Crypto Markets See Ongoing Mild Losses, Bitcoin Trades Below $6,400

 

Friday, Nov. 9: crypto markets are continuing to see downward momentum, with virtually all of the major cryptocurrencies at least mildly in the red, as data from Coin360 shows.

Market visualization by Coin360

Bitcoin (BTC) is down just over 1 percent, trading around $6,340 at press time. After a period of protracted stability, the top coin has seen a short-lived burst of price action of late, growing Nov.7 to break above the $6,500 mark.

Bitcoin has since corrected downard to trade close to the start of its weekly chart, where it is seeing virtually no price percentage change to press time. On the month, Bitcoin is down a mild 3.6 percent.

Bitcoin 7-day price chart

Bitcoin 7-day price chart. Source: Cointelegraph Bitcoin Price Index

Bitcoin pioneer Jeff Garzik – reportedly the “third-biggest contributor” to Bitcoin’s code and one of Bitcoin creator Satoshi Nakamoto’s key collaborators – gave an interview today in which he reflected that:

“[Bitcoin] hasn’t evolved in the direction of high-volume payments, which is something we thought about in the very early days: getting merchants to accept Bitcoins. But on the store-of-value side it’s unquestionably a success.”  

The market’s largest altcoin Ethereum (ETH) has also sustained a fractional loss, down just over percent to trade at $211. Correlating with Bitcoin, the altcoin saw an intra-week spike at around $220 Nov. 7, and has since jaggedly shed value down to its current price point.

Nonetheless, on the week, the asset remains a strong 6 percent in the green, with monthly losses at around 7.2 percent.

Ethereum 7-day price chart

Ethereum 7-day price chart. Source: Cointelegraph Ethereum Price Index

Most of the remaining top ten coins on CoinMarketCap are in the red, although remaining within a 1-4 percent range.

Bitcoin Cash (BCH) has taken the heftiest hit among the top ten, down just under 4 percent to trade around $567, as controversies ahead of its forthcoming hard fork – scheduled for Nov. 15 – continue to divide the community.

Another top ten alt shaken by larger-than-average losses is Cardano (ADA), down 3.19 percent at $0.074.

Altcoins Ripple (XRP) and Stellar (XLM) are the only top ten coins in the green by press time, both up under 1 percent over the past 24 hours.

The top twenty coins by market cap are likewise almost unanimously red, with the exception of the 19th largest crypto, privacy-focused alt Zcash (ZEC), which is pushing 3.5 percent growth to trade at around $133.

For the remaining coins, losses are capped below 4 percent, with Vechain (VEC) and DASH (DASH) each on the higher end, down 3.9 and 3.47 percent respectively.

Total market capitalization of all cryptocurrencies is around $212.5 billion as of press time, down from an intra-week high of around $220.7 billion Nov. 7, but above the $207-210 billion levels it held throughout much of the past month.  

7-day chart of the total market capitalization of all cryptocurrencies

7-day chart of the total market capitalization of all cryptocurrencies from CoinMarketCap

In other major crypto news of the day, ConsenSys-backed blockchain startup Kaleido and Amazon Web Services (AWS) have launched a full-stack platform that helps enterprises implement blockchain solutions without starting from scratch. The platform, dubbed Kaleido Marketplace, reportedly “eliminates 80 percent of the custom code” needed to build a given blockchain project.

In Asia, Thailand’s securities regulator is set to clear “at least one” Initial Coin Offering (ICO) “portal” to operate legally this month, with officials saying that ICOs themselves “might” start being approved as soon as December.

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Crypto Markets See Visible Drop Off as Major Coins Are in The Red

Wednesday, Nov. 8: most cryptocurrencies have seen a drop-off today, with the most visible losses seen by Bitcoin Cash (BCH) and Ripple (XRP), as data from Coin360 shows. As of press time, the markers are seeing mixed signals, mostly staying in the red.

Market visualization from Coin360

While in the beginning of the week Bitcoin (BTC) was mostly in the green, up almost to 2 percent on the day Monday, Nov. 5, today the major coin is hovering around zero, mostly staying in the red and trading around $6,450 as of press time.

Bitcoin 7-day price chart. Source: CoinMarketCap Bitcoin Price Index

Ethereum (ETH) is also about 2 percent down on the day, being traded slightly over $213 as of press time. The coin is seeing some stability after it has regained its second spot, bypassing Ripple (XRP) by market capitalization.

Ethereum 7-day price chart. Source: CoinMarketCap Ethereum Price Index

Ripple (XRP), in its turn, is currently trading at $0.50, dropping as much as 5.6 percent over the day as of press time. As per its weekly charts, the currency has seen its peak on Tuesday, Nov. 6, when the coin temporarily overtook Ethereum as the second largest altcoin.

Ripple 7-day price chart. Source: CoinMarketCap Ripple Price Index

Total market capitalization of all cryptocurrencies is around $215 billion at the press-time, falling from $219 billion over the last 24 hours. According to daily trading volume, it has also dropped in comparison to yesterday, Nov. 7, hovering around $13.5 billion as of press time.

Weekly total market capitalization chart. Source: CoinMarketCap

18 of the 20 major cryptocurrencies are in the red, with Bitcoin Cash (BCH), Ripple (XRP) and NEM (XEM) seeing the biggest drops in last 24 hours according to CoinMarketCap. BCH has lost a distinctive 4.8 percent after almost a week-long growth following its upcoming hard fork, which is backed by major crypto exchange Binance. As of press time, the coin was traded at around $589.

Dash (DASH) is the only crypto to see a slight growth among top 20 coins, up to 1 percent on the day and trading at around $167 as of press time.

Meanwhile, today, Nov. 8, two countries in Asia have called for clearer crypto regulation. The Deputy Prime Minister of Thailand, Wissanu Krea-ngam, urged to lawmakers to amend the existing legal framework for crypto — set in May 2018 — to meet the development of the technology, warning about possible dangers for consumers. In the meantime, South Korea’s lawyers have lobbied the local government to speed up its work and expedite a legal framework for cryptocurrencies as well.

Yesterday, Nov. 7, crypto Twitter saw an extensive discussion in response to William Shatner’s positive tweet about Ethereum (ETH) co-founder Vitalik Buterin.

The Canadian actor, most known for his role of captain James T. Kirk in Star Trek, posted a thumbs-up emoji tagging Buterin for his 2.5 million followers. Shatner was then drawn into a debate over the ETH network’s decentralization, showing familiarity with ERC standards in his rebuttal to “crypto troll[s].”

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Crypto Exchange Gate.io Removes StatCounter Service Following Report of Security Breach

Crypto exchange Gate.io has removed web analytics tool StatCounter from their website following a breach report by cybersecurity firm ESET, according to an official blog post published today, Nov. 7.

The company has reported that they immediately removed StatCounter’s traffic stats service after receiving a security notice by ESET about suspicious behavior. Gate.io claimed they subsequently scanned the website with 56 antivirus products, and “no one reported any suspicious behavior at that time.” However, the firm still changed its traffic tracker, also reporting that “users’ funds are safe.”

On Nov. 6, Slovakia-based cybersecurity firm ESET published a security report claiming that hackers had successfully breached major web analytics tool StatCounter, targeting Bitcoin (BTC) exchanges that use the traffic analytic service. According to ESET researcher Matthieu Faou, the attackers compromised the StatCounter platform — which is reportedly used by more than two million other websites — by modifying the JavaScript (JS) code on each page of the website.

The hackers managed to add a piece of malicious code containing “myaccount/withdraw/BTC,” which intends to replace the destination address of a Bitcoin transfers by crypto exchange users with an address belonging to the attackers.

Modified script at www.statcounter[.]com/counter/counter.js. Source: WeLiveSecurity

According to Faou, who is reportedly the first to detect the “supply-chain attack,” this Uniform Resource Identifier (URI) “myaccount/withdraw/BTC” has been solely valid on crypto exchange Gate.io, allegedly “the main target of this attack.”

Now-ranked the 38th top crypto trading platform by daily trade volume as of press time, the exchange is quite popular in China with a rank of 9,382 in terms of in-country traffic, while its global rank amounts to 33,365, according to SimilarWeb traffic data and analytics tool.

In the conclusion to his report, the ESET researcher stated that the recent security breach again demonstrates the fact that external “JavaScript code is under the control of a third party and can be modified at any time without notice.”

As reported by Cointelegraph earlier this year, JS has been one of the major tools of hackers implemented in cryptojacking. According to the analysis, JS-based browser add-ons and extensions are “extremely vulnerable to hacking attacks” and often used for hidden mining by deploying users computing resources. For example, in mid-October, researchers found a crypto-mining malware that hides itself behind a fake Adobe Flash update.

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Taiwan’s Legislature Amends AML, CFT Laws to Place New Requirements on Crypto Exchanges

Taiwan’s legislature has passed amendments to existing anti-money laundering (AML) and counter terrorism financing (CFT) laws to place new requirements on crypto exchanges. The development was reported by FocusTaiwan, the English language news website of Taiwan’s national news agency, on Nov. 2.

Under the new changes to Taiwan’s Money Laundering Control Act and Terrorism Financing Prevention Act, the Legislative Yuan — the Taiwan-based unicameral legislature of the Republic of China — has given Taiwan’s Financial Supervisory Commission (FSC) the authority to bar anonymous crypto transactions.

The FSC can now demand that exchange operators require their customers to register using real-names: if they fail to do so, banks can block anonymous transactions and report them to the watchdog if they deem them to be suspicious.

Taiwan’s Ministry of Justice (MoJ) has said that the changes align the country more closely with international AML standards, and that the ensuring “good” AML and CFT practices will help to foster a “compliance culture and mindset” among local businesses and institutions.

The ministry further remarked that earlier amendments to the country’s Money Laundering Control Act had “not “fully prevented related financial crimes,” and that the latest action from the Legislative Yuan is expected to better Taiwan’s performance in its upcoming assessment by Asia/Pacific Group on Money Laundering (APG), due to take place Nov. 5-16.  

Last month, the Financial Action Task Force (FATF), an international organization that develops policies and AML standards, implemented changes to its AML and CFT standards for firms involved in crypto-related activities, such as exchanges and providers of financial services for Initial Coin Offerings (ICOs).

Taiwan has previously announced plans to release release draft Initial Coin Offering (ICO) regulation by June 2019, with the FSC chairman telling the Legislative Yuan on Oct. 22 that “the more we regulate, the more this new economic behavior wanes.”

