Consultancy Firm Accenture Targets Enterprise Blockchain Interoperability With Fresh Tool

Global management consultancy firm Accenture revealed a new blockchain tool in a press release Oct. 22, its second in a month focusing on interoperability.

A week after announcing a supply chain partnership with Thailand’s Siam Commercial Bank, Accenture said its latest offering facilitated existing enterprise blockchain systems to integrate with one another.

Specifically, blockchain platform Digital Asset can now work in tandem with R3’s Corda platform, while Hyperledger Fabric and JPMorgan’s Quorum form another interoperable pair.

Discussing the two separate solutions, which the company has already tested, managing director and Global Blockchain Lead David Treat described them as a “game changer.”

“The key challenge was to develop the ability to integrate without introducing ‘operational messaging’ between distributed ledger technology platforms in order to stay true to the principles and benefits of blockchain technology,” he commented, continuing:

“Applying this capability with our clients is already unlocking new opportunities to bring ecosystems together, mitigating key concerns about picking the ‘wrong’ platform or having to re-build if one partner uses something different.”

All four blockchain platforms continue to see success in enterprise uptake worldwide, making their way into systems throughout various sectors of the global economy.

For its most recent deal in Thailand, Accenture also opted for a single system, using Corda as the basis for its so-called Procure-to-Pay product.

“We have said right from the beginning that interoperability is key to avoiding the trapped assets and silos of the past,” R3’s CTO Richard Gendal Brown added in this week’s press release.

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Visa Set to Launch Blockchain-Based Digital Identity System with IBM in Q1 2019

Visa is readying its blockchain-based digital identity system for cross-border payments for launch in the first quarter of 2019, according to a press release published October 21.

The system, dubbed Visa B2B Connect, will provide a blockchain-based digital identity solution for financial institutions to securely process cross-border payments. The system reportedly tokenizes sensitive business data – such as banking details and account numbers – granting them a unique cryptographic identifier that will be used for transactions on the platform.

Kevin Phalen, global head at Visa Business Solutions, suggests that the system will help with fraud:

“B2B Connect’s digital identity greatly reduces the opportunity for fraud that might otherwise exist with checks, ACH and wire transfers today, while also helping companies remain compliant as part of the regulated financial ecosystem.”

From a technical standpoint the solution will integrate a Hyperledger Fabric framework (which is hosted by the Linux Foundation and was developed with input from IBM) with Visa’s “core assets,” which the release claims will establish a scalable permissioned network for use in the financial sector.

Jason Kelley, general manager at IBM Blockchain Services, is quoted as saying that the system represents one of the most “powerful examples to date of how blockchain is transforming payments.”

Fintech provider Bottomline Technologies – which serves 1,200 financial institutions, according to the release – is also partnering with Visa on the B2B Connect system, a partnership that will enable “mutual financial institution clients” to access the system.

As reported last month, Thailand’s fourth largest bank, Kasikornbank, just recently joined the B2B Connect corporate cross-border payments initiative.

According to Visa’s website, B2B Connect was first previewed back in 2017, and counted the U.S. Commerce Bank, South Korea’s Shinhan Bank, the Union Bank of Philippines, and the United Overseas Bank in Singapore as among the first partners processing pilot payments ahead of commercial launch.

Even as it embraces blockchain’s potential, Visa – alongside MasterCard – has this month reportedly moved to group cryptocurrency and Initial Coin Offering (ICO) under a new “High-Risk Securities Merchants” classification, meaning interaction with them will be subject to additional monitoring.

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Top 5 Crypto Performers Overview: Stellar, Ripple, NEO, Cardano, EOS

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

The market data is provided by the HitBTC exchange.

On Oct. 15, some market participants dumped stablecoin Tether as its CEO, who is also the CEO of Bitfinex, faced rumors of insolvency of both companies. Tether briefly lost its peg to the U.S. dollar as the traders sold it and lapped up other cryptocurrencies, providing a temporary boost in the total crypto market capitalization to about $220 billion.

However, after the initial frenzy, most digital currencies gave up their intraday gains and stabilized at lower levels.

Though most of the top cryptocurrencies are stuck in a range, there are a few that are showing signs of bottoming out. Let’s look at the top five digital currencies with a market capitalization of $1 billion or more, which have risen the most in the past seven days.

XLM/USD

Stellar bagged the pole position by gaining about 15 percent in the past seven days. There were a couple of events that have helped it rise in a dull market.

Rumors were making rounds that the new platform for institutional investors launched by the multinational financial industry heavyweight Fidelity will use XLM blockchain for moving digital assets.

The listing of XLM on the Coinsuper crypto exchange has also been well-received by the investors. Another positive news was the announcement of a partnership between Stellar and cryptocurrency exchange Hyperion, a subsidiary of a Canadian firm Global Blockchain Technologies.

Can Stellar maintain its momentum or is it nearing critical overhead resistances? Let’s find out.

The XLM/USD pair topped out in the first week of this year at $0.98239146, and since then it has been in a downtrend. It is currently trading inside a descending triangle, which will complete on a breakdown and close (UTC time frame) below the support.

However, on the downside, the bears haven’t been able to sustain below $0.184 in 2018. The digital currency has bounced off this critical support three times already. Repeated failure of the bears to break down of a level is a positive sign. It shows accumulation by strong hands when price corrects to this level.

Now, if the bulls continue their purchases at higher levels and break out of the downtrend line of the triangle, it will invalidate the bearish pattern. A failure of a bearish pattern is a bullish sign.

Therefore, a close (UTC time frame) above the triangle is likely to attract buying and start a new uptrend that can carry XLM to $0.47, and above that to $0.63.

Our bullish view will be negated if the bears break down and sustain the price below $0.184.

XRP/USD

The second best-performing cryptocurrency that is showing almost double-digit growth is Ripple, which has been in the news this whole month. Cory Johnson, chief market strategist at Ripple Labs has suggested that the White House might be interested in pushing XRP adoption, to counter China’s dominant position in the Bitcoin mining industry.

On Oct. 17, the Bill and Melinda Gates Foundation Deputy Director and Principal Technologist Miller Abel announced a partnership with Ripple Labs Inc. and digital payments firm Coil. With several positive news to help the price action, Ripple has made a small comeback this week. Can this continue or will the coin give up its recent gains?   

XRP/USD

The XRP/USD pair has been in a downtrend in 2018. It has repeatedly failed to hold on to the support levels and has been making new lows at regular intervals.

Currently, it is trading below both the 20-week EMA and the 50-week SMA, but is trying to form a higher low at $0.37185. The previous low was $0.25300. If the bulls succeed in pushing the price above $0.76440, it will indicate a probable bottom and might signal the start of a new uptrend. The higher levels to watch on the upside are $0.96 and $1.22.

On the downside, if the cryptocurrency breaks down of $0.25, it can sink to a new low. We believe that traders should wait for buying to emerge before initiating any long positions.

NEO/USD

NEO celebrated the second anniversary of their mainnet launch and the market cheered the event by pushing the price higher by 5 percent in the past seven days.

NEO/USD

The NEO/USD pair is looking weak as it is trading close to its year-to-date low of $13.60337627. There has been no visible bounce since early August, which shows a lack of buying interest. A break of the support levels will be very negative and can result in a drop to the next support at $6.47815308.

On the upside, NEO will face a stiff resistance at the 20-week EMA that is close to the horizontal resistance at $28.49944165. A break out of this level might start a new rally to $43, and above that to $60, where it might face resistance from the 50-week SMA. Above this level, the move can extend to $100.

We believe that the traders should wait for a new buy setup to form before establishing any new positions in it.

ADA/USD

Input-Output Hong Kong (IOHK) announced that its Icarus project was audited by a third-party independent security auditor Kudelski Security. This will purportedly ensure that Cardano’s wallet is secure for customers.

Cardano has shrugged off the infighting as the price went up by about 5 percent in the past seven days. Let’s see if the coin is showing signs of a turnaround.

ADA/USD

At the current levels, the ADA/USD pair has fallen about 94 percent from its all-time highs. For about a month and a half, the digital currency has been trading in a tight range of $0.060105–$0.094256. A break out of this range might attract buyers, pushing the price towards the 20-week EMA, followed by a move to $0.2.

On the other hand, a break down of the range can result in a drop to $0.033677. Therefore, traders should wait for a new buy setup to form before attempting a long position on Cardano.

EOS/USD

Hackers have siphoned off 65,000 EOS from the operational wallet of EOSBet, a gambling dApp. This is the second attack within 60 days but the traders have shrugged off this news and the digital currency is up 3 percent in the past seven days.

EOS/USD

The EOS/USD pair has been trading in the range $4.4930–$6.8299 for more than two months. The positive thing is that the bulls haven’t allowed the price to slip to the critical support at $3.8723. Instead, they are attempting to form a higher low at $4.4930.

However, they haven’t been able to break out of the overhead resistance, which shows profit booking at higher levels.

The 20-week EMA and the horizontal resistance are both at $6.8299, which makes this an important level to watch on the upside. If this level is crossed, the digital currency can move up to $9.4456, followed by a sharp rally to $15.

On the other hand, if the bears succeed in breaking down of $3.8723, the virtual currency can plunge to $2.4, followed by a drop to $1.7.  The traders should wait for the overhead resistance to be scaled before buying.

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Report: North Korea-Sponsored Hacks Comprise 65 Percent of Total Crypto Stolen

Hacker group “Lazarus,” reportedly funded by North Korea, has stolen a staggering $571 million in cryptocurrencies since early 2017, a study conducted by cybercrime company Group-IB reveals. Key takeaways from the study were published Tuesday, Oct. 16, alongside the full annual report, entitled “Hi-Tech Crime Trends.”

The report, dedicated to hacks in 2017 and 2018, identifies the allegedly state-sponsored hacker group Lazarus as responsible for $571 million of the $882 million total in crypto that was stolen from online exchanges during the studied time period; almost 65 percent of the total sum.   

Out of fourteen separate exchange breaches, five have been attributed to the group, among them the industry record-breaking $532 million NEM hack of Japan’s Coincheck this January.

The report states that hackers target cryptocurrency exchanges using mostly “traditional” methods, including spear phishing, social engineering, and malware:

“After the local network is successfully compromised [through downloaded malware], the hackers browse the local network to find work stations and servers used working with private cryptocurrency wallets.”

The report, which also includes a cybercrime forecast, predicts the number of attacks on exchanges to increase in future, as an alternative to traditional targets such as banks.

Group-IB further indicates that Initial Coin Offering (ICO) platforms are prime targets for hackers, revealing that 10 percent of total funds raised from token sales in 2017–2018 were stolen. A majority of illicit activity targeting ICOs was reportedly conducted through phishing methods, with Group-IB estimating that large phishing groups have the capacity to steal around $1 million a month.

Additionally, Group-IB suggests that mining pools could prove an easy target for 51 percent attacks by state-sponsored hackers. Attempts at such attacks, albeit with limited success, are said to already be on the rise.

U.S. experts have previously alleged that North Korea is “increasingly” turning to crypto as a tactic to circumvent sanctions, claiming that the country’s government is hiring people to “launder” cryptocurrencies via multiple wallets and exchanges, as well as so-called mixing services, with the aim of obtaining sanction-free U.S. dollars.

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Third Largest Crypto Exchange Huobi Opens Deposits for New ‘Stablecoin Solution’ HUSD

Singapore-headquartered cryptocurrency exchange Huobi announced the creation of what it calls a “stablecoin solution” in a blog post Friday, Oct. 19.

Set to go live from Friday, the project, known as HUSD, will consist of Huobi’s own stablecoin asset which investors can use as an go-between to interact with four USD-backed stablecoins currently listed on the exchange.

Specifically, Huobi will accept and store Paxos Standard (PAX), True USD (TUSD), USD Coin (USDC) and Gemini Dollars (GUSD), giving users a balance in HUSD as a kind of aggregator of all four.

According to Huobi’s post, users can then cash out the same stablecoin they deposited or select from any of the other three.

HUSD will also be tradeable against other cryptocurrencies, beginning with controversial stablecoin Tether (USDT), followed by Bitcoin (BTC) and Ethereum (ETH).

Commenting on the project, Huobi said it would expand it to cover other stablecoins in future.

“We will keep a close watch on new stablecoins that appear on the market and optimize the HUSD standards,” executives wrote:

“We look forward to more stablecoins being involved in the HUSD system.”

Huobi announced the listing of the above four USD-backed stablecoins earlier this week, following a similar move by OKEx.

Huobi is currently the third largest crypto exchange globally by daily trading volumes, seeing about $416 million in trades on the day to press time.

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Dubai – the Blockchain Oasis of the UAE: From Public to Private Sector

In some countries around the world, governments have had a stifling effect on the adoption of blockchain technology. Conversely, the government of the UAE and Dubai have been the driving force behind the promotion of blockchain use in the country.

2018 has seen some significant developments on this front but the foundations had been laid a couple of years ago.

Across the private and public sectors, there has been a push to incorporate this new tech to overhaul current systems. This includes as plans to launch a cryptocurrency that will be used by citizens and governmental departments.

EmCash

The first proposal for an official Dubai cryptocurrency called emCash came about in October 2017. The cryptocurrency is touted to be used for payments for governmental and nongovernmental services – and is pegged to the UAE Dirham.

Consumers could well be using emCash in the next few months after the government signed a deal with a number of parties to setup point of sale payments for the cryptocurrency.

The partnership was announced on October 9, which includes emCredit, a subsidiary of the Dubai Department of Economic Development, blockchain payment provider Pundi X and its partner Ebooc Fintech & Loyalty Labs LLC.

Ebooc will be responsible for providing point of sale terminals in retail outlets, while Pundi X is expected to create 100,000 point of sale units over the next three years.

Regulations – ICOs lead to cautious approach

The Central Bank of the UAE began working on legislation at the beginning of 2017 to address the use of cryptocurrencies in the country.

This culminated in a report by Abu Dhabi’s Financial Services Regulatory Authority in October 2017, which released its findings on initial coin offerings (ICOs) and cryptocurrencies – classing them as securities and commodities respectively.

A swathe of apathy towards ICOs, with bans in countries like China, happened around the same time last year. This had a slight ripple effect, as other institutions and regulatory bodies put out warnings to investors centred on the associated risks of investing in ICOs. This saw UAE Central Bank Governor Mubarak Rashid al-Mansouri caution citizens against the use of cryptocurrencies – amid fears of volatility and criminal uses.

This was primarily due to the corresponding drop in value of various cryptocurrencies following China’s ban, as Al-Mansouri said in a speech at the Islamic Financial Services Board Summit:

“The risks of trading in digital currencies have clearly appeared when the prices of digital currency fell sharply after some countries announced a ban on using initial coin offerings.”

The negative stigma around ICOs seemed to continue into the new year, amid an overall decline in the crypto markets following all time highs in December. In the US, the Securities and Exchange Commission (SEC) led the way with no-nonsense attitude towards ICOs in February 2018.

