SEC Investigating Crypto Company Salt’s $50M Sale

Salt Lending Holdings Inc., a lender that uses cryptocurrencies as collateral, is under investigation by the Securities and Exchange Commission (SEC) for a roughly $50 million dollar ICO it held in August 2017.

Subpoenaed for ICO Records

Salt was one of the first digital lending companies to come on the scene, incorporating in 2016 and launching their ICO in 2017. The company allows customers to use cryptocurrency or other blockchain-based assets as loan collateral, regardless of their credit score, thereby circumventing the traditional lending structure. In order to use the platform, Salt’s token must be purchased.

The company was subpoenaed in February for records of the sale. The Wall Street Journal (WSJ) reported Thursday that Bitcoin entrepreneur and CEO of cryptocurrency exchange ShapeShift AG, Erik Voorhees – who sits on Salt’s board of directors, may be entangled in the investigation. The SEC’s current probe is to uncover whether Voorhees broke any laws with his involvement in last year’s coin sale.

The SEC is looking into whether the $50 million dollar sale should have been declared a securities offering and registered with the SEC. Officials are also combing through documentation provided by Salt to determine how those involved in the sale acquired their tokens, how proceeds from the sale were used, and whether Voorhees violated a 2014 SEC settlement banning him from fundraising.

In Violation of the Securities Act

In 2014, the SEC investigated Voorhees for his role in promoting the companies SatoshiDICE and FeedZeBirds which raised money from investors in Bitcoin. He was ultimately charged with offering unregistered securities and had to pay over $50,000 in penalties and disgorgement and was found guilty of violating the Securities Act of 1993. Voorhees also agreed to “not participate in any issuance of any security in an unregistered transaction in exchange for any virtual currency including Bitcoin for a period of five years.”

Former SEC Division Director Keith Higgins told the WSJ that Voorhees would not be protected under safe harbor laws if he were found to be involved with Salt’s ICO, stating:

“A provision in the settlement makes him a so-called ‘bad actor’ unable to rely on an SEC safe harbor for private, unregulated stock sales.”

A separate lawsuit was filed against Salt on Tuesday in Colorado state court by a former employee, who alleged the company gave some of its executives and their families a better deal on loan terms. The suit also claims Salt lost $4 million in crypto due to a hack in February. However, Voorhees was not named in that lawsuit, according to the WSJ.

Jennifer Nealson, an executive with the company, told the WSJ that while Voorhees was an “early contributor” to Salt’s efforts, he “no longer serves in any formal capacity” with them.

Despite this, Salt does list him as a director on their form D filed with the SEC in 2016, and on promotional materials used to promote the ICO, according to the WSJ. If the SEC concludes that Voorhees’ involvement prevented the company from raising funds privately, civil penalties may be in order.

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Marshall Islands Government Votes to Move Forward With Plan for State Cryptocurrency

The Republic of the Marshall Islands will move forward with its plan to introduce its own cryptocurrency, despite a vote of no confidence against President Hilda Heine’s support of the venture, according to reports on Tuesday.

A ‘Sovereign’ Crypto Nation

The Pacific Island nation intends to introduce a cryptocurrency called the Sovereign (SOV), to be used as a form of legal tender alongside the U.S. dollar, according to the Independent. The plan led eight senators of the Marshallese government to accuse President Heine of damaging their country’s image by advocating for the cryptocurrency and called for a vote of no confidence against her. Heine survived it by one vote.

The country’s Finance Minister Brenson S. Wase confirmed the decision to move forward with the proposal, according to the Nikkei Asian Review. The publication added that concerns over the plan being backed by China motivated the vote against Heine, as support from the Chinese government may be interpreted as undermining Marshallese authority.

The government aims to take the ICO route to fund the new currency, pursuing half the money necessary to get it off the ground from foreign investors. Once the goal is reached, the remainder will reportedly either be kept in a government trust or distributed to the country’s citizens.

Already Approved as Legal Tender

Minister-in-assistance to President Heine, David Paul, says the SOV’s status as legal tender equal to the U.S. dollar has already been approved, paving the way for its regulation. An official statement from the Marshallese government reads:

“This creates legal certainty for its use, because all jurisdictions have laws in place for dealing with legal tender, whereas private cryptocurrencies are dealt with differently in different jurisdictions.”

Despite the potential risks of issuing the SOV, which include the loss of the Marshall Islands’ correspondent banking relationship (CBR) with the dollar according to the IMF, the Marshallese government does appear to be taking the correct steps to deal with such liabilities. A recent report by the IMF that advised against the issuance of a government crypto stated:

“They have created a high-ranking committee to examine all the risks, including those raised by the IMF and the US Treasury, and those discussed during the public hearings on the legislation.”

Israeli startup Neema reportedly convinced the Marshallese government it could profit from introducing its own cryptocurrency, spurring the SOV’s development. The official website of the currency distinguishes it to be more digital fiat than crypto, asserting it will meet the highest regulatory standards for money. The site claims the currency will serve as a bridge between fiat and cryptocurrencies while opening up new opportunities for smart contracts and financial products written on-blockchain.

The SOV will allegedly get around money laundering concerns via built-in know your customer (KYC) technology called the Yoke Protocol only allowing transfers between wallets that have been identified with a token. The protocol will also allow users to establish that transferred funds are from verified users.

Twenty-four million units of the currency will be minted at launch, with an annual four percent projected growth rate, according to the RMI’s Sovereign Currency Act. Following the launch and completion of the ICO, vendors, and citizens will be able to conduct business with the SOV via an app.

The IMF’s report states that the issuance of the SOV is likely still a few years away, as it must first comply with Financial Action Task Force (FATF) regulations and the U.S. government must also approve the SOV’s use in transactions within the U.S. financial system.

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BitMEX CEO Denies Allegations of Trading Against Customers

Last month an independent crypto researcher who goes by the name, Hasu, posted an article exploring some of the most prevalent concerns users have with crypto exchange behemoth BitMEX, one of which is that the exchange trades against its customers to make a profit. BitMEX CEO Arthur Hayes publicly came out against the allegations on Monday in an interview with Yahoo Finance.

Hasu brought up three shady practices in his article that he claims the people he spoke with – on condition of anonymity, had concerns about. While there is no hard evidence to support them, he still views them as valid in consideration of the incentive BitMEX has through them to make money.

  1. BitMEX trades against its customers.
  2. The exchange “weaponizes” server problems.
  3. BitMEX monetizes customer liquidations via its insurance fund.

The Desk

BitMEX has its own trading desk that acts, according to BitMEX’s website, as a market-maker posting bid and sell orders to bring liquidity to the market. They fill an exchange order book, and others match those orders. Any money made by a market-maker is gained through the spread of pricing, not through trades.

This is exactly what Hayes claims BitMEX’s trading desk does, stating in the interview with Yahoo that no one is granted exclusive or special access to the desk’s information:

“They have the same trading rights as any other regular trader, they can’t see the liquidation prices of any of our customers. We don’t trade against our customers. It’s actually pretty bad business model and introduces a lot of risk into what is right now a riskless business model, BitMEX. We match trades, that’s it, we have no risk. Trading against our clients is nonsensical.”

Hayes also states on BitMEX’s official blog that “no front office personnel are shared between the trading business and [BitMEX],” and

“that the trading business operates from a separate physical location, and…does not have access to any platform order flow, execution, customer or other information on terms that are not otherwise available to any other platform user.”

In his post, Hasu alleges that the exchange kept its trading desk a secret, and even insinuates that that may have lost their legal counsel after making it known to the public. He asserts most of BitMEX’s customers “don’t believe” that their trading desk breaks even, and cites a lack of an external audit of their business practices as the source of customer concern.

“Weaponized” Tech Issues

To Hasu’s second point, when the exchange receives more orders than it can process at once, which is frequently, BitMEX will temporarily shut users out and close down to trading. It is during this period that the people who spoke with Hasu think others are given priority access to the network while everyone else is forced to sit and twiddle their thumbs.

Bitcoin Bear Market Could Last Another Year and a Half, Says BitMEX CEO
Related: Bitcoin Bear Market Could Last Another Year and a Half, Says BitMEX CEO

In his article, he alleges server overloads happen as many as two to three times daily, and that while the desk contends it closes open orders first, it’s impossible to do so with certainty when users are logged out of their accounts and can’t get back in to close their orders. Furthermore, the article cites the “market keeps moving” during these outages and takes that activity to mean that someone is still able to trade.

Theoretically, this could allow someone to buy an asset on BitMEX while the price is frozen cheap, then sell it at a gain elsewhere.

Hayes also denies this, reiterating that his company doesn’t give priority access to anyone, though he stated during the interview that they’ve been asked before:

“Many clients, larger traders, ask us for a special API, or can we colocate somewhere, or can we get a special order type so we can bypass the queue and we’ll pay for it or when there’s a time of system overload can we get priority access? The answer to that is always no.”