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Trend of Global Crypto Mining: Despite the US-China Trade War, Activity Surges as Samsung and GMO Enter

Throughout 2018, the cryptocurrency market experienced the fourth worst correction in its nine-year history, as Bitcoin lost more than 69 percent of the value from its all-time high of $19,500.

Despite the substantial decline in the price of Bitcoin (BTC), which heavily affects the earnings of miners, the hash power of the Bitcoin network has continuously increased throughout the past 10 months, from 15 million TH/s to over 50 million TH/s from January to October.

As portrayed by the research of blockchain analyst Barclay James, the breakeven cost of mining Bitcoin at 35 million TH/s is around $6,900. The formula employed by James considers the hash power of the Bitcoin network, the hashing power of an ASIC Bitcoin miner, and the efficiency of each miner in producing BTC:

# units = global hashing power ÷ unit hashing power ÷ unit efficiency

Given the cost of Bitcoin mining, when its hash power is currently around 35 million TH/s and the value is $6,400, the breakeven cost of Bitcoin is in the $7,000 to $8,000 range. Which means, at $6,400, Bitcoin miners are losing money by generating BTC and are solely relying on their expectations of the price of BTC to eventually increase in the months to come.

For miners outside of China, specifically the mountainous region of Sichuan known to have the cheapest electricity in Asia and a cold climate that naturally cools down cryptocurrency mining equipment, it is even more expensive to mine BTC. The paper of Barclay James reads:

“China has some of the world’s cheapest electricity rates as well as average temperatures consistent with temperate regions. This is important as cooling is one of the largest overheads in mining. In addition, the country’s generally low operating costs also give it a competitive advantage. In fact, current estimates place 70 % of global hashing power in China, the majority of which is located in the Sichuan region.”

Since June, Bitcoin miners have been mining the dominant cryptocurrency at a significant loss. The fact that the hash power of BTC has continuously risen throughout the bear market of 2018 demonstrates large activity in the global cryptocurrency mining sector and the confidence of miners that the industry will recover as the year comes to an end.

Bitmain and its Antminer sold at a discount

BitMEX Research, a cryptocurrency firm that operates as a research subsidiary of major digital asset exchange BitMEX, disclosed in its paper in August that Bitmain, the dominant conglomerate in the cryptocurrency mining sector, has been deliberately selling its latest Bitcoin ASIC miner Antminer S9 at a lower price.

In 2017, Bitmain sold more than one million Antminer S9 miners and another 700,000 of them in the first quarter of 2018. According to the researchers, who calculated the disclosed gross profit margin of Bitmain in 2017 and the implied cost of each miner. Bitmain has set a negative profit margin of 11.6 percent for the Antminer S9, its main product.

The researchers stated that the distribution of Antminer S9 miners at such a low profit margin and the sudden increase in the sale of the miner in the first quarter of 2018 suggest the company employed a strategy to outsell its competition by underpricing its products.

“These low prices are likely to be a deliberate strategy by Bitmain, to squeeze out their competition by causing them to experience lower sales and therefore financial difficulties. In our view, herein lies the key to one of the main driving forces behind the decision to IPO. A successful IPO may increase the firepower available to continue this strategy and eliminate an advantage rivals could have by doing their IPOs first.”

The paper also proposed that the company may simply have too many Antminer S9 miners in its inventory.

In June 2018, Bitmain was criticized for shipping Antminer S9 miners caked with dust. Some miners alleged the firm of sending old or used ASIC miners. In response to this, Bitmain stated that all traders who received defective or affected Antminer S9 miners would be fully compensated.

“Any product can be imperfect, and there will be shortcomings in the process of enterprise development. We have also compensated the miners who have received mining equipment with inadequate computing power and the mining equipment are now being run properly.”

Whether the decision of the firm to sell its main ASIC miner with a low profit margin was to due to its competition or to clear its inventory, the end result was the distribution of an increased number of efficient and high performance ASIC miners to the global mining sector, which ultimately led to the increase in the hash power of the Bitcoin network.

Is Bitmain’s dominance in danger with the emergence of Samsung and GMO?

In the first quarter of 2018, Bitmain generated twice the profit of Nvidia, the world’s largest graphics card manufacturer. Nvidia generated $550 million in pure profit while Bitmain recorded $1.1 billion in profit from January to March.

The lucrative business model of Bitmain and its high profits led GMO and Samsung, two of the most influential technology conglomerates in Japan and South Korea, to enter the global cryptocurrency mining industry.

GMO introduced its own ASIC miner with competitive specifications in comparison to Bitmain’s Antminer S9. Samsung Electronics has allocated a portion of its foundry in Suwon, South Korea, to manufacture cryptocurrency ASIC miners, in partnership with emerging companies in the mining sector.

When Samsung Electronics first announced its decision to target the global cryptocurrency mining industry, it emphasized that it remains unsure whether it can improve the company’s revenues in general. But, the emphasis of the establishment on its mining venture was to engage in an emerging industry like crypto, given that it has successfully penetrated into insurance, fintech, electronics manufacturing, car making, and ship building in the past several decades. Samsung Securities analyst, Hwang Min-seong, said in January of this year:

“Samsung Electronics could increase its revenues through ASIC chip manufacturing but because the foundry only accounts for a small portion of the company’s semiconductor manufacturing plant, it is difficult to predict that the firm’s mining venture will have a significant impact on the company’s revenues.”

 Since then, Samsung has aggressively expanded its mining businesses, seeing an increased demand in the market. The uncertainty of Samsung towards cryptocurrency mining demonstrated the firm’s unwillingness to commit to the industry unless the company sees significant potential in both the short-term and long-term growth of the market.

Most recently, Samsung signed a deal with Squire, a Canada-based crypto mining corporation that raised $19.5 million in August to develop cryptocurrency mining equipment, to manufacture ASIC miners on behalf of the Canadian firm.

Around a similar period, Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest independent chipmaker, slashed the growth target of the cryptocurrency mining sector from 9 percent to 6.5 percent.

The conglomerate stated that the weakening of the demand for cryptocurrency mining led the firm to decrease the growth target of the industry. But, it remains unclear whether the report is exclusive to Bitmain, given that TSMC is the manufacturer of Bitmain’s ASIC miners, or to the rest of the industry.

“However, our business is also negatively impacted by further weakening of cryptocurrency mining demand. As a result, we estimate our 2018 growth rate will be about 6.5% in U.S. dollar term, which is close to the foundry industry’s growth but slightly below our 7% to 9% guidance given in the last conference.”

New multi-million dollar mining facilities open

Despite the conflicting viewpoints of Samsung and TSMC toward the demand for cryptocurrency mining, in the past several days, two multi-million dollar mining facilities have opened in Armenia and Colorado.

Local publications in Armenia reported that a new $50 million digital asset mining facility was opened on October 19 with 3,000 ASIC miners to mine Bitcoin and Ethereum. In the upcoming months, 120,000 ASIC miners are expected to be added to the facility.

It was local real estate firm Multi Group Concern (MGT) and Malta-based technology company Omnia Tech International Company which created the facility with the support of the government and local authorities.

The plan to build the facility was originally released in April, when Omnia Tech founder, Robert Velghe, said that the two companies intend to invest more than $2 billion in mining and crypto-related businesses in Armenia.

“We will also help Omnia Tech with the establishment of the Financial Technology Park and the data exchange center in Armenia. We intend to create here a blockchain-based center for the development of new information projects, which will turn Armenia into a high-tech platform.”

On October 25, MGT, the largest mining facility operator in the U.S., announced that it will establish another large-scale mining facility in Colorado equipped with 6,300 Bitmain S9 miners. Already, MGT operates 6,800 Bitmain S9 miners and 50 GPU Ethereum mining rigs in the country.

MGT COO Stephen Schaeffer emphasized that despite the decline in the price of Bitcoin, the company intends to “run into the burning building” to find opportunities, which in this case is to mine BTC.

Regulation and state of the mining sector

Many of the world’s largest economies are in the process of implementing practical regulatory frameworks to facilitate the growth of mining companies. Authorities in South Korea, Japan, and the U.S. have welcomed mining facilities to operate with low-cost energy. Countries with ambiguous cryptocurrency regulations such as China and Russia have also demonstrated a neutral stance towards mining.

Throughout the past 15 months, China has banned virtually every business and activity related to the cryptocurrency sector including trading, events, and over-the-counter (OTC) investment. However, it has opened two use cases of cryptocurrencies: processing transactions and mining digital assets.

Several regional governments in Russia have also opened up to cryptocurrency mining, leading various initiatives to convince major mining companies to launch mining farms in the country.

In August, Deputy Governor of the Leningrad Region, Dmitry Yalo, said at the opening of a new mining facility in Russia that the region intends to lure in more mining centers in the years to come with low electricity prices, qualified personnel, and a naturally cold climate to cool down ASIC miners with no additional costs.

US-China trade war

The conflict between the U.S. and China began to affect chip makers and mining equipment manufacturers based in China, including Bitmain. The 27.6 percent tariffs on the Antminer S9 has made it significantly more expensive for buyers outside Asia to purchase the miner.

Previously, Bitmain was able to ship Antminer S9 miners with no tariffs as the product was classified as a data processing machine. The sudden imposition of tariffs against electrical machinery apparatus, which includes data processing machines, has created an inefficient ecosystem for China’s ASIC manufacturers.

The imposition of tariffs by the US against China comes in a period in which U.S. President Donald Trump has expressed concerns about the lack of reciprocity between the two countries. For many years, China has been able to ship products to the U.S. with near-zero tax and fee, thus, Amazon’s Vice President of Global Policy Paul Misener said once:

“The cost to ship a one-pound package from South Carolina to New York City would run nearly $6; from Beijing to NYC: $3.66.”

South Korea and Japan remain unaffected by the tariffs, and with practical regulatory frameworks established by both countries, Samsung and GMO are expected to continue their successful run in the global mining sector.

As of current, despite the significant drop in the price of major cryptocurrencies, the demand for cryptocurrency mining remains relatively high as seen in the rise in the hash rate of the Bitcoin network and the expansion of Samsung, GMO, and Bitmain’s operations.

Major regions have established positive regulatory frameworks towards cryptocurrency miners and companies, which could lead to the increase in the establishment of mining facilities by investors that foresee a substantial surge in the valuation of the crypto market in the mid-term.

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Crypto Markets See Stirrings of Volatility as Major Coins Tip Into Red

Monday, Oct. 29: Crypto markets are seeing the first momentum in a while after a period of marked stability: virtually all of the major cryptocurrencies are in the red today, with some seeing losses of between a 4-6 percent range, as Coin360 data shows.