The UAE Securities and Commodities Authority (SCA) also cautioned local investors about the inherent risks associated with ICOs. Given that they are not regulated in the country, investors had no means of legal protection against fraud.

In an effort to address these concerns, it is understood that the UAE in nearing the completion of a draft of regulations for ICOs in the country. This was reported in September 2018, and is led by the UAE SCA.

Dubai – A Smart blockchain city

In 2016, the foundations were laid for Dubai to uncover startup companies that could help drive the way for the city to become blockchain-powered by 2020.

The UAE government founded the Smart Dubai initiative in 2013, an ambitious project looking to provide cutting edge technological innovations across the country, from technology to governmental processes.

A central part of the initiative is to improve government efficiency by using blockchain technology, in the hopes of making Dubai a global leader in the space. This includes a transition to digital systems which will see visa applications, bill payments, and license renewals move away from traditional paper documentation.

According to Smart Dubai, blockchain technology could redistribute up to 25 million hours of economic productivity by removing the need for paper document processing. The project also promised to benefit the tourism industry in Dubai as international travellers will have fast-tracked entry with pre-approved passport, visas, and security clearances.

Moving around the city will also be improved with approved drivers licenses and car rental, wireless connectivity as well as pre-authenticated temporary digital wallets.

An official Blockchain Strategy was launched in October 2016, in association with Seed Fund 1776, looking for companies building blockchain-based applications across a broad range of industries. In 2017 Dubai won the City Project award for its blockchain strategy, awarded by the Smart City Expo and World Congress in Barcelona.

In conjunction with the Smart Dubai initiative, in April 2018 UAE Vice President and Prime Minister Sheikh Mohammed bin Rashid eventually launched the broader UAE Blockchain Strategy 2021. At the time Sheikh Mohammed said that the project could save the UAE government up to $3 billion annually on document circulation, and drastically improve the quality of life and efficiency:

“The adoption of this technology will reflect on the quality of life in the UAE and will enhance happiness levels for citizens. 50 percent of government transactions on the federal level will be conducted using Blockchain technology by 2021. This technology will save time, effort, and resources and enable individuals to conduct most of their transactions in a timely manner that suits their lifestyle and work.”

Cointelegraph spoke with Muhammed Arafath, executive director at Apla Blockchain, platform helping integrate blockchain technology into government operations in a number of countries including India and the UAE, to get a first hand perspective on the current crypto climate in Dubai:

“Considering the vision which the Dubai government has set on being the ‘blockchain capital’ and the commitment for having most if not all of the government applications on Blockchain by 2020, Dubai is one of the most pro-blockchain governments in the region.”

Over the past two months, the UAE and Dubai have made significant progress in realizing some of the goals outlined in the Smart Dubai initiative.

Partnering with the Dubai Department of Finance, a blockchain-powered payment system was officially launched in September 2018. The Payment Reconciliation and Settlement (PRS) system aims to allow government entities like the Dubai Police, Roads and Transport Authority, and Dubai Health Authority to transact in real-time, providing a transparent system for intergovernmental processes..

According to local media outlet Zawya, the Dubai Electricity and Water Authority and the Knowledge and Human Development Authority have already been using the PRS system.

The tourism sector in Dubai is also expected to benefit from blockchain technology. In March 2018, plans for a virtual business-to-business tourism-specific marketplace using blockchain were unveiled. The Dubai Tourism Blockchain Marketplace will reportedly provide tourists with a platform that features real-time, transparent pricing of Dubai’s hotels availability.

From roads to the judicial system

Blockchain technology is also being leveraged to improve other areas of life in Dubai, from the streets of the city to its courts.

Thus, in February 2018 the Dubai Roads and Transport Authority (RTA) announced plans to launch a blockchain-based system in 2020 that would track the lifecycle of vehicles in the country.

According to media outlet Arabian Business, RTA chairman and executive director Mattar Al Tayer says the initiative should benefit almost every single player in the industry:

“The platform benefits many stakeholders including car manufacturers, dealers, regulators, insurance companies, buyers, sellers and even garages, providing transparency and trust in vehicle transactions, preventing disputes and lowering the cost of services. It tracks ownership, sale, and accident history to create smart, more efficient systems for supply chains.”

In July, Dubai International Financial Center Courts announced a formal partnership with Smart Dubai in order to set up a ‘Court of the Blockchain’ to facilitate improvements in the judicial system. The move would eventually create a blockchain-powered judiciary to help verify court judgements for cross-border enforcement.

Ambitious programs to lead the way

Countries like Malta and the UAE seem to be leading the way in terms of blockchain adoption. Having recognized the many benefits of the technology, strides have been made to actively get out ahead of other countries.

A seemingly important factor is the balance between accepting this new technology while providing the necessary frameworks to ensure investors are protected.

The UAE Blockchain Strategy 2021 is a clear indication of the efforts being made by the country to foster the development of blockchain to improve its own governance and the quality of life for people in the region.

This positive and proactive attitude towards the industry is proving a point, as Arafath told Cointelegraph:

“Dubai is clearly leading the region by example on the adoption of blockchain and crypto.”

As Dubai and the UAE continue to explore and develop technology with the use of blockchain technology, as well as provide a guideline for the use of ICOs and cryptocurrencies, the outlook in the region seems positive.

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Indian Internet ‘Blockchain Committee’ Attracts Reps From Zebpay, MasterCard, Microsoft

The Internet and Mobile Association of India (IAMAI) is forming a dedicated focus group for blockchain exploration made up of both big business and cryptocurrency players, Indian daily newspaper Economic Times reported Monday, Oct. 15.

Confirmed in a tweet Tuesday, the IAMAI, whose remit is to “expand and enhance” the online and mobile sector, will use its “Blockchain Committee” to “identify opportunities and challenges and work with government, industry and startups” to develop a blockchain “ecosystem.”

The move comes amid testing times for cryptocurrency in India, with the country’s supreme court still deliberating on the legality of the Reserve Bank of India’s (RBI) cryptocurrency banking ban it instigated in July.

Commenting on the plans, Tina Singh, chair of the newly-founded Blockchain Committee, said the technology was nonetheless “undoubtedly the technology of the future,” noting:

“The IAMAI Blockchain Committee will focus on creating dialogue between all stakeholders; curate and create content to aid skill development and move towards creating a participative economy with the usage of blockchain.”

Participants in the committee include major Indian cryptocurrency exchange ZebPay, itself a conspicuous victim of the central bank’s ban, having halted its exchange offering altogether late last month.

Other parties include representatives from MasterCard, Microsoft and IBM.

The RBI itself is also “researching” blockchain, sources reported in August, as part of an assessment process in which it would “check what can be adopted and what cannot.”

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Japan: Messaging Giant LINE Launches Trading of Its LINK Token on Native Exchange

Japanese messaging app provider LINE Corporation announced that its newly-developed LINK (LN) token is now tradeable on its native BITBOX cryptocurrency exchange in a press release Tuesday, October 16.

LINE, which launched BITBOX in July, will offer trading against three cryptocurrency assets – Bitcoin (BTC), Ethereum (ETH) and Tether (USDT) – out of a total of thirty currently available on the exchange. BITBOX does not offer fiat trading.

In future, LN holders will be able to spend their holdings in LINE’s decentralized application (DApp) system, also currently under development, the press release notes.

“We’re very pleased that users are now able to trade LN on BITBOX, which is a major step forward in our plans for creating a token economy,” LINE CEO Takeshi Idezawa commented in the release, continuing:

“We think it is important to promote co-creation and mutual growth with LINK, while ensuring BITBOX continues to develop as a user-friendly platform that adds value to those who use it and contribute to our services.”

Along with promotional activities such as an airdrop of TRON (TRX) tokens for LN holders, the move marks the latest step in the company’s continued efforts to embrace the crypto economy.

As Cointelegraph reported in August, LINE’s Hong Kong-based subsidiary Unblock launched a $10 million “corporate token fund” with the aim of “boosting the development and adoption of cryptocurrencies and blockchain technology.”

Separately, internet conglomerate GMO Internet Co. Ltd revealed plans earlier this month to launch a cryptocurrency stablecoin pegged to the Japanese yen.

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Binance Launches Its First Fiat-Crypto Exchange in Uganda

Major international crypto exchange Binance has announced that its fiat-to-crypto exchange will open in Uganda this week, the company reveals Monday, Oct. 15.

CEO and founder of Binance, Changpeng Zhao (CZ), had told Cointelegraph in an exclusive interview in June of plans to open the Ugandan crypto-fiat exchange.

As per Binance Uganda’s press release, the new branch will officially start accepting deposits and withdrawals of Ugandan shillings (UGX) Wednesday, Oct. 17. Binance Uganda notes that exchange has already begun its know-your-customer (KYC) procedures.

An additional press release reports that Uganda’s national fiat can only be traded with Bitcoin (BTC) and Ethereum (ETH), but that the exchange is planning to add more pairs soon.

A Cointelegraph analysis of cryptocurrency in Africa noted that although the Bank of Uganda issued a warning to investors about cryptocurrency risks in March 2017, the country’s government has showed interest in using blockchain technology.

Binance’s CFO Wei Zhou says that company’s first fiat-to-crypto exchange in Uganda will help maintain sustainable economic stability in Africa, noting that the company plans to bring “more innovations to the region.”  

As Cointelegraph previously reported, this year Binance has revealed plans to open several fiat-to-crypto exchanges.

In August, Binance LCX — a joint venture between Binance and Liechtenstein Cryptoassets Exchange (LCX) — had announced plans to launch a fiat-to-crypto platform in Liechtenstein and offer trading between Swiss francs (CHF) and euros (EUR) against major digital currencies pairs. However, the exact date of the launch was not revealed.

Later in September, Binance had stated it will soon start private beta testing of a fiat-to-crypto exchange in Singapore, which will presumably support the Singapore dollar.

Binance is the largest international crypto exchange by 24-hour adjusted trading volume, seeing almost $1.8 billion in trades on the day to press time, according to CoinMarketCap.

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Nouriel Roubini Versus Blockchain: Notes from the Senate Floor

Normally, there is very limited room for drawing legitimate comparisons between a Senate hearing and an Mixed Martial Arts (MMA) fight. Yet the hearing entitled “Exploring the Cryptocurrency and Blockchain Ecosystem,” which took place on October 11, 2018 on the US Senate’s Committee on Banking, Housing & Urban Affairs’ floor, definitely bore quite a few similarities to a hyped sporting event that had made big waves just a few days ago. Two witnesses who were brought to testify on issues and promises of crypto stood by polarising views on the subject matter, albeit they expressed these views with varying intensity.

On the pro-crypto side, there was Peter Van Valkenburgh, Director of Research at Coin Center, a reserved yet very articulate speaker. In the opposite corner, there was Nouriel Roubini. Roubini or “Dr. Doom”, whose reputation is mainly founded on the prediction of the 2008 housing bubble crash, would be the fighter who does trash talking. In the buildup to the hearing, he fired a long series of vehement tweets, bashing blockchain and its supporters, picking local fights and bragging about having debated best crypto gurus and “beating them by a wide margin”.

Into the hearing

Chairman Mike Crapo, a Republican Senator from Idaho, opened the proceedings with a statement that gave a nod to Bitcoin’s unique status as the first ever digital asset, and highlighted how the bulk of the latest news on crypto has been negative, including falling prices and regulatory woes. Ranking member Sherrod Brown of Ohio weighed in to point out that it was almost Bitcoin’s tenth anniversary, yet the space is still rife with fraud and misconduct, while tangible applications are scarce. He mentioned regulatory issues and referenced the famous statement by Jay Clayton, the chairman of the US Securities and Exchange Commission, as well as the recent report by the Attorney General of New York that was anything but complementary to biggest crypto exchanges. Brown implied, however, that blockchain could be potentially useful for improving the lives of the unbanked and underserved.

Roubini’s testimony

In his speech, the New York University professor followed rather closely the rambling argument presented in his 30-page written statement. In addition to a constellation of derogatory terms – it is quite likely that for many senators this became the first encounter with terms like ‘shitcoin’ – Roubini developed several central talking points that he would reiterate dogmatically throughout his testimony and on to the Q&A session. He argued that the whole crypto ‘asset class is imploding’ now, following the steep decline of prices compared to late 2017, and educated senators on the study that identified 80 percent of initial coin offerings (ICOs) in the same year as scams. He added that digital assets are useless as currency, since they are unable to serve as unit of account, means of payment, or store value.

A recurrent theme in Roubini’s account was superiority of centralized payment systems to blockchain-based ones. Several times he brought up the claim that the Bitcoin network’s throughput is only five transactions per second, while Visa can process up to twenty-five thousand transactions per second. Other attacks included assertions that ‘nobody uses it for transactions,’ except for criminals and terrorists, while mining is an ‘environmental disaster.’

Roubini also offered a rather unconventional view of what constitutes the realm of fintech. He claimed that, indeed, there is a revolution in the financial services industry currently going on, yet it has nothing to do with blockchain. Instead, it is allegedly powered by artificial intelligence, big data, and the Internet of Things (IoT), and displays in proliferation of centralized digital payment systems.

Meanwhile, the crypto libertarian dream of total decentralization is ‘utter nonsense.’ In fact, Roubini claims, ‘crypto land’ is subject to the opposite trend: heavy centralization of mining – which is apparently controlled mainly by Chinese and Russian oligopolies, trading at the hands of centralized exchanges that are ‘hacked daily’, and development reserved for a narrow tech elite that arbitrarily changes code and forks coins whenever things go wrong.

Against this background, massive manipulation permeates the ‘crypto land,’ where pump & dump schemes, spoofing, and insider trading call the shots. In Roubini’s view, stable coins exist for the sole reason of manipulation; security tokens break all security laws, and utility tokens pave the way back to the Stone Age, where barter was prevalent. According to Roubini, even the “Flintstones knew better,” as they used clams as a universal currency.

Finally, corporate permissioned ledgers received their fair share of beating: according to Roubini, they are no more than ‘glorified databases,’ and they have no relation to the concept of blockchain.

Van Valkenburgh’s testimony

Right after Roubini’s furious charge, a composed account that Coin Center’s Van Valkenburgh delivered sounded almost soothing. The crypto advocate decided not to overcomplicate things, and dedicated a huge share of his time to explaining what Bitcoin is, what it does, and why is it revolutionary. Unlike cash, which only works face-to-face, Bitcoin is the world’s ‘first globally accessible public money.’ It is not yet ‘perfect or stable,’ yet it is working. Similar to the early years of the internet, the technology is full of loopholes and inefficiencies, but this is by no means a reason to abandon it.

Various kinds of human interactions, Van Valkenburgh maintained, are riddled with state or corporate chokepoints. Like the internet had removed such chokepoints from the realm of communication, blockchain’s promise is to do away with single points of failure that are inherent to other interaction systems’ designs – such as that of monetary transaction systems. Giant private corporations are increasingly prone to security failures, such as electronic bank robberies and massive personal data leaks. The rise of IoT makes such concerns even more grave, as even cars and pacers can now be targeted. According to Van Valkenburgh, no critical infrastructure has to have a single point of failure, and to achieve that, we need a ‘light-touch, pro-innovation’ policy in place.

