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TechCrunch Founder Outraged at US SEC, Will Crypto Firms Also Pivot to Asia?

The US Securities and Exchange Commission (SEC) has been heavily criticized for its actions against Elon Musk’s Tesla, the crypto market and investment firms within the local market.

 

On Sept. 29, Michael Arrington, the co-founder of TechCrunch, announced that his venture capital firm has decided to move out of the US and relocate to Asia after the SEC sent two subpeonas to XRP Capital.

 

 

 

“We received a second subpeona from the SEC, again collecting information from us as investors in a U.S. company. The legal costs of dealing with these are not insignificant. We will not invest in any further U.S. deals until the SEC clarifies token rules. Pivot to Asia,” Arrington said.

 

Outraged by the decision of the SEC to crackdown on local companies and investment companies, Arrington added: “the U.S. has already been left behind.”

 

Regulatory Uncertainty in the US

Gemini and Coinbase, two of the most heavily regulated cryptocurrency exchanges in the global market, have been actively cooperating with the SEC and local financial regulators to solidify the country’s cryptocurrency infrastructure and policies.

 

Most recently, Coinbase introduced a framework that enables tokens to get listed on the platform under full compliance with local regulations. If a token is integrated into Coinbase with the approval of the SEC, then it is officially cleared as a security and exchanges are free to integrate it without having the risk of being acknowledged as a distributor of unregulated securities.

 

 

 

But, until Coinbase lists tokens on its platform, exchanges and investors in the US market cannot be certain that tokens are considered as non-securities under existing laws The entire crypto market of the US is waiting on Coinbase to initiate the integration process of tokens.

 

Such an impractical ecosystem and the SEC’s continuous clampdown on cryptocurrency-focused investment firms have led major investors like Michael Arrington and his VC firm XRP Capital to pivot from the US to other major markets. For merely investing in the crypto market, VC firms have started to receive subpeonas and become vulnerable to investigations.

 

Moreover, Jake Chervinsky, as government enforcement defense & securities litigation attorney at Kobre & Kim LLP said, the US Congress is nowhere close to passing any crypto-related legislation due to the lack of companies and consortia pushing lobbyists in Washington D.C. to convince the government to pass a piece of legislation to solidify policies surrounding the crypto market.

 

Chervinsky said:

 

“There’s no money behind it yet. Like it or not, if you want to push legislation through Congress, you need lobbying infrastructure. The friend I mentioned is a fairly savage political operative. His question is basically ‘who’s gonna to pay me to get this done?’”

 

Meanwhile, Japan has already passed a piece of legislation to strictly govern its local cryptocurrency exchange market and South Korea is expected to pass its legislation on crypto and blockchain technology by the end of this year.

 

Leaving the US

Already, most major crypto-related business remains operational outside of the US. Binance, ShapeShift, Upbit, OKEx, Huobi, BitFlyer, and BitMEX are all based in Asia, with the exception of Binance and ShapeShift which are based in Malta and Switzerland.

https://www.ccn.com/techcrunch-founder-outraged-at-us-sec-will-crypto-firms-also-pivot-to-asia/

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Malta PM at UN General Assembly: Crypto is the Inevitable Future of Money

At the UN General Assembly, Malta Prime Minister Joseph Muscat stated that blockchain technology will allow crypto to inevitably become the future of money.

 

He stated:

 

“I passionately believe technology revolutionizes and improves systems. This is why in Malta, we have launched ourselves as the blockchain island. By being the first jurisdiction worldwide to regulate this new technology that previously existed in a legal vacuum. Blockchain makes cryptocurrencies inevitable future of money. More transparent it helps filter good business from bad business.”

 

Prime Minister Muscat emphasized that recognizing the potential of the blockchain, Malta has openly embraced the crypto market and businesses within it, leading the global cryptocurrency sector with favorable regulations and practical policies.

 

Blockchain Island’s Success

Since early 2018, Malta has focused on building an ecosystem that significantly improves the businesses of crypto and blockchain-related companies.

 

Binance, the world’s largest cryptocurrency exchange with around 10 million users and $200 million in quarterly profit, openly praised the efforts of Malta to lead cryptocurrency regulation, relocating its headquarters to the region.

 

 

 

Changpeng Zhao, the beloved CEO of Binance better known to the cryptocurrency community as CZ, stated in March that the company is dedicated to investing in Malta  and its local cryptocurrency market to assist the growth of the local blockchain industry.

 

“After reviewing a proposal bill, we are convinced that Malta will be the next hotbed for innovative blockchain companies and a centre of the blockchain ecosystem in Europe. Binance is committed to lending our expertise to help shape a healthy regulatory framework as well as providing funds for other blockchain start-ups to grow the industry further in Malta,” said CZ.

 

Shortly after the relocation of Binance to Malta, Tron, another billion dollar company based in Beijing that oversees the development of the Tron blockchain network, disclosed its intent to establish an office in the country and invest in the local cryptocurrency market of Malta, moved by the forward-thinking approach and regulation of the government.

 

 

 

Within such a short period of time, the ambitious plan of Malta to become a leading region in the global cryptocurrency and blockchain space allowed the country’s economy to grow rapidly, solidifying the position of Malta at the forefront of blockchain development.

 

Most recently, regional governments of Seoul, Busan, and Jeju Island, three major cities of South Korea, the fourth biggest economy of Asia, announced their intent to replicate the success of Malta after being inspired by its success.

 

Taking Blockchain Further

In his speech, Prime Minister Muscat further explained that the local government remains passionate about the potential of the blockchain and its ability to eliminate third party service providers to provide users complete freedom over information and money.

 

He explained that the blockchain will eventually produce solutions that can replace existing infrastructure in major industries like healthcare and charity.

 

 

 

“Blockchain can provide solutions to health care systems where patients have real ownership of their medical records. Emissions trading systems can be taken to the next level. We can help verify that humanitarian assistance is reaching its intent destination. We can make sure that nobody is deprived of their legitimate property because of compromised data,” Prime Minister Muscat noted.

https://www.ccn.com/malta-pm-at-un-general-assembly-crypto-is-the-inevitable-future-of-money/

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Tether Dominates 98% of Stablecoins’ Daily Trading Volume: Report

Despite the criticisms of opaqueness and centralization leveled against Tether, the stablecoin which was initially known as RealCoin continues to beat its rivals by wide margins.

 

In a  report titled The State of Stablecoins, digital assets tech firm Blockchain Luxembourg SA estimates that approximately 98% of the total daily trading volume of stablecoins is dominated by Tether. On a daily basis this translates to approximately 60% of the daily trading volume of Bitcoin.

 

 

 

With regards to market value, Tether comprises approximately 93% of the market cap of all stablecoins. Currently, the combined market capitalization of all stablecoins is approximately US$3 billion and this is around 1.5% of the entire cryptocurrency market.

 

Tier-1 Cryptocurrency Exchanges

Compared to other stablecoins Tether also boasts of being listed in the highest number of Tier-1 exchanges. Tether was listed on 6 Tier-1 exchanges compared to TrueUSD’s 5, SteemDollar’s 4, NuBits’ 2, BitBay’s 2, Gemini’s 2, Paxos’ 2, Numins’ 1, STASIS’ 1 and HelloGold’s 1. Overall, stablecoins are listed on a total of 50 exchanges and Tether is listed in at least 46 of them.

 

Blockchain’s report which analyzed 57 stablecoins (23 in live mode and 34 in the pre-launch phase) also revealed that investors were getting increasingly interested in stablecoins with venture funding totaling around US$350 million raised so far. Part of the venture funding was raised from established funds that include Andreessen Horowitz, Bain Capital Ventures, Google Ventures and Lightspeed Venture Partners

 

 

 

The report which categorized stablecoins as being either backed by traditional collateral (fiat currency-backed, gold-backed or a mix of the two), cryptoassets or algorithmic-backed found that the latter were more popular with investors. Algorithmic stablecoins such as NuBits raised around 50% of the total funding directed to stablecoins which was approximately US$174 million. Stablecoins backed by traditional collateral, on the other hand, attracted 41% of the venture funding and this translated to US$144 million. Crypto-collateralized stablecoins attracted 9% of the venture funding (US$33 million).

 

Favored Locations

Blockchain’s report also found that the United States and Europe were the most popular locations for the project teams of various stablecoins. Currently, 19 such project teams are based in the United States while Europe has 13. Within Europe, Switzerland is the most popular location with 5 projects located there while the United Kingdom follows with 3 projects.

 

As pertains to where the various stablecoins were legally domiciled, the same pattern emerged with the United States being the legal home for 10 stablecoins while Switzerland had 7. Other jurisdictions which had more than one stablecoin project legally domiciled within their borders were Cayman, Jersey and Australia.

 

 

 

Predictably, the US dollar emerged as the most common peg for stablecoins with 66% of stablecoins utilizing it.

https://www.ccn.com/tether-dominates-98-of-stablecoins-daily-trading-volume-report/

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Big Brokers, a Bigger Circle, and MakerDAO’s Round: This Week in Crypto

Make sure you check out our previous edition here, now let’s go over what happened in crypto this week. Also, make sure you subscribe for this week’s edition of The CCN Podcast on iTunes, TuneIn, Stitcher, Google Play Music, Spotify, Soundcloud, YouTube or wherever you get your podcasts.