Market visualization by Coin360

Bitcoin (BTC) is trading at $6,352 at press time, seeing an almost 2 percent loss on the day according to CoinMarketCap. Having traded sideways throughout the week, the top coin today saw a vertiginous price drop, plummeting from its $6,480 trading range down to around $6,350 in the couple of hours before press time.

Earlier this month, Bitcoin had achieved a 17-month low volatility rate, recording its highest level of stability since mid-2017: the trend had continued over recent weeks, excepting one short-lived spike on Oct. 15.

Volatility and the lack thereof had become a staple on crypto twitter, with prominent crypto commentators quick to underscore Bitcoin’s new quasi-stablecoin status. Senior market analyst Mati Greenspan from eToro joked on Oct. 24: “Hey stock jocks!!! Tell me again how Bitcoin isn’t a stable store of wealth due to extreme volatility…”

As the market returns to its “normal” momentum, Adamant Capital founder Tuur Demeester has today quipped on Twitter, “is there a way to go long Bitcoin volatility? I would if I could.”

On the week, the crypto is now around 2.7 percent in the red: monthly losses are at around 3.4 percent.

Bitcoin 7-day price chart

Bitcoin 7-day price chart. Source: CoinMarketCap

Having seen similarly stable trading patterns, Ethereum (ETH) has today also been jolted by negative momentum, sliding steeply down 3 percent on the day to trade around $198, according to CoinMarketCap. Over the past week, the leading altcoin has also been trading sideways, showing only marginally more fluctuations than Bitcoin over the same time frame.

This brings Ethereum to a 3.8 percent loss on its weekly chart; monthly losses are a much starker 14.8 percent.

Ethereum 7-day price chart

Ethereum 7-day price chart. Source: CoinMarketCap

All of the remaining top ten coins on CoinMarketCap are in the red, except for stablecoin Tether (USDT), which is trading stably again.

The hardest hit top-ten performer is seventh largest coin Litecoin (BCH), down 5.2 percent on the day to trade around $49.22 by press time. EOS (EOS) is down 4.2 percent at $5.17, roughly on par with Bitcoin Cash (BCH), down 4.25 percent at $419.22.

In the context of the top twenty coins, the market picture is similarly bleak, with all assets seeing losses of within a 1-5 percent range. Anonymity-oriented alt Monero (XMR) is the least scathed, losing 1.1 percent over a 24 hour period to trade at around $101.43.

TRON (TRX) is down 4.9 percent at $0.022, IOTA (MIOTA) is down 4.23 percent at $0.456, with Ethereum Classic (ETC) pushing a 4.85 percent loss at $9.12.

Total market capitalization of all cryptocurrencies has slid to around $203.6 billion as of press time. Since its interweek peak at $211.1 billion Oct. 24., the market had held around or just below the $210 billion mark for much of the week before today’s tumble.

7-day chart of the total market capitalization of all cryptocurrencies

7-day chart of the total market capitalization of all cryptocurrencies from CoinMarketCap

In crypto news today, major European cryptocurrency exchange Bitstamp has been acquired by Belgium-based investment firm NXMH. NXMH is a subsidiary of South Korean-based media giant NXC Corp., which bought a 65.19 percent stake in South Korean crypto exchange Korbit last year.

Meanwhile, the operator of Japanese crypto exchange Coincheck, which suffered an industry record-breaking hack this January, has revealed the exchange saw a 66 percent decline in revenue for Q3 2018.

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Skirting the Great Wall: The Chequered Saga of Crypto in China, 2013-2017

Take a quick look at CnLedger, a Twitter-based Chinese crypto news information source, and a tweet pinned at the top of its profile might come as something of a surprise:

On Sept. 30 2018, China’s oldest tech journal, the Beijing Sci-Tech Report (BSTR), announced it would be offering subscriptions payable in Bitcoin (BTC). And Ethereum Hotel, reportedly the “first” Chinese hotel to accept Ethereum (ETH) as payment, is poised to open its doors in the country’s southwestern Sichuan Province.

How does all this square with Beijing’s notorious onslaught of anti-crypto regulations? How is it possible that you can buy a McLaren or Ferrari using major cryptocurrencies, and yet cannot legally operate a cryptocurrency exchange in the country?

What of official reports that China’s initial coin offerings (ICO) industry continues to find means of “reemerging,” despite a domestic blanket ban on the fundraising model? And how do all these facts align with the Chinese central bank’s exploration of issuing its own digital currency, which started as early as 2014?

Cointelegraph looks back at Chinese authorities’ cumulative attempts to make the People’s Republic impregnable to the crypto phenomenon — and the whip-smart industry response — in the first of a three-part series, spanning 2013 to the present.  

2013: Restrictions on financial institutions’ Bitcoin dealings, stark warnings about financial stability threats, but a hands-off approach to crypto trading

2013: Restrictions on financial institutions’ Bitcoin dealings, stark warnings about financial stability threats, but a hands-off approach to crypto trading

In a Dec. 3 circular, the Chinese government defined Bitcoin as a virtual commodity, declaring that it was not recognized as legal tender. The government said the directive was needed to “protect the property rights of the public, protect the status of the renminbi [RMB]* as the statutory currency, prevent risks of money laundering and protect financial stability.”

* Renminbi or [Chinese] yuan are interchangeably used to refer to China’s national fiat currency.

While warning that “excessive speculation” in virtual currencies* “harms the public interest and the legal currency status of the RMB, the government nonetheless allowed citizens to freely participate in the online trading of such commodities “at their own risk.”

* The term 虚拟货币 (“virtual currencies”) is used to designate cryptocurrencies in Chinese.

2013’s so-called ‘Notice on Precautions Against the Risks of Bitcoin’ was signed by five official entities, the People’s Bank of China (PBoC), the Banking Regulatory Commission (CBRC), the Ministry of Industry and Information Technology (MIIT), the China Securities Regulatory Commission (CSRC), and the China Insurance Regulatory Commission (CIRC).

The notice stipulated that financial and payment insitutitions were prohibited from dealings in Bitcoin, including banks, and that crypto exchanges should register with the government’s Telecommunications Regulatory Agency and comply with anti-money laundering (AML) and know-your-customer (KYC) measures. It also advocated for financial institutions to propagate investment and virtual currency education in order to “guide the public to establish correct monetary concepts and investment philosophy.”

The PBoC considered at the time that “the public lacks sufficient understanding of Bitcoin, and some individuals have been caught up by faddishness or a speculative mentality in holding, using and trading in Bitcoin,” warning that “ordinary investors who blindly follow the crowd can easily suffer major losses.”

2016: PBoC reveals it has been studying the possibility of issuing state-backed digital currency since 2014

2016: PBoC reveals it has been studying the possibility of issuing state-backed digital currency since 2014

On Jan. 20 the PBoC held a Digital Currency Seminar, attended by PBoC governor Zhou Xiaochuan, the bank’s deputy governor, and a gamut of experts from domestic and foreign research and financial institutions, as well as consulting firms — including representatives from Deloitte and Citigroup. In its official press release, the central bank stated its intent to launch a state-backed digital currency, considering the move would have “positive practical and far-reaching historical, significance”:

Since 2014, [the PBoC] has set up a dedicated research team [to thoroughly study] a framework for digital currency issuance [encompassing its prospective] circulation, environment, legal problems, the impact of digital currency on the economic and financial system, [and] the relationship between legal and privately issued digital currency.”

The central bank stated that it considered that a state-backed “legal” digital currency could bring down the high cost of distributing and circulating paper notes, as well as bring greater transparency to economic transactions — thereby reducing money laundering, tax evasion, and other criminal acts. It also proposed its issuance would have a positive impact on financial inclusion, help to improve China’s new financial infrastructure, and enhance the efficiency of payment and settlement systems .

The statement further proposed that digital currency would give the central bank greater control over the circulation of money, bolstering economic and social development. Reports at the time estimated that around $843 billion of capital had flowed out of China in the eleven months leading up to November 2015 — meaning that policy makers were being forced to inject funds into the system in order to prevent interest rates from rising.

Even as the bank lauded the “great importance” of its digital currency project and praised participants’ rigorous analyses of relevant theoretical matters, practical exploration and development prospects, it notably remained silent on the phenomenon of decentralized cryptocurrencies such as Bitcoin.

2017: PBoC exchange scrutiny

2017: PBoC exchange scrutiny

On Jan. 6, the country’s central bank, the PBoC, released a notice that it had contacted relevant regulatory authorities and ordered them to meet with major Bitcoin trading platforms to scrutinize their business operations and regulatory compliance and carry out a corresponding “clean-up” where necessary. The notice reaffirmed the official stance that Bitcoin was not considered currency by China’s government.

Renewed attention came as the estimated share of global Bitcoin trading denominated in the Chinese yuan was commonly set at between 50 to as high as 90 percent.

The day before the bank’s action, Jan. 5, the global Bitcoin market had taken a steep 21 percent price plummet, with Bitcoin tumbling from over $1190 to $938. The South China Morning Post (SCMP) reported that — in the midst of the coin’s vertiginous decline — Chinese investors were experiencing system failures on major exchanges such as BTCC and OKCoin.

PwC China Fintech Partner William Gee told SCMP that “investors suffered losses as they were unable to trade, possibly because of the sudden price fluctuation and large sell offers.” The official China Securities Journal had for its part stated that:

Regulators have noticed that some Bitcoin platforms crashed during the recent market volatilities, causing some investors, particularly those trading with leverage tools, to bear huge losses because they were unable to log on to the website during the sell-off.”

Domestic industry leaders stepped up to calm investors, as news of the on-site inspections only further unsettled market participants. Bobby Lee, CEO of the popular Shanghai-headquartered BTCC exchange, tweeted on Jan. 6:

“BTCC regularly meets with the People’s Bank of China and we work closely with them to ensure that we are operating in accordance with the laws and regulations of China. The press release put forth from the PBOC today outlines that there is significant volatility in Bitcoin trading, and also quoted from a notice released in 2013 saying that Bitcoin is a virtual good and doesn’t have legal tender status. All of our users should be aware of the current policies on virtual goods as well as the risks involved in trading in volatile markets.”

On Jan. 11, the PBoC launched spot checks into leading domestic crypto exchanges BTCC, Huobi and OKCoin. Reuters contextualized the move at the time as part of Beijing’s efforts to “stem capital outflows” and “relieve pressure” on the yuan. The agency noted that the yuan had fallen 6.6 percent against the dollar over the course of 2016 — the worst chapter in its price performance since 1994.