Questions

Chairman Crapo opened up the floor for questions on where the crypto markets are headed next year, and what conditions need to converge in order for them to stabilize. Van Valkenburgh responded that volatility is raging due to the markets having a hard time with finding a level, a fair price for something very new and disruptive. However, institutional money have already brought some sense of stability: it’s been beneficial to have  Commodity Futures Trading Commission (CFTC) regulated crypto derivatives enter the market, but it would be even better if the SEC allows the trading of crypto-based exchange-traded funds. Having a nationally chartered bank for crypto custody would bring even more rationality to the market.

Criticisms thrice told

Roubini responded to this point with the argument that cryptocurrencies are not scalable, not decentralized, and not secure, seasoning his response with the same points about five transactions per second, widespread oligopolies, and no authority to go to in case if one’s funds get stolen. Crapo pressed on, asking what hinders faster development of decentralized computing technologies’ real-world applications. Van Valkenburgh deflected this with a reference to email, which first appeared in 1972 and took a couple of decades before going mainstream, while Roubini said that no government or corporation will use permissionless decentralized systems. The idea of decentralization, he maintained, “won’t fly, because it’s nonsense”.

Ranking member Brown inquired whether there are blockchain-based applications ‘on a broader scale,’ which Roubini took as a chance to dismiss permissionless blockchains again, grudgingly admitting that there is some useful innovation in the sphere of private distributed ledgers. Again, he lauded payment systems like Paypal, China’s WeChat Pay, and African M-Pesa as the ‘real revolution,’ dismissing decentralized crypto systems as being losing users and transactions. While the internet had a billion users after a decade in existence, he added, cryptocurrencies command the following of just 22 million.

As Senator Brown asked to describe a typical crypto investor, Van Valkenburgh painted a portrait of a young, tech-savvy person, and quickly moved to a more policy-relevant conversation. After praising the US Financial Crimes Enforcement Network’s (FinCEN) trailblazing efforts in laying the groundwork for crypto investors’ protection, he criticized the current state-by-state approach to money transmission licenses’ issuance to crypto enterprises, and called for federal licensing system.

Bridging gender gaps & standing up to totalitarians

Senator John Kennedy of Louisiana demanded how the world got better since cryptocurrencies came into existence. Van Valkenburgh offered a story of an Afghani female entrepreneur who used crypto to pay her mostly female employees’ wages, which was the only way to do it in a society where women are especially underserved by banks, while few accounts that exist are often controlled by male relatives. Roubini, once again, brought up superiority of centralized payment systems and Bitcoin’s meager five transactions per second. He then went on to complain about concentration of miners in places like China, Russia, and – for some reason – Belarus and Georgia, claiming that these nations will use their alleged oligopolistic dominance to manipulate the US.

Van Valkenburgh retorted that with payment infrastructures like the Chinese WeChat Pay, users’ transaction records and personal details reside without encryption in centralized repositories, ready to be hacked or surveilled by the government, if needed. Such systems, he argued, are ‘tools for totalitarians.’

A word on security

Doug Jones of Alabama was concerned with the extent to which ‘bad guys’ and rogue nations can exploit the decentralized design of public blockchains. Van Valkenburgh noted that every worthy technology, especially at the early stages of development, gets exploited by shady characters – if it does not, it is probably not very useful. At the same time, he contended, US law enforcement is already quite comfortable for tracking illicit transactions on open ledgers. Roubini took to bemoaning the dangers of blockchains’ anonymity.

Potential for scaling

Pennsylvania senator Pat Toomey jumped in, showing off his intimacy with blockchain fundamentals and jargon. He said that while crypto assets are riddled with flaws, central banks do not have a flawless record of frictionless operations either. He suggested that an asset being a currency or not is just an issue of scale, and asked whether cryptocurrencies are fundamentally not scalable. Toomey was also interested whether the oligopolistic tendencies in mining really mattered for cryptocurrencies’ capacity to operate securely.

Van Valkenburgh delved into an overview of various scaling solutions, particularly highlighting the potential of batch settlement. He added that with oligopoly, you cannot really do much more to the network than denial-of-service attacks. Roubini’s response was anything but surprising:  five transactions per second, centralized mining, not secure. He explained that 51 percent attacks are a reality – they happen ‘every day’ with minor coins. Transactions costs “have gone through the roof,” while massive economies of scale implicit to mining operations incentivize cartelization.

ICO woes

Elizabeth Warren of Massachusetts was wondering how the theft of an aggregate $1.1 billion in the first half of 2018 was possible, as well as what could be done with the 80 percent rate of scam ICOs.  Van Valkenburgh explained that most of the funds stolen were in obscure alternative coins from overseas exchanges that failed to scale up their security systems to match the value they came to store. He also said he was on the same page with those who identify ICOs as securities, but added that it is entirely possible to have an ICO and comply with all the relevant securities regulations.

Maryland’s Chris Van Hollen appeared to be marginally interested in crypto affairs specifically. He lamented how the Fed was sluggish in moving towards a real-time payment system, blockchain-based or not, and moved on to solicit Roubini’s advice on the overall state and near perspectives of the US economy. The famed economist did not sound optimistic, suggesting that it’s possible that growth would stall by 2020.

Global KYC standards

Catherine Cortez Masto from Nevada was the last to pose questions. She asked if there are any provisions in the bitcoin protocol that enable detection of payments that go to human trafficking, drug trafficking, or money laundering. Van Valkenburgh responded that policing such activities is incumbent upon the businesses that operate on top of the blockchain, as well as law enforcement. Roubini noted that such policing won’t be efficient unless there is a globally ratified set of rules in place. Van Valkenburgh agreed that such a unified approach to know your customer (KYC) procedures are needed, marking a rare moment of solidarity with the opponent.

Finally, Cortez Masto asked Roubini whether he believed in blockchain technology’s successful applications beyond finance, to which he responded, once again, that no serious government or corporation would ever entrust an open, trustless, permissionless distributed system with any sensitive information. ‘It’s just nonsense!’ – he concluded.

Chairman Mike Crapo reminded senators that additional questions to witnesses, if any arise, are due within one week, and adjourned the hearing.

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Unconfirmed: TRON to Partner with ‘China’s Google,’ Baidu

The team of cryptocurrency project TRON (TRX) has reportedly partnered with China’s largest Internet search provider Baidu. Crypto market news service Coinness has claimed this in a tweet Thursday, Oct. 11, citing its private correspondence with TRON’s team.

Neither TRON nor Baidu have been able to confirm the partnership to Cointelegraph as of press time.

Without specifying the details of the partnership, Coinness has claimed that the deal between TRON and China’s Internet giant Baidu will be “officially” revealed by the cloud storage service Baidu Cloud “next week.”

While Coinness claims that TRON has exclusively confirmed the partnership in private correspondence with it, the crypto platform itself has not yet officially announced any details of the partnership or even the identity of its new business partner.

TRON’s CEO Justin Sun has recently hinted on Twitter at a secret partnership with an unnamed “industry giant” that is valued at “tens of billions of dollars.” In his Tweet, posted Friday, Oct. 12, Sun has similarly provided little information:

“Finally, First time to partner with tens of billions USD valuation industry giant. Guess the name.”

As mentioned on TRON’s website, the decentralized Internet company TRON Foundation was established in Singapore in July 2017, while TRON’s open source protocol was launched in December 2017. The company has dual headquarters in Beijing and San Francisco, and a team of over 100 employees working all over the globe, with some of them being formerly employed by China’s Internet giants such as Alibaba, Tencent and Baidu.

In late September, TRON released details about its partnership with a popular torrent client BitTorrent, following the earlier acquisition of the company. A collaboration between the two companies dubbed “Project Atlas” will reportedly enable the users of the BitTorrent client to receive rewards in TRON for seeding torrent files.

Earlier in August, Baidu has joined Tencent and Alibaba in enforcing new anti-crypto policies in line with China’s overall toughened stance on the industry. The firm has shut down at least two popular crypto-related forums, with a notice to their users stating that Baidu’s measures are compliant with the “relevant laws, regulations and policies.”

On Sept. 26, Baidu has released its Baidu Blockchain White Paper V1.0, aiming to create “the independent development of the ‘Super Chain’ network system.”

TRON is currently the eleventh largest cryptocurrency by market cap, according to CoinMarketCap data. On June 25, TRON celebrated its “Independence Day,” when it migrated off the Ethereum (ETH) blockchain to its own independent public blockchain.

At press time, TRON is trading at $0.023, up 2.79% on the day. The coin saw its all-time price high of $0.217 on Jan. 5, 2018, which was followed by a fall in value of almost 90% over the rest of the year – against the backdrop of an overall declining crypto market.

TRON one-year price chart. Source: CoinMarketCap

 

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Plastic Surgeon and Startup Investor Buys $352 Million Stake in Korean Crypto Exchange Bithumb

A group led by one of South Korea’s leading plastic surgeons, Dr. Kim Byung Gun, has made a major investment in crypto exchange Bithumb’s holding company. Bloomberg reported the news Friday, Oct. 12.

The surgeon’s BK Global Consortium has closed a deal to acquire “50 percent plus one share” of BTC Holding Co. – the largest investor in Bithumb’s operator – for around 400 billion won ($352 million), Bloomberg reports, citing a Bithumb spokesperson. The report states that BK Global Consortium was already the “fifth-largest” shareholder of BTC Holding.

According to Bloomberg’s source, the transaction is to be finalized in February 2019.

Dr. Kim Byung Gun also established an Initial Coin Offering (ICO) analysis firm in Singapore last year, according to a Korea Joongang Daily profile published in May. The firm reportedly aims to help individual investors distinguish between scams and “promising project models,” amid the surgeon’s concern about the prevalence of Ponzi schemes and other fraudulent offerings in the space.

The profile outlines how the surgeon, who is said to have made his fortune by investing in tech and bio startups, “has caught the blockchain fever.”

Bithumb is currently the world’s second largest by reported daily traded volume according to CoinMarketCap.

Earlier this month, Cointelegraph reported that the exchange plans to open a global decentralized crypto exchange (DEX) with technical support from blockchain firm One Root Network (RNT).

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Want to Meet Your Favorite Celeb? New Platform Backed By Jason Derulo Could Make it Happen

A platform enabling celebrities to “cryptonize” their popularity on an exchange powered by blockchain, while giving fans the opportunity to connect and engage with their idols in new ways, has attracted the support of several prominent stars.

GCOX recently announced that Jason Derulo – the American singer-songwriter who has sold more than 30 million singles, making him a mainstay on international charts – has joined its platform. In time, the company hopes he will be able to build upon his popularity even further, giving his global fanbase unprecedented access.

In a news release announcing the signing, GCOX’s chief communications officer Evan Ngow said: “We are committed to assembling a diverse, multi-talented array of stars at GCOX, and Jason will certainly not be the last musician to join our ranks.”

Several renowned names from the sporting world joined the platform prior to Derulo, including Filipino boxer turned politician Manny Pacquiao and former Liverpool striker Michael Owen, who were among the first to sign up to GCOX, making headlines internationally.

Both Owen and Pacquiao are offering their own cryptocurrencies – known as OWN and PAC respectively – paving the way for fans to buy merchandise, make donations to good causes the athletes are passionate about, and unlock exclusive content.

Supporting celebs throughout their life cycle

In its white paper, GCOX explains that its technology, built on the Acclaim blockchain, is designed to benefit celebrities at different points in their career. While newer public figures have the chance to increase their profile, catalyze their popularity and build a brand, established celebrities will be able to mobilise existing fans and sustain their momentum. ”Stars who are experiencing a decline in popularity will have the chance to recapture exposure and fame – “enhanc[ing], prolong[ing], and re-accelerat[ing] their career development.”

According to GCOX, the services it offers to celebrities and their fans can be split into three specialised platforms.

The first, “Celebreneur,” gives stars the impetus to be more entrepreneurial by providing them with an avenue to promote their existing businesses. Celebrities would also have a chance to sell their memorabilia, such as sporting paraphernalia or movie props, to their fans who want to own a slice of their history. Fans would also be able to be their own merchants and conduct their own transactions for their favorite celebrities’ memorabilia on the platform.

The next platform is “Celeb-connect.” Here, celebrities have the chance to engage with their fanbase like never before, whether this involves sending birthday video greetings on social media or sharing a live-stream with fans using the respective celebrity’s tokens in exchange for such services.

Finally, “Celeb-charity” allows the stars who are passionate about a certain good cause to raise awareness and boost fundraising.

GCOX’s chief executive officer, Dr Jeffrey Lin, told Forbes India he was driven to develop the platform so fans would no longer have to fantasize about interacting with the celebrities they’ve come to admire. This vision originated from his childhood dream of being able to get up close and shake hands with music legend Michael Jackson.

Fame, fortune, and the future

According to GCOX, it has a team of more than 60 people working in its enterprise. While they are mainly based in Singapore, some of its technical staff are located in Malaysia and Vietnam.

Following on from a pre-initial token sale (ITS) the platform’s Acclaim and Applause tokens are being sold in three tranches – and GCOX says the first of these tranches was oversubscribed.

The company is hoping to launch the ACCLAIM blockchain, and the GCOX exchange, in the third quarter of 2018. By the end of the year, it plans to have its Celeb-connect, Celeb-charity, and Celebreneur platforms open for business.

 

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

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China Should Consider Launching its Own Stablecoin, Central Bank Expert Says in Op-Ed

The Chinese government should consider launching its own yuan-backed stablecoin despite the current ban on cryptocurrencies, an op-ed in Chinese financial journal CN Finance reports Tuesday, Oct. 9.

An expert from the People’s Bank of China (PBoC), Li Liangsong, and professor of Fudan University Wang Huaqing wrote an article called “Analysis of Digital Stable Coins” for CN Finance — a bimonthly journal affiliated with the PBoC.

In the opinion piece, the authors provide a brief review of USD-backed coins, such as Tether, the Gemini dollar, and Paxos Standard. The researchers expect them to increase the role of dollar on a global stage and to suppress other fiats, with the yuan among them.

The authors suggested that China should analyze other companies’ experience and “double its efforts” to create a local stablecoin. However, other digital currencies have to stay prohibited in China, they stated.

Stablecoins have recently seen a boom with two USD-backed coins launching in the U.S. in September.

The Winklevoss twins, founders of crypto trading platform Gemini, acquired permission from New York regulators to release their own stablecoin, the Gemini dollar. Later, Circle — through a consortium that includes Bitmain — announced it is launching a USD-backed digital token dubbed the “USD Coin.”