 

Price Watch:

Bitcoin is down 2% to $6,333 this week after hitting $6,700 last week. The price varied minimally this week as compared to last weeks dramatic price movements. This included rapid oscillations between $6,300 and $6,400 and the price hiting $6,600 level and the $6,200 level within days of each other. This week saw much less variability.

Ethereum is down 10% this week reversing the 10% gain made last week. The gains of last week may be an anomaly with preceding week having a drop of 31% last week, 5% the week before and drops of 11%  and 24% in the preceding weeks with single and double-digit drops going back months. The recent drops have continued to be blamed on ICO sell offs. Further contributing to the price drops this week was the fact that UTRUST has partnered with the Ethereum Classic dev team in order to integrate ETC.

The Coin Market Capitalization was Flat last week owing to minimal changes by Bitcoin and with the losses of Ethereum being made up for by surging Stellar prices.

Banks:

Thailand’s Kasikornbank to Pilot Visa’s Blockchain Cross-Border Payments Platform – Kasikornbank, the biggest bank by market capitalization in Thailand is joining the Visa B2B Connect platform. Designed to enable fast and secure cross-border payments between businesses using blockchain technology, the platform relies on a permission private blockchain architecture which is operated by global financial services firm, Visa Inc.

Governments:

Brazil’s Biggest Brokerage Plans to Legally Processes Bitcoin Trades – Grupo XP, the largest independent brokerage in Brazil, has publicly released its plans to launch a Bitcoin and Ethereum trading platform by the end of 2018. The move comes after an investigation by the government of Brazil and its antitrust watchdog have launched a formal investigation into banks and major financial institutions in the country after receiving complaints that crypto exchanges received subpar financial services from local banks.

Dubai Upgrades Payment Portal DubaiPay with Blockchain technology – Developed in collaboration with Dubai’s Department of Finance (DoF), the Smart Dubai Office (SDO) launched the system aimed at enabling reconciliation and settlement transactions in real-time. on Sunday with a  press release labeling it a “blockchain-powered upgrade to its financial system”.

India’s Supreme Court to Listen Final Arguments on Central Bank vs Bitcoin Case -The Supreme Court of India is set to hear the final arguments on the petition against the Bitcoin banking ban on Tuesday,  reported local media.

Exchanges:

Gemini Eyes UK Expansion – The Financial Times reports that Gemini has hired advisors regarding a move into Britain and may soon submit an application to the U.K. Financial Conduct Authority (FCA) for regulatory authorization to open an exchange in the country under the agency’s e-money licensing program. The move comes after a recent announcement of the Gemini dollar could mark a swipe at Coinbase, as the exchange e received such an e-money license from the FCA, authorizing it to provide payment and electronic money services to customers in the U.K. and 23 other European Union countries.

Crypto Giant Circle Lists EOS, Stellar, 0x and Qtum – Circle has announced in a   blog post the addition of four new digital assets to the Circle Invest platform, bringing the total number of listed cryptocurrencies on the platform to 11. According to Circle’s blog post, the four crypto assets were chosen for listing based on their suitability, which was determined by the  Circle Asset Framework. Since releasing Circle Invest in March, the platform has aggressively courted increased market share, listing Zcash and Monero in May.

$230 Million: Mt. Gox Trustee Confirms Past Bitcoin Sell-Off – According to a document published on the Mt. Gox website, Nobuaki Kobayashi, the exchange operator’s trustee, sold approximately 24,658 BTC and 25,331 BCH between the last creditor’s meeting on March 7 and the June 22 court ruling allowing the estate to exit bankruptcy and enter civil rehabilitation. Some have questioned wether this sell off has caused the bear market.

Google Unbans Crypto Ads – Google, the $828 billion search engine behemoth, has  unbanned crypto-related ads, allowing regulated companies to utilize its platform to advertise their products.

Cryptocurrencies:

Brave Browser Hits 4 Million Monthly Active Users –  Brave, the web browser created by Mozilla founder Brendan Eich  and funded through a $36 million ICO has hit 4 million monthly active users and 10 million downloads. The new numbers come after last weeks announcement of a partnership with blockchain identity startup Civic to allow verified publishers to accept their monthly BAT payments in an external Ethereum wallet rather than the default one provided by the browser.

Vitalik Says Ethereum Can Scale to 500 tx/s Using Zcash Technology – Writing on an ETH research forum in a post originally published on Saturday, Buterin said that Ethereum can borrow a technological innovation from privacy-centric cryptocurrency Zcash to “mass-validate” ETH transactions by  allowing relaying nodes to “verify the correctness of computations without having to execute them” or “learn what was executed”.

Bitmain Rival Ebang Launches New Line of Uber-Efficient Bitcoin Miners –  China-based Ebang Communication, one of the world’s largest manufacturers of application-specific integrated circuit (ASIC) chips for bitcoin miners, has unveiled the next generation of its flagship product line, complete with an upgraded chip that makes significant strides in energy efficiency.

Andreessen Horowitz Invests $15 Million in MakerDAO’s Asset-Backed Stablecoin – The American venture capital firm, which has invested in crypto startups like CryptoKitties and OpenBazaar in the past, purchased 6 percent of the total supply of MKR tokens through its $300 million crypto fund, a16z. The fund committed a total of $15 million to the MakerDAO project and marked their investment as a “strategic purchase.” Holding MKR tokens will offer a16z the rights to govern MakerDAO and the Dai Credit System as it becomes the first decentralized autonomous stablecoin organization.

Crime:

Indian Authorities Round up on Bitcoin Scammer’s Properties Worth $60 Million –  Indian law enforcement officers have confiscated immovable properties of the owner of GainBitcoin.com, including six offices in Dubai and the residential apartments and bank balances of two of his associates Hemant Bhope and Pankaj Adlakha, under the provision of Anti Money Laundering (AML) act.

Japan Slaps Crypto Exchange Operator after $60 Million Theft – Japanese financial authorities are ramping up their scrutiny into the domestic crypto exchange sector after last week’s ¥6.7 billion ($60 million) hack of Tech Bureau’s exchange Zaif.

Cryptojacking Surged by 86% in the Second Quarter of 2018: McAfee Labs – According to McAfee Labs, cryptocurrency mining malware attacks increased by 86% in the second quarter of this year. While the primary target of cryptocurrency mining malware has remained personal computers, cryptojackers have increasingly turned their attention to devices such as smartphones and other gadgets possessing an internet connection.

Noteworthy:

 

These are a few pieces that were particularly popular this week.

 

Meet The Man Who Tracks Kidnappers and Paramilitaries Using Blockchain – Profile of Ben Strickland, who used blockchain data to track down kidnappers. This article offers a look at the 10-30 daily reported cases of sexual extortion which use Bitcoin.

This Off-Grid, Solar-Powered System Sends Crypto Through Radio Waves – A overview of Burst,  a solar-powered blockchain that operates completely off-grid. Burst may be the first project to have performed a fully off-grid transaction, opening a use case for cryptocurrency in instances of natural disaster or areas with poor infrastructure.

Opinion: Is India’s Central Bank Nervous About Supreme Court Allowing Crypto Trading? – In-depth analysis of India’s Central Bank’s motivations surrounding its policies on cryptocurrencies.

Green Energy Bitcoin Mining Will Have ‘Insignificant Environmental Impact’ – An interview with Hass McCook, a civil engineer as well as a Bitcoin researcher and advocate who has done the deepest investigation into Bitcoin’s energy requirements that’s ever been carried out. McCook recently released a 39-page report on energy use in crypto along with a  ten-part Youtube series explaining his findings.

Bitcoin Mutual Fund CEO Explains Why Canada is More Blockchain-Friendly than the U.S. – In an exclusive interview with CCN, Sean Clark, CEO of First Block Capital Inc. — the operator of FBC Bitcoin Trust, the first bitcoin mutual fund to trade in Canada — discussed the underlying factors that make Canada a country that is friendly to new technologies such as cryptocurrency.

Interview: TechCrunch Editor-at-Large Josh Constine Talks Cryptocurrency – Sit down with TechCrunch editor-at-large Josh Constine. Josh is a media heavyweight, having interviewed the likes of Mark Zuckerberg, Edward Snowden, and Cory Booker and having spoken at 120 events on a diverse set of topics.

https://www.ccn.com/big-brokers-a-bigger-circle-and-makerdaos-round-this-week-in-crypto/

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Ripple Overtakes Ethereum Once Again With 7% Surge, Bitcoin Stable at $6,600

Over the past 24 hours, Ripple (XRP) has overtaken Ethereum once again with a 7 percent surge in price, achieving a market valuation of $24.28 billion.

 

The market cap of Ethereum remains slightly below that of Ripple at $24.15 billion and based on the weak volume of XRP, it is likely that Ethereum will regain its position as the second most valuable cryptocurrency in the short-term.

 

 

 

Ripple has taken over Ethereum on three occassions in 2018, all of which occured in the second half of September. Subsequent to recording a three-fold increase in price, many investors expected Ripple to retrace and XRP to demonstrate a minor correction due to oversold conditions displayed by the market.