Hayes also attests BitMEX’s top priority is fixing the exchange’s server issues, and that they’ve increased the volume of orders they can process already.

The Fund

The third point raised in hash’s article was BItMEX’s insurance fund. He upholds that the fund is far, far larger than necessary to cover BitMEX’s losses, even in a worst-case scenario. The fund stands around 14,000BTC, with 11,000 of them allegedly added this year. The fund gains money when a leveraged trade is closed out and BitMEX liquidates the order. If there is a surplus of money after a liquidation, it goes into the fund.

The insurance fund is meant to provide resources in times when the market is especially volatile, as a backup if the price of BTC moves drastically before an order can be closed. Hasu contends the fund is actually making BitMEX money, saying that BitMEX views it as an asset since they don’t store the BTC in a separate account or cap its growth. He argues that it creates an incentive to grow the fund as large as possible, then liquidate it. 

According to Hayes, however, the fund is “a function of the market,” and the large amount stored there could be needed. When the SEC denied an application to offer Bitcoin ETF last year, Hayes says the fund was basically emptied, stating:

“The price dropped about 30% in about five minutes and we actually emptied our entire insurance fund and we still had to close out traders who were short, had the correct position, but they didn’t get the full benefit.”

He added,

“A lot of people have forgotten about that but it was actually very traumatic for a lot of clients who put on a position, expected a certain amount of profit, we weren’t able to live with that.”

After Yahoo’s interview was published, Hasu responded on Twitter that while Hayes addressed the concerns listed, he did not speak to the list of suggestions offered at the end of Hasu’s piece.

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$62 Million Litecoin Transaction Sent for Fifty Cents: The Potential of Crypto Transactions

On Nov. 9, the Litecoin (LTC) news site litecoin.com reported one of the highest transactions to date on the LTC network, valued at 1,159,005.90779568LTC, or roughly $62M USD. Aside from the sheer amount of money moved, the transaction gained attention because it was settled for a mere fifty cents.

Cutting Expenses

In the world of conventional currency, bank fees can run $45 or higher per transaction and can be held up while waiting on confirmation from intermediaries. Other crypto assets like Ripple’s XRP are trying to build a brand based on circumventing the present infrastructure for cross-border payments, which can be the most expensive of all.

The LTC funds were made in a series of transfers which appear to have consolidated the crypto under a single multi-signature address. That address is now reportedly one of the richest LTC addresses on the network. The theory put forward by Litecoin.com is that a large entity, possibly an exchange, owns it, and transferred the funds there as part of its cold-wallet holdings:

“…it is most likely an exchange cold wallet which is used to securely store funds that are held on an exchange offline away from potential attackers. The move into a multi-signature address would provide the owner(s) better security as any transactions would need to be signed off by multiple parties as unlike with Legacy addresses there are multiple private keys to the address.”

Transaction fees for crypto are going down across the board, with other massive transfers of cryptos like Bitcoin being conducted for the equivalent of $0.10 at the time of this writing. The average transaction fee for BTC is still somewhere around $0.36, according to Live Bitcoin news, but that’s still far better than last year’s $25-$55.

Trying to Leverage the Potential of Decentralization

Aside from security concerns, transaction fees and the amount of time it takes to transact in crypto are two of the biggest roadblocks to mainstream acceptance of cryptocurrencies.

Related: Ripple Labs Expanding Via Partnerships with Gates Foundation, Omni, and Nexo

If fees continue to drop and transactions become more efficient, crypto could become a viable option for the transfer of even very large sums of money. Developments like the Lightning Network are bringing this closer to reality, even for notoriously clunky BTC, and products like Xcurrent and Xrapid are trying to get big banks on the crypto train. 

The ease with which crypto can be transferred has also led to charitable organizations branching out into countries like Africa, where they are trying to put currency in the hands of people without financial infrastructure. Crypto’s decentralized nature makes this easy but also makes security an issue, as less oversight means more opportunities for fraud.

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Fake EOS Wallet Found Stealing User Funds

A fake EOS wallet app on the Google Play store has been stealing cryptocurrency. EOS developers took to Twitter Thursday morning to warn the community.

A Reasonable Facsimile

EOS RIO is an independent software firm based in Rio de Janeiro. The group is designated as one of the 21 ‘Block Producers’ for EOS, one of the primary governing bodies on the EOS blockchain.

The fake app, SimplEOS was designed to mimic the appearance of other apps made by EOS RIO. Once downloaded, the wallet app would steal funds by deceiving users into divulging their private keys.

Following the app’s appearance, EOS RIO warned the community in a Tweet that the group currently has no apps in the Google Play store.

As of this writing, the malicious app has been taken down by Google.

Fake wallet apps do their best to imitate the real thing in an attempt to gain a user’s login credentials and clean out their crypto wallets. Usernames, passwords, and private keys are all targets for malicious software, and because of the decentralized nature of crypto stolen funds are oftentimes gone for good.

Sticking with trusted developers is usually a great way to make sure you aren’t downloading a fake app. However, even the developers of an app can be faked. Luckily, once EOS RIO was made aware of the app, the group published warnings to ensure the community was informed.

Not The First Fake EOS Wallet

Google Play Store Hosted App Found Hacking Crypto Login Credentials
Related: Google Play Store Hosted App Found Hacking Crypto Login Credentials

Fake apps can wreak havoc, even if they get removed quickly. Last week, security researcher Lucas Stenfanko found a seemingly innocuous currency converter app that was harvesting user’s banking passwords, including ones for crypto exchanges like Binance. The app had over 500 downloads before it was taken down.

According to The Next Web, YouTubers The Hodgetwins had their EOS stolen from another shady wallet app hosted in the Apple app store. The app was only removed after the theft of 1,500 EOS (roughly $8,500 USD).

Protecting Your Cryptocurrency

Cryptocurrency holders are prime targets for hackers. To protect your investment it is important to remain vigilant.

The best way to identify fake apps is to check the app’s reviews. If there are a large number of downloads and more than a thousand reviews, then you can be reasonably sure that the app is legitimate.

Another good practice is to keep the majority of your funds in a cold wallet. Although hot wallets give users quick access to funds and access over the internet, these features are also areas of attack for hackers. To minimize these risks a cold wallet is the best solution. Cold wallets store funds completely offline, providing hackers with fewer ways to steal your funds.

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Chinese Principal Fired for Crypto Mining on The Job

Headmaster Lei Hua has been fired from his job at a school in Hunan, China, after a total of nine mining rigs were found stealing his school’s electricity to mine Ethereum, the BBC reported on Friday.

School Foots the Electricity Bill

The scheme was uncovered after staff heard mysterious whirring noises produced by the machines and decided to investigate. All told, the secret rigs cost the school a total of 14,700 yuan, the equivalent of $2,100 USD.

Cybersecurity expert Matthew Hickey was quoted by the BBC as saying the noise and heat generated by the rigs would be “very noticeable,” but Hua reportedly staved off concerns over the noise by claiming it came from the school’s heating and air conditioning units.

The headmaster installed mining rigs in the school’s computer lab between the summers of 2017 and 2018. Each of these mining machines cost Hua over $1,500 USD. He decided to use the school’s power because of the electricity costs associated with mining at home. 

Headmaster Hua was fired in October following the incident. The ninth machine belonged to the school’s deputy headmaster, who was let-off with an official reprimand. Local authorities also seized any cryptocurrency mined from the operation.

Hickey says stealing energy to mine crypto isn’t uncommon given the high energy costs:

“Sadly, stealing electricity is one way that people have tried to maximize their revenue – by avoiding those costs it can drastically improve returns on a mining operation.”

In addition to offsetting energy costs, the headmaster and his deputy were also able to harness the school’s computing power to mine Ethereum at scale.

Other Schools Targeted for Illicit Mining

A similar hijacking incident occurred last week at St. Francis Zavier University in Nova Scotia, Canada. The university discovered that the school’s entire network was compromised with mining malware.

suspected phishing attack installed malicious software on the school’s network and the software tried to hijack the university’s 150 computer servers for illicit mining. In response, an administrator from St. Francis shut down their network for four days. The perpetrators of the attack have yet to be identified.

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Maduro Says Petro Purchasers Can Exchange It For Any Crypto, Plans to Take Petro to OPEC in 2019

Allegations that Venezuela’s Petro cryptocurrency is all hot air hasn’t stopped President Nicolas Maduro from announcing a special exchange period for the Petro, and that he’ll be presenting it to the Organization of the Petroleum Exporting Countries (OPEC) next year as a unit of account for Venezuelan oil.

Petro ‘Savings Plan’

On Tuesday, Maduro announced via a government release that those who purchase Petro certificates during the exchange period of Nov. 6 to Dec. 31, will be able to exchange the cryptocurrency for any other crypto or “any other convertible currency in the world.”