Shortly after, the audit giant PricewaterhouseCoopers (PwC) partnered with decentralized lending platform Cred to offer their expertise in launching its USD-backed coin, especially in terms of transparency and “substantiation,”

The Chinese government first started its anti-crypto campaign in 2017 by closing all of the country’s cryptocurrency exchanges and banning Initial Coin Offerings (ICO). Following the move, the PBoC has repeatedly warned citizens about the risks of crypto trading.

Despite the crypto ban, the country has actively been exploring blockchain solutions. Earlier this autumn, the PBoC announced that its blockchain trading and finance platform is launching in Shenzhen. The ecosystem is also being tested in Guangdong, Hong Kong, and the Macau Bay Area and is being developed for cross-border trading. Later, the country’s official blockchain pilot zone was established in the Hainan province within a dedicated tech park.

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Think Crypto’s Challenges Are Unique? It’s Just History Repeating Itself

From bartering to blockchain, the world of money – and the way we transfer it – has never stood still. Indeed, even the assets we prize have changed. Although it might be nice to have some vegetables in your fridge, using it as a form of currency has probably never crossed your mind.

It’s easy to take financial systems for granted. But every advancement over the centuries has caused some major disruption and a lot of getting used to. With each new system came imperfections and pitfalls – and in some ways, this is good. Cryptocurrencies hold a lot of promise but still face teething problems and challenges. History tells us that this is to be expected, and things can be fixed with patience and a few bright sparks.

Buckle yourselves in. Together, we’re going to take a journey exploring where money transfers began, and how we got to where we are today. Surprisingly, the issues facing crypto right now have been seen throughout the centuries.

Barter

We’re going way back to start off – so imagine everything in black and white. The barter system was the one of the first known forms of trading, pioneered and relied upon by civilizations as far back as 9000 BC. Goods would be exchanged for anything from food and tea leaves to spices, weapons and even human skulls. In every sense, this system is the godfather of money as we know it today.

Cowrie shells

As you can imagine, lugging around cattle and heavy sacks of grain whenever you wanted something from someone would have been a bit of a drag. Thankfully, it only took a few thousand years for traders to get a better idea – create a small and portable replica which symbolizes the goods which are yet to come.

Around 1200 BC, merchants in China started to use cowrie shells, which were commonly found in the Indian and Pacific Oceans. They were later imitated in bronze and copper. Metal knives were also popular as a substitute for the items due to be delivered – but perhaps unsurprisingly, sharp edges were taken away to swerve any nasty accidents. Often, holes would feature in the middle so they could be linked together – and it’s from here the inspiration for coins was born. Fun fact for a dinner party? Cowrie shells were still commonly used as currency in parts of Africa until the early 1900s. Now that’s stamina.

Creating an asset which represents something else is something that hundreds of utility coins in the crypto world do today. Digital tokens are increasingly being used to represent assets in the physical world – bringing a whole new meaning to ownership.

Coins

Fast forward just 700 years (why aren’t all history lessons this fast?) and we finally get to something resembling money – the coins jingling in your pocket. Or not if you’re a diehard crypto nerd, or like the Queen, who doesn’t carry cash.

By the time we arrive at 500 BCE, coins have popped up in Persia, Turkey, Greece and Macedonia – and soon enough, the Roman Empire was getting in on the action. That said, its soldiers appeared to take the revolution with a grain of salt, as many of them appear to have been partly paid in, er, salt. A payment method that’s slow to take off and enjoy mainstream adoption – that rings a bell.

Paper currency

At roughly the same time, paper currency was beginning to come along in leaps and bounds, but they did cause immense amounts of price volatility. In some cases, countries created way too many of these bills – devaluing their currencies and causing rampant price inflation. The story of price volatility sounds familiar, with the price of bitcoin soaring dramatically in 2018 before crashing – sending shock waves through the entire cryptocurrency market and prompting experts to question its suitability for day-to-day use.

Returning to history, banknotes soon emerged which were tied to precious metals like gold and silver – commodities which are still regarded as safe havens today. Further inventions such as checks (16th century) and the telegraph (19th century – yes, still in black and white) helped modernize transactions and speed up transfers. Want another fun fact for that dinner party? The rollout of telegraph systems paved the way for Western Union, which launched in 1851.

Making notes notable

With money changing hands in ever larger quantities, it became important for bank notes to be trusted and recognized internationally. This resulted in nations including England and the US moving away from gold as a value standard – and instead, they established centralized institutions like the Bank of England and the Federal Reserve. Many crypto organizations, which do not rely on central banks, are now underwriting their digital currencies with precious metals – and some banks are even making a cautious foray into the world of crypto.

The modern era

Here’s where we start to leave black and white behind and live in technicolor, with the traditional financial systems we’ve all grown up with. The middle of the 20th century brought about the advent of credit cards, and the late 1960s saw the launch of ATMs. By the 1970s, banks teamed together to launch SWIFT – or to give it its longer, catchier name, the Society for Worldwide Interbank Financial Communication. This allowed financial institutions to talk to one another and facilitate transfers globally – but even today, these can still take a few business days to clear.

Transaction speeds started to rev up as we entered the new millennium thanks to eCommerce platforms such as PayPal, but indeed, these were (and are) still tied to old-fashioned banks. The huge global downturn 10 years ago, which saw several financial institutions collapse, could be regarded as the straw that broke the camel’s back – with high fees, slow speeds, a lack of transparency and the exclusion of hundreds of millions of people without a bank account leading some to realize that a new approach was needed.

The future?

Just like cowrie shells had to gain traction all those millennia ago, cryptocurrencies and blockchain are now hoping to deliver a seismic change in money transfers – and economies as we know them. Their immutable records at every stage of a transaction helps prevent fraud and money laundering – speeding up transfers while driving down costs for consumers. Sure, there are hurdles to overcome, but as we’ve seen, practically every development in the history of money has had endured struggles at one point or another.

Several platforms are working to make cryptocurrencies practical – and minimize currency losses. For example, Piixpay enables users to settle bills and transfer money to friends and family using Bitcoin, Bitcoin Cash, Litecoin, or Dash – with these payments arriving to recipients in the form of euros.

Slow adoption, price volatility, underwriting currencies with gold and banks slow to embrace new technology. To understand cryptocurrency’s challenges today, it really pays to look at the problems of yesterday (and yestercentury.)

 

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

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China: Man Gets 3.5 Years in Jail for Stealing Train Power to Mine Bitcoin, Local Media

A man in China has been been sentenced to three and a half years in jail for stealing power from a train station to fuel his Bitcoin (BTC) mining operations, local media outlet The Paper reports October 8.

According to court documents released today, the sentencing was served September 13 at the Datong Railway Transport Court in China’s northern Shanxi province. In addition to jail time, the individual, a local named Xu Xinghua, has reportedly been fined 100,000 yuan (around $14,500).

Xinghua is said to have stolen electricity from one of the factories at Kouquan Railway back in November and December 2017 to power his 50 Bitcoin miners and three electric fans around the clock. The document states that five of the mining machines were damaged during this period.

As of April 2018, Xinghua is said to have successfully mined 3.2 Bitcoin, earning 120,000 yuan (about $17,400) and running up an electricity bill of 104,000 yuan ($15,000).

In addition to imprisonment and a fine, the court has ordered Xinghua to cover the cost of the electricity charges and has confiscated his mining equipment, The Paper reports.

Charges of a similar nature are not unprecedented in China. In June, a man in China’s Anhui province was arrested for attempting to steal electricity to fund his reportedly “unprofitable” mining operations. The suspect was said to have stolen 150 megawatt (MW) of power to fuel two hundred computers that he used to mine both Bitcoin and Ethereum (ETH) – running a bill of over 6000 yuan ($930) daily.

With the country established as a crypto mining superpower due to its abundance of cheap energy and hardware, reports surfaced at the start of this year that Chinese authorities were poised to attempt to quash the industry.

A leaked memo from the People’s Bank of China (PBoC) to a top-level government internet finance regulator reportedly stated that Bitcoin miners should make an “orderly exit” from the country due to them sapping “huge amounts of resources and stok[ing] speculation of virtual currencies.”

The regulator is said to have subsequently ordered local authorities to wield all available means in their arsenal – including “measures linked to electricity price, land use, tax, and environmental protection” – to pressure miners to cease their operations.

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Hodler’s Digest, October 1-8: WSJ Gets In and Out of Crypto, While BofA Sees a $7 Billion Future for Blockchain

Coming every Sunday, the Hodler’s Digest will help you to track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions, and much more — a week on Cointelegraph in one link.

Top Stories This Week

Crypto Exchange ShapeShift Rebuts WSJ Report of Money Laundering

Cryptocurrency exchange ShapeShift has issued a denial in response to a Wall Street Journal article that the exchange had laundered around $9 million in ill-received funds. The article, which calculated a total of $88.6 million funneled through 46 exchanges, pinpointed $9 million as going through ShapeShift. In a blog post, Erik Voorhees, CEO and founder of ShapeShift, wrote that the information that the exchange gave the WSJ was misrepresented, and that the exchange has its own AML program that “deploys “blockchain forensics that are far more advanced than asking someone for their ‘name and address’.”

Wall Street Journal Creates, Then Destroys, Its Own Cryptocurrency

Major U.S. publication the Wall Street Journal (WSJ) has created and then halted the issuance of its own cryptocurrency in the pursuit of learning more about the industry. WSJ journalist Steven Russolillo created the “WSJ Coin,” in order to both shed light on the crypto economy as well as provide a use case for the journalism industry. However, after the two issued units were spent on two beers, the WSJ ethics head shut the project down, citing “ethical questions.”

Bank of America Estimates Blockchain Could Be $7 Billion Market

Bank of America (BofA) analysts said this week that blockchain has the potential to become a $7 billion market, providing a boost to corporations like Microsoft and Amazon. Although no timeline was offered, the BofA analysts used the figure that two percent of corporate servers could run blockchain at an annual cost of $5,500. However, the bank noted that the full capacity of blockchain has not yet been “built out.”

US SEC Gives November 5 Deadline For Bitcoin ETF Review

The U.S. Securities and Exchange Commission has given a time frame for reviewing the rule changes proposed in a series of application to list and trade Bitcoin exchange-traded funds. The SEC’s review period until Nov. 5 will affect nine different ETFs that were proposed by three different applicants: ProShares, Direxion, and GraniteShares. The SEC has solicited  “any party or other person” to file a statement in support or rejection of the proposed BTC ETFs in the review period.

Venezuelan President Maduro Claims Petro Launch Set For November 5

Venezuela’s President Nicolas Maduro said this week that the public sale of the national, oil-backed cryptocurrency Petro is set for November 5. According to Maduro, the official site of the Petro and the coin’s wallet are already live. The president also noted that the Petro is available on six major exchanges, without naming them, and that all oil purchases in and out of the country must be paid in Petro. Petro’s new whitepaper notes that the cryptocurrency is backed 50 percent by oil, 20 percent by gold, 20 percent by iron, and 10 percent by diamond assets.

Most Memorable Quotations

Most Memorable Quotations

Bill Clinton

“This whole blockchain deal has the potential it does only because it is applicable across national borders [and] income groups. The permutations and possibilities are staggeringly great,” — former U.S. President Bill Clinton

Joseph Muscat

“Blockchain makes cryptocurrencies the inevitable future of money, more transparent since it helps filter good businesses from bad businesses,” — Prime Minister of Malta, Joseph Muscat

Laws And Taxes

Laws And Taxes

US Legislators Propose Blockchain Promotional Bill

Two U.S. representative, Doris Matsui and Brett Guthrie, proposed this week a bill, the “Blockchain Promotional Act 2018,” in the House of Representatives. The bill notes that the definition of blockchain differs across different bills, and suggest that the U.S. Department of Commerce create a working group in order to form a common definition of blockchain, as well as come up with suggestions for government tech and communications bodies to research the potential impact of blockchain tech across the policy spectrum.

Chilean Deputies Present Blockchain Adoption Resolution To Parliament

Two Chilean deputies, Miguel Angel Calisto and Giorgio Jackson presented a text to the lower house of Chile’s parliament this week for a blockchain resolution project. In the proposal, the legislators suggest that Chilean president Sebastian Pinera adopts blockchain in all public areas of the country. The resolution also offers to carry out studies on the advantages of blockchain-based security and energy solutions.

Adoption

Adoption

Ripple Launches xRapid Payment Solution, Signs On Three Companies

Ripple’s real-time settlement platform xRapid became commercially available this week, after the pilot phase had already been launched in May. The platform, designed with the intention of speeding up international payments, reportedly sources liquidity from the digital currency XRP on exchange globally. Three firms — Cuallix, MercuryFX and Catalyst Corporate Federal Credit Union — have thus far been signed up as clients.

Retail Brokerage Firm TD Ameritrade Backs New Crypto Exchange ErisX

US retail brokerage firm TD Ameritrade — which currently supports 11 million clients with investment services — is backing new cryptocurrency exchange ErisX. The details of the deal have not been made public, but Bloomberg reports that  investing company DRW Holdings and high-speed trader Virtu Financial are also participating with investments. According to the Wall Street Journal, ErisX will support both direct cryptocurrency sales as well as launch futures contracts in early 2019.

Ripple-powered Payments App MoneyTap Goes Live In Japan

MoneyTap, a consumer-focused service co-developed by Ripple and Japanese financial services firm SBI Holdings, was launched this week. According to MoneyTap’s website, the app will use blockchain solution xCurrent to permit domestic bank-to-bank transfers in “real time.” Account holders at three participating Japanese banks   SBI Sumishin Net Bank, Suruga Bank and Resona Bank   can send funds using the mobile app, which is compatible with both iOS and Android devices.

Institutional Investors Become Largest Crypto Buyers, Report Shows

Institutional investors are now bigger buyers of cryptocurrency transactions worth more than $100,000 as opposed to high net-worth individuals, Bloomberg reported this week. The publication’s research found that traditional investors like hedge funds are becoming more involved in the cryptocurrency market through private transaction, noting that miners have begun scheduling regular coins sales rather than holding or selling during market rallies.

Russia’s Nuclear Corporation To Use Blockchain For Increasing Efficiency

Rosatom, the Russian state nuclear energy corporation, will develop “4.0 technologies” including blockchain, artificial intelligence, and the Internet of Things in order to increase the efficiency of their manufacturing process. The corporation is also seeking new talent in the three new technological fields.

Mergers, Acquisitions, And Partnerships

Mergers, Acquisitions, And Partnerships

Enterprise Ethereum Alliance And Hyperledger Join Each Other’s Organizations

The Enterprise Ethereum Alliance (EEA) and Hyperledger reported this week that they would each join the other’s organization as “Associate Members” in order to foment enterprise blockchain adoption. Brian Behlendorf, Executive Director of Hyperledger at the Linux Foundation and Ron Resnick, Executive Director of the Enterprise Ethereum Alliance, wrote about their decision to join together, nothing that collaboration will “enable more active and mutual cross-community collaboration through event participation, connecting with other members, and finding ways for our respective efforts to be complementary and compatible”

Funding Rounds

Funding Rounds

ConsenSys Invests $6.5 Million In Blockchain Startup Founded By Former R3 Execs

Ethereum co-founder Joseph Lubin has invested $6.5 million in DLT startup DrumG Technologies through blockchain ecosystem ConsenSys. DrumG, notably headed by senior level executives at rival blockchain consortium R3, will now include Lubin as an outside member of its board of directors, with Drum3 now having a “significant presence” in ConsenSys’s ecosystem. DrumG plans to address the problems in the blockchain space with acception of multiple interconnected distributed ledgers in the corporate world.