 

Yet, XRP continues to increase rapidly in value, directly competing against Ethereum for the number two spot in the global cryptocurrency market.

 

Trend of the Market

On September 27, the cryptocurrency market seemed to be initiating a strong corrective rally as Bitcoin surpassed the $6,700 mark and moved closer to the $6,800 resistance level. However, on September 28, Bitcoin recorded a slight drop in value to $6,500.

 

In the past few hours, Bitcoin has demonstrated some momentum in the mid-$6,000 region, after closing above the $6,550 mark on September 29. Prominent crypto trader Luke Martin wrote yesterday that the closure of Bitcoin at $6,550 will most likely lead to a positive short-term trend.

 

 

 

“Would be a bullish sign for BTC to get the daily close above $6,550 zone. Since they’re still highly correlated would be positive for alts too and could make a stronger case that the recent higher lows would hold,” Martin said.

 

On Saturday, Bitcoin closed aboe the $6,550 zone and rebounded to $6,630, which has led the majority of small market cap cryptocurrencies in the global market to recover.

 

“BTC daily was able to close above the $6,550 zone. Successful retest on the daily and as noted above. This gives alts a nice boost as well, lots of good movers early Sunday morning,” he added.

 

The positive short-term trend of Bitcoin could lead the market to record decent gains in the upcoming days, especially if the volume of BTC increases in the next 12 to 24 hours. In comparison to last week, the volume of the dominant cryptocurrency remains fairly low and relative to the recovery in the volume of ETH and XRP, BTC has slightly lagged behind.

 

ETH and XRP Rally

XRP has already recorded a strong 7 percent gain in the past 12 hours. But, based on the volume and short-term price trend, ETH is primed for a corrective rally and in the upcoming days, ETH is expected to record decent gains to challenge XRP.

 

Tokens have not shown strong momentum despite the positive price movement of major cryptocurrencies including BTC, ETH, and XRP, which suggests that alternative cryptocurrencies may engage in a large rally in the weeks to come. In the short-term however, tokens will likely fall behind major digital assets.

https://www.ccn.com/ripple-overtakes-ethereum-once-again-with-7-surge-bitcoin-stable-at-6600/

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Too Late: India’s Lack of Regulation is Hurting Cryptocurrency Exchanges

Earlier this month, CCN reported that the Securities and Exchange Board of India (SEBI) sent government officials to Japan and Switzerland to better understand Bitcoin and crypto-related regulations prior to a supreme court hearing on a crypto trading ban imposed by the country’s central bank.

 

At the time, many investors in India were optimistic towards the intent of SEBI to obtain better understanding and knowledge of the global standard on cryptocurrency regulation by closely cooperating with officials in Japan, the largest cryptocurrency exchange market in the world.

 

 

 

But, a case can be made that it is already too late for regulators in India to salvage the local cryptocurrency exchange market.

 

Bitcoin Exchange Zebpay Calls it Quits

On September 28, Zebpay officially shut down its popular cryptocurrency exchange in India, unable to obtain any banking service from commercial banks and financial institutions in the country following the blanket ban imposed by the central bank.

 

“The curb on bank accounts has crippled our, and our customer’s, ability to transact business meaningfully. At this point, we are unable to find a reasonable way to conduct the cryptocurrency exchange business,” the Zebpay team said.

 

The decision of Zebpay to terminate its service in India is monumental, not merely because of its status as one of the three most widely utilized and trusted Bitcoin trading platforms in the region but its patience in dealing with impractical policies implemented by local financial authorities.

 

 

 

Throughout the past few years, Zebpay, as a leading Bitcoin exchange in India, has proactively established industry standards including Know Your Customer (KYC) and Anti-Money Laundering (AML) systems to ensure that exchanges are able to provide relevant information to governments despite the lack of regulations.

 

Sandeep Goenka, the co-founder of ZebPay, which has millions of users in its mobile app, stated in February that the company wholeheartedly welcomes the government’s willingness to eliminate the possibility of utilizing exchanges and cryptocurrencies like Bitcoin and Ethereum to launder money by criminal groups and that local trading platforms will implement necessary solutions to assist the government.

 

Goenka said at the time:

 

“Every citizen and business in this country should play their role in eliminating financing of illegitimate activities, regardless of whether such financing is done using legal tender, cryptocurrency, gold or any other medium. We welcome this move by the government and want to wholeheartedly support the government in this move. We encourage the government to work with our members, as we are committed to detect, report, and eliminate suspicious transactions in pretty much the same way as other institutions do.”

 

It requires additional resources, capital, and development work to integrate strict KYC and AML systems to create a seamless process for governments to deal with suspicious transactions from unknown sources. Zebpay, Unocoin, and other leading exchanges in India voluntarily integrated these solutions to establish standards in the local crypto market.

 

 

 

Yet, Zebpay, which has been supportive towards the agenda of the government, was forced to shut down its business as banks rejected exchanges and denied any service to crypto-related businesses.

 

India Will be Isolated

The attitude of the government of India in its delay in regulating the cryptocurrency market is quite clear; it believes that as soon as it regulates the local market, businesses will come in and the crypto market of India will flourish.

 

Malta, Switzerland, Busan, Seoul, Japan, and France have focused on establishing friendly regulations for crypto startups to bring in leading exchanges and blockchain projects into their regions. Once local exchanges leave the market of India, it will be difficult for the country to revive its local crypto and blockchain market and it may take years, if the government continues to pursue its approach of pressuing existing companies, for the local industry to recover.

https://www.ccn.com/too-late-indias-lack-of-regulation-is-hurting-cryptocurrency-exchanges/

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The crypto world is going wild for 'stablecoins' — here's everything you need to know about them

'Stablecoins' are the hottest thing in crypto right now, with over 50 projects in development. A 'stablecoin' is a cryptocurrency that's price is pegged to a real-world asset like gold or the dollar. Here's a guide to what they're used for, how they work, and why people are excited about them.

 

'Stablecoins' are hot.  (REUTERS/Arnd Wiegmann/File Photo) « less

'Stablecoins' are the hottest thing in crypto right now, with over 50 projects in development.

A 'stablecoin' is a cryptocurrency that's price is pegged to a real-world asset like gold or the dollar.

Here's a guide to what they're used for, how they work, and why people are excited about them.

LONDON — The latest innovation in the fast-moving world of cryptocurrencies is the "stablecoin" — cryptocurrencies pegged to real-world assets such as the dollar or gold.

 

A report from crypto wallet provider Blockchain  released this week found that "the number of active stablecoin projects has dramatically increased over the past 12-18 months and more than a dozen project teams have stated they plan to launch in the coming weeks/months." There are now over 50 in development globally.

 

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Here's everything you need to know about the hottest new area of crypto:

 

What is a stablecoin?

"Stablecoins" are cryptocurrencies whose prices are linked to a real-world asset. In theory, they could be linked to anything, but the majority are linked to currencies such as the dollar or euro.

 

How do they work?

There are two main types of stablecoins: reserve-backed and algorithmic.

 

Reserve-backed stablecoins function a little like paper money used to when it was linked to the gold standard. Just as cash used to be ultimately backed by gold reserves in a central bank, reserve-backed stablecoins are backed one-for-one by reserves of the currencies they are pegged to.

 

Issuers of coins like USDC or Tether "tokenize" dollars by exchanging them for a stablecoin and depositing the dollars in a bank. Those dollars are then left untouched until somebody redeems the stablecoin for the dollars. It's this confidence that the stablecoin can be redeemed that maintains the price peg.

 

 

null  (Blockchain)

The second type of stablecoin is one that is not backed by any reserves but instead controlled by an algorithm. Garrick Hileman, head of research at Blockchain and author of the recent stablecoin report, told Business Insider: "They’re really using software rules to try and match supply with demand to maintain a peg to something like the US dollar.

"As demand for an algorithmic stablecoin increases, supply also has to increase to make sure there’s not an appreciation in the value of the stablecoin. At the same time, as the value decreases, there needs to be a mechanism by which supply can be reduced again to try and bring the price of the stablecoin back to the peg.

 

"That’s really the class of stablecoins that are much more challenging to design. They’re really unproven at this point."

 

Examples of algorithmic stablecoins in development include Basis, Terra, Carbon, and Fragments.

 

Why do people need stablecoins?

Cryptos have been plagued by price volatility, with swings of 5% or even 10% in a day not unusual. This volatility has led critics to say that cryptos are speculative investments rather than currencies or assets.

 

Stablecoins are an attempt to harness the benefits of cryptos — value can be transferred digitally — and combine them with the stability and trust in mainstream currencies.

 

Hileman told BI: "For millions of individuals, tens of millions in our view, as well as institutions, the volatility of crypto assets that we saw last year really is keeping a number of people’s on the sidelines of the cryptocurrency movement.

 

"Stablecoins can address that and enable a number of use cases that bitcoin or ether or other more volatile cryptocurrencies are suboptimal for — things like insurance."

 

What are they used for?