These certificates are part of a new “savings plan” organized by Maduro and the Venezuelan government to push the cryptocurrency’s adoption. Part of the country’s “Comprehensive National Cryptoasset Plan,” it will reportedly make 4 million Petro available for purchase. Certificates are acquired through an investment in the Bolivar, Venezuela’s fiat currency, according to local media outlet Telesur.

Maduro also announced his intention to present the Petro to the OPEC as an official unit of account for Venezuelan oil this week. According to the Minister of Petroleum Manuel Quevedo, the presentation will happen “during the first half of 2019.”

Is The Petro a ‘Scam?’

Banks have also been ordered to adopt the Petro, and court cases have even recently been settled with fines imposed in the cryptocurrency, all in a multi-front effort to push adoption of the state-backed crypto coin, itself purportedly backed by Venezuela’s oil and other natural resources. Despite the state’s enthusiasm, though, the coin has been controversial since its inception.

Emigrating Venezuelans must pay passport fees in Petro, making a grueling process even more difficult. The app for downloading the coin has reportedly vanished twice from the Android platform. According to the Economist:

“Over the weekend the app made for acquiring the digital token disappeared from the Android platform. The petro is not sold on any major cryptocurrency exchanges. No shops accept it. A major crypto-rating site ranks it as a ‘scam’.”

The White House has also barred U.S. businesses from accepting Petro as currency, echoing sentiments that the coin has no real value.

Nonetheless, Quevedo said that Venezuela was encouraging airlines and shipping companies to register with the state’s crypto website as of Friday, as the country’s oil market business will soon be conducted entirely in the Petro. Quevedo stated,

“The gasoline for planes, ships, we will be selling it in Petros. It is the currency of Venezuela.”

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Why India Says Yes to Blockchain, Yet Still Undecided About Crypto [INTERVIEW]

As countries around the world find their feet in the cryptocurrency market, governments have jumped on board in attempts to regulate the use of digital assets. Places such as Malta, Gibraltar, and Singapore have taken an open-arms approach to new crypto ventures and companies, coupled with a strict regulatory framework to help prevent fraud.

India and China, however, have opted for a much more cautious approach to cryptocurrencies while embracing blockchain technology. Both governments have said they think cryptocurrencies are too risky to remain unregulated.

Bullish on Blockchain, but Not Crypto

India is currently considering a ban on cryptocurrency offerings to private retail investors, an announcement that comes mere months after the ribbon was cut on India’s first ‘Blockchain District’ in Hyderabad, in the southern Indian state of Telangana. The country hasn’t outright banned crypto but has communicated to banks that they cannot have accounts for digital assets, making their integration into the mainstream financial sector more difficult.

“I think that the current space in India is that the government is very pro-blockchain,” said ex-Morgan Stanley banker turned crypto entrepreneur Prashanth Swaminathan. He added:

“Where I think the country is lacking at this stage is in its understanding of the crypto space.”

Before founding crypto exchange XDAT and becoming an advisor for Indian blockchain company eleven01, Swaminathan worked ten years with Morgan Stanley and even guided financial institutions in the EU through the financial crisis of ’08. He leverages that experience to try and educate companies like eleven01 on the regulatory standards they need to stay abreast of to stay out of trouble.

Swaminthan says he hopes the government reaches a more thorough understanding of crypto “sooner rather than later, because this space moves very quickly,” and fees India could suffer a “brain drain” if a crypto ban is imposed. He outlined three ways the government was approaching the thorniness of integrating crypto into the Indian economy:

  • Looking at the travel of fiat currency into and out of India. Currently, the rupee cannot move in and out of the country, and crypto could offer an alternative to the country’s fiat currency.
  • Figuring out ways to prevent tax evasion.
  • Figuring out how to prevent money laundering.

XDAT is based in Malta, and Swaminathan told us that he hopes it can serve as a model for similar crypto ventures in India, some of which could be launched through eleven01. “It’s important for any society to be able to have its own call on currencies,” he said, adding that access to digital assets would offer that chance.

India Considering Cryptocurrency Ban
Related: India Considering Cryptocurrency Ban

Swaminathan didn’t appear worried about the possible ban India’s government is considering on cryptocurrencies but said it would be up to the government, financial regulators like the Financial Stability and Development Council (FSDC), and the Central Bank of India (CBI) to hammer out a functional approach to regulation going forward.

The FDSC stated outright it was considering a ban, but other measures, such as an 18 percent goods and services tax on crypto trading, are also on the table.

Government on the Blockchain?

Where enthusiasm for crypto might be lacking in India, there’s plenty of love for blockchain technology. When Indian IT giant Tech Mahindra partnered with the government of Telangana to open the Blockchain District, Telangana’s IT Minister, K.T. Rama Rao, described it as “not just a proud moment for Telangana but India as a global leader in the Digital Era,” and the official release stated a goal of making India the “blockchain capital of the world.”

Right now, blockchain will probably see the most use is in the public sector. Swaminathan told us that he saw several memorandums of understanding (MOUs) inked by blockchain companies exploring areas like land rights, health records, and billing at the International Blockchain Congress conference in Hyderabad this past August. He also moderated a panel on “the way forward for Indian exchanges” at the event.

Applications like these may be more favorable to India’s government because the services sector comprises so much to the country’s economy. More than half the Gross Value Added-55.65 percent-comes from the sector, and it employs 28.6 percent of the total population. To government officials, there exists a clear incentive to invest in blockchain technology to make service sector businesses more efficient.

Proponents of crypto argue that the adoption of digital currencies would bring more money into the economy through greater liquidity across borders and, perhaps, more ready access to monetary resources for the poor. Charitable projects in Africa are exploring ways to get finances into the hands of those without banks, and similar applications may be viable in poorer parts of India.

When asked about the hurdles to crypto adoption in India, Swaminathan said that “the primary block is the government’s unclear stance on cryptos,” adding that it would be difficult for them to flourish in the current environment. Once a regulatory framework of some kind is in place, it could clear the way for more widespread adoption.

There is currently no ban on crypto per se, and retailers can accept it as payment, but with the government discouraging investors and no real institutional backing from India’s banks, the road ahead remains murky. Blockchain technology, on the other hand, is positioned to flourish.

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China’s Central Bank Calls for More Government Oversight on Blockchain

China’s central bank the People’s Bank of China (PBC) encouraged the government to increase supervision of blockchain-related ventures in a working paper released on Tuesday, warning that “bubbles were apparent,” according to Reuters.

‘Cannot Disrupt the Market’

The abstract of the paper, entitled ‘What Blockchain Can Do, and What it Can’t Do’ states the approach the PBC’s Research Bureau took in dissecting blockchain technology and examining it from an economic perspective, stating:

“…by explaining blockchain technologies from an economic perspective, it introduces the Token Paradigm to summarize mainstream blockchain systems, discusses the true meaning of consensus and trust in the blockchain field, and analyzes the functions of smart contract [sic].”

Translated excerpts from the working paper via CCN China show a pessimistic view of blockchain technology, especially as the disruptor to the financial system crypto supporters claim it will be. The report warns readers not to “exaggerate the function of the blockchain,” adding, “So far, no technological innovation has had a disruptive impact on the financial system, and blockchain is no exception.” 

The PBC also issued a notice to investors in September warning of the risks involved with cryptocurrency, and the new working paper calls blockchain “superstitious” according to translations. The paper asserts that there is no flexibility in the supply of digital currencies and that a lack of intrinsic value support is also a problem.

Still Exploring Crypto

The paper does indicate that there are some places within China’s financial structure where blockchain technology could be helpful if applied, specifically noting the country’s digital bill trading platform. Still, the PBC says it’s “very difficult to replace institutions and trust with technology.”

Despite calling blockchain enthusiasm “superstitious” and saying that it would only be possible to completely replace the current financial system with a crypto-based on in a utopian scenario, the PBC does appear to have its hand in crypto projects of its own.

China: Central Bank May Launch State-issued Cryptocurrency, Seeking Cryptography Talent
Related: China: Central Bank May Launch State-issued Cryptocurrency, Seeking Cryptography Talent

CryptoSlate reported in October that the PBC is hiring several new employees with backgrounds in cryptography, computer science, and finance to develop its own “digital fiat currency.” The bank, in fact, sought out those with blockchain experience to fill these roles, as well as people with a background in big data.

Early last month, a researcher at the PBC published an op-ed in the bank-owned CN Finance magazine calling for more research into a government-backed stablecoin pegged to the Yuan, saying that U.S. stablecoins pegged to the dollar showed promise.

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Canadian University Shuts Down Entire Network After Mining Attack

Last week St. Francis Xavier University in Nova Scotia, Canada reportedly shut down its entire computer network for four days due to an attempted mining attack.