CNY/USD Exchange Rate in 2016

Several crypto analysts had gone so far as predict an eventual “quasi-synchronization” between the yuan’s declining fortunes and Bitcoin’s ascent, noting that Chinese investors were increasingly using the cryptocurrency as a vehicle for conveying value into more stable foreign currencies — and also as an instrument for speculative trading. The Omni Foundation’s Patrick Dugan proposed that “for every one percent that the yuan devalues, Bitcoin pops 10-15 percent.”

On the day of the inspections, PBoC’s Shanghai headquarters clarified that “in order to prevent market risks,” the central bank was scrutinizing exchanges’ business practices and regulatory compliance standards, mentioning only BTCC by name.

View of the action as being tied to escalating capital outflows was widely echoed, with China’s QQ.com reporting that the bank’s crypto exchange scrutiny was “possibly to investigate the use of the digital asset to evade capital controls.”

The trend significantly raised the stakes for Chinese crypto traders; director of the Finance and Securities Research Institution at Wuhan University of Science and Technology, Dong Dengxin, observed that “the policy risks of Bitcoin trading in China are higher” because of the country’s capital controls. “If bitcoin trading disturbs China’s financial order, there’s a possibility it will be deemed illegal or banned.”

China’s ‘big three’ exchanges, Huobi, OKCoin and BTCC — which had hitherto been zero-fee — soon announced in separate statements on Jan. 22 that they would begin charging clients a flat 0.2 percent commission fee for each transaction. The exchanges are said to have rationalized the move by stating that such fees would help “curb market manipulation and extreme volatility.”

An insider source claimed at the time that while the exchanges had not received direct instructions from the PBoC, they had decided to introduce trading fees to align with the bank’s wishes “to see the Bitcoin market cool down.” The platforms also stopped margin lending under the pressure of PBoC’s intensified scrutiny.

On Feb. 8, the central bank then warned nine smaller domestic exchanges that they faced potential closure if they violated regulations or offered margin lending. Of the larger exchanges, OKCoin and Huobi issued statements on Feb. 9 they would be halting Bitcoin withdrawals completely, with BTCC reviewing the matter and subsequently announcing on Feb. 15 it would be suspending crypto withdrawals until March 15.

The withdrawal freeze on all three platforms eventually lasted until early June, and had an almost immediately-felt impact on the Bitcoin market. As CryptoCompare.com’s Charles Hayter observed mid-February:

When China sneezes Bitcoin catches a cold. The PBoC moves to regulate Bitcoin more stringently will bring short term woes. Volumes can be expected to again slow in China as more friction is incorporated in the form of KYC and AML policies. For the duration of this transition the CNY-BTC pairs can be expected to trade at a discount to other fiat-BTC pairs.”

2017: criminalization of ICOs

2017: criminalization of ICOs

On Sept. 4, a total of seven Chinese central government regulators — the PBoC, the Cyberspace Administration of China (CAC), MIIT, the State Administration for Industry and Commerce (SAIC), CBRC, CSRC, and CIRC — jointly issued an Announcement on Preventing Financial Risks from Initial Coin Offerings (ICO Rules).

The announcement stated that ICOs that raise “so-called virtual currencies” such as Bitcoin and Ethereum “through the irregular sale and circulation of tokens” are engaging in “unauthorized” public financing, which is illegal.

It reiterated that virtual currencies involved in ICOs are “not issued by the country’s monetary authority” and therefore are neither legal nor mandatorily-valid tender. They are divested of the legal status of fiat currencies and so “cannot and should not be circulated nor used in the market as currencies.”

The ICO Rules further warned that a host of financial crimes — such as the illegal issuance of tokens or securities, illegal fundraising, financial fraud, or pyramid schemes — may be associated with ICO projects, and that, if discovered, such cases would be transferred to the country’s judiciary.

The announcement ordered all types of ICOs to “be stopped immediately” and to return any assets held in investors’ accounts to these investors as soon as possible.

2017: official restrictions on crypto exchanges

2017: official restrictions on crypto exchanges

Not only were domestic ICOs banned, but the first of a series of restrictions were imposed on cryptocurrency exchanges. Pursuant to the new rules, exchanges were forbidden from enabling clients to convert legal tender into crypto, or vice versa; from buying or selling virtual currencies as a central counterparty; and from setting a price for virtual currencies, or providing other related brokerage or commission services.

Further, the MIIT stated it would shut down websites, delist crypto-trading mobile applications from app stores, and would request that the SAIC revoke the business licenses of exchanges.

The Sept. 4 announcement also extended the existing prohibition on financial and payment institutions’ crypto dealings, stating that they were forbidden from “directly or indirectly” providing products or “services such as account opening, registration, transaction clearing or settlement” for ICOs and virtual currencies. They were also barred from providing insurance services to both ICOs and crypto-related businesses.

Lastly, the seven regulators robustly warned against investors being “fooled” by ICO and crypto-related investments, soliciting the public to “report relevant violations in a timely manner.” The announcement ordered financial industry organizations to “self-discipline” and “stay away from market chaos,” in order to collectively maintain a “normal” financial order.

Following the announcement, on Sept. 15 the Beijing Internet Finance Risk Working Group met with senior officials of crypto trading platforms in the Chinese capital, ordering them to set a deadline for ceasing their trading services; to immediately stop registering new clients; and to outline a detailed plan for how to refund clients’ assets. Authorities were also reported to have issued similar orders to crypto exchange officials based in the cities of Shenzhen and Shanghai.

“The scope of the cleanup” was not limited to curtailing major exchanges’ operations, but aimed at an internet-wide swoop of related websites, internet forums, as well as chat groups on WeChat and QQ — two of China’s most popular social media platforms. The former counted a staggering 963 million active users at the time.

In a media interview mid-September, Lokman Tsui, an assistant professor at the School of Journalism and Communication at the Chinese University of Hong Kong, noted that many hitherto active crypto-dedicated groups on WeChat were swiftly disbanding:

“If you are a group chat leader you have two choices, either you are going to super actively monitor the group, because your livelihood is at stake, or you’re going to delete the group. It’s a chilling effect.”

China’s largest crypto exchanges swiftly fell into line with Beijing’s orders. BTCC told customers on Sept. 14 it would completely shut down on Sept. 30 in accordance with the new restrictions, and would refund any renminbi, Bitcoin, Litecoin and Ethereum held in users’ accounts.

Huobi made a similar announcement on Sept. 15, stating it would be halting new registrations and deposit services, and would be ceasing all services by Sept. 30. OKCoin announced on Sept. 15 it would cease all trading on Sept. 30.

Also on Sept. 15, ViaBTC said it would deactivate the ViaBTC official website for mainland China Sept. 30 and return any holdings of renminbi or Bitcoins to clients before then.

By mid-September 2017, reports were emerging that the impact of the protracted freeze on services at major domestic crypto exchanges as they had faced scrutiny from the PBoC had seen the country’s share of global Bitcoin trading drop to just over 10 percent.

Yet even as the dust was just beginning to settle on the September ban, Chinese investors were increasingly turning to alternatives such as peer-to-peer (p2p) platforms and OTC trades; China’s LocalBitcoins market posted its highest-ever weekly volumes of 115 million yuan during the week leading up to Sep. 23.

By Oct. 27, the “second life” of China’s exiled “crypto barons” was already becoming apparent — 19 formerly China-based companies had already applied for a Japanese crypto exchange license. Other crypto-“friendlier” jurisdictions at that time were deemed to include Hong Kong, Singapore and South Korea.

As early as May, OKCoin had in fact begun to encourage domestic traders to migrate to its newly-launched Hong-Kong based fiat-crypto trading platform OKEx, beginning with futures trading.

On Nov. 1 OKEx launched an OTC platform, with the Chinese yuan tellingly the only supported fiat currency at the outset. The company’s financial market director, Lennix Lai, said that the new OTC service would aim to serve Chinese investors, many of whom had been tiding over the tumultuous 2017 fall by trading p2p.

In parallel, Huobi rebranded as Huobi Pro and incorporated its operations in the Seychelles, then rolling out its own OTC service on Nov. 4 to enable direct, p2p yuan-crypto transactions.

Alongside their relocations overseas, OKEx and Huobi’s OTC platforms thus enabled domestic investors to use mobile payment methods such as Alibaba’s Alipay or Tencent’s WeChat Pay to purchase cryptocurrencies. OTC purchases were typically made a ten or even twenty percent premium as compared with prices on global crypto exchanges, due to the intensity of demand in an increasingly stifled trading climate.

In November, the government caught up: China’s National Committee of Experts on Internet Financial Security issued a Bitcoin OTC report, remarking that “over-the-counter trading is booming,” and that “this warrants further attention.”

The report took stock of burgeoning number of OTC platforms, highlighting that whereas only four such platforms had been active before October, the number had now risen to twenty one.

Taiwan-based OTC platform OTCBTC, according to media reports, had seen $100 million in transactions in the first 50 days since its launch in October.

In an interview with SCMP, Leonhard Weese, president of the Bitcoin Association of Hong Kong, further observed that even as OTC services had not been officially banned, increasing concerns over government surveillance were pushing p2p traders to encrypted messaging services such as Telegram:

“Telegram is very popular for large over-the-counter trades. While WeChat is used by the less paranoid.”

In those last months of a turbulent year, Wesse considered that China’s “authorities are more worried about the narrative, rather than what people actually do. Once it gets widely reported that Bitcoin trading is well and alive in China, the government will again try to put a lid on it.”

2013-2017: the evolution of a toughened anti-crypto stance

Between 2013-2017, China’s authorities thus evolved an increasingly draconian stance as their perception of the financial risks posed by cryptocurrencies hardened. In 2013 they deemed Bitcoin to be a “faddish” and speculative phenomenon, thus prohibiting financial institutions’ dealings with crypto, yet allowing individual investors to bear the risks for their trades.

Pressure on the yuan and escalating capital outflows provided fresh impetus for coordinated action from the country’s regulators; they specifically targeted the ICO space, perceiving it to be rife with dangers for wider fiscal stability, and took action against online trading platforms. The measures nonetheless inadvertently fostered alternative channels such as OTC trades and did not prevent exchanges from flourishing in “friendlier” overseas jurisdictions.

Cointelegraph’s three-part series will continue to trace Chinese authorities’ continued attempts to ring-fence crypto from mainland investors, as they broadened their offensive to tackle the mining industry, as well as perceived regulatory “loopholes,” both on- and offline.

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All Quiet on the Crypto Front as Bitcoin, Altcoins Shun Volatility

An eerie calm continues to linger over cryptocurrency markets Friday, Oct. 26, as Bitcoin (BTC) volatility hits an all-time low and altcoins remain stagnant.