The most common use case for stablecoins at the moment is as a liquidity tool for cryptocurrency exchanges. Many exchanges have been shut out of mainstream banking because banks are wary of dealing with anything crypto-related for compliance reasons.

 

As a result, many exchanges can't accept dollar or euro deposits. Clients want to buy with dollars and to be able to trade out of cryptos into dollars at times of high volatility. Stablecoins offer an elegant solution to this problem.

 

However, proponents of stablecoins think the technology could allow for more complex financial products to be built on crypto — things like insurance, smart contract dividend payments, and loans.

 

Which are the biggest stablecoins?

Tether is by far the most popular stablecoin and is used primarily by exchanges to offer dollar-like liquidity.

 

"Tether (USDT) is the second most actively traded cryptocurrency (~60% of BTC daily trading volume) and earlier this year entered the top-10 crypto asset rankings by market value," Blockchain said in its report.

 

Hileman said: "Certainly, last year we saw Tether really demonstrate that there was a real demand for a stablecoin. We saw use of Tether on exchanges like Poloniex that did not have access to US dollar deposits really take off. It helped facilitate the rise of a number of exchanges that were either cut off or chose not to integrate with the existing banking system."

 

Who's developing them?

Stablecoins are being developed by both new startups and existing crypto businesses such as Circle and Gemini, the crypto exchange run by the Winklevoss twins.

 

There are currently 57 stablecoins in development according to Blockchain's report. 23 are already live.

 

Recent examples include the Winklevoss twins' Gemini coin, Paxos Standard, the US Dollar Coin, developed by Goldman Sachs-backed Circle, and the LBXPeg.

 

 

» more The number of stablecoins in development has boomed over the last 18 months.  (Blockchain)

Venture capitalists are also betting big on the space. Blockchain's report said: "$335 million in venture funding has been raised by all stablecoin project teams to date." A notable investment in the space came from Silicon Valley fund Andreessen Horowitz, which recently invested $15 million into stablecoin  project MakerDAO.

 

Why are so many appearing?

Hileman said that the success of Tether "really set off a whole load of innovative teams to think about: how can we do this better?"

 

Despite its popularity, Tether has been beset by criticism of its auditing standards, corporate opacity, and claims of manipulation. As a result, many in the industry feel there is an opportunity to provide a better solution.

 

The potential for stablecoins to be used in everything from crypto insurance to lending and savings means entrepreneurs also hope there can be room in the market for many successful stablecoins.

 

What are the challenges stablecoins face?

Heilman told BI that one of the biggest challenges facing stablecoins is scaling. For reserve-backed stablecoins to reach a level where liquidity is deep enough to support interesting applications of the technology, backers will have to invest millions or even billions in each coin.

 

This could create "a cap on how fast the stablecoin can grow," Heilman said. "When you’re talking about use cases in the trillions, having any upward limit or friction on how quickly something can grow is potentially a huge problem."

 

Heilman also believes that stablecoins looking to replace Tether as a liquidity proxy may end up having a tougher time than some may assume.

 

"Tether, for all the complaints and criticism and concerns, has generally been pretty reliable at holding its peg to the US dollar. It’s worked well enough," he said. "Tether had a huge head start. It has a network effect — it has a love of exchanges, over 150 that have listed it, it’s a top 10 cryptocurrency."

 

 

» more The Winklevoss twins are developing their own stablecoin.  (REUTERS/Stephen Lam)

Another potential hurdle is regulatory scrutiny. Heilman believes that central banks may be quicker to act on stablecoins than they were on cryptos like bitcoin because stablecoins more closely resemble fiat money and could have effects on monetary policy.

 

Not everyone believes in the promise of stablecoins either. Bitfinex'd, a prominent crypto Twitter account that attacks what it sees as bad practice in the space, recently said: " target="_blank"Essentially the only application for them is for scam exchanges to use it," in relations to those outside the banking system.

 

Preston Byrne, a fellow of the Adam Smith Institute and the former COO of blockchain company Monax, has also expressed skepticism, calling stablecoins "doomed to fail" in a lengthy blog post.

 

Finally, the emerging asset also faces a variety of technical challenges. Blockchain's report concludes: "The technology is still nascent and it is highly unlikely that the perfect stablecoin design exists at present; we expect further experimentation and innovation."

https://www.pulse.com.gh/bi/finance/the-crypto-world-is-going-wild-for-stablecoins-heres-everything-you-need-to-know-about-them-id8919074.html

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Interview: Fmr. Morgan Stanley Exec. Caitlin Long on How Wall Street Wants to Ruin Bitcoin [Part 1]

Note:  This is part 1 in a multi-part series exploring the dangers of rehypothecation and commingling in bitcoin and other cryptocurrency assets that could occur once Wall Street begins offering crypto products. Part 1 is an interview with Caitlin Long and subsequent parts will ask the question, “How did we get to a place that where laws look like this?” Stay tuned for part 2.

 

Caitlin Long is a 22-year Wall Street veteran with an impressive career inside of and outside of the cryptocurrency space. She started out as an associate at Salomon Brothers (now Citigroup) before becoming a managing director at Credit Suisse and finally heading up Morgan Stanley‘s Pension Solutions Group. As it turns out, Long’s extensive experience on Wall Street (in addition to her Harvard Law degree) give her some unique insight into things that most cryptocurrency investors aren’t going to have top of mind but that institutional investors have been dealing with for years. At the beginning of our conversation, Long says that everyone’s “backgrounds bring them to who they are today and bring them the knowledge base for recognizing trends.” It is Long’s impressive background, combined with a unique recognition of the opportunity to make Wyoming a “crypto haven” and a  passion for doing what was necessary to achieve this goal, that put her in the unique position of understanding everything that is wrong with our current system and the opportunity blockchain — and specifically bitcoin — give the financial services industry to ameliorate its past mistakes.

 

Note: The following has been edited for clarity

 

CCN Interviews Caitlin Long

 

 

CCN: How did you get into cryptocurrencies and how has your background allowed you to enter the space?

 

CL: Well, like everyone, their backgrounds bring them to who they are today and give them the knowledge base for recognizing trends, and I just happen to have a slightly maybe a typical background because I’m not a technologist but I actually have the legal background as well as having worked on Wall Street for 22 years, most recently running the pension business at Morgan Stanley [where I] really got into the weeds of how assets are custodied, cleared, and settled when they transfer.

 

 

 

The system that we have is very unstable. It’s not fair to investors, and I’ve learned from experience not to trust my brokerage account. My brokerage account itself is not inaccurate, but there’s so much that goes on in these commingled pools of assets behind the scenes that you can’t see. In other words, if you own 100 shares of Apple stock you don’t know that the leveraged institutions of Wall Street haven’t promised those very same 100 shares out to someone else too — and they also show up on that person’s brokerage statement. That kind of stuff really hit me in the gut as just unfair and morally wrong and there’s a lot to be said for pension fiduciaries upping their game and for the investor protection regulation to up its game because frankly, regular investors are the losers from all of these issues in the system.

CCN: Would you talk a little bit about the crypto problem? How the regulations allow that to happen?

 

 

 

CL: Well, there’s fault tolerance in the system. It stems from the fact that trades are not required to be settled instantly, which, for your crypto listeners is going to sound really strange because your trades literally go in the next block. If you’re talking about the bitcoin  blockchain, you can see them within minutes, on the ethereum blockchain, your actual trades are right there, and that’s not the way Wall Street works.

 

Wall Street just settles trades. When I started in 1994, the industry was five days after the trade date [T+5] and now it’s two days after the trade date. We just went from T+3 to T+2 this year, but it’s still two days. Obviously, [delayed settlement is] not a technology problem. It’s long since not been a technology problem anymore. So why is it that Wall Street is stuck with this crazy practice of not settling trades in near real time? The answer is it has to do with the market structures.

 

Now all these crazy market structures that we’ve let been left with, that were designed to do — to try to help Wall Street settle the increasing trading volumes on the New York Stock Exchange in the 1970s — which essentially said, “Why don’t we immobilize shares, instead of literally running share certificates back and forth across all the brokerage firms?,” which is why if you go down to the New York Stock Exchange in New York, that’s why all the brokerage firms were located right there because they literally were running paper securities back and forth to each other every day. And then they got overwhelmed it and they said, “Why don’t we just immobilize them in a vault somewhere, and everybody will actually own a certificate. That’s a claim against that share.” So instead of owning the real thing, everybody now owns a paper claim against the real thing, and the real thing is immobilized in a vault at a company called the DTC, a big huge company that is the legal owner of 99.9 percent of the securities issued and outstanding in the United States.

 

 

 

Most people don’t realize that if you don’t own the actual paper certificate, you don’t own your securities, the DTC [Depository Trust Company] does. What you own is an IOU, and that IOU is from a leveraged financial institution that might default. So behind the scenes, all of these different institutions that were designed to clear and net settle transactions that gave rise to this settlement delay, those institutions haven’t been done away with, even though the technology problem that created them long ago was solved.

 

CCN: It’s just crazy to think, here we are in 2018, and it’s still taking, two — recently, three — days to settle these trades. So I guess there’s got to be a market advantage to the brokerage firm and I guess they’re lobbying to kind of keep that open?

