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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Data Shows US Dollar, Not Japanese Yen, Is Dominating Bitcoin Trade

Japan may not be quite the cryptocurrency powerhouse that the world thinks it is.

A deep dive by CoinDesk has found methodological flaws in widely-cited bitcoin exchange data that appear to overstate the importance of the Japanese yen as a trading pair. Our analysis of trading data collected from July 26-30 suggests that the U.S. dollar, not the yen, is the dominant currency traded for bitcoin by a wide margin.

Currently, analytics sites CryptoCompare and Coinhills offer a breakdown of bitcoin trading by currency pair, and until recently the data from both sites indicated that over 50 percent of bitcoin trading is denominated in Japanese yen.

The problem is that the vast majority of yen-denominated transactions are not “spot” trades of actual bitcoin for yen. Instead, they are derivative products: contracts that derive their value from the performance of an underlying asset.

In other words, the parties to these transactions are betting on the price of bitcoin, but no bitcoin is actually changing hands. While there’s nothing inherently wrong with these contracts, selectively mixing derivative and spot volumes can paint a misleading picture.

Specifically, Coinhills and CryptoCompare, whose data has been cited by major outlets such as Bloomberg and the Wall Street Journal, did not distinguish between the spot and derivative volumes of Bitflyer, Japan’s largest exchange. In other words, both types of trading were counted toward the total for yen-bitcoin activity.

However, their calculations did exclude equivalent dollar-denominated derivative markets such as those on Bitmex.

As a result, the yen and dollar totals were not an apples-to-apples comparison, since the former includes derivative trades and the latter does not. When correcting for the misclassification, the data compiled by CoinDesk paints a starkly different picture.

To be sure, Japan remains a global hotspot of cryptocurrency interest, thanks in part to a law that took effect early last year recognizing bitcoin as legal tender and regulating the country’s exchanges. And the CoinDesk analysis covers only a five-day period, so it isn’t quite conclusive evidence that the U.S. dollar underpins most cryptocurrency trading.

Still, after being contacted by CoinDesk, CryptoCompare changed its methodology, and its data now shows the dollar out-trading the yen.

Further, the inconsistencies in how different types of transactions are counted across exchanges, and the wildly different results when these are addressed, underscore the nascent state of the cryptocurrency industry’s data practices.

Devilish details

As mentioned, the issues with currently available data stem from the classification of Bitflyer’s various exchange markets.

Bitflyer handles both spot trades and derivative trades, but it is the sheer scale of these derivatives trades that can distort market data.

During the time period of CoinDesk’s snapshot, Bitflyer’s Lightning FX derivatives service processed the equivalent of nearly $2 billion in yen-denominated trades every day. These derivative trades accounted for 90% of CryptoCompare’s observed yen trading and 85% of Coinhills’ yen trading.

By itself, the inclusion of derivatives volume would not necessarily be a problem if  CryptoCompare and Coinhills also counted dollar-denominated derivatives markets when tallying the total volumes. Trouble is, they don’t.

For perspective, Bitmex, the largest dollar-denominated derivatives market, recently set a record of over $8 billion of contracts traded in a single 24-hour period (July 23-24), dwarfing Bitflyer’s volumes. These derivative trades are uncounted in CryptoCompare’s and Coinhill’s respective measures of total USD-BTC trading.

To create a more balanced comparison of global trading activity, CoinDesk took a snapshot of both the spot market, which excludes all derivative trading, and the total market, which includes all spot trading and the dollar and yen volume at the four major derivative exchanges: Bitflyer’s Lightning FX, Bitmex, CME and Cboe.

Both these measures indicate that the U.S. dollar dominates worldwide, with the yen a distant second.

For example, the dollar accounted for only 17 percent of CryptoCompare’s tally and 21 percent of Coinhills’ figure for those five days in July. In CoinDesk’s apples-to-apples snapshot, by contrast, the dollar makes up 56 percent of spot market trading and 68 percent of total trading when including major global derivative markets.