Entire Network Brought Offline

An official statement published on the university’s website on Nov. 4 stated they were bringing their network slowly back online after an attempted crypto-jacking. The statement read:

“On Thursday, ITS, in consultation with security specialists, purposefully disabled all network systems in response to what we learned to be to be an automated attack on our systems known as ‘crytpocoin mining.’” 

It went on to add:

“At this time, there is no evidence that any personal information within our network was breached, however, ITS will continue to analyze and monitor for suspicious activity in the days and weeks ahead. ITS has also implemented heightened security measures in response to this event.”

University officials also required students and faculty to change their passwords following the incident to regain access to campus resources.

The breach interfered with access to email accounts, WiFi, debit transactions, online courses, and storage drives hosted on the school’s network comprised of 150 servers, according to Canadian news outlet CBC.

An Ongoing Cyber Threat

A spokesperson for the university said they’d never seen a cyberattack like this before, but it marks the latest in a string of attempts to hijack the computing power of others and bend it toward mining crypto.

Hackers Using Software Vulnerability Stolen From the NSA to Illicitly Mine Crypto
Related: Hackers Using Software Vulnerability Stolen From the NSA to Illicitly Mine Crypto

In most cases, crypto-jacking of host computers occurs via phishing schemes designed to covertly install illicit mining malware on unsuspecting machines. CryptoSlate reported in September that hackers were using the Eternal Blue vulnerability in old Windows systems to illicitly mine Monero. More sophisticated schemes actually install legitimate software on the host computer, like a fake Adobe Flash updater that actually installs the program, but runs crypto-jacking malware in the background.

In most cases of such cyber attacks, poor “digital hygiene” is to blame. Old systems go unpatched or without important security updates. Employees click on emails from senders they don’t recognize. The end result is a largely avoidable cyberattack that can, in cases like this one at St. Francis Xavier, mean the disruption of important systems.

Institutions like this with large networks make attractive targets for crypto-jackers, as they stand to gain more computing power from a single attack. For its part, the university says it will be stepping up its security measures.

“We will be investigating opportunities like increasing our sensitivity settings within our security systems,” said St. Francis Xavier spokesperson MacKenzie in an interview with CBC. “We’ll also be looking into taking old systems offline.”

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Wallet Company Blockchain Plans $125M Airdrop of Stellar to Boost Mainstream Adoption

Crypto wallet company ‘Blockchain‘ announced Nov. 6 that it would distribute $125M in Stellar XLM cryptocurrency to its users “to build on the crypto revolution.”

The Largest Crypto Giveaway Ever?

The wallet maker has partnered with the Stellar Development Foundation to distribute the funds and is claiming this to be the largest giveaway in crypto’s history. The first batch of recipients will be getting their XLM this week, according to TechCrunch.

In an effort to increase mainstream adoption, they say, Stellar is giving its XLR away for free to people that sign up for it via their website, which states:

“The first step to becoming an active participant in the crypto ecosystem is getting a crypto asset. By offering XLM to our users for free, we hope to help build a bigger community of crypto users.”

To get their free XLM, users must have a Blockchain wallet. Once they sign up, they’ll get an email when their time comes to claim their share of the cryptocurrency giveaway. Users will also be required to verify their identity to prevent multiple disbursements to the same person. Once their identity is verified, each user will get $25 worth of XLM crypto.

Stellar’s network takes aim at the marketplace of global financial transactions, seeking to make them easier and more seamless. XLM currently sits at $.26USD, with a market cap of almost $5BN. This airdrop marks the XLM’s addition to Blockchain as the wallet’s fourth supported cryptocurrency alongside Bitcoin, Bitcoin Cash, and Ethereum.

Regarding the decision to airdrop so much of his company’s crypto, Stellar co-founder Jed McCaleb said:

“Our hope is to eventually have global citizens own and use lumens, in both developing and developed economies. By working with Blockchain to increase the availability and active use of lumens on the network, leveraging their almost 30m wallets, we will increase the network’s utility by many orders of magnitude.”

More News on Partnerships to Come

Blockchain stated that it also has plans to partner with several charitable organizations as part of this airdrop, including Stanford’s d.school, Charity: water, Code.org, and Network for Good. The wallet maker said it chose these companies to partner with because they “share our vision for using this transformational technology,” and will be donating to Charity: water.

Blockchain said more details on these partnerships would be revealed in the coming weeks, and Stanford d.school’s Director of Teaching and Learning Carissa Carter stated:

“The strength of any network is derived from innovation. We are excited to join Blockchain on this airdrop to empower some of the most brilliant and creative minds to start experimenting and building on Stellar’s network.”

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Wallet Company Blockchain Plans $125M Airdrop of Stellar to Boost Mainstream Adoption

Crypto wallet company ‘Blockchain‘ announced Nov. 6 that it would distribute $125M in Stellar XLM cryptocurrency to its users “to build on the crypto revolution.”

The Largest Crypto Giveaway Ever?

The wallet maker has partnered with the Stellar Development Foundation to distribute the funds and is claiming this to be the largest giveaway in crypto’s history. The first batch of recipients will be getting their XLM this week, according to TechCrunch.

In an effort to increase mainstream adoption, they say, Stellar is giving its XLR away for free to people that sign up for it via their website, which states:

“The first step to becoming an active participant in the crypto ecosystem is getting a crypto asset. By offering XLM to our users for free, we hope to help build a bigger community of crypto users.”

To get their free XLM, users must have a Blockchain wallet. Once they sign up, they’ll get an email when their time comes to claim their share of the cryptocurrency giveaway. Users will also be required to verify their identity to prevent multiple disbursements to the same person. Once their identity is verified, each user will get $25 worth of XLM crypto.

Stellar’s network takes aim at the marketplace of global financial transactions, seeking to make them easier and more seamless. XLM currently sits at $.26USD, with a market cap of almost $5BN. This airdrop marks the XLM’s addition to Blockchain as the wallet’s fourth supported cryptocurrency alongside Bitcoin, Bitcoin Cash, and Ethereum.

Regarding the decision to airdrop so much of his company’s crypto, Stellar co-founder Jed McCaleb said:

“Our hope is to eventually have global citizens own and use lumens, in both developing and developed economies. By working with Blockchain to increase the availability and active use of lumens on the network, leveraging their almost 30m wallets, we will increase the network’s utility by many orders of magnitude.”

More News on Partnerships to Come

Blockchain stated that it also has plans to partner with several charitable organizations as part of this airdrop, including Stanford’s d.school, Charity: water, Code.org, and Network for Good. The wallet maker said it chose these companies to partner with because they “share our vision for using this transformational technology,” and will be donating to Charity: water.

Blockchain said more details on these partnerships would be revealed in the coming weeks, and Stanford d.school’s Director of Teaching and Learning Carissa Carter stated:

“The strength of any network is derived from innovation. We are excited to join Blockchain on this airdrop to empower some of the most brilliant and creative minds to start experimenting and building on Stellar’s network.”

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Tokyo Limos to Start Accepting Crypto Payments

Japan will test pilot a service to allow passengers to pay for limo rides with cryptocurrency, according to an article published Sunday by Bloomberg.

Expanding Into the Ride Business

Payment company Remixpoint Inc., which also has its hands in the energy management and automotive industries, will partner with Japanese limousine company Hinomaru Limousine Co. for a small trial run of cryptocurrency payments for limo services.

The trial will start this month and will cover limo rides between Tokyo’s Haneda or Narita airports and the city’s 23 wards to begin with. An official announcement of the trial is reportedly coming on Nov 6. and cryptos accepted include Bitcoin, Bitcoin Cash, and Ethereum.

BITpoint’s Retail Crypto Presence

Remixpoint also owns Japanese crypto exchange BITpoint, which has partnered with other companies in the past to try and move crypto payments into the mainstream retail sector. The exchange has offered crypto payments for airline tickets and partnered with retailers to get cryptocurrency payments into Japanese stores last year.

Why Japan’s Decision to Allow Crypto Sector to Self-Regulate is Significant
Related:  Why Japan’s Decision to Allow Crypto Sector to Self-Regulate is Significant

BITpoint is one of 16 major exchanges in Japan now under the jurisdiction of the Japanese Virtual Currency Exchange Association (JVCEA) thanks to a recent ruling by the Japanese government.

Hinomaru Limo’s fleet of vehicles consists of 362 limousines and 161 taxis, and the company could expand the crypto payment service to include its taxis if the limo service trial run is a success, according to Bloomberg’s unnamed sources.

After a number of high-profile attacks on exchanges resulting in millions lost, crypto companies are still trying to make inroads in Japan. The recent decision by Japan Financial Services Agency to let the JVCEA police the market has led to stricter rules and a trend toward more stringent enforcement, and a stablecoin backed by the Yen was announced last month as part of the stablecoin boom. Bitcoin payments, in particular, have climbed since Japanese retailers began accepting BTC in 2017.