 

CL: Well, it’s interesting they did when we went down to T+3. I remember that was in the late 90s from T + 5, the industry fought it tooth and nail. They didn’t fight it as much when we went from T+3 to T+2, but they will fight it tooth and nail if we ever go T+1, and here’s why: because the industry makes a lot of money on securities lending. This is the hypothecation word that I wrote about on Forbes.com, that’s one of those phrases that crypto enthusiasts are going to know and understand just like they know and understand the phrase fiat currency.

 

Ten years ago it was only the Austrian School economists that were talking about fiat currency; no one ever talks about [U.S.] dollars as a fiat currency. Now everybody talks about it that way to the point that even Fiat — the car company — had this hilarious tweet about two weeks ago that asked why everybody was criticizing their money. It was a play on the name of the company, the Italian car company Fiat. It’s now in the regular vernacular, and I think the word application we have going is going to be in the regular vernacular of industry very soon because that is one of those insidious and subtle things that happen behind the scenes in these in these commingled collateral accounts behind the scenes that you can’t see from your brokerage statement.

 

 

 

For instance, in the MF Global bankruptcy a lot of people, unfortunately, learned what rehypothecation was and learned that it was legal and learn that their brokerage firm got them to agree to it. The remedies to our default are pretty limited if you’ve agreed to it, and it was right there in the fine print. I’ve very publicly been campaigning against this for a while, and it’s not new just because this has been something I wrote about recently. It’s only because it burst on the scene in the crypto sphere due to the entry of Intercontinental Exchange (ICE).

 

They’re the parent of the New York Stock Exchange, which is one of the largest operators of central clearinghouses and counterparties in the world. So they are a major rehypothecator of collateral. This is one of those things that I love about bitcoin because you actually can own your asset. It’s the same as if you were actually owning that paper stock certificate, except it’s just in digital form and it’s not as easy as paper is to counterfeit or lose. In the case of bitcoin, if you have your private keys and you haven’t lost them and they haven’t been hacked, then you really own your bitcoin. I would love to get back to that in the financial markets as a whole.

 

CCN: How did the institutional investors let this happen, let the brokerage firms take this amount of power so the pension fund managers and — why [aren’t] all those people kind of lobbying to do away with that old system?

 

CL: That is a great question and I don’t know the answer — I wish I did. Having better pension fiduciaries and having negotiated some of these agreements ,I knew I was an outlier when we were asking for title collateral terms and one-day collateral posting. We went for intraday collateral posting on our interest rate contracts and nobody would give it to us. When we first started asking, I think it was T+3 collateral posting. You can have a major move in interest rates and the counterparty wouldn’t have to give you any additional collateral for three days.

 

Well, in the intervening three days, of course, they can go bankrupt. I was pushing for that and it was the experience of the financial crisis that made me learn that I needed to ask for that. Why did many others not? I actually had that conversation with a couple of people in the pension business at a recent Free State Project picnic. So they, like me, are opposed to fractionally reserved assets and fractional reserve banking in general. And I said, “God, why are the fiduciaries not digging into this?,” and they said it’s two things: they think that they’re powerless to change the system, which on an individual basis may be correct, but if they were to work together, I don’t think that’s correct at all.

 

 

 

I think they do have the power to force positive change. Indeed, there’s a terrific speech called The Block Chain Plunger: Using Technology to Clean Up Proxy Plumbing and Take Back the Vote that was given by a Delaware court judge back in 2016, his name is Vice Chancellor Travis Laster. I strongly encourage your listeners to read his speech because it gives a tremendous amount of detail about all the problems in the clearing and settlement system of Wall Street, and he like me, is trying to encourage the fiduciaries to take the reins, take the control back in the markets, because it’s their investors and their clients that are losing as a result of all the issues in the system. Lastly, I’ll add I hope the plaintiffs’ bar starts to come into some of these issues and litigate.

I don’t know the outcome of the Dole Foods situation. I have not seen any FCC enforcement actions in the Dole Food situation, which means somebody lost money there. Why has there not been litigation? Why have there not been enforcement actions? It’s the sort of thing that regular mom and pop investors out there look at this kind of thing and just think the system is rigged against them. And guess what? In a lot of ways it is!

 

CCN: How common is the over-issuance of shares as it happened in the Dole Foods situation in the traditional stock market?

 

CL: It’s very common, it happens every day. But it is a matter of degree and so essentially it all gets back to the delayed settlement that we talked about earlier, plus securities lending and the fact that these brokers and clearinghouses and custodians are making money off securities lending and they’re allowed to, and again, it’s in the legal agreements.

 

In most cases, the pensions for these shares have agreed to it or the clearinghouse, the Commodity Futures Trading Commission  (CFTC), and FTC (Federal Trade Commission) allow the clearinghouses to do it. What I’ve experienced is that failures to deliver in securities lending can happen on almost a daily basis, especially for something that is a hard-to-deliver security. A hard-to-deliver security would be something that is very scarce and very difficult to find a borrower in the security. There are failures to deliver every day.

 

Here’s the other shocking statistic: The market where this happens the most is the U.S. Treasury bond market, and the Federal Reserve actually encourages all of this. It is the means by which the Fed institutes its monetary policy. It used to be that monetary policy was instigated through the traditional banking system, it’s how a lot of us learned it in school, the Fed injects a dollar of a monetary base into the traditional banks, they typically had about an 8 percent capital requirement. And that would turn into $12 of M2 if you’ve ever taken an economics class and learned about the difference between M0 and M2 the multipliers, and those similar multipliers exist in the securities industry as well, and it happens through rehypothecation.

 

 

 

CCN: Wow, it just almost sounds corrupt. If you’re advising Bakkt, what are you telling them to do?

 

CL: Well, I’m not advising Bakkt, to be clear. They put out an interesting statement today and it directly spoke to some of the critiques that I and others have made about the fact that they’re creating more paper claims to bitcoin then they have real bitcoin in their warehouse, and they didn’t actually answer the question. They did actually say something very positive, which I gave them credit for, which is that they’re not going to allow any margin on the physically-settled bitcoin contracts and no leverage in the contracts. But based on what I just walked you through, the devil is always in the details, right?

 

It’s the analogy that your broker statement isn’t incorrect. It’s just what’s going on behind your brokerage statement that you don’t have any visibility into and you don’t know how many times they’ve promised that those very same Apple shares out to different people. That is the same thing happens in these clearinghouses; you don’t know how many times the collateral has been promised out to different people, and I will give — I sent back credit if they actually released their documents and indeed they absolutely are not commingling the collateral and they are not rehypothecating the collateral, and again, in this case what I’m talking about is physical bitcoin. If they are not playing those games, then I will be the first to stand up and congratulate them for doing it right.

 

Then, if they don’t play those games the only thing that I think probably is outstanding the question posed by Andreas Antonopoulos, which is related but different which is the power of these large custodians to influence the software upgrades in the bitcoin network in the future.He raised this issue related to the big exchanges last summer when we were going through what happened in the control of bitcoin related to the scaling debate.

 

He’s saying it, rightfully so, that that’s going to be even more pronounced when Wall Street comes in and you start to get institutional quantity money in these markets. I think he would probably be in favor of is to enabling the actual owners of collateral to vote with their feet as opposed to Bakkt essentially voting on behalf of the entire pool that it controls. So we know if you control all your keys it’s your bitcoin, if you don’t control your keys it’s not your bitcoin, and that is going to become an issue with the [bitcoin] ETF as well. Gigantic “not-your-keys-not-your-bitcoin” pools of bitcoin where the people who really control them and therefore control the influence over the future of the software are those who are not necessarily aligned with the individual users.

 

CCN: Being able to make decisions for you, how is that currently handled with stocks where you have a big vote?

 

CL: It’s not handled well; you would think that there would be one-for-one, one share-one vote. And that is indeed what the system appears to be. In fact, actually, if you go back and read that blockchain plunger speech by Vice Chancellor Travis Laster, that I referred to earlier, he talks about just how awful the proxy voting mechanism is in U.S. capital markets.

 

Laster should know because all the proxy laws are governed by state laws, and, of course, most corporations are domiciled in Delaware and so they are subject to Delaware law. All the proxy laws are governed by state laws. State law says you’ve got to have one share-one vote. Well, you don’t have one share-one vote, and you don’t have one share-one share even because of the way the shares are owned under indirect basis.

 

Anyway, he said that a big corporate attorney advised him that if there is a proxy vote that’s closer than 55/45 that it’s just a sheer guess, finger in the air as to who actually won the vote. We saw that in the Procter and Gamble proxy contest, which happened at the end of 2017, and in the Dole Foods case which was a 2017 case.

 

These examples are not old. They’re very recent, but [in] the Proctor Gamble case the first vote count was plus 6.2 million for the Procter and Gamble candidate for the board seat. Then they did a recount and it came out negative 449,000 some odd votes. So the challenger in the recount actually won. Then it’s swung back to positive 498,000 votes for Procter and Gamble. So you had two votes swinging by as many as 6.2 million in those vote counts. It just goes to show you how inaccurate the proxy system is, and the reason it’s that inaccurate is the same reason that I don’t trust my brokerage statements, which is that what’s going on behind the scenes on Wall Street is not required to be accurate either. There’s a lot of fault tolerance and estimation of ownership that happens in the system, and they count on the fact that not everybody wants to withdraw their shares at the same time, they count on the fact that there’s not going to be a run on the bank. If there ever is you could have a situation like the Dole Foods situation where you discover they’re actually one-third more shares outstanding in people’s brokerage statements then there were actual shares issued. In Dole Foods there were 49.2 million brokerage statements for 36.7 million shares outstanding.