Regulatory implications

The findings are notable as the spot market is particularly relevant to officials concerned about potential illicit uses of cryptocurrency.

Any unsavory actor attempting to make use of ill-gotten gains today must rely on spot exchanges to convert cryptocurrencies into fiat currency.

The dollar’s role in this exchange ecosystem extends the reach of the U.S. government. Just as the dollar’s preeminence in the international financial system gave U.S. regulators the leverage they needed to shape global anti-money laundering (AML) practices in the wake of 9/11, the dollar’s importance in global fiat-to-cryptocurrency trade could give them outsized influence as governments around the world mull new regulatory frameworks for cryptocurrencies.

For example, Japanese officials have thus far led the push for global cryptocurrency AML standards in international forums like the G20 and the Financial Action Task Force, but continued dollar dominance of cryptocurrency trading could inspire a more active U.S. presence.

Yaya Fanusie, director of analysis at the Center on Sanctions and Illicit Finance at the Foundation for Defense of Democracies and co-author of a report on bitcoin laundering, told CoinDesk:

“If your assumptions are correct and the dollar in fact dominates on crypto exchanges around the globe, this data could prompt U.S. regulators to take a more active role.”

Data deluge

To be fair, the uncertainty, complexity and constant churn of the exchange market leaves analytics sites like CryptoCompare, Coinhills and others struggling to keep up. In such an environment, errors are bound to occur, even with data from large, highly regulated exchanges like Bitflyer.

When contacted about the inclusion of Bitflyer’s derivative data, both CryptoCompare and Coinhills acknowledged that data from Bitflyer’s Lightning FX derivatives market was the root cause of their observed yen dominance.

“We do currently count Bitflyer’s Lightning FX volume, and thank you very much for pointing this out. We plan on excluding Bitflyer’s futures volumes from calculations at the end of this month,” Constantine Tsavliris, an analyst at CryptoCompare, told CoinDesk.

Subsequently, CryptoCompare, which recently announced a data partnership with Thomson Reuters, indeed removed Biflyer’s derivatives market data from its calculations.

A Coinhills representative stated that the company is exploring adding other major derivatives markets such as Bitmex.

While the industry continues to mature by the day, it remains the Wild West for all observers hoping to gather a clear image of the cryptocurrency exchange market.

For more data, research and analysis, check out CoinDesk’s recently released Q2 2018 State of Blockchain report.

Dollar vs. yen image via Shutterstock.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Indians Use Creative Means to Trade Bitcoin Amid RBI Ban

Regulation

Indian crypto traders have found some creative ways to trade cryptocurrencies, especially bitcoin, to circumvent the crypto banking ban imposed by the country’s central bank. The Reserve Bank of India has banned financial institutions from providing services to companies dealing in cryptocurrency.

Also read: Yahoo! Japan Confirms Entrance Into the Crypto Space

Money Finds a Way

Indians Use Creative Means to Trade Bitcoin Amid RBI BanFollowing the crypto banking ban by the Reserve Bank of India (RBI) which went into effect last month, Indian traders are finding multiple ways to bypass the ban.

One of the methods they are using is referred to as Dabba trading, Business Today recently reported:

Ever since the banks were stopped from providing financial services to digital exchanges, the trade of bitcoin through Dabba trading has increased manifold.

Indians Use Creative Means to Trade Bitcoin Amid RBI BanIn Dabba trading, brokers do not execute trades on a “system connected with commodity or stock exchange,” the news outlet described. Instead, they transfer “money through hawala network” and trade “using an overseas bank trading account,” most of which are based in Europe, especially the UK and Dubai.

While “mostly used for trading in stocks,” the publication explained that this method “has seen an upsurge as traditional Dabba operators are accepting bets on bitcoin too, giving a boost to their overall earning,” adding:

Such traders are based out of Ahmedabad, Surat, Rajkot, Kolkata and Mumbai. They work as a bridge between a customer and foreign trading company. The broker accepts money in cash, buys bitcoins using an overseas trading account and sells them when the bet placed in India is settled. The difference is paid in cash to the customer.

