivanov said. “I think we should become the main blockchain tech advocate in Russia.”
Leaving ‘East’ for WESTIn July, Ivanov sold the Vostok brand to the investment firm GHP Group for $3.8 million. The team and the product of Vostok, however, remained a part of Waves’ business. As part of the sale, Vostok, or “East” in English, was renamed Waves Enterprise, with Waves and GHP sharing the new entity’s profits. Waves and GHP joined forces to develop the enterprise blockchain for transportation together. The new name is meant to distance the company from the Vostok brand, mostly because of its close affiliation with Rostec, Ivanov said. Vostok’s VST tokens, issued last year, were re-branded too, becoming WEST: Waves Enterprise System Token. Registered in Switzerland, Waves is striving to become a key blockchain provider for the Russian state. Based in Moscow, in a large office in the middle of a hipster office cluster, Waves is walking a fine line between being friendly with Russia’s state-controlled corporations (many of which are sanctioned by the U.S. and Europe) and building a positive image for the global market. Any business wanting to lead Russia’s blockchain effort necessarily has to talk to government bodies a lot and Waves has been expanding its work with the government-related structures. The company has recently secured partnerships with several entities linked to the Russian government.
Blockchain for electionsThese include the Department of Information and Technologies in Moscow City Hall, which trialed the first blockchain voting system for elections to a Moscow legislative body. About 450,000 Moscow residents could vote electronically during the September 8 municipal elections, though the experiment got some harsh reviews. French security researcher Pierrick Gaudry showed that the system could be hacked quite easily. Ivanov said Moscow City Hall didn’t accept all the recommendations Waves provided. “We found a lot of bugs in that system. It was weirdly designed and didn’t rule out data manipulation,” he said. Contacted by CoinDesk, the Department of Information and Technologies hadn’t commented on the Waves partnership by press time. However, Ivanov sees a promising future for blockchain in election management. “Blockchain can help the government communicate with the civil society. It’s a good marketing tool for the government. It’s hard to tell how much transparency it will bring, but definitely more than there is out there now,” he said.
Hyperledger challengeCurrently, Hyperledger is the leader in enterprise blockchain, both worldwide and in Russia. But Waves believes it can catch up. The Waves Enterprise product, built upon the public Waves blockchain as a ready-to-use, out-of-the-box option, is designed for clients that don’t want to hire their own development teams, Ivanov said. Waves Enterprise, together with GHP Group’s subsidiary FESCO Transportation Group, is now in talks with the major players of the logistics market in Russia, starting with the railroad monopoly The Russian Railways, or RZD, which has already been testing a solution by Hyperledger to track the production of train car wheels. RZD didn’t respond to CoinDesk’s request for comment. One way Waves is trying to differentiate itself from Hyperledger is to get the Waves Enterprise cryptography certified with the Russian Federal Security Service, or FSB. Such certification is necessary for working with government bodies in Russia but it is a long and costly process. So far, only one enterprise blockchain system in Russia has passed the certification process: Masterchain, a system for banks. Waves hopes to complete certification by the end of this winter. The process, overseen by FSB-approved personnel and designed to ensure software has no hidden features, costs companies up to $100,000, Ivanov said.
Not like ChinaWaves worked with Rostec to develop a roadmap for blockchain development in Russia. According to the document, cited by the Russian media outlets when it was published last May, most government IT systems should be put on the blockchain, which will require about $1 billion of investment. The document was not greeted with universal approval, Ivanov said. “The roadmap apparently didn’t meet the government’s expectations, and the government didn’t realize why [it needed to] use the blockchain tech. We’ll make another attempt.” There will probably be more opportunities to take advantage of the government’s ambitious blockchain plans. Its nearly $28 billion Digital Economy initiative aims to improve broadband coverage and increase the use of home-grown software in government bodies. Blockchain can be both a liberating technology as well as a tool for surveillance and greater control. In recent years, Russia, like China, has curbed the free online realm in favor of a managed system. In 2017, it attempted to block the encrypted Telegram messenger (the attempt failed) and the Russian parliament recently passed a law to create a “sovereign internet” — an internet segmented away from the global commons. But Ivanov does not sound too worried. He thinks Russian internet users will continue to find ways around government censorship. “The things that China is doing, they are kind of dying here. Or they turn into a farce.”