 

CCN: If a bank starts handling these shares, and then there is a run on the bank because maybe there’s going to be a hard fork, they can’t even handle that. What usually happens in those cases in traditional markets?

 

CL: Well, in traditional markets you don’t have something like a hard fork. You have stock splits and stock dividends. There are very clear rules if somebody is selling a stock short to govern what happens if there’s a dividend or something that they have to actually pay the long investor the dividend. But because there is rehypothecation, it does create an interesting question like in a Dole Foods case. This is why I know there were losses because there were people who were owed money in the Dole Foods case that were not paid because I know that the brokers would not have been able to go back and collect what was paid out to the hedge funds, it took three years for this court case to find its way through the system.

 

What’s happened in the intervening three years is every single hedge fund that owned Dole Foods shares is probably not open, and a lot of those hedge funds were specialist merger arbitrage hedge funds, many of them are still around, but not every one of them. I virtually guarantee that there are a couple of them that are just — that wound up and they are not there anymore. So how’s the broker going to go back to them and get the money to pay for the rightful owner? This is swept under the rug and there were some pensions and long-only owners of Dole Food that did not get their class action consideration in that case. It’s a good question. I think that’s something I can’t answer. Only Wall Street can answer that question.

 

CCN: I just think one of the other interesting things about bitcoin is the hard cap on the amount of shares. I think you said this previously, the FTC should just come out and put you can’t have more than 18 million shares at the moment. And then up that to 21 million. Is there any reason they’re not doing that just because it’s not really a concern right now? Have you heard anything there and are you willing to speculate on that?

 

CL: It all comes back down to the fact that the clearing and settlement system is where things get lost, so this is why this judge in Delaware who has to deal with these situations like Dole Foods and like Procter and Gamble and he talks about a Yahoo proxy contest and the Dell — there was an issue with Dell shares a couple years ago, where he’s got to try to reconcile the fact that Wall Street ends up saying that there’s a different number of shares outstanding than is actually legally issued and outstanding under Delaware law and because corporate law is state law even though securities law is federal law, the corporate law is state law, so it ends up in litigation in the state courts.

 

This judge has been advocating for years that these are major issues being ignored and they have to be fixed, and it’s the fiduciaries of pension funds and mutual funds, the boards of mutual funds, these are the guys that really should be looking out for regular investors and they’re either — they don’t understand the issues because they are subtle. This rehypothecation is subtle. It may seem like how is it that the accounting system of Wall Street can create all these extra paper claims? Aren’t they required to settle up and foot the balances every single night? Well, you actually do have these failures to deliver which creates, more shares outstanding than legally issued.

 

There is naked short selling, even though it’s illegal and the SEC is supposed to be going after it again, I haven’t seen them go after it in the Dole Foods situation and that doesn’t mean they didn’t, but I would have thought they would have made it public because that was such a public court case. There was black and white naked short selling that happened. I think the corporations are doing everything they can do to ensure that their shares are not over issued. It’s the clearing and settlement infrastructure of Wall Street that doesn’t have an interest in fixing the system. Unfortunately, the SEC, which has an investor protection mandate today is the one that really should be on this, but an interesting question is why they haven’t been.

 

Stay tuned for part 2 of CCN’s interview with Caitlin Long.

 

Note: This interview is part of the CCN Podcast. The podcast and this interview are also available on iTunes, TuneIn, Stitcher, Google Play Music, Spotify, SoundCloud, YouTube or wherever you get your podcasts. Make sure you rate and subscribe!

https://www.ccn.com/interview-fmr-morgan-stanley-exec-caitlin-long-on-how-wall-street-wants-to-ruin-bitcoin-part-1/

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Oklahoma Duo Arrested for $14 Million Cryptocurrency Theft

Oklahoma police have arrested two men who reportedly stole millions of dollars from a California-based cryptocurrency company, local media  reported.

 

Fletcher Robert Childers, 23, and Joseph Harris, 21, of Missouri, were arrested on suspicion of grand theft, a first-degree felony, and identity theft, a Class C misdemeanor. If charged for both, the duo could receive up to 35 years of prison time, according to Oklahoma state laws.

 

 

 

Court documents filed by Crowd Machine, a San Jose-based decentralized IT company, named Childers and Harris for their alleged involvement in a $14 million theft. The report accused the twosome of swapping the victim’s mobile sim card with a fake to steal his identity and phone number. That allowed Childers and Harris to compromise a cryptocurrency wallet registered with the stolen sim and lift $14 million worth of CMCT tokens.

 

An investigator with the Santa Clara County District Attorney’s Office and members of the state’s Regional Enforcement Allied Computer Team (REACT) worked with the local Oklahoma police in tracing the phone used in the hack. It was later tracked to a hotel, where the subsequent arrests were made.

 

The confiscated phone, according to the court documents, was purchased by two white males from a nearby Walmart. The report cited video footages to back its claim that those two men were Childers and Harris. The car used by both the males in the video footage also belonged to Childers, another surveillance video at a local store proved. The same car was parked at the hotel they both were staying.

 

 

 

Crowd Machine had recently concluded a pre-ICO round of CMCT tokens. So far, the company has released 500 million token units to the market and was holding 1.5 billion ICO tokens in reserve. After the hack, the accused reportedly moved 1 billion CMCT to cryptocurrency exchanges, some outside the United States. Crowd Machine reached out to its community with a request to not deal with people associated with the compromised wallet address. In response, many exchanges halted trading of CMCT tokens.

 

“It is highly recommended that no one purchase CMCTs until the criminal investigations have ceased, at which time, we expect closed exchanges to re-open. Purchases of stolen tokens by those not involved with the theft will be honored,” Craig Sproule, the CEO and co-founder of Crowd Machine wrote.

 

Harris is now kept under custody at an Oklahoma jail without bond. The detention status of Harris was not clear at the time of writing.

https://www.ccn.com/oklahoma-duo-arrested-for-14-million-cryptocurrency-theft/

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Mike Novogratz: Bitcoin Price Rally Inbound in Q1 2019

Perennial bitcoin bull Mike Novogratz, founder and CEO of Galaxy Digital, claims bitcoin is positioned for major growth now that institutions are investing in it and big compananies are starting to accept it. Novogratz told CNNMoney’s “Markets Now” that big companies like Microsoft and Starbucks are allowing customers to use bitcoin and that, in the short term, more institutions will invest for fear of missing out (FOMO).

 

Novogratz, a former principal at Fortress Investment Group, last week said bitcoin would post a 30 percent increase by the end of the year once its surpasses major resistance levels at $6,800, $8,800, and $10,000, at which point institutions will enter the market through trusted custodian solutions. The price stood at $6,581 at the time of this report, according to CCN.

 

Institutions Step Forward

Citigroup and Morgan Stanley announced plans in the last month to add cryptocurrency custodian solutions. Coinbase and Bitgo, meanwhile, have regulated custodian solutions, providing products institutions can use to enter the cryptocurrency market.

 

Bitcoin will become part of individual portfolios eventually, he said, and more people will also view bitcoin as a store of value, similar to gold.

 

 

 

Galaxy teamed with Bloomberg on the Bloomberg Galaxy Crypto Index in May to track 10 digital currencies, including bitcoin and ethereum.

 

Also read: $10,000 target: Novogratz sees bitcoin jumping 30% in 2018

 

Bottom Already Hit?

While bitcoin surged to almost $20,000 late last year before losing nearly two-thirds of its value this year, Novogratz thinks it reached its bottom early in September. He said in mid-September that the market reached a low  when a widespread selloff drove the market cap to around $186 billion.

 

He expects momentum to begin in the first quarter of 2019.

 

Novogratz is not as upbeat about cannabis — whose recent volatility has sparked comparisons to last year’s crypto rally — but he sees some comparisons to cryptocurrency in that both have a limited supply that will become a major factor in the next five to 10 years.

 

 

 

Some cannabis shares have surged on reports that big companies like Constellation Brands and Coca-Cola have taken an interesting it.

 

Novogratz said he will invest in cannabis on a “significant sell-off from here” when the cannabis  companies shed half their value.

https://www.ccn.com/mike-novogratz-bitcoin-price-rally-inbound-in-q1-2019/

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Op-Ed: How Air Gap Technology Has and Will Secure Our Cryptocurrency Assets

The truth is that anything connected to the internet can be hacked. However, hacking wasn’t always a problem.

 

The History of Air Gap Technology

Data used to be held offline, in what’s now known as cold storage. Data on external paper cards, then moved to tape and digital media as technology evolved. The first computers built were by default on cold storage or ‘air gap’ technology.