Yale University Participates In $400 Million Funding For Crypto-Focused Fund

Yale University, an Ivy League institution in the U.S., is reportedly one of of the investors in a $400 million investment into crypto-focused fund Paradigm. The fund was reportedly created by Coinbase co-founder Fred Ehrsam, former Sequoia Capital partner Matt Huang, and Charles Noyes, formerly of crypto fund Pantera Capital. Bloomberg notes that the fund reportedly plans to invest in “early-stage” crypto-focused projects, new blockchains and digital asset exchanges.

Binance Labs Invests “Millions” In Decentralized Digital Content Startup

Binance Labs, founded by major crypto exchange Binance, has reportedly invested millions of dollars in decentralized digital content ecosystem Contentos. The exact amount of Binance Lab’s “multi-million” investment was not disclosed. Contentos noted in their press release that they plan to develop a decentralized ecosystem that will allow for more transparency and the monetization of content.

South Korean VC Firm Invests For First Time In Blockchain Startup

Korean Investment Partners (KIP), South Korea’s largest venture capital firm, has invested in TEMCO, the first time the company has invested in a blockchain startup. KIP, known for investments in firms like Korean search engine Naver and Japanese messaging app LINE, has invested an undisclosed sum in TEMCO, which aims to develop supply chain management solutions on blockchain for enterprises.

Winners And Losers

Winners And Losers

Winners And Losers

Crypto markets have had a calm week, with Bitcoin trading at around $6,525 and Ethereum at around $223. Total market cap is around $216 billion.

The top three altcoin gainers of the week are RabbitCoin, Rupee, and Royalties. The top three altcoin losers of the week are Carebit, ConnectJob, and Oxycoin.

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

FUD Of The Week

FUD Of The Week

Expert From Blockchain Capital Believes Bitcoin Has Nearly Hit Bottom

Spencer Bogart, an expert in crypto and blockchain from Blockchain Capital, said this week that Bitcoin has almost found its bottom. According to Bogart, the markets are down around 70 percent from their high, so he thinks that “Bitcoin is close to bottoming and so is the rest of the market.” Bogart also noted that media coverage of the crypto markets is “a piece of kindling that we are going to throw onto a future crypto bonfire when we have the next bull market.”

Cryptojackers Have Compromised Over 30,000 Routers In India, Report Shows

Security company Banbreach’s recent report has found that the number of routers compromised by cryptojacking software in India has doubled in the past month, now numbering over 30,000. The report, which was compiled by tracking Internet traffic on devices with public IP address, grouped areas of India together from the most to the least dense. According to Banbreach, 45 percent of the compromised routers are located in the less-populated areas.

German ICO Investors Have Lost 90 Percent Of Their Capital, Report Finds

According to research, investors in German ICOs have lost as much as 90 percent of their capital. German business magazine WirtschaftsWoche looked at the token issue prices of ICOs in Germany in early September 2018, finding that German startup coins lost even more in value than Bitcoin and Ethereum so far this year. The magazine noted that only eight startups with a head office in Germany so far have completed an ICO.

Audit, Consulting Firm Deloitte Describe Five Obstacles To Blockchain Adoption

Deloitte has outlined five basic areas that need development in order for blockchain technology to achieve widespread adoption. According to the firm’s report, blockchain must first overcome five issues —  the possibility of time-consuming operations, lack of standardization, high costs and complexity blockchain applications, regulatory uncertainty, and the absence of collaboration between blockchain-related firms — before in can be more widely accepted.

WSJ Report Shows Automated Trading Bots Manipulate Crypto Market Prices

According to a report from the Wall Street Journal, automated trading programs (bots) are manipulating cryptocurrency prices. The WSJ writes that the lack of regulation in the crypto markets has allowed the bots to execute their abusive strategies on an industrial level. The article specifically references a $80 million digital currency hedge fund and its battle with “enemy bots” in the crypto markets.

Prediction Of The Week

Prediction Of The Week

Mike Novogratz: Bitcoin Won’t Break $9,000 In 2018

CEO of crypto investment firm Galaxy Digital Capital has corrected his BTC price forecast — having said in November 2017 that BTC could hit $45,000 in a year — now stating that Bitcoin won’t actually break $9,000 in 2018. Novogratz also suggested that the falling prices in the crypto market are a result of companies currently selling crypto “just to fund the burn rate of the industry.”

Best Features

Best Features

The Future Of Cryptocurrency Legislation

Brookings looks at where exactly cryptocurrency regulation is going in the future, noting key concerns such as the defining of crypto and tokens as securities, the multiple class-action suits against ICOs, and diverging international views on regulation.

Rapper Soulja Boy Extols Bitcoin Gains In New Song

Learn how American rapper Soulja Boy “got on a computer and bought a Bitcoin” in his new album. The rapper further explains in verse: “This cryptocurrency man, it’s crazy. I got Bitcoin, and I got Litecoin. I’m going digital. Yah. Soulja.”

Article First Published here

South Africa and Crypto – a Conservatively Optimistic Approach

Blockchain and cryptocurrencies have proliferated the minds of millions across the world, as trading and crypto asset ownership continues to rise.

In the same breathe, many countries across the world have taken a tough stance against cryptocurrencies in particular. Some, like China, have outlawed their use, while others like Malta are at the forefront of cryptocurrency and blockchain development.

In an African context, this sector is slowly growing. At the southern end of the continent, South Africa sits in an interesting position. As one of the bigger economic hubs of Africa, it has the potential to lead the way in terms of blockchain development and cryptocurrency adoption.

With that being said, it’s worth considering what the current climate is like in the country and what efforts are being made to drive innovation and acceptance of this burgeoning new industry.

The tax man

Cryptocurrency trading has become immensely popular over the past two years — as was demonstrated in the latter half of 2017, when Bitcoin and a number of altcoins cruised to all-time highs.

During this period, plucky investors flocked to the market in the hopes of cashing in on a spiralling bull run that made many early investors substantial sums of money.

Across the world, cryptocurrency exchanges were inundated with new users looking to open up accounts and get their hands on the increasingly valuable Bitcoin and the like.

Some people made massive profits while others were left watching their investments decline in value during the resulting correction. That didn’t change the fact that the tax man wanted his pound of flesh from those that had cashed in their profits.

This was the case in South Africa, where the South African Revenue Services (SARS) made it clear to registered taxpayers that they would be liable to pay tax on cryptocurrency gains.

How crypto is classified in South Africa

As the SARS pointed out, the word ‘currency’ is not defined in the Income Tax Act. It’s important for people to understand this because it means that cryptocurrencies themselves are not taxable.

“Cryptocurrencies are neither official South African tender nor widely used and accepted in South Africa as a medium of payment or exchange. As such, cryptocurrencies are not regarded by SARS as a currency for income tax purposes or Capital Gains Tax (CGT). Instead, cryptocurrencies are regarded by SARS as assets of an intangible nature.”

However, the value of a given amount of cryptocurrency can be valued in South African rands, and any income received or accrued from cryptocurrency trading can be taxed under the laws of gross income.

Simply put, South Africans that are actively trading cryptocurrency will be liable to pay tax on any income made.

Don’t stress, it’s legal

In a South African context, the use of cryptocurrencies is legal. There are no laws governing the sector although the South African Reserve Bank (SARB) is monitoring the situation.

The Reserve Bank issued a white paper outlining its views on cryptocurrencies in 2014. The institution does not recognize any cryptocurrency as legal tender.

In South Africa, the Reserve Bank has the sole right to issue and manage money, in the form of bank notes and coins. As such, cryptocurrencies fall outside the jurisdiction of the Reserve Bank.

In layman’s terms, the Reserve Bank doesn’t view cryptocurrencies as an alternative to fiat currency, in fact it doesn’t view them as legitimate currencies at all. In that very document, the SARB went as far to say that cryptocurrencies won’t pose any threat to the South African Rand, or financial institutions:

“Given the current landscape and information currently available, the Bank contends that VCs pose no significant risk to financial stability, price stability or the National Payment System.”

Task force looking at crypto

Given that the SARB’s first report on cryptocurrencies is nearly 5 years old, the institution has since launched a Fintech task group that will handle cryptocurrency and fintech developments in the country.

As it was the case around the world, investor protection has been a big concern amid the inherent risk of investing in cryptocurrencies and initial coin offerings (ICOs).

This self-regulatory body will be allowed to set up its own rules and directives, while looking to balance crypto and blockchain development in the country with risk prevention.

In the initial announcement in April 2018, SARB director of banking practice Bridget King said a major hurdle has to do with timelines and the dangers of imposing regulations that could stifle the growth of the sector:

“Regulating cryptocurrencies prematurely could have the negative consequence of throttling the growth and innovation of the industry. In addition, if laws are drafted based on existing technology, which is still in its growth phase, there is a risk that the technology may have moved so much by the time the legislation is enacted, that the legislation is obsolete or requires updating almost immediately to align with the latest technology.”

In May 2018, the SARB made it clear that it still doesn’t classify cryptocurrencies as money. Deputy Governor of the bank, Francois Groepe, explained the reasoning behind their classification and choice of terminology:

“We don’t use the term “cryptocurrency” because it doesn’t meet the requirements of money in the economic sense of the stable means of exchange, a unit of measure and a stable unit of value. We prefer to use the word ‘cyber-token’.

This is part and parcel of why the SARB created its Fintech task group. Groepe said the bank wants to make sure that cryptocurrencies, and their trade, are still adhering to South African laws:

“We want to ensure or establish whether there is still compliance with the relevant financial surveillance or exchange-control regulations.”

Reserve Bank tests pilot blockchain payment system – Project Khokha

In addition to establishing this regulatory body for the South African crypto industry, the SARB has also forged ahead with a proof of concept for a blockchain-based payment system.

Project Khokha has been tested and in June 2018 a report was released. The system was built using JPMorgan’s Quorum platform, and providing participating parties actual experience using blockchain technology in a safe, test environment.

According to the report, the daily volume of the South African payment system could be processed in less than two hours. Along with this, transactions would remain completely confidential and would be completely settled.

Transactions were processed within two seconds by a network of nodes in different locations using distributed consensus. Furthermore, the SARB was able to view the details of transactions, ensuring regulatory oversight for their own purposes.

The project was mainly aimed at giving the SARB and various participants a first hand look at how blockchain technology could help streamline payments systems.

While no official, blockchain-based payment system has been launched from the proof-of-concept, the exercise has provided first-hand experience of the capabilities of  distributed ledger technology and how it could possibly improve the current South African payment system:

“One objective of Project Khokha is to provide a better understanding of how South African Multiple Option Settlement (SAMOS) system would integrate with a DLT system. The intention is not to consider changing the approach with the SAMOS replacement, but to provide input to that project.”

A waiting game

Regulation is somewhat of a double-edged sword. It has the power to both promote and nurture, as well as stifle and strangle. When it comes to cryptocurrencies, the second scenario is a real concern.

This is why, in a South African context, a slow and methodical approach to cryptocurrency regulation is a definite positive. As King suggested above, rushing to regulate prematurely could hamper the development of the industry in the country.

If anything, South Africans should be encouraged by the SARB’s Fintech working group and the outcome of Project Khokha’s report on the uses of blockchain-based payment systems.

While we may not see any clear cut legislation or regulation on the sector soon, the fact that the SARB is making a concerted effort to research the possibilities of blockchain technology is positive.

Cointelegraph has reached out to the South African Reserve Bank for comment – and is awaiting an official reply.

Article First Published here

Bitmain IPO: Trial by Fire for the Mining Equipment Giant

The views expressed here are the author’s own and do not necessarily represent the views of Cointelegraph.com

Bitmain, the world market leader for mining equipment, on the eve of an epic IPO — which could become the largest in the entire history of the IT market — is experiencing an equally epic publicity and information attack. Despite the fact that the upcoming IPO is getting closer, as demonstrated by a draft application for registration recently filed by the company on the Hong Kong Stock Exchange, its success may be questionable. 

The fact is that, since Aug. 21, official refutations have started to appear on the internet from companies that were previously listed in the Bitmain investor list. Beginning with SoftBank, the rumor about participation in the company’s IPO was also denied by DST Capital.

Without making unequivocal conclusions, let’s try to figure out whether there is any smoke when it comes to Bitmain’s IPO claims — to which its founder, Jihan Wu, prefers not to respond.

Reconnaissance

On June 6, media presented information that Bitmain’s IPO on the Hong Kong Stock Exchange was scheduled for September 2018 and, according to investment analysts, was expected to raise anywhere from $3 billion to $18 billion, thereby becoming the largest initial public offering in the IT market’s history, beating Facebook with its $16 billion.

However, on August 6, the company gave a more cautious outlook on the IPO date, taking the gap between the fourth quarter of 2018 and the first quarter of 2019. Nevertheless, a draft application for the listing on the Hong Kong Exchange indicates that the giant’s intention is getting stronger and the date for the launch of the initial offering is getting closer. Additionally, as part of the approval process, Bitmain has submitted a prospectus where it reported new financial data which was closed before.

According to the updated information, Bitmain earned $701 million in net profit in 2017, while various estimates show that the annual income for the same period ranged from $1 billion to $4 billion. A gross income claimed for the first half of 2018 exceeded the one received for the whole previous year and comprised $743 million, despite a significant fall in the crypto market.

However, according to the report published by BitMEX at the end of August, Bitmain could face “visible losses, which might be caused by “allegedly investing the majority of its operating cash in 2017 in acquiring Bitcoin Cash (BCH).” Experts believe the estimated potential losses could reach $328 million.  Additional calculations show that the ratio of the $2.5 billion revenue to the $701 million net profit in 2017 is more positive than that of 2018 ($2,5 billion and $743 million). Further analysis made by the BitMEX team implies “Bitmain are currently loss-making, with a negative profit margin of 11.6% for the main S9 product and a margin of over negative 100% on the L3 product.”

Given the continuing decline in Bitcoin’s price and the challenging situation in the mining hardware market, some experts suggest that the company’s IPO may become a challenging task. Although the corporation still remains the industry leader, with 60-70 percent share of the ASIC production market.

As of the beginning of October, the capitalization of Bitmain has reached $12 billion with its latest funding round in August 2018 reported to be $442.1 million. In total, Bitmain has raised $784.8 million to date and was rumored to have accumulated around 51 percent of the Bitcoin network hash — or that it was at least close.