Market visualization from Coin360

Data from Cointelegraph’s price tracker and Coin360 paints an underwhelming picture for short-term speculators, but one that has delighted many analysts, who have begun hailing a new era of Bitcoin stability.

On Friday, Bloomberg joined the multiple cryptocurrency industry commentators to highlight Bitcoin’s lack of volatility, with October 2018 being the least volatile for eighteen months. Commentators claimed this was a sign the leading coin was nearing its bottom.

At the same time, one fund management head told the publication, the ongoing bear market should be “getting tired” and a bullish upturn was likely to form Bitcoin’s next move.

That sentiment was repeated by Fundstrat Global Advisors’ Tom Lee earlier this week in separate comments to Cointelegraph.

At press time, BTC/USD is up just a fraction of a percent over the past 24 hours to trade around $6,480. The pair has also remained uncannily stagnant since the end of last week.

Bitcoin 7-day price chart

Bitcoin 7-day price chart. Source: CoinMarketCap

Among the altcoins, Ethereum (ETH) is also recording only a minute percent change over the past 24 hours to press time.

Attention had largely fallen away from the largest altcoin asset this week ahead of a planned hard fork in January which, as Cointelegraph reported, has faced various hurdles to its implementation. Constantinople, as it is known, was originally scheduled for next month.

ETH/USD is currently trading just under $203, just slightly down since the same time last week against a backdrop of around 8 percent monthly losses.

Ethereum 7-day price chart

Ethereum 7-day price chart. Source: CoinMarketCap

Across the top twenty altcoin assets, no anomalies to the sideways trading trend had appeared, with coins staying within a tiny 1 percent of their position 24 hours previously. The only exception is Zcash (ZEC), ranked 19th by market cap, which is seeing a little over 4 percent losses to trade at $121.22 by press time.

Total market capitalization of all cryptocurrencies remains just under $210 billion, a level it has been holding close to for the past week.

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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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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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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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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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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

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

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.

team

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.

Photo

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:

Photo

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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UK-Based Crypto Platform Launches $1.45 Million Crowdfund Campaign to Bank the Unbanked

Nebeus, the London-based crypto platform, has launched a 1.1 million pound ($1.45 million) crowdfunding campaign as they set out their ambitious goal of bringing financial services to people around the world. According to the World Bank, there are 1.7 billion adults globally who remain unbanked, yet two-thirds of them own a mobile phone that they could use for online banking. The Nebeus’ campaign went live on Sept. 24, 2018 and has already attracted more than 400,000 pounds ($527,490).

The goals of the campaign

Backed by industry expert Brett King, the Nebeus campaign will last until October 23, 2018. Currently operating in 45 countries, they now plan for expansion across Europe, Asia and South America. The company wants to make banking simple for people and encourages a wider use of cryptocurrency in everyday spending, offering user-friendly Bitcoin wallets and its recently launched Exo card. The new prepaid card allows users to seamlessly convert crypto into fiat, making transactions convenient online, offline and even at ATMs.

“We want to create an ecosystem where those who add value are rewarded, and those

who consume services and products can do so in a competitive and secure

environment, built on blockchain technology. Our current campaign will bring us a step

closer to achieving this,” Konstantin Zaripov, co-founder and CEO of Nebeus, said.

How the platform works

Nebeus is a new crypto bank which facilitates crypto-collateral Bitcoin loans globally. The company says it is working on “bridging the gap between crypto and fiat finance through the use of blockchain technology.” According to the company, 30,000 users of the Nebeus platform have already created active blockchain-based wallets.

The fintech startup was founded in 2014, and the peer-to-peer (p2p) exchange platform was launched at the end of 2017. Nebeus has already enabled the transaction of 34 million euro ($39.9 million) and facilitated 1.9 million pounds ($2.23 million) in p2p Bitcoin loans. Their trading platform allows users to purchase and sell Bitcoin and Ethereum with instant deposits into their accounts.

Nebeus’s open API allows third parties to develop value-added products and services on top of the Nebeus platform or incorporate Nebeus’s services into their existing ecosystems.

The Nebeus card, launched in the summer of 2018, allows for converting cryptocurrency into fiat and also has some additional features. For example, all the users’ cryptocurrencies can be stored, easily accessed and managed in a Crypto Basket. Moreover, the Nebeus card functions as a regular debit card. It is accepted in over 40 million locations and can be used in stores, for online payments or for ATM withdrawals. The card can be issued to consumers worldwide.

The expansion to unbanked regions

In June 2018, Nebeus announced it was entering the African market through local telecommunications and mobile money. The company said that cryptocurrency users in Kenya, Uganda, Tanzania, Rwanda, South Africa, Nigeria and Ghana have received full access to the startup’s “crypto bank.” The company expects to enable over 400 million people with crypto services through help of local partners that already have an established network in the region.

Some of the latest research from the World Bank proves that Nebeus’s targeting of mobile money is justified. The organization’s analytics came to the conclusion that “in Sub-Saharan Africa, mobile money drove financial inclusion.” While the share of adults with an account with a financial institution remained flat in the region, the share with a mobile money account has almost doubled since 2014. Moreover, mobile money accounts have spread from East Africa to West Africa and beyond.

However, there are still a lot of unbanked adults in other continents too. According to the World Bank, account ownership in Europe and Central Asia was 65 percent in 2017 (58 percent of adults in 2014) and 71 percent in East Asia and the Pacific.

 

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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Operator of Hacked Crypto Exchange Zaif Gets Third Warning From Japan's Watchdog

Japan’s Financial Services Agency (FSA) has issued a third business improvement order to the owner of hacked crypto exchange Zaif, Tech Bureau. The news was reported by Cointelegraph Japan today, September 25.

As previously reported, as a result of a security breach on the Zaif exchange September 14, hackers succeeded in stealing 6.7 billion yen ($59.7 million) worth of crypto assets belonging to both users and to the exchange itself. The Financial Services Agency had already ordered Tech Bureau to make business improvements first in March, and subsequently in June this year.

The FSA considers that Tech Bureau’s investigation into the causes of the recent hack – as well as its response to customers – have been inadequate. While the firm reportedly announced it was in talks with Fisco Group to receive financial support of 5 billion yen on Friday, September 21, the FSA says it did not receive a concrete report on the matter from the firm directly.

The FSA’s newly-issued business improvement order specifies the following contents as necessary measures that are to be urgently addressed:

“(1) Determination of the facts and causes of the hacking incident (including clarification of the attribution of responsibility) and [the] formulation and execution of measures to prevent [its] recurrence

(2) Prevention of [the] expansion of customer damage

(3) Response to customer damage

(4) Review and implement concrete and effective improvement plans based on the hacking incident, [as well as the] contents of [two prior business improvement orders] from 8 March and 22 June [this year]

(5) Submit written reports pertaining to (1) and (4) above by Thursday, September 27.”

According to CT Japan, FSA staff are continuing to undertake on-site inspections of Tech Bureau. Based on their findings, the agency will reportedly potentially issue more stringent measures such as a business suspension order and/or cancellation of the exchange’s registration.

Earlier this summer, the FSA published the results of its on-site inspections of cryptocurrency exchange operators, deciding on the basis of its findings to apply more rigorous oversight into new applications from exchanges hoping to receive an official operating license. According to the agency, there are currently “hundreds” of companies awaiting its review.

In the wake of January’s industry record-breaking $532 million hack of crypto exchange Coincheck, the year has seen the agency unfold a series of increasingly exacting measures for domestic operators.

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Hodler’s Digest, September 16-23: Elon Musk Wants Advice on Twitter Crypto Scammers, the US SEC Wants Comments on BTC ETFs

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

Japanese Cryptocurrency Exchange Zaif Hacked Of Reported 5,966 Bitcoins

As a result of a security breach on September 14, hackers have managed to steal 4.5 billion yen from Japan’s Zaif cryptocurrency exchange, as well as 2.2 billion yen from the assets of the company, with total losses amounting to 6.7 billion yen or around $59.7 million. Tech Bureau Inc, which operated Zaif, stated this week that the exchange detected a server error on September 17, after which Zaif suspended deposits and withdrawals. On September 18, the exchange realized that the error was a hack, and reported the incident to Japan’s financial regulator, reporting losses of 5,966 bitcoins (BTC) in addition to some Bitcoin Cash (BCH) and MonaCoin (MONA).

SpaceX CEO Elon Musk Turns To Dogecoin Creator To Stop Crypto Scammers

Elon Musk, the CEO of SpaceX and Tesla Elon Musk asked Jackson Palmer, the creator of Dogecoin (DOGE), to help him combat “annoying” cryptocurrency scammers on Twitter this week. Musk, directing his tweet at Palmer, asked for help getting rid of scam spammers, to which Palmer replied by sending Musk a short script in direct messages to try to fix the problem.

US SEC Postpones VanEck Bitcoin Exchange Traded Fund, Asks For Further Comments

The U.S. Securities and Exchange Commission (SEC) has requested further comments regarding its decision on the listing and trading of VanEck and SolidX’s Bitcoin (BTC) exchange-traded fund (ETF), which is expected to list on the CBOE BZX Equities Exchange (BZX). In a notice, the SEC asks for additional comments from interested parties addressing the sufficiency of the BZX’s statement in support of the proposal. In particular, the SEC is seeking comments on eighteen key issues, among which are commenters’ views on BZX’s assertions that BTC “is arguably less susceptible to manipulation than other commodities that underlie exchange-traded products (ETPs).”

New York Attorney General Report: Crypto Exchanges Vulnerable To Manipulation

A new report published by the New York Attorney General’s office states that cryptocurrency exchanges are vulnerable to manipulation, conflicts of interest, and other consumer risks. The findings, part of the “Virtual Markets Integrity Initiative” that consisted in surveying 13 cryptocurrency exchanges, found that an absence of standard methods for auditing virtual assets results in the lack of a consistent and transparent approach to independently auditing digital currency traded on exchanges.

Researchers Explain How Gemini Dollar Transactions Can Be Changed Or Paused

The implementation of the recently launched Gemini dollar (GUSD) stablecoin can be completely changed by a Gemini custodian every 48 hours, according to a study authored by blockchain researcher Alex Lebed and crypto consultant Alexey Akhunov. In the study, the authors review the code of the GUSD’s smart contract in order to demonstrate that the implementation of the Gemini USD can become non-transferrable or frozen at any moment, which is noted in the Gemini dollar’s white paper.