 

Even when networks were initially built, much of the data still had to be manually connected to the system by adding in the media to a device. In the early days, sensitive codes and information were kept locked in vaults accessible by an authorized individual or in some cases, by multiple people required to key in simultaneously. This approach was the genesis of multi-signature authorization.

 

 

 

Eventually, with the invention of the internet, those computers and that data could be connected to an outside, worldwide network. The concepts upon which the internet was built had some basic principles of security within them, but the exchange of data and the ease of doing so was paramount in the original architecture of the web.

 

Sensitive institutions were slow to add their most critical data to the internet, and all-important military institutions initially relied on a manual air gap, where a command was sent to a person who would retrieve data devices out of a vault and connect them to a machine for a short period in which they needed to be used.

 

Some institutions still rely on these methods. The Russian military is famous for its continued reliance on typewriters for some of their most sensitive documents – if it’s never digital, well, it’s certainly a lot harder for your enemies to get their hands on it.

 

 

 

The value of air gap technology is unparalleled in its ability to hide data away from digital thievery; however, inaccessibility has always been its shortcoming. With the institutions using the tech over the course of history, having the physical manpower on hand to mount drives online at a moment’s notice was not an issue, but the corporate application of this technology requires some automation of that process to scale and serve the needs of millions of customers simultaneously.

 

However, how to bridge that gap without systems being online? The fact is that with a recent invention, human interaction, and the resulting security risk those touch points entail are no longer required to remotely close an air gap.

 

Application of Air Gap in Crypto Custody

 

Source: Trezor

Individuals have been storing sensitive data on cold storage devices for decades. USB thumb drives are ubiquitous across society these days, and their use for storing cryptocurrency keys began almost as soon as currencies were first invented. Over the years, the complexity of these drives has evolved, and now cold storage wallets like Ledger or Trezor are de rigueur for smaller independent investors.

 

However, these drives are not a viable solution for larger investors who need instant access to their funds but who do not wish to take the risk of employees carrying around their codes. Additionally, for institutions the gaping holes in the security of these devices, and their applicability to the global needs of their clients renders them useless.

 

 

 

Beginning in 2013, institutional grade custody providers came to market to provide offline storage of digital assets. Amongst the first of these was Xapo, a group focused on serving the needs of long-term holders of cryptocurrency. Xapo built vaults within mountains for the long-term cold storage. Since the founding of this company, many other institutions offering deep cold storage have entered the market.

 

Most recently, the Winklevoss twins announced a cryptocurrency-based patent in the air gap space, lending even more credibility to the application of the technology. The solutions all rely on a combination of codes on digital or physical (paper or other) media in coordination with some vaulting solution. These options are great if you don’t need to access your keys to make trades; however, trading is a key to doing business.

 

All of these solutions have the same issue which has vexed institutional investors for years – entirely locking them out of the market in many cases – and that problem is accessibility. The typical solution, like Xapo, requires a 2-day notice to bring your keys online manually for you to make a transaction. This delay means these solutions can’t meet the needs of active investors who need access at a moment’s notice. Additionally, the additional human interaction point represents a significant risk to data.

 

Remote Automated Air Gap Security (RAAS)

In early 2017, Tony Hasek, one of the founders, of Goldilock was working with a company offering deep cold storage for physical assets – mostly precious metals. He had been trading cryptocurrencies for years and was worried about the constant breaches suffered by even the largest institutions, starting with Mt. Gox back in 2011. Not wanting to carry his codes around, he started thinking about ways to keep them offline using some of the same concepts of cold storage combined with some analog technology he’d worked with back in the 90s.

 

Combining forces with his co-founder Jarrod Epps, who had also worked with analogue telephony solutions, the two collaborated for several months to build out an architecture which would allow all data to be kept offline in a vaulted, air gap, cold storage state until the exact moment the owner of the data wanted to bring it online (also known as ‘hot’).

 

 

 

By relying on a sophisticated combination of legacy offline technology as a trigger mechanism for remotely-toggling data nodes on/offline, alongside cutting-edge cryptography and biometric gateways, and adding in options for remote multi-sig approvals, the two filed a patent for a unique way to access cold-stored data at a moment’s notice. Also, they built it in a way so simple and secure that anyone with a mobile telephone could use it.

 

This new RAAS technology (pronounced ‘race’) allows anyone to access their data anytime from anywhere that he or she has a mobile or landline phone.

 

RAAS into the Future

Remotely accessible air gap technology is truly transformational for the handling of all data across the internet. Institutions such as banks, credit rating agencies, video distribution groups, software developers, healthcare record custodians, crypto funds, crypto custodians, and crypto exchanges have all reached out to get on the waiting list to use this technology.

 

Outside the cryptocurrency space, being able to bank, manage credit data, health information safely, even personal photos and videos will transform the way consumers interact with the internet, allowing them to do so without fear of hacking, identity theft, or hijacking of their credit.

https://www.ccn.com/op-ed-how-air-gap-technology-has-and-will-secure-our-cryptocurrency-assets/

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Japanese Tech Firm GMO Releases ‘Free’ Zcash Mining Software

Japanese tech firm GMO is expanding its nascent cryptocurrency mining operation beyond bitcoin through the release of a software client designed to mine zcash and other Equihash-based cryptocurrencies using general-purpose GPU chips.

 

Japanese Firm Releases Zcash Mining Software

Dubbed Cryptoknocker, the software has specifically been developed for mining rigs composed of Nvidia graphics cards (GeForce 8 or later).

 

While the software itself is free, GMO wants a cut of the proceeds generated through it, namely, two percent of the coins users mine while running the client. GMO says that this fee is offset by a two percent efficiency improvement over other Equihash mining clients.

 

 

 

Though used by a variety of cryptocurrencies, Equihash is most often associated with the privacy-centric zcash, currently the 21st-largest coin by market cap. Like several other mining algorithms, it was developed to be ASIC-resistant, ensuring that it could be mined without specialized hardware only available from a small group of manufacturers.

 

However, China-based mining giant Bitmain recently announced a zcash ASIC, signaling that — unless zcash hard forks to alter its instance of Equihash — the era of mining ZEC with general-purpose hardware will soon come to an end.

 

Faced with a similar plight following the release of a Cryptonight ASIC, monero’s community decided to activate a hard fork and “brick” those new mining rigs. Zcash, though, has chosen not to make maintaining ASIC resistance a developmental priority.

 

GMO Builds out Cryptocurrency Mining Business

The development of Cryptoknocker is the publicly-traded GMO’s latest foray into cryptocurrency mining.

 

Earlier this year, the Tokyo-based company unveiled the first line of bitcoin ASIC miners wholly-developed by a Japanese company, with the firm’s CEO stating at the time that GMO intends to disrupt Bitmain, who reportedly controls a 70 percent share of the cryptocurrency ASIC market.

 

 

 

In addition to producing mining rigs and software, GMO also oversees an in-house bitcoin mining operation. According to the firm’s latest monthly report, GMO mined 510 BTC and 25 BCH in August with a hashrate of 459PH/s, primarily using miners produced by other manufacturers. The company hopes to increase that hashrate by more than 70 percent before the end of the year.

 

“We will continue to introduce the mining machine from other manufacturers to the in-house mining. Our plan is to see our hash rate surpass 800 PH/s by the end of December,” GMO said.

https://www.ccn.com/japanese-tech-firm-gmo-releases-free-zcash-mining-software/

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Bitcoin Slightly Retraces to $6,500 after Decent Rally, Ripple Gains Another 5%

After rising to $6,700 on September 27, the price of Bitcoin has slightly retraced to $6,500. Ripple (XRP) still recorded a decent gain of 5 percent, extending its momentum.

 

The volume of the crypto market has increased from $13 billion to $15 billion in the past week, demonstrating an increase in activity in the market.

 

 

 

Interestingly, in the past 24 hours, the volume of Ethereum (ETH) has risen quite substantially to $2.2 billion. Last week, the volume of ETH hovered at around $1.3 billion.

 

Strengthening Volume

In September, especially over the past two weeks, the crypto market has shown recovery in its daily trading volume. Generally, the cryptocurrency exchange market has seen more activity in the past week than it did in the first half of September, most likely as the crypto market experienced a strong corrective rally following large losses recorded by Ethereum and Ripple.

 

For Bitcoin, the next two weeks could be crucial and it could determine the price trend of the dominant cryptocurrency for the rest of the year. Since February, in a two-month basis, Bitcoin has shown the tendency of record lower highs after dipping to a lower low.

 

 

 

However, since early 2018, each time Bitcoin bounced back from a lower low in the region of $5,800 to $6,500, it showed less momentum on the upside. In February, April, June, August, and September, Bitcoin rebounded to $11,000, $10,000, $9,000, $8,000 and $7,000, with every attempt to break out of a major resistance level declining in volume and momentum.

 

As such, Josh Rager, a well-recognized technical analyst in the cryptocurrency community, stated that the price trend of Bitcoin in the next two weeks will determine its mid-term trend.

 

“BTC with each passing month it’s taken less time to reach the ’lower high.’ The next two weeks will bring to higher highs (pushing out of bear market). Or will send BTC in a cold dark bear winter that last months BTC doesn’t have long to choose it’s path,” he explained.