One of the reasons the research group Sanford C Bernstein & Co. is given as an argument on why Bitmain may strongly need to start its IPO, is increased competition. Wall Street may also be occupied by the company Chinese Canaan Inc., whose value is estimated at about $500 million and Ebang International Holdings Inc., registered in the Cayman Islands. Both companies also announced an IPO with plans to begin before the year ends, which will also take place on the Hong Kong Stock Exchange. According to Reuters, Ebang is planning to raise up to $1 billion, while Canaan is targeting at least $400 million, which in total is 2 times smaller than the sum planned by Bitmain.

The challenges Bitmain is facing

In the middle of the summer, the media reported that Bitmain had held its first round of the pre-IPO and that among the investors there was a co-owner of Uber, Japanese SoftBank and Chinese IT giant Tencent, which developed the WeChat platform. WeChat itself is reported to be ahead of Facebook in terms of capitalization with the market valuation of $534,5 billion against $519,4 billion. Later, the insider information was released about DST Global participating in the pre-IPO.

Neither references to Bitmain’s publications disseminating information, nor the company’s comments on these data were provided. Information was distributed in Twitter with a reference to an investor deck screenshot.

By August, all three companies named originally as investors in Bitmain’s pre-ICO, have issued public denials. But this was only the beginning.

In late August — theoretically on the eve of September’s IPO, the analytical agency Sanford C. Bernstein & Co., which in 2000 merged with Alliance Capital, published a detailed report analyzing the challenges of Bitmain’s IPO.

The study is devoted to Bitmain and contains clear indications of the Chinese giant’s loss of technological advantage, connected with increased competition and the purchase of a large amount of Bitcoin Cash, which could pose a significant risk to the company if the digital token declines. Moreover, Bloomberg, which detailed the report of Sanford C. Bernstein & Co., pointed out that analysts directly called for Bitmain’s technological partner — Taiwan Semiconductor Manufacturing Co. — not to produce chips for ASIC-miners without a full prepayment.

Meanwhile at the Bitmain headquarters

The Chinese giant is consistently expanding its mining empire. In August, Cointelegraph reported that NVIDIA left the mining equipment market, unable to withstand the severe competition of Bitmain. Thus, it appears that 85 percent of the world’s mining equipment production market has come under the control of Bitmain, a figure with which the analysts of Sanford C. Bernstein & Co. agree.

More questions are raised by the above mentioned purchase of BCH, which according to some users, was either a risky investment, given the unstable market situation, or was made with the purpose of not disclosing Q2 income.

At the presentation for investors, Bitmain reported that, since the end of 2017, it consistently traded Bitcoin Cash for any available Bitcoin, despite the fact that the company lost about $500 million. A slide taken from an investor deck was published in Twitter, and caused a stormy reaction in the crypto community.

While information about the future IPO and the monopolized market was teeming with passion, Jihan Wu himself shared his opinion regarding the futility of ICOs and the prospects for Bitcoin Cash in an interview with Coingeek.

An imperturbable 32-year-old Chinese billionaire called ICOs “a bubble that will last for two years and then burst,” followed by the securities of crypto startups released on the blockchain. The Bitmain owner predicted a rate of $100,000 of Bitcoin’s fork — Bitcoin Cash (BCH) — and a dominant position in the market by 2023, as he believes only BCH corresponds to the real vision of Satoshi Nakamoto. Having intrigued Bitcoin evangelists in this way, Jihan Wu completed the interview without commenting on the prospects of his future IPO.

Possible scenarios

Bitmain has accumulated a lot of BCH, but there is no liquid market and there is no demand outside the market. A lot of ASIC-devices were released, but their profitability decreases as the complexity of BTC mining grows. So far the company has not developed any AI initiatives since the moment Jihan mentioned his plans to take on Nvidia.

The IPO process may be hindered by some of Bitmain’s mistakes, such as “producing too many units and buying too many speculative altcoins in a bull market,” BitMEX analysts say. Still they are not so catastrophic and “typical” of mining producers management teams.

The exchange specialists predict that in order to keep their industry dominance and achieve higher results, “the Bitmain management team may need to improve their management of company resources. Once the company goes public, capital allocation decisions in this volatile and unpredictable market will be difficult enough, letting emotions impact too many investment decisions may not be tolerated.”

Perhaps, the giant will reconsider their target sum for the IPO due to revealed losses, and increased competition.

Article First Published here

Chinese Energy Outfit to Support Spanish 300 MW Crypto Mining Farm

Chinese energy company Risen Energy has partnered with a Spanish cryptocurrency mining farm will to develop capacity of up to 300 megawatts (MW) of photovoltaic power. The news was reported by a Chinese media outlet PV Tech Thursday, October 4.

Several months after CryptoSolarTech confirmed it was building two farms near the city of Malaga using energy-efficient technology, Risen “will develop and take on engineering, procurement and construction (EPC) responsibilities for the projects,” according to the new report.

For comparison, Bitcoin network consumes an average of about 200 MW of energy for mining every day, according to the Bitcoin Energy Consumption Index.

In June, CryptoSolarTech released its own token via an ICO to assist in financing its operations, the token raising a reported $68.2 million.

“Funding for the project is secured against the launch and sale of the cryptocurrency tokens from the farms and based on a 15-year power purchase agreement (PPA),” PV Tech added.

A month previously, CryptoSolarTech reported it had raised 60 million euros ($69 million) from its first two months of existence, along with concluding a power supply contract with Barcelona-based Respira Energia.

Since the culmination of the ICO, the company’s token has lost the vast majority of its value, making it into the top ten ICO ‘losers’ in research released late September.

Article First Published here

‘Ethical Questions’: Senior Executive Halts Wall Street Journal’s Own Cryptocurrency

The Wall Street Journal (WSJ) created and then destroyed its own cryptocurrency in a bid to “understand” the industry, the publication revealed in a mini documentary Wednesday, October 3.

WSJ Coin, which journalist Steven Russolillo hoped would shed light on the emerging crypto economy while providing real use cases for the journalism industry, made it to the grand total of two issued units.

A mound of around 150 physical WSJ Coins was further distributed to the audience of a panel discussing the concept at the publication’s D.Live annual technology conference in Hong Kong.

Speaking on the panel were remittance service BitPesa CEO Elizabeth Rossiello and former Ripple CTO Stefan Thomas, who both saw considerable potential in a journalism-based crypto asset.

“If you lower the cost of moving money around, the entire economy changes … ‘How do I pay for a news article online?’ changes,” Thomas said by way of example.

Russolillo teamed up with Japanese developer Makuto Takemiya to use Hyperledger’s Iroha blockchain as the basis for WSJ Coin.

The two fixed a supply of 8.4 billion units, which they arrived at by averaging the supply of the top ten cryptocurrencies by market cap.

Two coins made it to a local bar to pay for two beers.

When Russolillo pitched a full issuance to investors, however, it was the WSJ’s own ethics head who shut the scheme down. Neil Lipschitz, editor for ethics and standards, said WSJ Coin raised what Russolillo says are “ethical questions.”

“We’re not in the business of getting into the cryptocurrency world; we’re here to report it and to explain it, just like we report on banks but we don’t go out and start a bank,” he said, adding:

“We’re not going to create a currency.”

At the end of August, the Associated Press signed a partnership with content licensing partnership with blockchain-based startup Civil to explore ways to secure intellectual property rights, support ethical journalism, and track content usage with blockchain technology.

Article First Published here

Major Chinese Tech Magazine Adds Payment in Bitcoin to Show Blockchain ‘Practicality’

Beijing Sci-Tech Report (BSTR), China’s oldest media publication covering the tech industry, has announced it will offer subscriptions payable with Bitcoin (BTC), local media outlet Guangming reported Sunday, September 30.

An evidently rare occurrence from China, were government pressure has forced crypto exchanges and Initial Coin Offering (ICO) operators to halt activities over the past year, BSTR says it wishes to promote blockchain and crypto use through “practical actions.”

“[S]ubscribers can pay subscription fees to the specific bitcoin receiving address of the newspaper to complete the subscription,” Guangming confirms.

The product on offer is an annual subscription to the publication’s ‘Tech Life’ magazine, which costs 0.01 BTC (about $65).

Chinese authorities continue to clamp down on trading and promotional operations related to cryptocurrency, Cointelegraph reporting on fresh efforts to tackle overseas platforms by blocking access to them online in August.

At the same time, owning and investing in cryptocurrency is not officially illegal.

Responding to queries about the BSTR move on social media, Chinese cryptocurrency news commentator cnLedger underlined the fact that by offering a Bitcoin subscription, the publication was not breaking the law.

“Owning and investing in crypto is not banned,” it wrote.

“Otherwise Jihan (Wu, CEO) of Bitmain and Leon (Li, CEO) of Huobi would be among the first ones to get fined/caught. Thousands if not millions would have been arrested already (large amount of OTC tradings).”

Article First Published here

Crypto Behind Bars: Arrests Making Headlines Across the Globe

Gone are the days when shady dealings in crypto were perceived as immune to the clutches of law enforcement.

Illicit crypto proceeds can be shuttled between wallet addresses at the click of a mouse, and their obfuscation behind the multiple strings of numbers and letters of wallet addresses can create a dizzying — if not impenetrable — cryptographic maze for authorities to navigate.

But the criminals themselves present a more concrete target, and as they interface with everything from crafty code to unwieldy hardware to ‘traditional’ firearms, there has been some success in 2018 in nabbing some of the year’s darkest — and most imaginative — offenders.

From soap actors to former lawmakers, Cointelegraph takes stock of some of the most illustrious arrests of the figures behind crypto’s high crimes and misdemeanours this year.

Foiled supercomputer Bitcoin heist in Russian nuclear no-man’s land

In February, Russian security agents scored a coup against a group of nuclear engineers at a top-secret nuclear warhead facility who tried to use one of the country’s most powerful supercomputers to mine Bitcoin (BTC).

The engineers worked at the Federal Nuclear Center in the western city of Sarov — formerly one of the Soviet Union’s closed-off cities, unmarked on historic maps and shrouded in secrecy.

As one of the Soviet “closed administrative territorial entities,” Sarov was then known as Arzamas-16, and was the center of research and production for the first Soviet atomic bomb and hydrogen bomb under Joseph Stalin. Special permits are still required today for ordinary Russians to visit it.

With such a stellar off-grid history, you’d think the Bitcoin-hungry nuclear engineers might have suspected that connecting the site’s supercomputer — a 1 petaflop titan with a capacity for 1,000 trillion calculations per second — to the internet might draw just a little attention.

As soon as the engineers tried to bring it online, the security department was alerted and was able to foil the scientists, who were peremptorily handed over to the Federal Security Service (FSB).

Tatiana Zalesskaya, the head of the press service for the research institute, told the Interfax news agency that that the attempt was a “technically hopeless and criminally punishable offense.”

A criminal case was reportedly duly opened against them.

Contentiously, it has been alleged that the radioactive polonium-210 used to kill ex-FSB agent Alexander Litvinenko in London in 2006 was produced in Sarov, which houses a plant that is said to be the “world’s only commercial producer of the substance,” according to evidence presented before a court in the United Kingdom.

Sarov’s rogue scientists are not the only ones to have thought of using former Soviet military spaces for crypto mining. The Ice Rock Mining firm has plans to — legally — set up mining operations in a former Soviet bunker located in a cave in Almaty, Kazakhstan.

Caught in the headlights: Thai actor “Boom” arrested on set for alleged crypto fraud family affair

Boom

This summer, reports emerged tied to the story of a Finnish millionaire allegedly fooled by a Thai crypto investment scam — to the tune of Bitcoin worth 797 million baht ($24.62 million) at the time.

According to the Thai Crime Suppression Division (CSD), the 22-year-old Finn, identified as Aarni Otava Saarimaa, claimed he had been lured into investing his Bitcoin into several companies, a casino and the gambling-focused crypto token Dragon Coin.

Saarima’s business partner, the Thai businessman Chonnikan Kaeosali, reportedly first approached the CSD in January this year, outlining how the pair had been drawn to purchase shares in three firms — Expay Group, NX Chain Inc. and DNA 2002 Plc — that were purported to be investors in Dragon Coin. He said they had first been approached in connection with the affair by a local Thai group back in June 2017.

The fraudsters are said to have taken their would-be victims around a Macau-based casino where they claimed the gambling-focused token would soon be used. Saarima subsequently transferred his crypto but never saw returns, shareholder papers nor any proof of investment in Dragon Coin.

As the CSD’s investigations unfolded, they identified a group of nine suspects — three of whom were revealed to be a group of siblings from the Jaravijit family. The suspects are said to have swiftly sold the crypto for local fiat currency, dispersing the spoils between various bank accounts.

It was the arrest of one of the siblings this summer — a dapper 27-year-old soap-opera star known as Jiratpisit “Boom” Jaravijit — that first brought the case to public light.  

On Aug. 9, Boom was taken into custody on money laundering charges in the midst of filming at the Major Cineplex Ratchayothin in Bangkok’s Chatuchak district. Local media noted it was the day after the star’s birthday.

It was alleged that the actor had colluded with his siblings to launder the swindled money, after investigations revealed they had bought 14 plots of land worth 176 million baht ($5.44 million).

Boom’s brother, Prinya Jaravijit, is said to have been the ringleader of the scheme, having reportedly received a tip-off from a Thai banker about the wealthy Finn and then setting the heist in motion. Prinya has reportedly fled to South Korea, while Boom’s sister is said to have made contact with the CSD to turn herself in.

The CSD has sought arrest warrants for a further six suspects and frozen a total of 51 different bank accounts in addition to the siblings’ land.

Boom was temporarily released on a 2 million baht ($61,827) bail bond on the condition that he would not leave the country, having argued that his arrest on set in a public place was ample proof he had not been intending to flee.

Earlier this month, another Jaravijit sibling turned himself in to deny the fraud charges, while police met two further suspects: Prasit Srisuwan, a well-known stock trader, and Chakris Ahmad.

Boom’s parents, Mr. Suwit and Ms. Lertchatkamol, have also been questioned after police traced that 90 million baht ($2.78 million) had been transferred to their accounts. Both have denied involvement.

India: Former ruling party lawmaker nabbed “fast asleep” on a construction site

india

As news of the many-tentacled Bitconnect investment heist continues to unfold globally, recent developments have unearthed a web of kidnappings and extortions allegedly tied to Bitconnect investors in the wealthy state of Gujarat.  

Earlier this month, a former Member of the Legislative Assembly (MLA) for India’s ruling Bharatiya Janata Party (BJP) was remanded in custody for allegedly conspiring with local police to kidnap and extort Bitcoin from a Gujarati Bitconnect investor.

In February, a Surat-based builder by the name of Shailesh Bhatt had charged into the Home Minister’s office in the Indian state of Gujarat, alleging that 10 district cops had kidnapped and extorted him for 176 BTC, worth 9.45 crore* rupee (around $1.31 million).

*A crore rupee denotes 10 million and is equal to 100 lakh rupee in the Indian numbering system (1 lakh rupee denotes 100,000)

The band of 10 was alleged to have comprised not only rank-and-file constables but even a superintendent and a local Crime Branch Inspector.