Where are the Deals Happening?

Indians Use Creative Means to Trade Bitcoin Amid RBI BanMost Dabba deals are done “via messaging app Telegram, cloud-based instant messaging service with end-to-end encryption and the money in cash is routed through the hawala channels,” the publication detailed.

Citing that “such deals are also happening through official channels like brokers who maintain bank accounts in India as well as overseas,” the news outlet elaborated:

The money is then routed through official or unofficial channels to the foreign account where bitcoins are bought and sold. The money is usually paid in cash or cheque to the investor following the deduction of commission or any loss.

Cash and P2P Markets

The use of physical cash for crypto trading has also surged since the RBI ban took effect, the news outlet noted. “The cash market existed way before the RBI diktat on cryptocurrencies but it has now flourished as people with illicit cash are using it to earn more money.”

In addition, a number of crypto exchanges in India have launched peer-to-peer (P2P) trading solutions to circumvent the ban. News.Bitcoin.com recently reported on a few crypto exchanges launching P2P trading services – Koinex, Wazirx, and Coindelta. A few others such as Giottus, Instashift, and Zecoex also offer some forms of P2P systems. Furthermore, Chinese exchange Huobi has reportedly said that it will launch P2P trading in India.

Disclaimer: Bitcoin.com does not endorse or support claims made by any parties in this article. None of the information in this article is intended as investment advice, as an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement, or sponsorship of any products or companies. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

What do you think of Indians using these methods to bypass RBI’s ban? Let us know in the comments section below.


Images courtesy of Shutterstock.


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BINEX.TRADE Unveils Alpha Launch: A New Era for Crypto Trading


This is a paid-for submitted press release. CCN does not endorse, nor is responsible for any material included below and isn’t responsible for any damages or losses connected with any products or services mentioned in the press release. CCN urges readers to conduct their own research with due diligence into the company, product or service mentioned in the press release.

Bitcoin Press Release: Binex.Trade exchange has announced that the alpha launch of their platform will go live on July 17th, 2018.

July 18th 2018, Singapore: Months of hard work and the BINEX team have finally arrived at their big day, the Alpha Launch. The team has been receiving support from the Crypto community throughout their journey, and they are glad to receive such an overwhelming response. It gives BINEX.TRADE immense pleasure to unveil the Alpha version of the Exchange to the Binex family of more than 85,000 Users.

The Alpha Launch is on the 17th of July, 2018. The main objective of the Alpha Launch is to test the exchange’s live performance with traders. The company plans to launch the exchange initially with the basic features, and post Alpha Launch will come up with the Beta version of the exchange with advanced features.

BINEX.TRADE promises to deliver excellence to its users, and their ultimate motto is to create a hassle-free trading platform that caters to every need of the trader.

In the initial days of the launch, traders can have the first-hand experience of transacting in trading pairs including BTC, ETH, BEX, USDT, LTC, and XRP. The exchange is designed to provide the traders with a smooth and user-friendly experience. From top-notch Security, Leveraged Trades, Analytics Dashboard and insightful Reports to maintaining Liquidity, Powerful Matching Engine, and Volatility Monitoring, the exchange has it all.

As mentioned earlier, BINEX.TRADE offers 70% of the trading commission to the users holding BEX on a daily basis. Apart from the Revenue Sharing phenomena here are the features that will set the benchmark for Crypto trading:

Advanced Trading Features

Features provided by the Exchange can ease trading and help traders earn more. Traders might need to keep a watch on the price trends of a cryptocurrency for which a price chart can be useful. Reports on daily, weekly or monthly trades can help traders track their earnings. An Analytics Dashboard can help traders build a strategic portfolio. All these features help traders make better decisions while trading.

Leveraged Trades

Features like Margin Trading enable traders to leverage their trade quantity and profits. BINEX.TRADE Exchange allows the user to open a position at a 2x to 3x leveraged amount in Margin Trading. The exchange also provides for an automatic exit feature that closes the user position at the most efficient rate so that the user doesn’t miss the opportunity.