‘Mercenary and Baseless’ — Bitfinex Responds to New Lawsuitpublished on Nov. 24, the exchange revealed the lawsuit was filed against both companies in the United States District Court for the Western District of Washington two days prior, on Nov. 22 — allegedly without advance notice.
Bitfinex: no “nuisance settlements” will be reachedBitfinex’s post uses sharp language to cast aspersions on the motivation and legitimacy of the fresh legal action. The exchange compares the purportedly “copycat lawsuit” to one filed earlier this fall, at the District Court for the Southern District of New York. The new action, Bitfinex claims, “suffers from the same multitude of deficiencies,” makes claims that are “similarly without merit” and is based on what it considers to be “bogus research.” The language remains steel-tipped, as the announcement continues to state: “As we predicted last month, mercenary lawyers continue to try to use Bitfinex and Tether to obtain a payday. To be clear, there will be no nuisance settlements or settlements of any kind reached.” Bitfinex says it will vigorously contest the claims raised by both this and the prior lawsuit, claiming it will succeed to ultimately trounce the allegations in due course. Should this succeed, Bitfinex and Tether will fully evaluate their legal options against the plaintiffs, the announcement reveals. The companies characterize the lawsuits as an “attack on the growth, success and innovation of the entire digital token ecosystem,” in which it says it is proud to play a “critical role.” Their fight, they state, “is the community's fight.” The announcement also redoubles the companies’ denial that Tether tokens or issuance have ever been used to manipulate the cryptocurrency markets. It also refutes the allegations that Tether as well as persistent allegations the token is not backed 1:1 by the U.S. dollar. The exchange is already fighting its case on crypto Twitter, with Bitfinex CTO Paolo Ardoino saying he “can’t wait to annihilate this one too.”
Mired in legal battlesAs reported, Bitfinex, its operator iFinex and stablecoin issuer Tether have been accused by the New York Attorney General’s office to have lost $850 million of the commingled client and corporate funds and to have subsequently engaged in a cover-up to hide the apparent loss. In October, the U.S. Attorney’s Office for the Southern District of New York indicted the principal of controversial Panama-based shadow payment processor Crypto Capital on three criminal counts. Crypto Capital had, in the exchange’s own words, “processed certain funds for and on behalf of Bitfinex for several years.” Bitfinex has argued it is itself a victim of the fraud.
Fidelity Digital Assets to Sign Up Its First Crypto Exchange by End of the Year
Fidelity Digital Assets (FDAS), the young cryptocurrency trading business of a financial-services powerhouse, expects to sign its first exchange by the end of the year, according to its president Tom Jessop.
As a brokerage, FDAS helps institutional investors get the best deal buying or selling bitcoin from various sources. So far, those have all been over-the-counter (OTC) trading desks.
“Between launching our trading platform five months ago to year-end, we will have more than doubled the number of liquidity providers,” Jessop told CoinDesk, declining to say exactly how many that would be. “We are primarily focused on OTC liquidity providers. It's likely we will connect to our first exchange perhaps before year-end.”
The move would likely give FDAS access to a broader market and liquidity for smaller trades. OTC desks primarily trade with larger institutions and high-roller “whale” investors, whereas exchanges serve retail traders and smaller institutions.
"An exchange has more small order activity and is more comprehensive than an OTC desk which may rely more on relationship driven activity and is mostly used for larger block trades," said John Todaro, director of research at Tradeblock, a provider of institutional trading tools.
FDAS, a unit of Fidelity Investments, is one of several firms attempting to bridge Wall Street with the wild world of crypto, along with Bakkt, the bitcoin futures market launched this year by Intercontinental Exchange.
It's a bold challenge. For example, OTC desks have been easier to bring on board than exchanges, FDAS has found.