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Scammers Steal £137,000 in Crypto Hacking, Posed As Verified Twitter Accounts

Scammers in the UK were able to make off with £120,000 in Bitcoin after posing as the verified Twitter accounts of two well-known British companies, according to a report by the Telegraph on Monday.

Attack of the Fake Elon

The hackers pirated the verified accounts of clothing store Matalan and film company Pathé UK, then claimed to be Elon Musk and promoted a phony giveaway via the social media accounts. The two accounts had a total combined following of around 100,000. By Monday night, the fraudsters managed to steal £137,000 from nearly 400 people donating to the fake contest as of Tuesday.

Once hacked, the accounts’ photos and names were changed to match Elon Musk’s official verified account, and the deception was aided by the fact that the accounts kept their blue verification check mark.

The fake Elon account claimed Musk was stepping down from Tesla and giving away 10,000 BTC to commemorate it. Most were able to spot it as a scam, but enough people were duped for the hackers to get away with a sizable amount of money via requests for BTC to “verify their address.” Users were encouraged to donate more BTC with the promise that they’d get much more back than they put in, “+200% back!” according to the scam page.

The first account hacked was Pathé UK, which was restored by yesterday afternoon, according to reports. Then came Matalan, who managed to regain their account much more quickly, even joking about the hack once they were back behind the controls, stating on Twitter:

“And we’re back! Apologies for the brief interlude. You know you’re important when someone takes the time to hack your account!”

The tweet has since been taken down.

A third account, American book publisher Pantheon Books, was allegedly hacked as part of the scam as well. The account has just over 70,000 followers, and as of this writing, all fake tweets have been removed.

Responding to the Breach

When asked about the security of their network, and the speed at which they could respond to these kinds of breaches, a spokesman from Twitter told the Telegraph that “impersonating another individual to deceive users is a clear violation of the Twitter rules,” adding:

“Twitter has also substantially improved how we tackle cryptocurrency scams on the platform. In recent weeks, user impressions have fallen by a multiple of 10 in recent weeks as we continue to invest in more proactive tools to detect spammy and malicious activity.”

Two-factor authentication (2fa) could be utilized to help prevent scams like this, as the accounts may have been phished, but users of verified accounts don’t seem to want to deal with the extra hassle to access their feed.

“Many verified accounts are used by multiple people, and I suspect some switch off some of the security features for ease of use — that’s where things tend to start going wrong,” Chris Boyd, lead malware intelligence at Malwarebytes, stated in an interview with tech site ZDnet.

Were the scammers able to steal more money as a result of the blue check marks? It likely lent a degree of credibility to something that would’ve immediately been dismissed as a scam otherwise.

However, much of the language and tactics smacked of typical scam behavior, notably the request of money for a dubious reason and the promise of a ridiculously high return. Similar tactics have been used by innumerable fake ICOs and false crypto companies hoping to make an easy buck, and awareness of scams is increasing as knowledge of what to look for becomes more widespread.

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SEC Expands Crypto Fraud Crackdown

The Securities and Exchange Commission (SEC) is doubling down on their efforts to stamp out cryptocurrency investment fraud, according to a report by Politico published Nov. 1.

Custody Questions

The government regulatory body is questioning investment advisers registered with the SEC to determine how they store their cryptocurrency, probing for evidence of price manipulation, and looking into just how vulnerable crypto is to outside attacks.

The agency released its annual enforcement report that catalogs its previous efforts to stamp out crime in the cryptocurrency space, including its approach to ICOs. The report claims “dozens” of investigations opened around ICOs in the last fiscal year, and twelve stand-alone cases were brought to court in FY 2018.

The report states:

“As of the close of FY 2018, the SEC had brought over a dozen stand-alone enforcement actions involving digital assets and ICOs…In the past year, the Division has opened dozens of investigations involving ICOs and digital assets, many of which were ongoing at the close of FY 2018.”

This new leg of the SEC’s investigation goes beyond the subpoenas and voluntary requests for information that the regulator has sent to ICOs by targeting investment advisers with the potential to manage millions. According to Politico, the SEC regulates advisers who oversee more than $100 million in client assets.

Rules for fiat currency say that investment advisers have to hold them in a bank or at a brokerage firm, but the storage of cryptocurrency in digital wallets raises questions around what kind of policies should be in place regarding their protection. The SEC is asking which advisers have a policy in place for crypto custody, and those without one could see trouble from the regulator.

Forming Guidelines

Reports of thefts and hacks, as well as the patchy regulatory environment for cryptocurrency exchanges in North America, are all fueling the SEC investigation as the agency tries to nail down a way to put a consistent value to digital assets.

SEC to Engage Directly with ICOs and the Public via New Portal
Related: SEC to Engage Directly with ICOs and the Public via New Portal

The agency recently opened its own online portal, allowing interested companies to ask questions and gain information on compliance. Named FinHub, the portal offers a way for people in the crypto and blockchain space to engage with the regulator directly. As of yet, the SEC does not appear to have issued any hard guidelines for investment advisers as a result of this sweep.

Until they do, its best for advisers to treat their digital assets with the same amount of care as their more conventional ones, says General Counsel Gail Bernstein of the Investment Adviser Association. Bernstein’s company represents over 600 SEC-registered advisement firms, and she stated in an interview with Politico:

“Advisers should think about investments in crypto assets the same way they think about any investments, through the lens of their fiduciary duty and compliance programs.”

She added:

“Typically, after a sweep of this type, the SEC staff will publish its findings and observations, and that can provide very helpful guidance for advisers as they consider their compliance obligations.”

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Will Paraguay Invest Its Excess Power Into Bitcoin Mining?

Paraguay’s Itaipú dam is posing an interesting dilemma to the country; the world’s most powerful hydroelectric plant gives it an excess of energy, but will that energy be used to drive the burgeoning crypto mining industry or help the poor?

A Booming New Business

The Itapú sits on the border of Brazil and Paraguay, pumping energy into Ciudad del Este, a town situated itself on the borders of Brazil, Paraguay, and Argentina. All of that power resulted in a crypto mining industry, particularly Bitcoin and Ethereum, popping up “almost overnight,” according to the Guardian.

An article published Monday noted that some are profiting from the country’s increase in crypto mining, renting out their rigs for cash or raking it in themselves, but others think that power could be better used elsewhere. The article states:

“…many argue Paraguay could better use its abundant hydroelectric energy to help the quarter of the population that currently live in poverty. According to World Bank figures, Paraguay has the highest level of inequality in land ownership in the world.”

But with people already profiting from the South American country’s crypto boom, whether that will happen, and how, remains to be seen. Businessman Gregorio Bareiro told the Guardian that some have already made millions from crypto mining.

Bareiro has a fledgling rental business, loaning out computers to miners, alongside his air conditioning shop. He first encountered crypto mining when he started building ad hoc cooling units for mining rigs. His mining rental business employee a dozen people, and rents out 750 machines. He told the Guardian he has plans to expand.

Since Paraguay’s power grid isn’t equipped to handle the Itapú’s massive output, they sell the excess to Brazil, which keeps energy prices incredibly cheap: around five cents per kilowatt-hour, according to the Guardian. This has led external companies like AWS Mining, who build mining farms in countries with cheap and plentiful energy, to set up shop in Paraguay.

Bareiro thinks that the crypto boom can be the answer to Paraguay’s poverty woes, stating in an interview that “in 10 years, [mining] would generate enough money to pay Paraguay’s external debt” and saying he hopes more crypto-based businesses come to Paraguay.

Investing In Infrastructure, Instead?

People in the crypto business like Bareiro want to take the excess energy produced by the dam and channel it into more mining efforts, but others think the extra power would be better invested in Paraguay’s manufacturing facilities. This group of politicians, business owners, and academics say it would be more beneficial to seize control of the negotiations over Itapú’s power in 2023 to make that happen.

The group believes doing so could generate two million jobs and boost Paraguay’s GDP by four times the current amount. Hosting clean energy data hubs for tech giants like Google could bring in more money for hospitals and infrastructure as well, according to development expert Miguel Carter.

As it stands, the crypto mining boom in Paraguay doesn’t appear to be slowing down. Since around January of 2018, small crypto-related businesses and mining farms have been cropping up to take advantage of the country’s cheap energy bounty. Itapú’s power provides such an incentive that some like Bareiro believe it will draw miners from countries like China and Argentina.

If Paraguay can gain the upper hand in the upcoming negotiations over Itapú’s mammoth power output, they’ll have to think very carefully about what comes next.

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Google Play Store Hosted App Found Hacking Crypto Login Credentials

A video published Thursday by security researcher Lukas Stefanko exposed a malicious app hosted on the Google Play store that distributes malware onto unsuspecting user’s mobile devices.