Bhatt, who is said to have been known for his penchant for Bitcoin trading, claimed he had been duped by one of his business aides, Kirit Paladiya, into thinking that the authorities were keeping him under close watch for his crypto dealings.

He alleged he had been lured by a phone call from his local Central Bureau of Investigation (CBI), where he was allegedly beaten in a “torture room” and asked by a CBI official to pay a cash ransom.

Two days later, he claimed he was kidnapped during a meeting with his aide Paladiya near a fuel station, where he was whisked off to a local farm house. There, he said, “[the police officers] beat me up inside a room and threatened to kill me […] if I did not hand over my Bitcoins.”

Bhatt then accused Paladiya of double-crossing him in cahoots with his influential uncle, the former BJP MLA Nalin Kotadiya, who he claimed had been the one who pressured him into paying the ransom.

Bhatt has himself been subsequently accused of being a wolf in sheep’s clothing. He has become embroiled in a case pertaining to an alleged earlier extortion of a staggering 1.55 billion rupee ($215 million) worth of crypto and cash at gunpoint — including around 2,400 BTC — from two colleagues of well-known local Bitconnect promoter Satish Kumbhani.  

However, Indian authorities nonetheless believed there is some weight behind the accusations against the former lawmaker Kotadiya, first issuing an arrest warrant against him in mid-May.

Kotadiya has repeatedly hit back against the allegations, notably via a WhatsApp video — reposted on Youtube in late April — in which, attired in pink, he claimed he had duly informed authorities about the Bitcoin heist and attributed the full blame for the extortion scandal and conspiracy to Bhatt.

Moreover, he threatened to leak evidence that would implicate even more local politicians in the scandal, saying that Bhatt was protecting them and therefore attempting to “fix him” in the case.

Nonetheless, by mid-June, a local sessions judge declared Kotadiya a “proclaimed offender” (absconder) and demanded he appear before the court within 30 days.

As Kotadiya continued to elude the clutches of law enforcement throughout summer, he was finally nabbed after four months in hiding on Sept. 10. He was reportedly found “fast asleep” on the second floor of a railway quarters still under construction, after a local contractor gave police the golden tip-off.

“When we [eventually] found him, he was sleeping on a mattress and there was just an earthen pot of water in the room.”

As Cointelegraph has reported, Kotadiya’s alleged embroilment has been a political gold mine for the opposition party, the Indian National Congress (INC), who allege that further members of the ruling BJP have used the Bitconnect scam to launder undeclared “black” money.

“The finger of suspicion of this massive scam of illegal cryptocurrency directly points to several top Bharatiya Janata Party leaders and a mastermind — an absconding BJP leader and former MLA Nalin Kotadiya […] Who are the top BJP leaders against whom Kotadiya has damning evidence? We demand an impartial Supreme Court-monitored judicial investigation.”

As of press time, the time of Kotadiya’s custody is up, yet the alleged evidence he claims to wield is yet to have been made public.

Iceland’s Bitcoin miner heist: A high-gliding fugitive and suspect hardware in Tianjin

miner

This year, what has been described as one of Iceland’s “largest criminal cases in history” has seen an outlandish set of twists and turns, leading all the way to the northern Chinese city of Tianjin.

In February, news broke of a series of unprecedented thefts, involving powerful computing equipment that had been stolen in a “highly organized” Bitcoin mining heist. Three burglaries were reported to have taken place in December 2017 and a fourth in January.

The burglars had allegedly swiped 20 million krónur (around $180,000) worth of equipment — 600 graphics cards, 100 power supplies, 100 motherboards, 100 memory discs and 100 CPU processors — from a house in the municipality of Reykjanesbær.

They had also allegedly broken into data centers across both Reykjanesbær and Borgarbyggð, with a total of 600 computers stolen from both places, worth 200 million krónur (almost $2 million). The whereabouts of the equipment, including the computers — said to have been used for Bitcoin mining — remained untraceable, even as authorities monitored energy consumption for suspicious increases.

Police are said to have initially arrested eleven suspects — two of which were ordered to remain in custody, after the Icelandic IT firm Advania produced incriminating surveillance footage taken at the data center in Reykjanesbær. The authorities soon recovered most of the stolen equipment, yet the 600 computers remained elusive. Both suspects were reported in local media as being “uncooperative.”

Then, on April 17, one of the detainees escaped at 1 a.m. from his custody in an “open” (low-security) prison, just a week before authorities were due to move forward with an indictment.

The fugitive, Sindri Thor Stefánsson, fled the country on a passport bearing another man’s name, boarding a passenger plane to Sweden that was embarrassingly revealed to have been carrying Iceland’s prime minister.

Stefánsson subsequently released a statement claiming he had been “legally allowed” to travel on the day he boarded the plane to Stockholm, as his custody ruling expired April 16 and a judge had requested 24 hours to consider its renewal. This, according, to him, left a brief interim during which the warrant for his custody was legally invalid.

He vowed to return home “soon,” telling reporters he would be challenging his two-and-a-half-month custody at the European Court of Human Rights.

Days later, he was arrested in central Amsterdam, after a photo published on Instagram with the hashtag #teamsindri allegedly gave him away, according to media outlet Iceland Monitor. Police at the time did not confirm this was the case.

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Allegedly incriminating Instagram snap of Stefánsson in Amsterdam: Source: Iceland Monitor

Despite #teamsindri reportedly briefly trending across Icelandic Twitter, the case last month came to a head when a judge charged Stefánsson — alongside six others — with the theft of the 600 computers. While Stefánsson’s charge has been confirmed as theft, it remains unclear what role the other six defendants are charged with as having in the incident.

Just days after Stefansson’s Amsterdam stint, police in the northern Chinese city of Tianjin seized 600 computers used to mine Bitcoin, after abnormal electricity usage attracted the attention of the local power grid operator. Local media outlets reported the case as being the “largest power theft case in recent years,” but it notably also drew the attention of authorities back in Iceland, who suspected the exact number match of suspect hardware was more than just an uncanny coincidence.

Icelandic police subsequently reached out to Chinese authorities to try to link the two cases, yet no results have been reported since then.

“One of the best out there”: A teenage SIM-swapping crypto hacker with a taste for luxury cars

Car

Last month, Californian police nabbed a hacker who allegedly stole Bitcoin worth over $1 million via a series of so-called ‘SIM-swapping’ heists — also known as ‘port-out scams.’ The 19-year-old suspect, identified as Xzavyer Narvaez, is said to have specialized in stealing cell phone numbers and using them to hijack online financial and social media accounts tied to those numbers.

A SIM-swap attack results in the victim suddenly losing all service, with any incoming calls or text messages redirected to the attacker’s device. As many firms use automated messages or phone calls to handle customer authentication, SIM swaps can be a goldmine in deft hands.  

Prosecutors allege that Narvaez used his ill-gotten crypto proceeds to purchase luxury goods, including a $200,000 high-performance McLaren sport car, which were tracked through records obtained from Bitcoin payment provider BitPay.

According to cybercrime blog Krebs on Security, the investigators interviewed several alleged victims of Narvaez, one of whom claimed he was robbed of $150,000 in crypto after his SIM was hijacked.

Between March and June 2018 alone, Narvaez’s account on crypto exchange Bittrex reportedly saw a flow of a staggering 157 BTC. He subsequently faced charges on four counts of using personal identifying information without authorization; four counts of altering and damaging computer data with intent to defraud or obtain money, or other value; and grand theft of personal property of a value over $950,000, according to court documents.

VICE’s parallel investigations traced Narvaez’s impressive “credentials” in the SIM-swapping underworld, with one source telling the magazine that he was considered “one of the best […] out there.” VICE’s source provided screenshots of Narvaez’s former Instagram account, which allegedly featured euphoric photos of his fresh, 2018 snow white McLaren, accompanied by the caption “live fast, die young.”

Narvaez is said to have come under the radar of law enforcement following the arrest of one Joel Ortiz, described as “a gifted 20-year-old college student from Boston” who was charged this July with using SIM swaps to swipe over $5 million in crypto from 40 different victims.

A redacted “statement of facts” in the case obtained by Krebs revealed that records obtained from Google had traced that a cellular device used by Ortiz to commit SIM swaps had at one point been used to access the Google account identified as Xzavyer.Narvaez@gmail.com.

In an unrelated case this July, Florida police reportedly arrested a 25-year-old, Ricky Joseph Handschumacher, who was accused of being part of a multi-state, cyber-fraud SIM-swapping ring that operated over the course of two years.

The gang of nine — scattered across different states — was initially tracked in February, when a “worried mom” overheard her son talking on the phone impersonating a telecoms firm employee. The group is alleged to have “routinely paid” employees at cell phone companies to assist in their schemes and to even have discussed a plan to hack accounts belonging to the CEO of the high-profile Gemini Trust company — namely those of Bitcoin billionaire Tyler Winklevoss.

Handschumacher himself posted multiple flashy purchases — including a pickup truck, multiple all-terrain vehicles and jet skis — on his public Facebook profile. Subpoenas to Coinbase revealed he had sold 82 BTC through his account, “virtually all” of which were not purchased on the platform.

As law enforcement closed in on this host of spry and unabashed millennial SIM swappers, in August, a U.S. investor filed a $224 million lawsuit, taking on telecoms giant AT&T. Michael Terpin accused the firm of alleged negligence, claiming that $24 million in crypto was stolen via a “digital identity theft” of his cell phone account.

His complaint alleged that:

“What AT&T did was like a hotel giving a thief with a fake ID a room key and a key to the room safe to steal jewelry in the safe from the rightful owner.”

“Fake news”: OKEx CEO “detained” for alleged fraud

fake news

The most recent high-profile, crypto-related “detention” involves OKEx CEO Star Xu, who was the subject of a host of conflicting media reports — and even one viral dumpling-related anecdote — following his sudden tête-à-tête with Chinese authorities this month.

Xu has robustly hit back at rumors that fraud was the reason for his purported ‘arrest,’ after local media reported that he had faced problems at his hotel from a group of investors in WFEE Coin, a blockchain WiFi sharing project they claimed Xu held shares in.

The allegedly defrauded victims had reportedly contacted Shanghai police, who “summoned” the CEO to a police station on Sept. 10 to “put [him] through a round of questioning to get to the bottom of the rumors,” as tech news source ZeroHedge wrote at the time.

A photograph of a police report about Xu on local news outlet Sina Technology appeared to confirm that the police had been notified at 5:59 p.m. on Sept. 10.

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Image of police report allegedly involving Star Xu’s detention. Source: Sina Technology

At the same time, alternative sources in China claimed the investors were in fact traders incensed by system failures on the OKEx exchange itself. As Bitcoin (BTC) tumbled on Sept. 5, OKEx platform crashes are alleged to have left users unable to close or otherwise salvage their positions, with losses all the more acute in the case of leveraged trades.

Cointelegraph’s own Chinese sources have since thrown some degree of light on what had spiralled into a sordid media affair, substantiating suspicions that much of the hearsay was indeed “fake news.”

The sources have emphasized that Xu was the one who approached the police of his own accord. In their account, on Sept. 10, Xu had arrived at the Shanghai office of OK Group to meet with customers and conduct other business affairs. He had also — incidentally — made an appointment at the office to meet with a prospective personal fitness coach.

There, the first troubles with the disgruntled investors are said to have begun — who are thought to have been a mix of OKCoin and WFEE Coin investors. Some ambiguity remains as to their exact identity — and whether they were indeed railing against problems tied to the OKEx exchange or held Xu responsible for the vicissitudes of the WFEE token, or a mix of both.

Having gotten wind of Xu’s visit to Shanghai, the aggrieved group is alleged to have been responsible for vandalizing the sign at the city’s OK Group office, as appears to be shown in the following photograph:

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Photo showing the apparent vandalization of OK Group’s entrance sign at the Shanghai office

An alarmed Xu is said to have headed back to his hotel, telling his prospective coach to make her way there as well, so as to resume their meeting. The investors are alleged to have then followed the woman’s tracks, suspecting she would lead them to Xu. There, they are alleged to have knocked on the door of the CEO’s room, threatening him.

After four tense hours, Xu is said to have alerted the police. The investors are again alleged to have followed his trail, whereupon Xu called a group of “henchmen” to join him at the police station. At this point, the investors are said to have taken fright and approached the authorities themselves.

In an interview published soon after his release, Xu confirmed he had been held by Shanghai police, seeming to imply he had made the contact on his own initiative:

“In Shanghai, someone reported that I was defrauding. I went to the police station to explain the situation and proved to the police that I did not swindle.”

On Twitter, OKEx COO Cheung also stated that Xu had been encircled by a group in Shanghai, although in his account, the police are said to have arrived to the scene themselves and moved all parties involved to the station. Cheung alleged that:

“While Star was invited to help with the investigation and those people was detained, they raised a fraud complaint against Star. Star stayed to clarify and then left afterward.”

According to Cointelegraph’s sources, no one was witness to Xu’s departure from the station, and it remains unclear how long he spent there.

Xu has stated that while it is “normal” for citizens to exercise their right to make such allegations, he has equally fulfilled his “duty” as a citizen by cooperating with the authorities. In terms of his alleged responsibility for system “abnormalities” on the exchange, Xu has responded that:

“I am not a legal person of OKEx, nor am I a shareholder or a director.”

This point was echoed in Cheung’s parallel tweets, in which the COO stressed that “Star is the founder of OK Group, [and] although we are good friends, he does not run OKEx.” Cheung has added that he felt “disappointed that the story was twisted before the truth came out.

Local news outlet Jiemian has meanwhile reported that seven out of a total of 300 investors who claimed to have “suffered heavy losses” on the OKEx exchange have since reached a form of settlement with Xu. Notably, repeated system failures are alleged to have caused a total economic loss of “around 300 million yuan.”

In his post-release interview, Xu stressed that while leveraged trading is a “neutral tool in itself,” it is “not suitable for ordinary investors” as the potential for accelerated net profits and losses requires “professional knowledge” to manage the risks involved.

As Jiemian noted, while OKEx offers investors the opportunity to add as much as 20 times leverage to their contracts, unlike traditional futures trading platforms, the exchange operates without regulatory oversight.

As for the WFEE connection, OK Blockchain Capital (OKBC) — a strategic partner of OKEx and a subsidiary of OK Group — has publicly refuted the allegations that Xu had any shares in the project, tweeting on Sept. 12 that:

“The rumor that OK Group founder Star Xu [is] a shareholder of WFEE is fake. Mr. Xu has no equity relationship with WFEE and its company.”

OKBC has further clarified its own relationship with WFEE, stating that “OKBC is one of the institutional investors of WFEE.” WFEE reportedly “acquired OKBC’s and several other capitals’ investments […] when it was still the prime partner of WeShare WiFi — a global leading WiFi sharing company.” The firm added that it had not been notified of subsequent changes to the WFEE white paper, as OKBC “neither participates in” WFEE’s operations, nor in its “results.”