Liquidity and Volatility Control

BINEX.TRADE ensures the efficient management of Market Volatility to secure the interest of its traders. It also eliminates the Liquidity Risk on the Exchange through continuous monitoring of the transactions. The higher the liquidity on the Exchange, the better the price economy and faster the transactions.

Powerful Matching Engine

Cryptocurrency markets are extremely volatile and even a second’s delay in the execution can lead to a loss. BINEX.TRADE has an efficient Matching Engine that helps smooth trading through quick buying and selling.

High End Security

BINEX.TRADE is designed to function on a Multi-Tier Platform that offers High-End security. The platform ensures secured transactions with a two-level Encryption which is at the Database level and the API level. The platform also provides enhanced security at the User level with Secured Login, Captcha, 2 Factor Authentication, Email Verification, Same Browser Login and Summary Page Approval.

Apart from the onboard Exchange features, BINEX.TRADE has come up with a reward of

1000 BEX for reporting a bug on the Alpha version.

Customer Service Support is available round the clock for the traders and users pre and post Alpha Launch.

About BINEX.TRADE

Binex.Trade, a cryptocurrency exchange that aims to reinvent the sharing economics by combining the power of BEX token and decentralization to deliver profits to our stakeholders from our daily trade revenue.

Visit our website: https://binex.trade
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Name: Vishal Gupta
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BINEX.TRADE is the source of this content. Virtual currency is not legal tender, is not backed by the government, and accounts and value balances are not subject to consumer protections. Cryptocurrencies and tokens are extremely volatile. There is no guarantee of a stable value, or of any value at all.

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‘World’s First’ Trade Blockchain Launches in Singapore to Link China and ASEAN Nations


A Singapore-based e-government service provider – notably owned by a government body and a port operator – has launched a blockchain platform focused on cross-border trade between ASEAN nations and China.

Singapore-based CrimsonLogic, an e-government solutions provider with a presence in over 20 countries, announced [PDF] details of its ‘inclusive and extensible blockchain service’ that the company says will will ‘boost overall efficiency, security and transparency’ for global trade.

The company launched the blockchain platform through its fully-owned subsidiary GeTS, labeling it the GeTS Open Trade Blockchain Platform. The platform will function as a permissioned blockchain network comprised of trusted nodes operated by accredited participating companies. Shippers, freight-forwarders and other key stakeholders in a trade flow will benefit from the blockchain platform, the press release added, due to enhanced security and seamless sharing of trade documents including a cargo’s origin certificate and commercial invoices.

In essence, the blockchain platform will offer a user-friendly interface with ‘drag-and-drop simplicity’ to share trade documents between port operators, shippers and buyers/sellers, enhancing transparency and efficiency in a trade and supply chain.

CrimsonLogic chairman Eugene Wong put the spotlight on trade between China and ASEAN nations as the primary focus of the trade blockchain, explaining:

“We believe that our Blockchain technology can help create greater trust amongst cross-border traders in ASEAN and along China’s BRI and Southern Transport Corridor. Trade volume between ASEAN and China would become the single largest transaction between two regions and we hope to facilitate this.”

Although the blockchain will remain a permissioned (private) blockchain, the company confirmed its ‘open infrastructure’ will enable developers to build new layers and services for specific use-cases in the trade flow.

CrimsonLogic is notably co-owned by the Port Authority of Singapore (PSA) – one of the world’s largest port operators – which sees a 45 percent stake in the company. As reported by CCN last year, PSA entered a partnership with technology giant IBM to develop proof-of-concept blockchain solutions for supply chain networks in the region. IBM has also been working with the PSA for early-stage trials of transnational container shipments tracked on a blockchain, further underlining the wider shipping industry as a prime sector for disruption by decentralized blockchain tech.

Singapore Port image from Shutterstock.

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Government-Backed Blockchain Trade Platform Launches in Singapore

CrimsonLogic, a Singapore-based e-government service provider owned by a government agency and a major port operator, has announced the launch of a blockchain platform focused on cross-border trade.