“We apply a very high standard of counterparty evaluation, involving a rigorous risk management and onboarding process,” said a spokeswoman. “This approach is something we’ve been able to apply to OTC desks with post-trade settlement more readily than working with an exchange”
Plans for 2020
Earlier this week, FDAS won a trust charter from New York’s Department of Financial Services. The charter allows FDAS to onboard New York clients and gives the firm more credibility with clients that are fiduciaries looking for a custodian with a trust license.
While Jessop wouldn’t name the New York clients that FDAS is onboarding, Galaxy Digital recently announced that it was using FDAS and Bakkt to custody its two new bitcoin funds. Other New York clients will be onboarded in the next five to six weeks, Jessop said.
FDAS has a diverse client base, including hedge funds, family offices, an investment advisor and a small, U.S.-based pension fund, Jessop said. “The interest in that [pension fund] segment is there.”
“We’ve been surprised over the course of the year about the level of interest and amount of work people have done to understand the asset class,” he said.
After FDAS has onboarded New York clients, it plans in the new year to begin onboarding new assets, developing its trading capabilities, scaling its business and pursuing licenses in other states where it is not currently doing business.
As a privately held company, Fidelity has been able to experiment with innovative technology without worrying about short-term payoffs. An R&D division, the Fidelity Center for Applied Technology (FCAT), has studied the crypto space closely, even mining bitcoin.
FCAT recently completed a proof-of-concept with security token facilitator Tokensoft, according to a Medium post by Tokensoft Head of Operations Lawson Baker
Bits and Blocks Club, an FCAT internal learning group focused on digital assets and blockchain, launched a restricted ERC-1404 token on ethereum which “Fidelity employees used … in a closed-loop rewards system designed to encourage employees to attend internal events and other activities.”
"From [European] banks to innovation labs at financial institutions like Fidelity's, TokenSoft is seeing traction up-market for institutional customers for security tokens and other financial assets," Baker wrote in an email. "We think this trend will really show up in Q1 2020 when customers with potential registered offerings plan to come to the market."
China's Dive Into Blockchain, Digital ID Spurs Rest of World to ActionNews on crypto and blockchain technology is coming in abundance from China. This became especially true in late October 2019, when the Chinese President Xi Jinping called for accelerating the use of blockchain technology in the country. President Xi identified dozens of use cases that should be promoted: loans, health care, anti-counterfeiting, charity and food security. Xi emphasized that blockchain development could “China gain an edge in the theoretical, innovative and industrial aspects of this emerging field.” That was the green light the Chinese blockchain startups and ongoing projects needed to further accelerate their development. A few days after the announcement, China launched a blockchain-based smart city identification system to support the interaction between infrastructure, data and cities. The system was put in motion by the China Center for Urban Development, the Chinese Academy of Social Sciences, and the Zhongguancun Industrial and Information Research Institute for Two-Dimensional Code Technology. The system — developed, distributed and managed in China — is based on uniform issuing rules, analysis of distributed storage, and protection against unauthorized access. Until now, the coding systems were not uniform, meaning that data could not be easily shared between different ministries and industries. But the Chinese government seems to have an idea of how blockchain technology could facilitate workflow in various sectors of the economy, and thereby bring economic benefits. However, China is not the first country to start looking in the direction of putting IDs on a blockchain.