OKBC has also pointed to the fact that OKEx had warned its users of the potential risks posed by WFEE in August and included WFEE in their first “Token Delisting/Hiding Guideline [sic].”

So… what of the dumplings?

Amid the flurry of “twisted” media reports, one viral anecdote alleged that the band of investors had brought a hungry — and short-of-cash — Xu some sustenance, namely dumplings, as he underwent questioning at the police station. The story, despite its oddity, appears to have had some traction. Cointelegraph’s Chinese sources, for their part, dismissed it out-of-hand as an unthinkable and breathless piece of confected hearsay.

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Russia’s ‘Disappointing’ Cryptocurrency Legislation: Why Experts Consider the Bill a Failure

Russia has been trying to pass cryptocurrency legislation since the beginning of January 2018, with no success as of yet. The government’s main bill, “On Digital Technologies,” which was expected to be passed by July 1 — according to the wishes of President Vladimir Putin — will instead most likely be pushed back until an October Duma session.

According to Artem Tolkachev, the self-proclaimed “first” lawyer in the Commonwealth of Independent States (CIS) to begin working with Bitcoin (BTC) and blockchain startups, the reason the crypto bills didn’t make it on the July agenda was “because of the complexity of the subject and lack of consensus over the state authorities about how and what they should regulate.”

The problems arising within Russia over how to regulate cryptocurrencies have taken the form of conflicts between the Russian Central Bank’s more conservative stance and the Ministry of Economic Development’s willingness to embrace a new technology with the hope of attracting more business to the country.

Tolkachev, who has been chairman of the Russian Blockchain.community since 2016 and founded the Blockchain Lab at Deloitte CIS, said that the current version of the crypto and blockchain legislation — which takes its form in three draft bills — has not lived up to his expectations.

Speaking to Cointelegraph, Tolkachev said that “of course” he is “disappointed by the current version of the regulation,” noting that the three bills — “On Digital Technologies,” regulation of the central bank on crowdfunding (including Initial Coin Offerings (ICO) and amendments to the Russian Civil Code — were prepared independently, which makes their legislation “rather ineffective.”

Tolkachev added,

“I spent around two years discussing with the central bank, the Ministry of Finance, the Ministry of Economic Development, the general security service and all [the] other guys [about] how we can regulate this stuff. And I was trying to sell the idea […] that we can be the country who attracts that kind of business and have the crypto-friendly environment here. Unfortunately, we have what we have. What can I say? That’s it.”

Yuri Igorevich Pripachkin, the president of the Russian Association of Cryptocurrency and Blockchain (RACIB), told Cointelegraph that the group was also consulted during the formation of the cryptocurrency bill, but that the bill still contains some unfavorable terms. According to Pripachkin, the Russian cryptocurrency bill in its current form is “far behind the ones which were accepted in Belarus, Kazakhstan and many other countries like Singapore, Switzerland.”

So what exactly is Russia’s digital economy legislation?

At the end of January 2018, the first variant of a Russian crypto bill was presented by Russia’s Ministry of Finance (MinFin). The bill on the digital economy included a framework for the regulations surrounding crypto and blockchain-related technology — like smart contracts, mining and ICOs. Russia’s central bank was also preparing a draft law on crowdfunding.

Tolkachev clarified that the draft laws are “not creating regulation for existing cryptocurrencies and tokens,” but are specifically aimed at newly created ICOs:

“According to these draft laws, none of the existing cryptocurrencies, especially cryptocurrencies with nothing behind [them], for example, Bitcoin […] will be allowed in Russia. It wouldn’t be under the scope of this legislation at all. According to the three bills, we can talk only about some kind of asset-based tokens, not about cryptocurrency.”

This first variation of the bill was originally opposed by the Bank of Russia, according to local news outlet TASS, which reported at the time that the central bank disagreed with the way transactions between crypto, rubles and foreign currencies were laid out. However, MinFin noted that any sort of legislative ban on crypto transactions will “lead to the creation of conditions for the use of such currency for illegal purposes.”

Pripachkin told Cointelegraph that “MinFin and [the] central bank, they can’t find the golden middle, because they’ve got different opinions in terms of cryptocurrency legislation, so it affects [the] legislative process.”

At the end of February, Russian President Vladimir Putin announced that crypto regulation should become law no later than July 1, 2018. At this time, Russia’s central bank still wanted to criminalize ICO token investments, while MinFin was insisting on just regulation, according to local news outlet Parlamentskaya Gazeta. The outlet quoted Anatoly Aksakov, Chairman of the State Duma Committee on Financial Markets, who commented on the central bank’s position:

“The central bank has come out against the legalization of this kind of digital currency inasmuch as citizens could then actively invest in instruments without considering possible risks.”

Tolkachev noted that the state authorities like the Ministry of Economic Development are “much more about creating a good environment for business, for attracting new business,” and thus think the regulation should be changed from the current draft bills. On the other hand, Tolkachev notes that the central bank and the Minister of Finance are the “really conservative guys who don’t really want to see cryptocurrencies.”

In March of this year, a group of Russian deputies headed by the Chairman Aksakov submitted the first draft of legislation on cryptocurrencies and ICOs to the State Duma, as well as a draft of the bill “On Alternative Methods of Fundraising (Crowdfunding).”

This draft defines cryptocurrencies and tokens as digital assets, with trading only allowed through authorized cryptocurrency exchanges, and establishes KYC regulations for ICOs. Digital assets are also defined as property, not as a legitimate means of payment in the Russian Federation. This March version differs from the initial January variant in that it now echos crypto exchange requirements in United States — i.e., the verification of accounts for anti-money laundering (AML) and counter terrorist financing (CTF) purposes.

Russia Grapples With Cryptocurrency, Blockchain Reform

Tolkachev noted the problem with the bills were their references to “basic Russian AML/KYC rules,” as they “may not be effective for tracing and monitoring transactions with crypto assets.”

The March bill also suggests the maximum limit of an individual investment in ICOs be defined by Russia’s central bank rather than the January-suggested 50,000 rubles (about $800).

January’s disagreement between the central bank and MinFin had been solved in March, according to local news outlet Ria Novosti, with the Bank of Russia noting that it will be considered permissible to exchange rubles, foreign currencies or property for tokens issued by Russian ICOs, while it will not be allowed to use cryptocurrencies due to the possibility of “questionable transactions.”

Also in March, Igor Sudets, a member of the Duma’s expert panel on the digital economy and blockchain, said that due to the proposed bill’s limit on domestic investment in Russia ICOs, investors may not want to conduct Russian ICOs, according to Forklog:

“I very much hope that [ICO investment specifications] will be substantially finalized for the second reading. Because otherwise, nobody will want to conduct ICOs in Russian jurisdiction, since the main goal — to raise money — will be unattainable.”

In April, a review of the draft crypto bill added that the exchange of crypto for fiat of more than 600,000 rubles (about $9,500) or its foreign equivalent would fall under mandatory currency exchange regulation.

Pripachkin said that RACIB is currently working to create additions to the bill that can be proposed to the Duma, and hopes that the Russian officials will take the changes into consideration:

“For now, we’re working on preparation of some kind of tips, we really hope that they are going to hear us, according to these remarks we are preparing […] legal bodies should really understand that if they are going to accept the law which is not in the interested of such industry, then this industry is not going to survive.”

He noted that he does believe that the drafts “are going to be accepted and implemented later on.” Otherwise, in Pripachkins’ opinion:

“None of the foreign investors will come, and what is more — the local industries could leave the country.”

The problems that Pripachkin sees in the bill are that there is not a lot of clarity “in terms of the mechanism of ICOs, nor about crypto exchanging licensing,” but he does note that mining is noted as being classified as an entrepreneurial venture for taxation and VAT purposes.

Where the crypto bill is now

The most recent version of the bill was approved by the State Duma in its first reading on May 22 in an almost unanimous vote — 410 for and one against.

However, on Sept. 19, Russian news outlet Vedomosti reported on an updated version of the bill, which no longer contains a definition for “cryptocurrency,” and where mining is defined as the “release of tokens to attract investment in capital.” In the previous version of the bill, mining was the extraction of cryptocurrencies.

The bill does not make digital currencies a legitimate means of payment. Instead, the central bank, the Ministry of Finance and the Ministry of Economic Development will create separate guidelines for these currencies to be used as payment in “controlled quantities.” The bill also makes a digital confirmation by a user in a smart contract legally equivalent to their written consent.

And, while crypto exchanges don’t fall under the scope of the bills’ legislation, Tolkachev noted that Russians can still trade in crypto through peer-to-peer (p2p) transactions in a “so-called ‘grey zone.’” In a separate comment with Vedomosti, Tolkachev underlines that the draft law does not regulate transactions with cryptocurrencies. Russia’s Federal Financial Monitoring Service notes that crypto exchange operators are subject to Article 5 of Federal Law 115-FZ (AML and CTF) or they will lose their license.

Pripachkin told Cointelegraph that the “Russian crypto industry and crypto economy is headed [down] the best path […] It’s not a problem for us that we are restricted by legislation in Russia. But, of course we would love to have the first [legislative norms] in the world.”

Law in progress

At the beginning of September, Dmitry Peskov, a special representative of the Russian president, said that Russia was not ready for the circulation and issuance of cryptocurrencies, as it “contradicts the basic functions of government.” Peskov notes that the best way forward to develop the cryptocurrency sphere legally in the country is to create a regulatory sandbox to analyze the different aspects of the crypto industry.

To this end, the Central Bank of Russia also announced on Sept. 11 the successful test of an ICO trial conducted with Sberbank and the National Settlement Depository.

More recently, on Sept. 15, a lobby group of the Russian Union of Industrialists and Entrepreneurs (RSPP) announced that they were also working on an alternative crypto regulation bill in order to clarify the supposed contradictions in the existing bill “On Digital Financial Assets.” This new bill is set to be developed by Russian businessmen, including two of the richest businessmen in the country: Vladimir Potanin, of the nickel and palladium mining and smelting company Nornickel, and Viktor Vekselberg, head of the Russian innovation fund Skolkovo.

Elina Sidorenko, the vice president of RSPP, explained that the new version of the alternative bill will divide digital assets into three groups: tokens, which will be equivalent to securities, cryptocurrencies, and digital ‘signs.’ Sidorenko, who didn’t clarify what “digital ‘signs’” entailed, noted:

“Cryptocurrencies will have a special status, which has never appeared in Russian legislation before, and will be regulated on the basis of laws and regulations that will be issued by the Russian Central Bank. The central bank will issue licenses for exchange operations. In this regard, the status of crypto owners will be notably facilitated in comparison to securities owners.”

If approved by members of the RSPP, the bill can then be then discussed with Russian officials in October.

In mid-September, cryptocurrency exchange Huobi joined Russia’s VEB Innovation Fund to share notes on crypto regulation and help create “a legal basis that could compete with current promising jurisdictions.”

Putin and crypto

Although President Putin himself instigated the now-passed deadline for cryptocurrency regulation, the country’s leader has still not made any clear, definitive statements about the future of cryptocurrency in Russia.

However, cryptocurrency was mentioned during President Putin’s most recent live Q&A “Direct Line” with the public, where he spoke relatively negatively — albeit vaguely — about cryptocurrencies and their use cases, noting that they work partially in Japan but not in any other countries.

Russia Grapples With Cryptocurrency, Blockchain Reform

Tolkchev believes that the reason Putin chose to speak about crypto in “Direct Line” is the lack of consensus between the regulator and the state authorities,

“That’s why if he answers something, in some way, it would be something like a direct order to the regulators and the state authorities. I think he just doesn’t want to do it right now because a lot of discussions are taking place over this topic.”

Pripachkin added that Putin was just repeating the position of the central bank, and that RACIB in their proposed amendments to the crypto bill is “working on explanations [on] why they’re thinking somehow in the wrong way […] [and] trying to clarify the fears of the central bank.”

The future of crypto in Russia

Cryptocurrency use to avoid sanctions has become a topic worldwide after Venezuela, a country under international sanctions, created its oil-backed government cryptocurrency, the Petro, earlier this year.

In January, Sergei Glazyev, economic adviser to President Putin, said that a Russian government-created “CryptoRuble” would be able to alleviate some economic pressure caused by Western sanctions.

However, Tolkachev doesn’t think that Russia will be looking to cryptocurrencies to avoid sanctions anytime soon, especially as the CryptoRuble is “still nothing but a rumor that’s been denied a number of times by various state authorities”:

“I think from the [state’s] perspective, it’s not a very safe way to use some kind of cryptocurrencies which [the] state doesn’t control, to rely on it as a main source of dealing with the sanctions […] As far as I understand the current agenda, it’s not on the list, we can’t use crypto to beat the sanctions.”

On the other hand, Pripachkin was confident that the CryptoRuble project will eventually be implemented:

“This project will be created. Sergey Glazyev is highly advanced in economics, and he understands what he is talking about.”

But Tolkachev does think that Russia will continue to see cryptocurrencies as something to have control over, as that has been the Russian mentality for the past “10 years”:

“Russia and the Russian mentality of the last 10 years was about competing with the [rest of the] world and building something of our own. And of course the Russian government would like to have a control over the internet, over […] cryptocurrencies […] For such kind of situation where a lot of people are involved, a lot of new technology involved, the government would like to have a little bit more pressure than other countries because of the paradigm in which we are living.”

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China's Nanjing Arbitration Commission Tests Blockchain Platform for Legal Disputes

The Nanjing Arbitration Committee is testing a new blockchain platform designed to store and process data for legal disputes. The organization officially announced this September 27.

China’s regional arbitration committees were established in 1995 with the passage of the Arbitration Law, and operate as independent non-profit organizations that offer services in arbitration, mediation, and other dispute resolution mechanisms as an alternative to litigation.

According to today’s announcement, the Nanjing Committee’s new platform:

“Makes extensive use of blockchain technology, and coexists with depository institutions, financial institutions, and arbitration institutions to deposit electronic data [and enable] real-time evidence preservation, electronic delivery, online trials and ruling.”

The Committee, based in the capital city of China’s eastern Jiangsu province, says it has “formulated a special network arbitration rule” within the system that will set a determinate time limit of thirty days for the resolution of online arbitration cases. This, the Committee notes, is shorter than existing online trial periods, and “significantly lower” than the standard for offline cases.

The new system is also presented as a means of reducing arbitration costs for all parties involved, with the new system overall expected to provide a more convenient, cost- and time-efficient  dispute resolution method for “the majority of Internet companies, especially in the financial field.”

As previously reported, on September 7 China’s Supreme Court ruled that evidence authenticated with blockchain technology is binding in legal disputes, as part of a series of comprehensive rules clarifying litigation procedures for internet courts across the country. The new ruling came into force immediately.

This January, a Hangzhou-based court dedicated to processing trials for internet-related disputes via an online “netcourt” web platform had handled its first case using legally valid blockchain-derived evidence.

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