The firm’s fully-owned subsidiary GeTS launched the service on Wednesday, according to a press release. Dubbed GeTS Open Trade Blockchain, the platform is a permissioned network that is run and validated by accredited trade compliance firms acting as nodes.

On top of the open infrastructure, companies in the cross-border supply chain industry can develop decentralized applications for specific needs. The goal is to enable different parties, such as ports, shipping companies and customers, to view and transact trade-related documents in a distributed way to improve supply chain efficiency and transparency.

Eugene Wong, chairman of CrimsonLogic and GeTS, said in the announcement:

“We believe that our blockchain technology can help create greater trust amongst cross-border traders in ASEAN and along China’s Belt Road Initiative and Southern Transport Corridor. Trade volume between ASEAN and China would become the single largest transaction between two regions and we hope to facilitate this.”

Currently, CrimsonLogic’s biggest shareholder (with 55 percent ownership) is IE Singapore, a government agency under the Ministry of Trade and Industry, which fosters the growth of Singaporean businesses overseas.

In February, PSA International, which operates ports in South America, Southeast Asia and Europe, became the other major stakeholder of CrimsonLogic through an acquisition of the remaining 45 percent of the firm.

The blockchain effort follows a pilot program conducted by PSA and IBM last year that tested a proof-of-concept aimed to automate trade document transactions via a distributed network for supply chain partners.

Earlier this year, the companies claimed the proof-of-concept successfully tracked and transacted trade information during a cross-border shipment from China’s Chongqing city to Singapore.

Cargo ship image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Is India About To Reverse Its Crypto Trade Ban?

On July 20, the Supreme Court of India will hold a hearing regarding the state of cryptocurrencies in the country. It is a decisive date for the local crypto industry that has been significantly suppressed in the past month by the Reserve Bank of India’s (RBI) ban on all banks’ dealings with crypto-related businesses.

The hope for an overview of the hardline approach lives on, however, as last week a report citing anonymous sources in the government suggested that cryptocurrencies might be viewed as commodities in the future, and hence become regulated by relevant authorities rather than remain mostly banned.

Brief history of cryptocurrencies in India

India has not been perfectly cohesive in its stance toward crypto. The relationship between the two dates back to December 2013, when the RBI first issued a general public announcement to potential crypto users, warning them about typical risks involved — volatility, security and ties to illicit activities. Since then, the agency has been putting out similar notes in response to crypto’s gaining popularity, with the last one being issued on December 2017.

Those kind of warnings, however, failed to address the legal status of Bitcoin (BTC) and altcoins in the country — as Dr. S.P. Sharma, Chief Economist, opined in an interview with the Economic Times of India in October 2017, “neither has the government formally brought Bitcoin under the definition of currency, nor has it made it illegal.” According to some experts, the state chose the passive role simply due to not having a coherent plan in mind. Thus, Anirudh Rastogi, managing partner at the law firm TRA, told Quartz India:

“[Not having a concrete strategy] is the reason why they have been reiterating similar comments and warning the common investors to not go overboard.”

Nevertheless, as cryptocurrencies gained even more extreme momentum in December 2017 — when Bitcoin was infamously trading for $20,000 — the government stepped in with straightforward action, as India’s Income Tax Department began its major sweep. According to Business Standard, by December 13, the watchdog had visited nine virtual currency exchanges in Bengaluru, Hyderabad, Mumbai, Delhi and Kochi on the matter of tax evasion. Further, the agency reportedly sent tax notices to as many as 400,000-500,000 investors, based on their transaction history.

The situation became even less optimistic for cryptocurrencies after India’s Ministry of Finance compared Bitcoin to a ponzi scheme and local banks — including State Bank of India (SBI), Axis Bank, HDFC Bank, ICICI Bank and Yes Bank — began taking strong action against crypto exchanges by either closing their accounts altogether or significantly curtailing operation.