Baby steps to giant leapsThe first step toward blockchain was made in 2016, when China's Ministry of Industry and Information Technology published a white paper on China’s blockchain technology and application development, which lists the benefits of blockchain and explains how its applications could be regulated in different sectors of economy. Several industries were mentioned as having potential for applying the technology, but preference was given to the financial sector. Since then, both the Chinese authorities and private companies have been working on how and where to apply blockchain. But taking into account the generally cautious attitude of the Chinese government toward systems using distributed registries — especially cryptocurrencies — there were not very many applicable blockchain-based solutions implemented. But in 2019, the situation began to change and several blockchain projects have emerged, especially in identification systems. For example, a large number of public affairs management systems based in Guangdong province and Xiongan New District in Hebei province are using blockchain technology. In the summer, a number of projects were announced or launched in various regions of the country, including a “blockchain + volunteer services project” and a “5G+ blockchain” implementation model. In addition, the municipality of Guangzhou launched the “Smart Bankruptcy Review System,” an enterprise services website that utilizes both blockchain and facial recognition technology. In July, the province of Yunnan launched China’s first blockchain-based invoice system for tourism attractions. Then, in August 2019, about 6 million blockchain-based electronic invoices had been issued in Shenzhen since the city introduced them a year prior. Following these developments was the news of the aforementioned blockchain-based digital ID initiative for smart cities in order to to promote the development of digital economy. These projects exemplify what China seeks to achieve and what Xi Jinping spoke about at the end of October 2019. Since his speech, many government structures and other organizations have announced the development of various solutions using blockchain. Even the Chinese army is now reportedly thinking about using the technology to aid its military, potentially by implementing a blockchain reward system to manage personal data and to stimulate the workforce. Thus, the adoption of blockchain has found fertile ground in China, where a lack of existing infrastructure can stimulate a faster adoption of new technologies. In the Chinese context, the importance that the government attaches to the digital economy, and its cautious but promising endorsements of blockchain technology are important signals that investors should take seriously. Digital identification is a key element for building trust in a decentralized environment. Therefore, decentralized solutions for user identification have become a popular direction for blockchain development in recent years. Paul Sin, a consulting partner with Deloitte China and leader of Deloitte's Asia Pacific Blockchain Lab, told Cointelegraph that he believes China is welcoming the technology only to facilitate the transfer of data and its uniqueness between participants in different fields: “China is very supportive on Distributed Ledger Technology (DLT), just not crypto. Digital identity is not crypto, hence very welcome.” Blockchain can be used to synchronize data between participating ecosystems, making them both contributors and consumers of the information. For example, one bank may collect Know Your Customer data and share it with other institutions, which means a client would not need to repeatedly submit the same information. Regarding this, Sin went on to add: “As long as we can resolve the governance model (who can on-board the individual on behalf of the whole ecosystem, who will be liable if one bank did it wrong, etc.), commercial model (how much should the data consumers pay the provider, so that there will be incentive), and technology interoperability (including network, data, API, DLT protocol, etc.), then this is definitely real.”
Blockchain identification elsewhere in the worldIn other countries, governments and financial structures are also pondering whether blockchain can be applied to various systems to reduce costs and facilitate citizen access to data.
South KoreaIn July 2019, seven large South Korean companies came together to develop a blockchain-based mobile identification system. The launch of the system is scheduled for 2020. The blockchain network has been named the Initial DID Association. One of the main features of the new system will be that it will work without intermediaries. The system will allow individuals and organizations to control their IDs for online transactions, as well as store various personal information, such as resident registration information or bank account numbers. The initial companies that joined the consortium include Samsung, major telecoms KT Olleh, SK Telecom and LG U+, the banks KEB Hana and Woori, and financial IT company Koscom. However, the size and scope of the project increased substantially in October, when such companies as credit card issuers BC Card and Hyundai Card, along with banks Shinhan and Nonghyup joined. The consortium said that blockchain technology will provide only the necessary information to verify identity rather than the entire certificate, and that it has developed security measures to protect personal information. The idea is to allow a person to control their identity, qualifications and personal information.
EuropeThe European Union has moved to publicly recognize blockchain technology only in the recent few years. In February 2018, the European Commission launched the EU Blockchain Observatory and Forum to consolidate the main developments of the technology and to support European countries engaging with parties working in the blockchain space. The commission has been funding blockchain projects through EU research programs like FP7 and Horizon 2020 since 2013. By 2020, it will finance projects that can use blockchain technology to the amount of 340 million euros. In September 2019, the European Commission’s Joint Research Centre released a report titled “Blockchain for digital government.” According to the JRC report, the European Commission has identified use cases of blockchain in the government sector for citizen ID management, taxation reporting and e-voting, among others. The report states that creating a benchmark blockchain infrastructure consisting of certified independent nodes to host public services has already become a priority for EU policy. It goes on to add that as more enterprises and institutions accept the general framework and participate in the hosting infrastructure, the safer and more secure it will become. Blockchain-based authentication will be widely used in the public domain to provide more advanced functionality, process more transactions without unnecessary financial costs and remove legal barriers. Compared to all other EU countries, Estonia has gone the furthest in implementing blockchain in the government sector. In the first half of 2016, the Estonian government and the blockchain-based digital signature system Guardtime reached an agreement for the transfer of electronic medical records data of over 1 million citizens of the country onto a blockchain.