Most Memorable Quotations

“The data age is major opportunity for manufacturers to reform the industry. But blockchain and IoT will be meaningless tech unless they can promote the transformation of the manufacturing industry, and the evolution of the society towards a greener and more inclusive direction,” — Jack Ma, founder of Chinese e-commerce giant Alibaba

“Cryptocurrencies are perfect, but are used for bad purposes today, so [one has to be] careful. Blockchain and distributed ledger technologies are also perfect, they are big, big tools,” — Francisco Gonzalez Rodriguez, executive chairman of multinational Spanish banking group Banco Bilbao Vizcaya Argentaria (BBVA)

“As the government and regulators decide whether the current Wild West situation is allowed to continue, or whether they are going to introduce regulation, consumers remain unprotected,” — UK Treasury Committee on cryptocurrency regulation

Laws And Taxes

Ukrainian Parliament Seeks To Tax Cryptocurrency Assets With New Bill

Ukraine’s parliament has proposed a bill that would tax operations with crypto assets with a five percent tax on individuals and legal entities operating with virtual currency assets, such as cryptocurrencies and tokens. Starting Jan. 1, 2024 crypto-related profits by businesses would be taxed at 18 percent, which is a basic rate for corporate and personal income tax in Ukraine. According to the lawmakers, the introduction of this tax would make it possible to “draw 1.27 billion hryvnia ($43 million) to the budget annually from 2019-2024.”

US Lawmakers Send Open Letter To IRS Asking For Crypto Taxation Clarity

U.S. lawmakers have called on the Internal Revenue Service (IRS) to issue clarified and “comprehensive” crypto taxation guidance in an open letter this week. The representatives deem that the IRS has had “more than adequate time” to work through complexities after its preliminary rules were issued four years ago, arguing that while the IRS has proactively continued to remind taxpayers of the penalties for non-compliance with its guidance, its failure to introduce a more robust taxation framework “severely hinders taxpayers’ ability” to meet their obligations.

Financial Task Force Says International AML Standards For Crypto Coming Soon

The Financial Action Task Force (FATF) said it is getting closer to the establishment of a global set of anti-money laundering (AML) standards for cryptocurrencies. The agency’s president Marshall Billingslea reportedly said that he expects the coordination of a series of standards that will close “gaps” in global AML standards at an FATF plenary in October. At that time, the FATF will purportedly discuss which existing standards should be adapted to digital currencies, as well as revise the assessment methods of how countries implement those standards.

Adoption

Binance To Soon Begin Private Beta Testing Of Crypto-Fiat Singapore Exchange

Binance, the largest global crypto exchange, will soon start private beta testing a crypto-fiat exchange in Singapore, as Binance co-founder and CEO Changpeng Zhao (CZ) tweeted this week. According to CZ, the testing will be launched on September 18, and while no further details have been specified, the crypto-fiat Singapore-based exchange will presumably support the local Singapore dollar.

US PNC Bank To Use RippleNet For Customers’ International Payments

PNC, which is ranked among the top ten U.S. banks with 8 million customers and retail branches in 19 states, will use RippleNet to process international payments for its customers. A particular PNC unit — Treasury Management — will use Ripple’s blockchain solution xCurrent to speed up overseas transactions held by U.S. commercial clients. Ripple emphasises that xCurrent will allow PNC business clients to receive payments against their invoices instantly, changing their approach to managing both accounts and their working capital.

Ripple Executive Hints Of xRapid Launch Coming Soon

Head of regulatory relations for Asia-Pacific and the Middle East at Ripple Sagar Sarbhai told CNBC this week that Ripple has been making strides toward the launch of its product xRapid, noting that a commercial version of its payment platform could launch “in the next month or so.” The xRapid product is a real-time settlement platform designed to speed up international payments that addresses the issues of minimizing liquidity costs and making cross-border payment transactions faster.

Canadian Coinsquare’s Investment Subsidiary Launches Two Tech-Based ETFs

Coinsquare’s subsidiary — Coin Capital Investment Management — has reportedly become the 30th ETF operator in Canada, with the launch of the Coincapital STOXX Blockchain Patents Innovation Index Fund (LDGR) and the Coincapital STOXX B.R.AI.N. Index Fund (THNK) on the Toronto Stock Exchange (TSX). LDGR is a research-focused ETF that intends to provide investors with global equity securities of firms that invest in the development of blockchain technologies, while THNK, aims to provide investments in global equity securities concentrated around four “megatrends” in technology — biotechnology, robotics, artificial intelligence (AI), and nanotechnology.

Brazil’s Largest Brokerage To Launch Bitcoin, Ethereum Exchange

The largest brokerage in Brazil, Grupo XP, will enter the crypto space by launching an exchange for Bitcoin (BTC) and Ethereum (ETH) in the near future called XDEX with around forty employees. Grupo XP is the biggest financial group in Brazil, comprising companies with various business models. XP has reportedly set a goal to have $1 trillion reais ($245 billion) under custody by 2020, which is four times what the company expects to raise by the end of this year. In addition, XP will launch a bank in the next few months.

Mergers, Acquisitions, And Partnerships

Crypto Exchange Huobi Joins Russian Bank Innovation Fund

Cryptocurrency exchange Huobi has joined Russia’s VEB Innovation Fund to share notes on crypto regulation. Russia’s cryptocurrency regulation draft law, which passed in a first reading in May, are tentatively set to be passed in October. One of the main goals of the partnership with Huobi and the VEB Innovation Fund is to draw on the crypto regulation experience gained by Huobi and to apply it in Russia, especially for adjusting the legal framework on digital assets.

Switzerland And Israel Agree To Share Blockchain Regulation Experience

Switzerland and Israel have agreed to share their experience on regulating the blockchain industry.Switzerland’s Minister of Finance Ueli Maurer and State Secretary for International Financial Matters Joerg Gasser have recently visited Israel to officially request access to the local markets for Swiss banks.As Gasser told Reuters, by the end of 2018 he plans to prepare a report on blockchain regulation for the Israeli officials that would outline general recommendations.

R3, Dutch Digital Security Company Partner For Blockchain-Based IDs

Blockchain consortium R3 has deployed a digital ID application developed by Dutch digital security company Gemalto on the latest version of the Corda Platform. The parties now expect to conduct several pilots of the application — called the Trust ID Network —  that will reportedly be launched later this year. The application enables digital service providers to operate “fully verified and secured” user personal data by creating a Digital ID, allowing consumers to register within various banking, e-commerce, and e-government services while avoiding repeated due diligence procedures.

Poland’s Largest Bank Partners With Coinfirm To Launch Blockchain Solution

Poland’s largest bank , PKO Bank Polski, will launch a blockchain solution for its customer documents via a partnership with UK-based Coinfirm “in the coming days,” the parties confirmed this week. As part of a drive to enhance security of customer data, PKO Bank Polski will use Coinfirm’s Trudatum to provide blockchain-issued paperwork to its some five million account holders.

Funding Rounds

Chinese Blockchain Fund To Raise Almost $13 Million For Japanese Stablecoin

Yao Yongjie, whose $1.5 billion Grandshores Blockchain Fund has the backing of well-known Chinese Bitcoin investor Li Xiaolai and the local government of the city of Hangzhou, is seeking to create up to three new stable cryptocurrencies (stablecoins) pegged to various fiat currencies. The first reported stablecoin project would involve the Japanese yen, and a second company Yao chairs, Hong Kong-based Grandshores Technology, aims to raise HK$100 million ($12.7 million) in financing for the cryptocurrency.

Winners And Losers

The crypto markets have experienced a comeback this week, with Bitcoin trading for around $6,756 and Ethereum at $245. Total market cap is now around $228 billion.

The top three altcoin gainers of the week are Carebit, Bob’s Repair, and the Ultimate Secure Cash. The top three altcoin losers of the week are Protean, Abulaba, and Bitmark.

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

FUD Of The Week

Bitcoin Core Updates Fixes Vulnerability That Could “Take Down The Network”

Bitcoin Core has released an update following the recent detection of a vulnerability in the software: Bitcoin Core 0.16.3 was released with a fix for a denial-of-service (DoS) vulnerability.The vulnerability could reportedly cause a crash of older versions of Bitcoin Core if they attempted processing a block transaction that tries to spend the same amount twice. According to Casaba Security co-founder Jason Glassberg, the recent vulnerability found on Bitcoin Core software could “take down the network.” He explained that the network crash “does not appear” to target users’ wallets, but would rather “affect transactions in the sense that they cannot be completed.”

China’s Central Bank Warns Public Of Risks With ICOs, Crypto Trading

The People’s Bank of China has issued a new public notice this week “reminding” investors of the risks associated with Initial Coin Offerings (ICOs) and crypto trading. Today’s notice ,released from the bank’s headquarters in Shanghai, censures the “unauthorized” and “illegal” ICO financing model for posing a “serious disruption” to the “economic, financial and social order.”

German Finance Minister Doubts Whether Crypto Could Ever Replace Fiat

Germany’s Finance Minister Olaf Scholz doubted publicly this week that cryptocurrencies can currently replace traditional fiat currencies. Scholz compared cryptocurrencies to the tulip fever bubble in the Netherlands in the 17th century saying, “and the danger is great that there will be such a tulip inflation,” noting that cryptocurrencies should also be closely observed by regulators, as they could be used for terrorist financing, money laundering or other criminal activities.

Reuters: Brazilians Antitrust Regulator To Inspect Six Major Banks Over Crypto Trade

Brazil’s antitrust regulator, the Administrative Council for Economic Defense (CADE), is reportedly inspecting six major national banks for alleged monopolistic practices in the crypto space, according to Reuters. The probe, which was initiated n the request of the Brazilian Blockchain and Cryptocurrency Association (ABCB) following several complaints, will determine whether the country’s largest banks closed the accounts of brokerages trading in Bitcoin.

Malware Reportedly Stolen From NSA Contributes To Skyrocketing Cryptojacking

Leaked code targeting Microsoft Systems which hackers allegedly stole from the U.S. National Security Agency (NSA) sparked a fivefold increase in cryptocurrency mining malware infections, according to a report from the Cyber Threat Alliance. Eternal Blue, which was reportedly stolen and then used for the infamous cyberattacks WannaCry and NotPetya, has been used by hackers to gain access to computers in order to covertly mine for cryptocurrency, with detections up 459 percent this year.

Prediction Of The Week

Bitcoin To See 30 Percent Rally By End Of 2018, Says Mike Novogratz

Billionaire investor Mike Novogratz predicted this week on Twitter that Bitcoin will see a 30 percent rally by the end of 2018. Stating that the $8,800 to $10,000 threshold would be the the defining moment for institutional investors to enter the space, Novogratz claimed that it is impossible for BTC to not reach the $8,800 to $10,000 price points by the end of the year.