In April 2017, the RBI announced that the bank would no longer provide services to any person or business that deals with cryptocurrencies, and that decision essentially became law on July 5, when the deadline expired. That means that Indian citizens are currently not able to buy and sell cryptocurrencies on exchanges. Instead, they need to use peer-to-peer networks, where mainly crypto-to-crypto operations are allowed. If an Indian citizen wants to exchange crypto to fiat, then they will need to turn to marketplace exchanges or the black market, the Times of India explains. Additionally, crypto exchanges and companies cannot receive loans from banks in India, according to the legislative.

New reality: outlawed crypto

It would be fair to argue that the Indian government’s hardline regulatory action thus far has only prompted the crypto industry to go underground, and has therefore become even less regulated. At this point, a significant number of local exchanges have either closed shop or partly ceased their operation: The first victims were BTCXIndia and ETHEXIndia, who chose to shut down back in March, when the RBI ban hadn’t been announced yet. BTCXIndia cited the Indian government’s “discouraging cryptocurrency trading” as the primary reason for closure at the time. Both of them are inactive to this day.

The largest remaining players, namely Zebpay and Unocoin — Coinsecure is still offline due to the recent cyberattack — now warn their clients that rupee withdrawal processes can be compromised at any time due to the RBI ban deadline. In its announcement regarding the matter, Unocoin mentions that they are “in the process of deploying new mechanisms for INR deposits and withdrawals,” and has introduced Unodax — a peer-to-peer solution bypassing the RBI ban. Similar services have been rolled out by other Indian exchanges, such as WazirX and Koinex.

Meanwhile, as the Times of India reports, a number of opportunists used the RBI ban for their advantage by cashing in on the panic sales in India via “arbitrage” — a strategy that implied buying BTC within the Indian market on the cheap, transferring it to a middleman in another country, who would then sell it there for a better rate and share the profit among the both parties involved.

Even more confusion was caused by a Bloomberg article quoting anonymous parties with “direct knowledge” of the government plans to impose an 18 percent goods and services tax (GST) on crypto, as it could hardly coincide with the RBI ban — how can cryptocurrencies be taxed, when one can’t even trade them? Nevertheless, such news indicate that more positive regulation might be on the way, or merely that different government agencies take varying approaches toward crypto, not coordinating their moves among each other.

New hope: the commodity route

On July 11, Quartz India published an article dubbed “India may not ban cryptocurrency after all” — the piece cited an anonymous source and claimed that “a finance ministry panel set up to study [virtual currencies] may even suggest that they be treated as commodities.” Thus, a senior government official privy to the matter told the news outlet:

“I don’t think anyone is really thinking of banning [cryptocurrencies] altogether. The issue here is about regulating the trade and we need to know where the money is coming from. Allowing it as [a] commodity may let us better regulate trade and so that is being looked at.”

Viewing cryptocurrencies as commodities resembles the U.S. Commodity Futures Trading Commission’s (CFTC) approach. The U.S. agency that fully controls commodity derivatives transactions in the country claims that tokens are commodities: Essentially, in their view, Bitcoin is closer to gold than to conventional currencies or securities, as it is not backed by the government and doesn’t have a liability attached to it.

Shubham Yadav, co-founder of Coindelta — an Indian cryptocurrency exchange — agrees with that viewpoint:

“Though cryptocurrencies belong to a new class of financial assets, we can still welcome them as commodities and not currencies because of their high volatile prices.”

The cryptocurrency panel cited was set up in December 2017 with the purpose of understanding the expanding crypto industry, and it includes Subhash Chandra Garg, secretary in the department of economic affairs; BP Kanungo, deputy governor of the RBI; and Ajay Tyagi, chairman of market regulator Securities and Exchange Board of India. It is the second cryptocurrency panel in India, while the first panel — established by the Narendra Modi government in April 2017 — recommended “slowly choking” the industry: It couldn’t be stopped in one day, as people would lose a lot of money, they argued, which is why a more timely approach was needed.