What’s next?The introduction of blockchain technology in the government sector all around the world is an irreversible process. It is worth recalling the attitude that states had about blockchain a couple of years ago and look at what is happening now. The implementation of blockchain in governments offers lots of opportunities, as blockchain-based systems are far superior to paper-based management systems, which have many vulnerable dimensions. Future-focused countries such as China or South Korea want to use blockchain as early as possible in order to reduce financial costs.
Bitcoin Price Dips to Six-Month Low of $7,000 Nov 22, 2019 at 11:00 UTC Updat
- Bitcoin’s price has briefly dropped to $7,000 – its lowest level since May.
- Next losses may extend to falling channel support at $6,800, with a weekly chart indicator reporting the strongest bearish bias since March.
- Intraday charts are reporting oversold conditions. As a result, consolidation or a minor bounce to $7,500 could be seen before a deeper drop.
- A break above $8,231 is needed to invalidate lower highs setup and confirm a short-term bullish reversal. The outlook as per the weekly chart would turn bullish once the RSI has moved above 53.00.
Bitcoin’s price dropped to a six-month low on Friday, with a widely tracked technical indicator reporting the strongest bearish bias in eight months.
The number one cryptocurrency by market value fell to $7,009 on Bitstamp at 10:05 UTC – the lowest level since May 17 – erasing the entire rally from $7,293 to $10,350 in October, plus some.
At press time, BTC has bounced back slightly and is trading at $7,220, down 8 percent on a 24-hour basis.
The downtrend looks sustainable, as the weekly relative strength index (RSI) – an indicator used to confirm market trends and overbought and oversold conditions – has declined to 43.00, the lowest reading since mid-March. A reading below 50 indicates bearish conditions. So, it seems safe to say the market sentiment is extremely bearish.
The RSI is holding well below 50 and pointing south (above left), confirming the bearish trend in the market. The MACD histogram is also printing deeper bars below the zero line, indicating a strengthening of bearish momentum.
The cryptocurrency is trapped in a falling channel (above right), represented by the trendlines connecting June and August highs and July and September lows.
As a result, a further drop to the channel support at $6,800 cannot be ruled out. That said, a minor bounce to $7,700–$7,800 may be seen first, according to the intraday charts.
Hourly and 4-hour chart
The RSI on the hourly chart is producing higher lows as opposed to lower lows on the price chart – bullish divergence suggesting sellers may be running out of steam. The RSI on the 4-hour chart is hovering well below 30, indicating oversold conditions.
The series of lower highs and lower lows seen above indicates the bears are in control. The immediate outlook would turn bullish only if and when prices invalidate the lower highs setup with a move above $8,231.
Overall, the outlook as per the weekly chart will remain bearish as long as the RSI is held below 53.00 and the price is trapped in a falling channel.
Note that as per textbook rules, RSI’s move above 50 implies a bullish reversal. In this case, however, 53.00 is the demarcation line between the bulls and the bears.
This is due to the fact that the indicator consistently bounced up from 53.00 levels throughout the 2016-17 bull market. That level was breached in early January 2018 following which BTC fell to $6,000 on Feb. 6.
JPMorgan’s Blockchain Products, Explained by Ex-JPM Tech LeadsJPMorgan Chase — whose CEO, Jamie Dimon, once notably expressed skepticism over cryptocurrency — was actually one of the first financial institutions to “learn to love the blockchain.” In 2015, the bank created a division dedicated to exploring emerging technology such as blockchain. We were two of the first members of the JPMorgan blockchain team. We built some of its earliest blockchain technology and vetted other blockchain providers for the bank’s strategic investment and adoption. In this article, we’ll discuss the technology we developed during our time at the bank and our insights into the current suite of JPMorgan blockchain products, from Quorum to JPM Coin. We worked on — and learned from — the challenges of adapting existing public blockchains for enterprise use, including what it takes to successfully lead financial institutions toward decentralized technology. We also discovered that the right place to drive blockchain forward was not from inside of a bank, as we couldn’t make the decisions we needed to in order to truly drive innovation. So, we left the JPMorgan team in 2016 to found Kadena, a hybrid blockchain platform company, and apply our knowledge to deliver on the promise of blockchain.