Harvesting Your Passwords

The app, called Easy Rates Converter, markets itself as a currency conversion tool. In reality, it infects devices with malware designed to harvest their login credentials to legitimate crypto and fiat banking applications.

According to Hard Fork, among the apps targeted were Binance’s official app, CommBank, and Google Play. At the time Stefanko published his video, the app had over 500 downloads. The developer name on the app is listed as ‘hitech_soft.’

According to Stefanko, once the app is downloaded, it deploys malware that infects the host device through a fake Adobe Flash update. On the surface, the malicious app still functions as a currency converter. Once downloaded and activated, it retrieves the malware via the user’s internet connection and deploys it.

After infected, the malware program waits for the user to open a targeted banking app, then overlays the screen with one designed to look exactly like the login screen of the actual app and prompts the user to enter their login information. When entered, the credentials are stored on a server.

When running, the infiltrating app can be seen on an Android device when the user toggles through the apps they have open. However, even knowing the app was there, when Stefanko tried to tap back into a legitimate app on his phone, the malware overlaid itself on his screen again.

Keeping an Eye Out

A search through the Google Play store showed the app has been taken down since becoming the subject of Stefanko’s video, in which he also explains how to remove the malware once found on a device. 

Adobe Flash Being Used For Cryptojacking
Related: Adobe Flash Being Used For Cryptojacking

This isn’t the only way hackers are using Adobe Flash updates to install malware on user’s computers. Early in October, security researchers at Palo Alto Networks discovered a spike in fake Flash installers being used to infect computers with crypto mining malware. The update did installed Flash on host computers, but at the same time infected them with software that mined Monero.

Stefanko works as a researcher for security company ESET.

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Nasdaq Wants to Help Eradicate Fraud in the Crypto Market

On Nov. 1st, Stock exchange giant Nasdaq Inc. released a paper announcing the intent to use the anti-fraud tools it’s developed for conventional exchanges to aid in stamping out crypto fraud.

Lending Market Surveillance Tools to the Cryptosphere

The goal, Nasdaq expresses the paper, is to integrate increased surveillance and regulation to cut down on the potential dangers of investment in cryptocurrency. The company asserts that exchanges like itself already have rules in place to prevent the types of schemes wreaking havoc in the crypto space, stating:

“Regulators, brokers and exchanges have surveillance teams that monitor activity constantly and advanced technologies to help capture and analyze abusive behaviors including pump-and-dump schemes, insider trading, wash trading as well as spoofing and layering.”

All of these have made headlines in the crypto-verse and contributed to the environment of leeriness that led to the New York attorney general’s Virtual Market Assets Integrity report and several state-level regulators creating Operation Cryptosweep.

Nasdaq points to the governments of Abu Dhabi and Singapore as an example of what successful crypto regulation frameworks are capable of achieving in the paper, calling for a unification of the “fragmented” regulatory approach of America’s crypto marketplace. They also claim that ‘know your customer (KYC)’ and anti-money laundering (AML) rules aren’t enough, stating:

“Technologically sophisticated players do a significant amount of wallet-to-wallet trading, and those opaque transactions never go through KYC and AML screening.”

The paper went on to add:

“Moreover, the markets are extremely volatile, partially because order flow is mainly driven by retail investors who are easily unnerved by geopolitical events and government statements about regulation.”

Crypto Companies Receptive

According to Bloomberg, some crypto companies are already approaching Nasdaq to license their market surveillance software, called Nasdaq SMARTS, for use in digital exchanges. The exchange claims its software can weed out bad actors through analysis of market data, combing through trades to try and determine a user’s intent through machine learning.

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Gemini already uses the software and the company has worked very closely with New York’s regulators, including the hire of former New York Stock Exchange (NYSE) exec Robert Cornish as their CTO. Nasdaq Head of Exchange and Regulator Surveillance Tony Sio said his company is getting approached by crypto firms “every week or two” to license their software, but turn down many of the requests Because the companies “aren’t reputable enough yet.”

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Blackrock Waiting Until Cryptos Become ‘Legitimate’ Before Offering ETFs

BlackRock CEO Larry Fink said Thursday that while he hasn’t entirely written off the possibility of his company trading crypto assets, he thinks the industry still needs time to mature.

Dealbook-Breaker

“I wouldn’t say never, when it’s legitimate, yes,” Fink said at the New York Times Dealbook Conference, held in Manhattan when asked about the possibility of crypto-based exchange-traded funds (ETFs). Fink was one of the conference’s scheduled speakers.

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The NY based firm currently has over 6 trillion in assets under its management as of March 2018, and has been approached by crypto companies like Coinbase seeking to launch their own crypto ETFs, but is yet to enter the space.

Fink’s concerns with the current state of the cryptocurrency space echo those of other investors wary of getting involved. Namely, that the lack of regulation and backing for crypto assets makes it too risky. He stated during the conference that crypto would have to be backed by something stronger before Blackrock gets involved, saying:

“It will ultimately have to be backed by a government. I don’t sense that any government will allow that unless they have a sense of where that money’s going for tax evasion and all of these other issues.”

Fink also pointed to crypto’s anonymity, notably Bitcoin’s, and the fact that it’s been used for criminal activity in the past, in places like the dark web. He did, however, say his company was “a huge believer in blockchain,” predicting its usefulness in mortgage applications like ownership and “anything that’s labored with paper.” 

Records of land rights and ownership have long been touted as a benefit that blockchain technology can provide, and some governments like New South Wales and Sweden are already making use of the tech.

Other Institutions Jumping In

Fink seems to be the exception to the rule lately, as several large institutions have put their money into the crypto investment space in just the last couple of months. Money from Yale’s endowment fund was put toward two major cryptocurrency investment groups, and Fidelity Financial just launched its own crypto custodian and trading service for institutional clients.

As far as government backing, different government entities have tried their hand with crypto, to varying degrees of success.

India appears to mirror Fink’s view, moving away from crypto but embracing the blockchain. Malta, Singapore, and Gibraltar are all looking to rigorous regulatory frameworks to try and attract quality clientele. Japan just decided to vest the country’s self-appointed crypto regulator with government authority to police its exchanges. Venezuela’s Petro coin has only just launched to the public but is already steeped in controversy

While America’s regulatory framework for cryptocurrencies is still catching up, many are diligently working to make it happen. Companies like Gemini and Bakkt have partnered with well-known entities in the Wall Street world to try and create a more secure environment and foster a higher degree of trust.

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The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are still working their way around the issue, with the SEC doubtful and CFTC Chair J. Christopher Giancarlo optimistic yet cautious.

The very nature of cryptocurrency makes it hard to regulate, and users may rebel against overregulation and centralization of digital assets, creating a barrier to mainstream individual adoption.

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India Considering Cryptocurrency Ban

Indian regulatory body the Financial Stability and Development Council (FSDC) is considering measures to ban the use of private cryptocurrencies while encouraging distributed ledger technology instead, after a meeting on Thursday.

Ban On Private Cryptocurrencies

The FDSC’s 19th meeting of the year convened on the subject of global and domestic economics, as well as India’s performance in the financial sector. The Council noted that advancements in fintech cybersecurity had been made, including steps toward a threat response team it named the Computer Emergency Response Team in the Financial Sector (CERT-Fin).

Despite that, the regulator will still move forward with consideration of a crypto ban, stating in the official release:

“The Council also deliberated on the issues and challenges of Crypto Assets/Currency and was briefed about the deliberations in the High-level Committee chaired by the Secretary (Economic Affairs) to devise an appropriate legal framework to ban use of private cryptocurrencies in India and encouraging the use of Distributed Ledger Technology, as announced in the Budget 2018-19.”

India’s finance minister Arun Jaitley attended the meeting, as well as members of the Reserve Bank of India (RBI), the country’s central financial institution. Both have been critical of cryptocurrencies in the past, according to a report by The Next Web.

A Continuing Pattern

This dislike of cryptocurrencies and favorable outlook on blockchain is in keeping with that we’ve seen in the past from India. We reported earlier this month that a new group was just formed to push blockchain projects with India’s government and encourage their development. The chair of that committee, Tina Singh, said blockchain was “undeniably the technology of the future.” Not so for crypto, apparently.

Last week, the first Bitcoin ATM installed in India was seized by Indian authorities, and the founder of the ATM company Unocoin was arrested. RBI had begun a crackdown on all things crypto-related since before the machine was even installed.

India’s supreme court has been pushing the RBI to clarify its stance around cryptocurrencies once and for all and has set a deadline of two weeks for it to do so, according to the Economic Times. The RBI has established a blockchain and cryptocurrency research unit to help meet that deadline.

A crypto crackdown isn’t entirely certain yet, as India is considering other alternatives to a ban, such as specialized taxes for digital assets. A proposal currently under consideration by the Indian government would apply a goods and services tax of 18 percent to cryptocurrency trading.

If that measure is approved, the government could choose to retroactively levy that tax from the date the tax category was first instated: July 1, 2017.