In June, Subhash Chandra Garg, the head of the newer — and more crypto friendly — panel, told local news outlet ET news that his task force was almost ready to introduce a draft for a crypto regulatory framework and promised to deliver it within the first two weeks of July — no such announcements have been made by press time, however.

“We are fairly close to developing a template [for the cryptocurrency industry] that might be in the best interests of our country. We have moved pretty far in this regard, and we have prepared a draft that entails what parts of this businesses should be banned and what should be preserved.”

Local cryptocurrency firms are open for negotiations with the government, and, as Quartz points out, “have already agreed to be open for more scrutiny.” Additionally, they assure that solid Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures are already implemented, while they are willing to introduce other suggestions. Shubham Yadav, co-founder of Coindelta, told the publication:

“We are also ready to work with the government and assist them on creating a regulatory framework. We can help them in designing a monitoring system for blockchain where it can remotely monitor all transactions.”

The central bank’s controversial ban has prompted both public and industry-led petitions, with some appealing to the courts on the grounds that the decision is unconstitutional.

Thus, the community awaits July 20, when the Supreme Court of India will come up with a clear-cut position regarding the RBI blockade. However, it is worth noting that on July 3, the court ruled not to grant interim relief to those affected by the ban at a hearing of the Internet and Mobile Association of India (IAMAI) — organization comprised of members of several crypto exchanges that are challenging the RBI’s stance.

At a previous petition hearing on May 17, IAMAI was reportedly requested to submit a representation against the central bank.

In any case, blockchain is welcome

Similar to China, the Indian crypto ban — although it is objectively less harsh than the Chinese one — coexists with the government positive stance toward blockchain technology. For instance, on the same day as it introduced the crackdown measures, the RBI announced its plans for issuing a central bank-backed digital currency (CBDC). The RBI Deputy Governor BP Kanungo told the Times of India at the time:

“Technological innovations, including virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system.”

Nevertheless, India is home to existing blockchain adoption initiatives as well. In May, seven of India’s largest banks joined a blockchain-powered trade finance initiative led by local IT giant InfoSys. The alliance, known as India Trade Connect, includes participants such as Axis Bank, ICICI and South Indian Bank. It was reportedly formed to conduct tests of InfoSys’ Finacle Trade Connect, a blockchain platform designed to “address the trade finance process requirements of banks.”

Moreover, in June, the government of the south Indian state of Kerala announced that it will use blockchain for food supply and distribution in a new project headed by Keralan think tank the Development and Innovation Strategic Council (K-DISC). It will use blockchain and Internet of Things (IoT) technology to make the state’s supply network for dairy products, vegetables and fish more efficient, further establishing blockchain as a viable tool for the local economy.

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Hong Kong Monetary Authority to Launch Multi-Bank Blockchain Trade Finance Platform

Hong Kong’s de facto central bank will launch its own blockchain trade finance solution with 21 banks in August, Financial Times (FT) reported Sunday, July 15.

The joint venture between the Hong Kong Monetary Authority and Chinese company Ping An Group’s fintech subsidiary OneConnect aims to substantially reduce paperwork, costs security risks for participants, FT reports.

A major aim of the 21-party scheme is to reduce the amount of time and bureaucracy involved in signing up new fledgling businesses to banking services by smoothing over transactions.  

Using blockchain, “some” transactions will process in just one day against up to fourteen days using current methods, as FT reports.

Originally announced in November 2017, the move marks the first example of a regulator “bringing banks together” to improve trade finance, as Ping An deputy chief executive Jessica Tan described it. As Cointelegraph reported in May, a previous trade finance deal from HSBC was a smaller-scale affair, involving an individual bank.

“Instead of individual banks trying to do this you have the regulator trying to bring the banks together,” Tan told FT.

Ping An has already developed blockchain-powered solutions for the Chinese domestic market, and hopes the same technology will see success over the border, according to FT. The company, China’s second-biggest insurer with assets worth 4.7 tln yuan ($704 bln), joined the distributed ledger technology-focussed R3 Consortium in 2016.

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