Juno: JPM Coin v.0JPMorgan never set out to build a blockchain. The company’s brand centers around finance and banking, not software and technology. At the same time, JPMorgan also knew the importance of adopting valuable financial technology and strategically investing in future innovation. We formed JPMorgan’s new products division in 2015 to evaluate and advise the bank on potential technology vendors — from cloud to big-data solutions. Six months in, blockchain rapidly became our primary focus. Using our experience as programmers and technical experts, we evaluated everything on the market at the time, from Ethereum to Digital Asset to Ripple to Hyperledger. It was clear back then that the blockchain options on the market were technologically inadequate for real-world enterprise use cases. Following our assessment, we decided to build our own blockchain within JPMorgan. We wanted to show the bank that the technology could work — if only someone could just get it right. Our program, Juno, began as a demo. We based it on a Byzantine fault tolerant, or BFT, variant of the Raft consensus algorithm, known as Tangaroa. Juno was designed to be a viable private blockchain, with sufficient transactions per second and node support for a serious enterprise use case, including a true BFT consensus for security. The demo turned into an early payments pilot that JPMorgan deployed to offices in London, Tokyo and New York, speeding up transaction settlements similar to what JPM Coin does today. We open-sourced and presented Juno to the Hyperledger Foundation in 2016. Juno remains an example of an early performant private blockchain. It showed us that blockchain could live up to its promise. Despite all the progress we were making, JPMorgan was not yet ready to put its full weight and brand behind blockchain back then. Its reluctance to announce Juno and the payments pilot at the time signaled to us that a large financial institution would not be the best place to develop blockchain. It was only after we left — and possibly because we left — that JPMorgan realized it needed to take its technology seriously to keep its talent. JPMorgan then turned the emerging technology group into the Blockchain Center of Excellence.
QuorumWhile we were building Juno, a second team in our division was working on a project integrating the Ethereum Virtual Machine, or EVM, and sidechains. This project eventually became JPMorgan’s current blockchain platform, Quorum. Built off Ethereum’s code base, Quorum is a permissioned blockchain designed for the needs of financial institutions and enterprises. The challenges that Quorum faces are a byproduct of its reliance on the EVM and Ethereum’s Solidity smart contract language, whose unsafe design problems were among the reasons we decided not to build Kadena’s current blockchain stack using the EVM. Quorum’s decision to build on Ethereum was an ecosystem play rather than a strategic choice informed by security or scalability. Quorum will be forever limited by Ethereum’s “original sin”: Ethereum’s founders never had the interest or the experience to design a platform ready for real-world business operations. Unlike IBM’s Hyperledger, Quorum’s blockchain is far simpler, but it still faces the problems of complexity when making an architecture for confidential transactions. Now that several of Quorum’s key developers have left the team to pursue new blockchain projects, it remains to be seen whether any client using Quorum will find robust support moving forward. Perhaps what places Quorum at the most risk is that the technology lives under the stewardship of a large bank, not a dedicated technology company. To JPMorgan, Quorum will always be a product, not its core business. In the long term, we expect that the bank will take its time and strategically find a mature blockchain platform to adopt for its workflows. However, we commend JPMorgan for its altruistic stewardship of Quorum. The bank has proven blockchain’s potential and built something that has been successfully deployed and used by key partners.