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Bitcoin Bear Market Could Last Another Year and a Half, Says BitMEX CEO

BitMEX CEO Arthur Hayes said we may not have seen the last of the bearish market for BTC in an interview with Yahoo Finance published Friday.

‘Flatness’ in the Price of BTC

After rapid plummets and spikes in recent weeks, the market value of BTC has leveled out at around USD 6,300, with another small spike in value on Friday. Hayes says it will likely stay that way, possibly for another eighteen months, in the interview with Yahoo:

“My view is the volatility environment that exists right now could persist for another 12 to 18 months, the flatness. I’m just basing it off my previous experience. I started in bitcoin in 2013 when the price went from $250 to $1,300 and then 2014 to 2015 was sort of the nuclear bear market. Price crashed, volume crashed — very, very difficult to make money.”

Hayes added that, based on his experience, BTC’s value could fall even farther than it has. The interview was part of the ‘Who’s Afraid of Bitcoin’ event hosted by The Spectator magazine.

Despite his less than upbeat view on the market, Hayes still seems confident on Bitcoin and was quoted as saying “I own the racetrack, I don’t need to bet on the horses,” at the aforementioned conference. Founded in 2014, BitMEX is one of the largest crypto exchanges around, and the largest one to trade BTC derivatives.

Optimism on the Applications of BTC

Other big players in the crypto space don’t necessarily share Hayes’ views on the market, thinking it could instead turn bullish. 0x project cofounder Will Warren said in a separate interview with Yahoo that he was one of these optimists, stating:

“The market is blowing off some steam right now. I think the market is probably going through some healthy consolidation but I do believe the long-term trend will be greater adoption of bitcoin and similar technologies.”

Others like Jonathan Levi, formerly of Goldman Sachs and Barclays, echo that sentiment, saying the current bear market needs to be put into context. Levi called the fluctuations in BTC a “bear-sized drop, but from an astonishing height.” BTC as a currency is in a bear market, he argues, but we are seeing more activity around blockchain projects and the application of BTC than ever before.

Just one example of that is Wrapped Bitcoin (WBTC), a crypto announced this week that applies BTC’s liquidity to the Ethereum blockchain. That project, the brainchild of dark pool platform Republic Protocol, custodian BitGo, and liquidity pool Kyber Network, is coming in early 2019.

Hayes told Yahoo that he thinks BitMEX is “well positioned” to ride out the coin’s low level of volatility, and the platform still conducts trades on contracts totaling around $1BN a day. He says the company’ expansion plans “have not changed.”

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Venezuela’s Petro Coin Now on Sale to Residents

The Venezuelan government announced via Twitter on Monday that its controversial Petro cryptocurrency is now on sale to residents of the country via the official government portal.

An infographic included with the message shows that Petro can now be bought at six government-approved exchanges as well as the government portal. The process will be overseen by the government appointed crypto-authority Sunacrip, whose head Joselit Ramirez will reportedly handle customer service issues with the coin.

Six Exchanges Authorized

The Venezuelan government authorized six crypto exchanges to trade the coin earlier in October, shortly after it first announced the coin and started trading it only for hard currencies before the sale opened to the public. Those exchanges, according to Venezuelan news outlet Noticiero Digital, are Bancar, Afx Trade, Cave Blockchain, Amberes Coin, Cryptia, and Criptolago.

At the beginning of October when Petro was officially announced, Venezuelan President Nicolas Maduro said November 5 would be the official date of availability to the public for the country’s cryptocurrency, whose price is supposedly pegged to the value of Venezuelan commodities, mainly its oil reserves. It’s also pre-mined and sold by the Venezuelan government.

Petro Facing Problems

There appear to be other inconsistencies with Petro. The coin’s official Twitter account was taken down as of this writing, and the wallet made for storing Petro has been blocked by the Google Play store. At first, it was claimed that Petro would be available for purchase with Bitcoin, Litecoin, Ethereum, and Dash, but as of now, the coin is available for BTC, ETH, and a variety of fiat currencies, including the Venezuelan bolivar.

Venezuela’s bid to use the Petro as its national currency has already drawn criticism from the international community, with U.S. officials calling it a “scam” and the White House barring American businesses from accepting the cryptocurrency. Venezuela’s native currency has also suffered devaluation through rampant inflation, and the price of even a few Petro coins adds up to several months of work for most Venezuelan citizens.

Recently in an apparent effort to stem the tide of emigration from the country, Maduro announced that passport fees would only be payable in Petro, along with the installment of a new police force to guard Venezuela’s borders.

That restriction was set to go into effect on Nov. 1, marking a grim deadline for the thousands of people already facing difficulty in their efforts to leave. It also exponentially increased passport fee prices in bolivars earlier in October.

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UK Report Warns PMs Not to Crack Down Too Hard on Crypto

A new report on cryptocurrency regulation in the UK warns that “bad regulation is worse than no regulation at all,” the Telegraph reported on Monday.

Experts cited in the report claim that an overly harsh crackdown on cryptocurrencies could break up the UK crypto market, causing companies to move to less regulated pastures to set up shop and dent the UK’s reputation as a hub for fintech innovation and advancement.

Calls to Regulate Crypto

The report comes as a response to a plan by MPs to use the Financial Conduct Authority (FCA), a UK regulator independent from the country’s government, to enact stricter rules around cryptocurrencies. The FCA outlined these planned regulatory steps on its website and was part of a task force reporting on the state of crypto in the UK whose findings were published in July and updated today.

Four agencies took part in the counter report: the British Business Federation Authority (BBFA), law firm Baker Botts, VC fund Novum Insights, and crypto exchange TodaQ. The BBFA’s chief executive Patrick Curry described the proposed regulatory measures as a “blunt instrument,” stating in an interview:

“It is a very blunt instrument approach and I haven’t seen this in other countries. The use of this technology is still a voyage of discovery and these technologies are being refined for different types of use. My concern is the law of unintended consequences.”

Those unintended consequences include what could happen if all digital assets get lumped together under the same set of rules. Instead, Neil Foster of Baker Botts argues that a more sophisticated classification of digital assets is needed to determine what should and should not be regulated.

Foster argues that putting all crypto assets under the umbrella of the UK’s Regulated Activities Order, which there have been calls to expand the powers of after crypto-related crime, would only offer one set of rules that might prove too restrictive for some digital asset businesses.

Foster likened trying to force digital assets into one box to a crowbar in an interview with the Telegraph:

“If you crowbar everything into the Regulated Activities Order you are making everything into an investment bank.”

UK Could Be At A Tipping Point

The UK is at a crossroads with cryptocurrencies, and it has to be careful of how it proceeds, experts warn. On the one hand, the UK is poised to become another crypto hub, with a strong reputation as one of the world’s financial centers already in place. On the other, Bitcoin’s volatility has provoked banks into distancing themselves from cryptocurrencies and digital assets altogether.

Ripple Urges UK Regulators to Establish a Consistent Cryptocurrency Framework
Related: Ripple Urges UK Regulators to Establish a Consistent Cryptocurrency Framework

But cryptocurrencies don’t necessarily have to mean volatility or massive investment losses. Companies like Ripple are in agreement that the space does need some degree of regulation to prevent money laundering and fraud, and are willing to work with governments to make that happen.

For its part, the FCA has stated it will commit to establishing “perimeter guidance” on which digital assets do and don’t fall within its rules by the end of 2018, and whether that guidance will be extended to include more. Additionally, the FCA stated that it will conduct a separate consultation in Q1 of 2019, to look at whether it should prohibit the sale of derivatives which reference crypto assets.

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UK Considering Ban on Crypto Derivatives

On the heels of a report by a coalition of pro-blockchain groups and financial institutions warning UK officials not to over-regulate the industry, the Financial Conduct Authority (FCA) is weighing whether or not to ban certain crypto-related derivatives.

Dual Reports, Conflicting Views

The FCA was part of its own group, the Cryptoasset Taskforce, along with the UK Treasury and the Bank of England. The Taskforce released its own report Monday, with the FCA stating that digital assets have “no intrinsic value and therefore investors should be prepared to lose all the value they have put in.”

In its report, the UK regulatory body also states that it believes crypto assets threaten to destabilize the UK’s economy, while the other side argues driving crypto business away would hurt the country’s reputation as a fintech hub.

According to the Financial Times, the FCA is specifically looking at a ban on cryptocurrency based derivatives to retail investors. This would include contracts for difference (CFDs), options, and futures. Some of London’s largest trading platforms, such as IG Group and Plus500, are already making money trading crypto-based CFDs based on popular cryptocurrencies like Bitcoin, Litecoin, Monero, and EOS. Since these financial instruments are classified as derivatives, the CFD has jurisdiction over their control.