Best Features

Bitcoin Miners Flock To New York’s Remote Corners, But Get Chilly Reception

The New York Times visits Massena — a region formerly filled with American corporations offering unions jobs — that now has one of the state’s highest unemployment rates. However, as the Time notes, the “abundant, cheap electricity flowing from a dam in the St. Lawrence River,” has brought in the cryptocurrency mining companies, bringing mixed reactions from the area’s residents.

No One Knows What to Call the Hottest Cryptocurrency

After Ripple (XRP) saw an unprecedented amount of growth this week, the question arose: what is it really called — Ripple or XRP? While Ripple Labs Inc. notes that the tokens are different than its open-source network, the token did used to be referred to as “ripples (XRP).”

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China's Central Bank Warns Investors of ICO, Crypto Risks

China’s central bank, the People’s Bank of China (PBoC), has today, September 18, issued a new public notice “reminding” investors of the risks associated with Initial Coin Offerings (ICOs) and crypto trading.

The notice, released from the bank’s headquarters in Shanghai, reiterates the severe line that has been adopted by the country’s Office for Special Remediation of Internet Financial Risks, which first introduced a blanket ban on ICOs in September 2017.

Today’s notice censures the “unauthorized” and “illegal” ICO financing model for posing a “serious disruption” to the “economic, financial and social order”:

“[ICOs are] suspected of illegally selling tokens, illegally issuing securities, illegal criminal activities, financial fraud, pyramid schemes and other illegal and criminal activities.”

The PBoC has today hailed the successes of the country’s stringent restrictions that have targeted ICOs and a broad spectrum of crypto-related activities to date, claiming that:

“[T]he global share of domestic virtual currency transactions has dropped from the initial 90% to less than 5%, effectively avoiding the virtual currency bubble caused by skyrocketing global virtual currency prices in the second half of last year in China’s financial market. The impact has been highly recognized by the community.”

Nonetheless, the bank recognizes that several challenges remain, notably the prevalence of offshore exchanges that are used by investors to circumvent the mainland ban.

The PBoC notes that the Office for Special Remediation of Internet Financial Risks has now adopted a series of targeted measures, including blocking up to 124 IP address suspected of providing a gateway to domestic crypto traders.  

It further points to redoubled efforts to “clean-up” payment channels and strengthen monitoring and inspection mechanisms, noting that around 3,000 accounts have already been closed as a result of increased oversight. Lastly the notice outlines recent measures undertaken to counter the circulation of crypto “hype” materials.

As previously reported, on August 25 the PBoC had already issued a fresh risk alert against “illegal” ICOs, warning that blockchain and the idea of “financial innovation” are being used to lure investors as a “gimmick” that conceals essentially fraudulent Ponzi schemes.

This summer has seen an onslaught of toughened anti-crypto measures from Beijing, which have included a ban on commercial venues from hosting crypto-related events in certain districts.

Alongside ‘offline’ measures, China’s tech titans – Chinese ‘Google’ Baidu, Alipay’s Alibaba and WeChat-developer Tencent – have all tightened their monitoring and acted to ban accounts suspected of engaging in or propagating crypto and even blockchain related activities.

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Former SpaceX Engineer Targets Consumer Traders With His LXDX Crypto Exchange

A former engineer at Elon Musk’s SpaceX has announced his new firm LXDX would launch a public cryptocurrency exchange, Leaprate reports Monday, September 17.

Previously engaged in automation and propulsion at SpaceX, Joshua Greenwald has since turned his attention to institutional-grade cryptocurrency trading.  

While already operating for institutional investors, Greenwald now wishes to hook the mainstream consumer market.

“Our immediate focus is on cryptocurrency and enabling every investor to utilize the exclusive tools, like smart order routing, that only institutions previously could access,” Leaprate quotes him as saying.

LXDX received backing from a mixed bag of investors in August, chief among which was Dymon Asia Venture Capital Fund, before confirming a move into Malta last week.

The announcement comes as the institutional investment sector becomes an increasingly important focus for traditional finance heavyweights, rumors circulating last week about plans from both Citigroup and Morgan Stanley to begin offering exposure to Bitcoin.

“Cryptocurrencies are a wholly new asset class,” Greenwald told Venturebeat after announcing the August funding round.

“To the extent that they can be integrated into the existing infrastructure, we seek to facilitate that integration […] We anticipate massive scaling in tokenization and securitization.”

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Japan’s Financial Regulator Expands to Handle Influx of Crypto Exchange License Demand

Japan’s Financial Services Agency (FSA) plans to bolster its workforce by 12 personnel to better handle the growing influx of applications for crypto exchange licenses, Reuters Japan reported September 12.

At a crypto exchange study group meeting Wednesday, the FSA’s vice commissioner for policy coordination, Kiyotaka Sasaki, said that the agency is currently conducting its oversight of crypto exchanges with a team of around 30 people, whose work includes the review of license applications.

Yet Sasaki reportedly stressed that with over 160 firms currently awaiting review, the dedicated number of personnel is insufficient, saying the agency would need to add 12 further persons in 2019 to handle its “biggest problem” – the burgeoning number of license applications.

According to a document released after the meeting, the FSA has to date been reviewing sixteen cases, twelve of which withdrew their application at the FSA’s request and one of which has been rejected. Three, including Coincheck — which notoriously suffered the largest hack in crypto industry history this January — await a final decision.

The document further states that the agency plans to refine its risk profiling mechanisms as part of its “ongoing in-depth monitoring” of the exchange space, and to work increasingly closely with related ministries and agencies vis-a-vis non-registered firms, both domestic and overseas.

The document highlights concerns over insufficient anti-money laundering (AML) and terrorism financing prevention measures among exchanges, and points to other concerns regarding business models, risk management and compliance, internal audits, and corporate governance.

As previously reported, the FSA published the results of its on-site inspections of crypto exchange operators last month, finding that  the total digital assets of domestic exchanges have surged to 792.8 billion yen ($7.1 billion) — an over six-fold increase within the space of one year.

Meanwhile, as today’s document reiterates, most exchanges’ system personnel are fewer than 20 people, meaning that one employee on average was found to be managing digital assets worth 3.3 billion yen ($29.6 million).

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Coinbase Research: 42% of Top 50 Universities Offer at Least One Crypto-Related Class

A recent study by the U.S. crypto exchange Coinbase has shown that 42 percent of the world’s top 50 universities have at least one class on cryptocurrencies or blockchain. The results of the study were published on Coinbase’s official blog Tuesday, August 28.

The research was jointly conducted by Coinbase and survey company Qriously. Together they interviewed 675 U.S. college students and reviewed courses at 50 international universities.

Of the 172 classes reviewed in the study, 15 percent were offered by economics, finance, law and business departments, while 4 percent were in social science departments.

The study has found out that blockchain- and crypto-related courses are most popular in the U.S. Only five of the 18 universities reviewed that operate outside of the United States offer at least one class on these topics.

Blockchain-related courses enjoy the most popularity at the Stanford and Cornell universities – numbered 10 and 9 respectively. University of Pennsylvania and the National University of Singapore follow with their respective 6 and 5 courses.

Dawn Song, a computer science professor at Berkeley, told Coinbase that her course “Blockchain, Cryptoeconomics, and the Future of Technology, Business and Law” was extremely popular, and that instructors had to turn away more than 200 students because their classroom could only hold 70:

“Blockchain combines theory and practice and can lead to fundamental breakthroughs in many research areas. It can have really profound and broad-scale impacts on society in many different industries.”

Earlier in August, Cointelegraph reported that the Hong Kong University of Science and Technology Business School had received a $20 million blockchain research grant. Also in early August, Turkey established its first university-level blockchain research center to ensure wide deployment of the technology.

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Chinese Crypto Bans on WeChat Accounts, Events, and Exchanges: What Happened and Why

This week, the government of China has cracked down on crypto-related WeChat accounts, blockchain events and digital asset exchanges, solidifying its negative stance on cryptocurrency trading and the Initial Coin Offering (ICO) market.

WeChat ban and PBoC’s warning against ICOs

On Aug. 22, Cointelegraph reported that WeChat, China’s biggest messaging app that has over 1 billion active monthly users, banned the accounts of cryptocurrency investors, users and businesses.

At the time, Lanjinger, a local financial media outlet, reported that the accounts of Deepchain, Huobi News, Node Capital-backed Jinse and CoinDaily were suspended or taken down permanently, as they violated its policy entitled “Interim Provisions on the Development of Public Information Services for Instant Messaging Tools” by promoting ICOs and cryptocurrency trading.

While CoinDaily confirmed that its WeChat channel with more than 100,000 subscribers was suspended by WeChat, Leonhard Weese, the president of the Bitcoin Association of Hong Kong, said to Cointelegraph that many accounts — destined to have been temporarily or permanently suspended — were actually taken down due to other sensitive subjects outside of crypto:

“They got blocked for talking about the vaccination scandal, not because of crypto. We find this counterintuitive, but reporting on scandals like that is far more sensitive than talking about crypto or doing crypto. I expect them to have their accounts reinstated in a week or a month.”

Expert argues WeChat ban is unrelated to crypto

In late July, the Chinese medical industry was involved in a major scandal after the country’s main drug industry watchdog released its findings that accused two pharmaceutical firms of developing inferior vaccines and deceiving local regulators.

Specifically, Changsheng Biotechnology was said to have released falsified data on the sale of more than a quarter million ineffective diphtheria, whooping cough and tetanus vaccinations, as Fortune reported.

Weese argued that, given the magnitude of the scandal in China and the global medicine sector, it is more likely that apart from the case of large-scale cryptocurrency accounts like CoinDaily, Deepchain, and Huobi News, most of the accounts that were banned by WeChat were involved in spreading misinformation about the scandal.

But, as one WeChat official confirmed to Lanjinger, the Chinese government vowed to take a stricter approach in cracking down on ICOs and token sales, and Chinese social media platforms will continue to shut down the accounts of individuals and businesses that are utilized to promote and advertise ICOs in the Chinese market, which were banned by the government in late 2017.

“[Accounts were permanently shut down for being] suspected of publishing information related to ICOs [initial coin offerings] and speculations on cryptocurrency trading,” the official said.

In a statement obtained by South China Morning Post (SCMP), the Huobi team denied that the ban of its account was related to the government’s restriction of cryptocurrency, but rather by the “broad action targeting industrial media” by WeChat.

Facebook blockchain initiative to affect China relationship?

In July 2018, Facebook, which was banned in China in 2008, obtained a license to operate an office in China. The social media conglomerate has opened a $30 million subsidiary called Facebook Technology in Hangzhou to finance emerging startups and technology-related initiatives.