JPMorgan’s stablecoin todayWe see the Juno payments pilot as the earliest version of JPM Coin, the stablecoin that the bank announced earlier this year. JPM Coin seeks to solve two problems in financial markets: the expensive and inefficient settlement process, and the volatility of cryptocurrency. The way JPM Coin achieves its goals is simultaneously impressive and unremarkable. To address cryptocurrency volatility, stablecoins can be “pegged” to the value of an asset for redemption at a fixed price. For example, JPM Coin is a stablecoin pegged to the United States dollar and is redeemable for one dollar from a JPMorgan bank account. However, stablecoins also have drawbacks: A stablecoin can only be pegged if there are sufficient assets and reserves behind it. Just as George Soros once famously broke the bank of England, it is possible to break the peg of a stablecoin with enough financial firepower. Also, controversy arises when a stablecoin like Tether may not have the financial reserves that it claims to hold. Adequate financial reserves are not an issue for JPMorgan. And unlike Facebook’s Libra stablecoin, which would be pegged to a floating basket of currencies, JPM Coin is tied to a single sovereign currency. While Facebook’s Libra has incurred serious and merited concern over its extraterritoriality, JPM Coin is far more innocuous. Eventually, JPM Coin could function as a token that you can cash out for money that is already in your JPMorgan account. Today, however, JPM Coin is used to track cash for compliance efficiencies, without doing much else at the moment. JPM Coin becomes far more impactful when it connects to a public blockchain network through a hybrid platform, one that is capable of interoperating between JPMorgan’s private ledgers and a secure, scalable public blockchain. With a hybrid network, the bank could benefit from the liquidity and market access of a public blockchain while ensuring privacy and security with a permissioned chain. The existence of JPM Coin bears important implications for the world of blockchain and finance. In five years, we expect every company will want to build its own version of JPM Coin. JPMorgan has demonstrated that it is ahead of the curve on blockchain implementation.
Main takeaways from JPMorgan’s blockchain groupOne of the biggest things we gained from our careers in financial technology and regulatory agencies was an understanding of how financial systems actually work, along with what is needed to drive adoption of blockchain forward. The hubris of Facebook’s Libra and Silicon Valley’s attempts to “disrupt finance” stem from a lack of institutional knowledge of how financial systems function in the real world, with real rules and consequences. In order to successfully “disrupt” something, you have to have a deep understanding of that which is getting disrupted. In order to understand what businesses require to adopt blockchain, we had to first build a blockchain for one of the largest financial institutions in the world. Despite the technological and business challenges facing Quorum and JPM Coin, it is important to give credit to JPMorgan for being a pioneer in the world of enterprise blockchain. The bank’s cautious steps into blockchain were understandably motivated by wanting to protect its strong brand in finance. Still, it has remained a savvy contributor to blockation innovation. Many large institutions — far more than have been publicly announced — have attempted to get Ethereum to work for a line of business. Nearly everyone has failed — and yet, JPMorgan succeeded. It has moved heaven and earth to get the EVM to work for any line of business with Quorum. Stuart Popejoy is the co-founder and president of Kadena, with 15 years’ experience in building trading systems and exchange backbones for the financial industry. Prior to starting the company with Will Martino, Stuart worked at JPMorgan in the Blockchain Center of Excellence, where he led and developed the bank’s first blockchain, Juno. Stuart also wrote the algorithmic trading scripts for JPMorgan, which informed his creation of Kadena’s simple smart contract language with formal verification, Pact. His past work also includes experience at Pragma Securities, Pink OTC Markets, JupiterMedia and Apple in various programming and analyst positions. Stuart received his B.A. in comparative literature from the University of California, Berkeley, and is also an avid musician and composer. Stuart has been featured in Forbes, Fortune and Quartz as well as additional publications. Will Martino is the co-founder and CEO of Kadena. He co-founded the company in 2016 with Stuart Popejoy to provide the fastest, safest and most scalable smart contracts for entrepreneurs and enterprises. Will’s background has earned him a reputation for delivering unique insights into the world of permissioned and hybrid blockchain. Prior to founding Kadena, Will worked in JPMorgan’s Blockchain Center of Excellence along with Stuart, where they spearheaded the company’s first blockchain, Juno. Before JPMorgan, Will worked as the tech lead for the cryptocurrency committee at the U.S. Securities and Exchange Commission, a software engineer for AxialMarket and in client services at Ion Trading. Will received a B.A. in economics and mathematics from Yale University. He has authored multiple first-name academic publications in the fields of fractal geometry and materials science.