Deciding What Falls Under FCA Jurisdiction

There are, however, other crypto-based assets that fall into more of a grey area. Ones used only as a means of exchange, for example, or to raise capital or invest. Since those are not technically derivatives, some argue that they should not be regulated in the same manner. In an interview with the Times, CryptoUK Chair Iqbal Gandham said:

“It is important that new rules are proportionate and do not put up excessive barriers, including for retail investors,” said CryptoUK Chair Iqbal Gandham in an interview with the Times.

The FCA appears to have gone from a more neutral stance on distributed ledger technology to advocating more strongly for its regulation, at least insofar as its use in creating financial derivatives. They stated to the Times:

“Given the complexity and new challenges presented to traditional forms of financial regulation, more time is needed to consider how regulation can meaningfully address the risks posed by exchange tokens, such as bitcoin.”

In Q1 of 2019, the FCA said it will hold a separate consultation on whether to ban the sale of crypto-based derivatives to retail investors, as well as make decisions on whether to regulate crypto exchanges and wallet providers. It will also clarify by the end of 2018 which crypto assets it has jurisdiction over, and which it would need to extend its powers to cover.

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Is Tether Quietly Exiting the Market?

The stablecoin Tether has been the subject of controversy, speculation, and what some are calling “weaponized FUD” in recent weeks. Some have speculated the company’s lack of transparency surrounding its dollar-backed crypto offering could mean insolvency. Last week, CryptoSlate reported that Tether removed almost half the USDT in circulation and burned them. But, rather than imploding, what if the company is simply winding down?

Stablecoin Boom Amid Tether Headlines

The theory posed by an independent researcher who goes by the name Hasu. In a post on his Medium blog, Hasu explains why Tether might actually be selling off their assets in preparation to close up shop and leave the market altogether. And, why that could be good for all parties involved.

Hasu points to Tether’s recent trouble as something competing stablecoins could use to their advantage, since previously USDT’s position as a stablecoin was so well-secured that it would take either insolvency or negative consequences from regulation for them to fail, and for competing coins to take their place.

This month, competing stablecoins like Paxos and TrueUSD, both pegged to the U.S. dollar and thus in competition with Tether, have had banner sales and are trading at just over one dollar as of this writing. Tether is back up to just under a dollar in value, but we still see tokens being reclaimed, with another 100 million USDT sent to its treasury account last week.

Buying Back the Stock

If Tether actually is planning an exit from the market, as Hasu speculates, then these massive transfers of USDT could be the company buying up coins at a discount while the value was low then destroying or retiring them, and crediting themselves the value of the coin. This is similar to what companies on Wall Street do when buying back stocks they believe to be trading for less than the fair market price.

Buying back their tokens in this way has the potential to make Tether millions by removing discounted USDT from circulation and reclaiming their fiat value. If the powers that be behind Tether have decided to wind the project down, selling off their inventory before doing so would be a good way to do it. Hasu states:

“Even if we assume that $200M was withdrawn by non-Tether traders, that would mean Tether still managed to buy back $600M worth of tokens. With a 3–5% discount, this buyback made them between $18M and $30M.”

Who Is Winning The Stablecoin Race?
Related: Who Is Winning The Stablecoin Race?

He goes on to say that all the attention surrounding Tether, and its corresponding price decline, has provided just the “external shock” needed to dethrone Tether as the king of the stablecoin heap. FUD or not, it does seem to have had an effect. We’ve seen a boom in the number of stablecoins hitting the market recently, including Gemini Dollar, who claim to be the “world’s first regulated stablecoin.”

A Tether exit has the potential to clear the playing field for these new stablecoins while allowing the company itself to reclaim fiat assets by gradually removing USDT from the market and selling them off. If that really is the case, we should see the amount of USDT in circulation slowly decline in the coming weeks.

USDT’s market cap as of this writing was just under $2 billion, and 1.93 billion remain in circulation.

Learn more about stablecoins:

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Wrapped Bitcoin: Bitcoin-backed ERC20 Token Coming Early 2019

Dark pool platform Republic Protocol has teamed with crypto custodian BitGo and decentralized liquidity pool Cyber Network to launch a Bitcoin-backed ERC20 token on the Ethereum blockchain.

The announcement was made Friday by Republic Protocol CEO Taiyang Zhang via a company Medium post, and has a lot of people in the crypto space already buzzing. The new joint project has been named Wrapped Bitcoin (WBTC), and is reportedly scheduled for a 2019 launch.

BTC + ETH

Zhang and company are touting WBTC as a beneficial cross-network initiative able to use both the liquidity and public awareness of Bitcoin and the developer ecosystem of Ethereum to its advantage. For each WBTC created, an equal amount of BTC will be held in custody to back it at a 1:1 ratio, according to Zhang. He goes on to add in the blog post that WBTC will operate in a similar fashion to Tether’s stablecoin, with the notable exception of greater transparency:

“The WBTC remains in circulation until the Bitcoin backing it is withdrawn and the equivalent WBTC is burnt. This method is similar to how TUSD operates, except that WBTC has the benefit of the ease of transparency with all custodian funds being fully verifiable on-chain.”

Zhang says WBTC will act as a guinea pig for future asset tokenization projects on the Ethereum blockchain, and that it presents a range of opportunities for decentralized exchanges (DEXs). WBTC will utilize atomic swaps, allowing for greater trust in the asset, with Kyber and Republic minting the first tokens from their own stash of BTC. Kyber and Republic will also serve as the first merchants to distribute the token.

New Transaction Possibilities

This combination of BTC with the ERC20 protocol gives DEXs and dApps on the Ethereum chain the power to “seamlessly” use BTC, opening up new possibilities for transactions that weren’t previously achievable, according to Kyber Network cofounder Loi Luu, who stated:

“Applications on Ethereum such as decentralized exchanges and financial protocols will all be able to use Bitcoin seamlessly, creating Bitcoin trading pairs which have been impossible until now. At the same time, the usage of Bitcoin will be expanded by having more decentralized use cases, such as exchange, loans, token payments.”

WBTC will also be regularly audited for proof-of-reserve, to continuously verify that every WBTC is backed 1:1 by BTC. These audits will be undertaken by a decentralized autonomous organization (DAO) established at launch. The full specs for WBTC will also be made available on GitHub prior to the January 2019 expected launch date.

Eleven companies have signed on to back the project, including MakerDAO, Airswap, Compound, and DDEX.

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Ripple Cofounder Chris Larsen at Money2020 FinTech Conference: ‘Silicon Valley Has Missed the Boat’

Ripple co-founder Chris Larsen sat down for a discussion on the cryptocurrency space and creating an internet of value with Arjan Schütte, the Founder and Managing Partner of Core Innovation Capital, for the keynote of this year’s Money2020 FinTech conference. During the talk, Larsen shared his views on Silicon Valley, disruption in the financial technology space, and regulation.

‘A Techlash Going On’

One point Larsen made was the need to end the “fetish for disruption” in the financial technology space. Just because a firm’s product is disruptive, he said, does not mean that the firm itself has to be:

“There is a ‘techlash’ going on, for sure. Silicon Valley has missed the boat. They’ve moved fast and broke things and didn’t worry about the consequences. This is where FinTech has struggled. Pure code is one thing, but it has to also be compliant and regulated. Technology is embedded in everything these days, and people are scared. They don’t want to hear how you’re going to break things.”

Technologies like the blockchain can and are being used for good, he argued, pointing to the investments Ripple has made toward charitable giving. He also called out the industry for not doing better to mitigate the potential harm digital assets can cause.

Related: Report: Crypto Theft Hits Nearly $1 Billion in First 9 Months of 2018

The fear and harm Larsen refers to is likely due in large part to reports of scams, massive theft, and money laundering that continue to pop up in the cryptocurrency space as the technology struggles with finding a compromise between its commitment to decentralization and independence and a need for consumer safeguards.

Creating Value

Larsen said crypto companies could assist in risk reduction by working with banks, building on their existing regulatory framework and incorporating security measures that have already been in use to help protect investor’s assets, build trust, and thereby inject value into the system:

“Work with banks. By working with the system, you are automatically confronted by what the concerns are. If you’re only on your own path, you don’t see what these issues are.”

With thoughtfully executed regulation, Larsen argued, digital assets could boost the creation of global liquidity that might serve as a protection against another financial crisis like the one we saw in 2008. Unsurprisingly, he cited XRP as an example of how it could be done, as Ripple has long touted its ability to ease cross-border transactions between countries.

Companies like Ripple and Binance that are expanding into the world’s poorer regions are banking on crypto’s ability to give people without any kind of financial institution or reliable government access to money. Both are actively involved in setting up ways to use crypto to help people set up accounts or receive monetary resources in regions like Uganda.

“Ninety percent of what we see today [in digital assets] won’t exist in ten years time,” Larsen said, “But the other ten percent of it will change the world.”

For more information on Ripple and XRP:

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