“We are interested in setting up an innovation hub in Zhejiang to support Chinese developers, innovators and start-ups,” Facebook told Verge in a statement.

Given the rumors around Facebook wanting to introduce its own cryptocurrency to the global market, it remains unclear whether Facebook’s supposed idea of integrating cryptocurrencies or launching its own blockchain platform could impact its current relationship with the Chinese government.

Chinese social media platforms like Baidu and WeChat have not seen any rumors in both domestic and international cryptocurrency communities regarding cryptocurrency and blockchain-related initiatives, possibly to avoid any conflict with local financial regulators.

PBoC issues warning against ICOs

On Aug. 25, the People’s Bank of China (PBoC), the central bank of the country, issued a warning against ICOs, firmly declaring that raising funds through token sales is illegal in the country. The PBoC and local financial authorities added in an official announcement that it was difficult to track and monitor transactions made through ICOs, even if the token sales are done domestically.

“The funds for these illegal activities are mostly overseas, and supervision and tracking are very difficult.”  

The PBoC further emphasized that, while the country has encouraged the development and commercialization of blockchain technology, ICOs cannot be considered to be legitimate operations or developments on the blockchain. The document reads:

“Such activities are not really based on blockchain technology, but rather the practice of speculative blockchain concepts for illegal fundraising, pyramid schemes and fraud. The main features are as follows:

  1. Risk of illegal activities, unregulated overseas markets and inability to track or monitor transactions made in ICOs.
  2. Deceptive, opaque and concealed fundraising methods, relying on celebrities and influencers to manufacture hype around investments to tempt investors.
  3. Illegal operations like profit-generating pyramid schemes and creating Ponzi schemes by describing them as ‘financial innovations.’”

Sheng Songcheng, an adviser to the People’s Bank of China, also confirmed to state-owned publication ce.cn that the government has decided to strengthen its ban on ICOs, banning public accounts, channels and communication platforms utilized to spread information about token sales.

Rise of OTC trading, Alipay takes notice

In December of last year, during the peak of the cryptocurrency market, when the combined valuation of all of the digital assets in the market totaled at $900 billion, China’s National Committee of Experts on Internet Financial Security — a government-backed research group — reported that the volume of the over-the-counter (OTC) Bitcoin market was rapidly increasing.

“Over-the-counter trading is booming. This warrants further attention,” the researchers said.

At the time, speaking to South China Morning Post, biggest mainstream publication in Hong Kong, Weese said that Telegram has been the go-to platform for large OTC trades due to the connections between local financial authorities and the operators of WeChat, but that a small portion of investors were still using the Chinese messaging platform. Weese explained:

“Telegram is very popular for large, over-the-counter trades. While WeChat is used by the less paranoid.”

Operators of various cryptocurrency exchanges and OTC platforms — including Tidebit — confirmed the rise in activity in the Bitcoin OTC market, stating that investors who could no longer trade within the Chinese market have started to explore peer-to-peer alternatives to invest in the asset class.

This week, Alipay — the most widely utilized fintech platform in China, with a 90 percent market share and a $150 billion market valuation — formally banned OTC trading on the Alipay network, preventing users of the Alipay mobile app to initiate transactions for Bitcoin or digital asset purchases.

Red Li, a cryptocurrency researcher and the founder of Chinese cryptocurrency community 8BTC, revealed that Alipay has begun the process of shutting down accounts involved in OTC Bitcoin trading, most likely due to the government’s request for banks and financial networks to shut down all possible payment channels that could be used to send funds to cryptocurrency trading platforms.

A rough translation of the statement released by Alipay disclosed the intention of the company to permanently ban any account that is reasonably suspected of funding Bitcoin exchanges to invest in the cryptocurrency space.

With the prohibition of OTC cryptocurrency trading by Alipay, the only channel that is left for local investors to allocate funds into the cryptocurrency market is the Hong Kong cryptocurrency exchange market.

Given that investors in China still send millions of dollars to Hong Kong shell companies’ bank accounts to purchase multi-million dollar properties on the Hong Kong real estate market, the possibility of investing through Hong Kong digital asset trading platforms with local bank accounts still exists.

But, due to the country’s strict capital controls and the government’s newly implemented initiative to track down savings and brokerage accounts utilized to evade taxes, it could become even more difficult to send money out of China to overseas markets.

Ban of crypto events

This week, Binance — the world’s largest cryptocurrency exchange by daily trading volume — had to cancel a cryptocurrency-related event in Beijing on August 23, as the government announced a ban on commercial blockchain conferences and meetups.

The local government of the Chaoyang District in Beijing revealed that it has informed hotels and other large-scale venues in the country that they are not allowed to host events that are related to cryptocurrency and blockchain, as part of its larger initiative to completely crackdown on ICOs and distributed fundraising.

In an interview with The Wall Street Journal, a Binance spokeswoman said that she was not aware of the closure of the event because the exchange hosts many events across the world.

“We have so many meetups around the world, and [they] may be canceled due to any reason.”

The People’s Daily, the publication operated by the Communist Party, reported that so-called venture capital-backed media outlets in China have made a significant fortune by creating hype around ICOs, but it is unsure whether the publications will be able to continue promoting ICOs in the long term. The publication could lead investors to believe that local authorities may target independent media outlets that promote ICOs in the months to come.

“These ‘media’ outlets have made huge fortunes in the speculative waves of cryptocurrencies, but due to their nature, it’s doubtful how long their barbaric growth can keep on going.”

Conclusively, in the past two months, the government of China has allocated the majority of its resources to strengthening its ban on cryptocurrency trading and the ICO market.

Given the censorship practiced by WeChat, Alipay and other platforms, along with Beijing’s ban on crypto events, it is likely that the country will see a decline in the adoption of blockchain technology and cryptocurrency development, which is ironic, as China has spent more than $3 billion in funding blockchain projects this year.

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Markets See Red Following BTC ETF Rejections, News of Anti-Crypto Measures in China

Thursday, August 23: virtually all of the top 100 cryptocurrencies are in the red today, with average losses of between 1 and 4 percent among the top 10 largest coins by market cap, as Coin360 data shows.

Yesterday evening’s news of the U.S. Securities and Exchange Commission’s (SEC) disapproval orders for 9 different Bitcoin exchange-traded fund (ETF) proposals from 3 applicants — which intersected with emerging reports of toughened anti-crypto measures in China — has apparently reversed yesterday’s short-lived market upswing.

Pointedly, multiple crypto commentators had attributed the markets’ evanescent green to bulls exploiting a maintenance window on leveraged crypto trading platform BitMEX to force a spike. Many had also argued that the negative announcements from the SEC had been widely expected, and were contributing to the alleged market action.

Market visualization from Coin360

Bitcoin (BTC) is trading at around $6,452 at press time, down around 1 percent on the day, according to Cointelegraph’s Bitcoin price index.

The top coin had been range bound around $6,400-6,500 for most of the week before sharply spiking August 22 and continuing to circle the $6,700 mark for most of that day. Breaking news from the U.S. and China then saw Bitcoin take a steep price hit, although the coin has since recovered back to hold its week-long levels.

Bitcoin’s 7-day price chart

Bitcoin’s 7-day price chart. Source: Cointelegraph Bitcoin Price Index

On the week, Bitcoin is up 0.8 percent, with its monthly losses at around 16.5 percent.

Ethereum (ETH) is trading around $274 at press time, dropping around 2 percent on the day.

While its losses have correlated with Bitcoin’s sharp descent, the leading altcoin has not since recovered to reclaim the earlier trading levels from its weekly chart, although it had notably been losing its hold on the $300 price point as of August 20. Ethereum is currently down 5.6 percent on the week; on the month, losses are at almost 40 percent.

Ethereum’s 7-day price chart

Ethereum’s 7-day price chart. Source: Cointelegraph Ethereum Price Index

Among the top ten coins by market cap, Stellar (XLM), Bitcoin Cash (BCH), Cardano (ADA) and Ripple (XRP) are all seeing losses of around 2-4 percent on the day.

Among the top twenty, NEO’s losses are somewhat heftier, pushing 4 percent to trade around $17.12, after taking a tumble earlier today to as low as around $16.18.

IOTA’s 24-hour price chart

IOTA’s 24-hour price chart. Source: CoinMarketCap

Ethereum Classic (ETC) is down 2.7 percent to trade at $12.40 at press time.

As ETC’s chart agains shows, the market-wide tumble aligns closely by time frame across all of the major crypto assets:

Ethereum Classic’s 24-hour price chart

Ethereum Classic’s 24-hour price chart. Source: CoinMarketCap

Total market capitalization of all cryptocurrencies is around $208.5 billion at press time, down almost $13 billion from yesterday’s high of $221.4 billion.

7-day chart of the total market capitalization of all cryptocurrencies

7-day chart of the total market capitalization of all cryptocurrencies from CoinMarketCap

Today’s $13 billion market cap squeeze is similar the sharp market tumble that came in response to July’s news that another Bitcoin ETF proposal — this time submitted by the Winklevoss twins’ — had also been rejected by the SEC, which then saw a dizzying $12 billion wiped from total market capitalization.

The parallels extend beyond market response, as the regulator had in all of its disapproval orders reiterated its qualms over inadequate “resistance to price manipulation” and vulnerability to fraudulent practices in the insufficiently sized Bitcoin derivatives markets.

China, meanwhile, has this week moved to prohibit all commercial venues from hosting any crypto-related events in Beijing’s Chaoyang district, as well as targeting communication channels or “loopholes” through which Chinese investors can gain exposure to Initial Coin Offerings (ICO) and crypto trading.

As reported August 21, China’s leading social media platform WeChat has permanently blocked a number of crypto and blockchain related accounts that were suspected of publishing crypto “hype” in violation of regulations introduced earlier this month. New measures are also reportedly underway to toughen the “clean-up” of third party crypto payment channels, including those used by over the counter (OTC) platforms.

Away from the negative onslaught from the U.S. and China, crypto analysts have today suggested that Segwit adoption is on the rise for Bitcoin transactions, as the top crypto continues to trade within a relatively stable price range. EToro Senior Market Analyst Mati Greenspan today tweeted:

“Price stability is great for network development!! Here we can see the adoption rate of the Segwit solution skyrocketing shortly after the number of transactions fell. Not sure when the next #bitcoin bull run will be but I’m quite confident we’ll be ready for it.”

Bitcoin Segwit Adoption, January 2016-July 2018

Bitcoin Segwit Adoption, January 2016-July 2018. Source: Woobull charts

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