 

 

 

For the first time in September, on Friday, BTC matched the intensity of other major cryptocurrencies in its movement to the upside. But, with a 4 percent gain, it fell short in breaking out of the $6,800 resistance level, which CCN emphasized in its previous reports as an important mark to surpass for Bitcoin to eye an entrance into the $7,000 region.

 

Where Does the Market go Next?

Ripple and Ethereum, both of which recorded fairly large gains in the past seven days, have recorded an increase in volume and value in the past 24 hours despite the negative state of the market.

 

The sudden increase in the volume of Ethereum, from $1.5 billion to $2.2 billion, suggests that the activity around ETH has abruptly increased in the past few days that may translate to a short-term rise in the price of ETH.

 

 

 

It could also indicate a build up on the sell-pressure of ETH and the short-term trend of the asset will demonstrate what the increase in volume of Ethereum will translate to in the upcoming days.

https://www.ccn.com/bitcoin-slightly-retraces-to-6500-after-decent-rally-ripple-gains-another-5/

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Pornhub Subscribers Soft On Paying with Cryptocurrencies

Pornhub disclosed that “less than 1 percent of purchases [are] made” on the adult website with supported cryptocurrencies. The site started with the option to pay with Verge (XVG) in April 2018, as CCN reported. Pornhub then opened support for Tron and ZenCash (which has since been renamed to Horizen) in June. No other cryptocurrencies are supported besides these three.

 

Pornhub reported the finding in an email to The Next Web’s Hard Fork.

 

Altcoins Sell Off and Altcoins have Fewer Users in 2018: Coincidence?

Tron (TRX), ZenCash (ZEN), and Verge (XVG) all felt the wringer with the steep bear market of 2018 for bitcoin and altcoins. That only three, relatively new coins are supported may seem strange. However, all three paid Pornhub a significant sum of money for the listing. Pornhub’s statistics thus don’t serve as a complete guide to the status of mass adoption, especially since they do not accept bitcoin (BTC) or Ethereum (ETH). Combined, bitcoin and ethereum now dominate over 61 percent of the market.

 

Conversely, Tron’s market cap ($1,447,850,461) accounts for roughly 0.006% of the total cryptocurrency market cap ($225,295,329,288). Verge (XVG) has a market cap of $219,596,525, roughly 0.001% of the total. Lastly, with a marketcap of $80,282,193, Horizen (ZEN) respresents only 0.0004% of the total.

 

 

 

Additionally, the 2018 bear market thus far has witnessed a steep drop in altcoin usage and dapp visitors, as CCN reported.

 

For instance, Horizen’s marketcap has fallen steeply in the past 90, along with weak trading volume.

 

 

 

 

ZEN 90-day marketcap in USD. Source: CoinGecko https://www.coingecko.com/en/coins/horizen

ZenCash fell victim to a 51 percent attack in early June this year, as CCN reported.  Afterwards, the team behind ZenCash decided to rename the coin to Horizen.

 

The other two coins supported on Pornhub — Tron and Verge — have followed a similar trajectory.

 

 

Verge 90-day marketcap in USD. Source: https://www.coingecko.com/en/coins/verge

 

Tron 90-day marketcap in USD. Source: https://www.coingecko.com/en/coins/tron

These charts are not unique for the overall cryptocurrency market trend. Pornhub could see an update in cryptocurrency payments if altcoins return to more bullish and sunny days. The timing for the launch of the coins could not have been worse. So we will see if this “less than 1 percent” stat grows with their next update.

https://www.ccn.com/pornhub-subscribers-soft-on-paying-with-cryptocurrencies/

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Crypto Startups Move to Hong Kong Skyscrapers While Major Banks Check Out.

The real estate market of Hong Kong is said to be one of the most expensive in the world, alongside New York, London, and Sydney. Yet, crypto startups are moving into the most valuable skyscrapers in the city.

 

On August 22, CCN reported that BitMEX, a popular cryptocurrency exchange that facilitates Bitcoin and Ethereum margin trading, moved its headquarters to Cheung Kong Center’s 45th floor, renting out 20,000 square feet at $28.66 per square foot.

 

 

 

Its old headquarters were based in Victoria Harbor, a region within Hong Kong that is known for expensive residential properties. In Victoria Harbor, BitMEX paid around $3.18 per square foot and in Cheung Kong Center, BitMEX is paying $573,200 per month, at a rate of $28.66 per square foot.

 

BitMEX will operate its office in the most valuable skyscraper with Hong Kong alongside major financial institutions such as Bank of America Corp, Barclays Plc, Bloomberg LP, Goldman Sachs Group Inc and the Securities and Futures Commission of Hong Kong.

 

Banks are Moving Out of Skyscrapers

According to a report released by SCMP, a mainstream media outlet in Hong Kong, even major banks like Goldman Sachs and BNP Paribas have started to explore cheaper locations for their offices in Hong Kong due to rising rental fees.

 

Annual office rental costs in Hong Kong Central average around US$307 per square foot a year, a rate that easily surpasses London’s West End and Beijing’s Finance Street.

 

 

 

BitMEX and Diginex Global, two crypto startups based in Hong Kong, are renting out 72,000 square feet in total, paying around $1.3 million per month.

 

“Blockchain companies show no signs of slowing their expansion in Hong Kong. These firms are leasing space in top-tier office buildings to attract and retain talent.” Philip Pang, an associate director of office services at Colliers,  told SCMP.

 

The local publication reported that Goldman Sachs is relocating from Hong Kong Central to Causeway Bay in the next few months to save 30 percent on rent. BNP Paribas has also relocated its office to Swire Properties’ Taikoo Place.

 

While JPMorgan has leased the Quayside in Kwun Tong near Victoria Harbor, the cost of rent comes nowhere close to the rent BitMEX will be paying throughout the years to come.

 

Landlords Not Confident in Crypto

Over the past nine months, despite the 80 percent drop in the valuation of the crypto market, cryptocurrency-related businesses have prospered. Specifically, exchanges have continued to generate large revenues.

 

However, local publications have reported that Cheung Kong Center demanded BitMEX to pay a year’s rent upfront, which is estimated to be around $6.8 million, demonstrating the lack of confidence in crypto-related businesses by major landlords in the Hong Kong real estate market.

 

 

 

“It’s pretty common for landlords to ask for larger deposits from tenants with weaker covenant strength. Landlords are always open to taking on new tenants, it’s just a matter of balancing rent against flight risk,” said Denis Ma, head of research at Jones Lang LaSalle.

 

With the one year’s rent at Cheung Kong Center, it is possible to purchase multiple story buildings in many major cities like Kuala Lumpur, Ho Chi Min, Tokyo, and Busan.

https://www.ccn.com/crypto-startups-move-to-hong-kong-skyscrapers-while-major-banks-check-out/

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Cybercriminals Hit Port of San Diego with Ransomware, Demand Bitcoin.

It has not been smooth sailing for the Port of San Diego’s IT department this week following a cybersecurity breach.

 

In a statement, the Port of San Diego has disclosed that its computer systems were hit by a ransomware attack with the attackers demanding to be paid in bitcoin before they can decrypt files. According to the chief executive officer of the port, Randa Coniglio, the breach which was initially reported on September has led to the disruption of the IT systems of the agency. While acknowledging that the cybercriminals demanded ransom Coniglio did not reveal how much they were asking for.

 

 

 

“As previously stated, the investigation has detected that ransomware was used in this attack,” said Coniglio in a statement. “The Port can also now confirm that the ransom note requested payment in Bitcoin, although the amount that was requested is not being disclosed.”

 

FBI and DHS Now Involved

Perhaps an indication of the seriousness of the incident, the port facility located in San Diego County, California has called in the U.S. Department of Homeland Security (DHS) and the Federal Bureau of Investigation (FBI). The port is also closely communicating and coordinating with the U.S. Coast Guard.

 

While the IT systems of the port which handles nearly three million tons of cargo annually have been disrupted with some of them being proactively shut down out of caution, operations at the facility are going on normally with a few exceptions.

 

 

 

“The temporary impacts on service to the public are in the areas of park permits, public records requests, and business services,” added Coniglio.

 

Despite reports suggesting that cybercriminals are embracing cryptojacking malware at the expense of ransomware, incidents of the latter are still common though they have fallen by around 22.5% according to Kaspersky Labs, as CCN recently reported:

 

“The total number of users who encountered ransomware fell by almost 30%, from 2,581,026 in 2016-2017 to 1,811,937 in 2017-2018.”

 

Still Lucrative

Earlier this month, for instance, Midland, a Canadian town in the province of Ontario disclosed that it had paid ransom in bitcoin in order to obtain encryption software from hackers who had infiltrated its computer network. While regretting that it had given in to cybercriminals, authorities in Midland argued that they had been left with no other option.

 

Additionally, the servers of Professional Golfers Association (PGA) of America were last month compromised by hackers who decrypted files consisting mostly of creative materials meant for use in print and digital marketing communications. At the time the golfing body indicated that it would not pay the ransom.

 

 

 

But while some ransomware creators, such as those who targeted the PGA, may fail to hit pay dirt, this has not been the case with the makers of the SamSam ransomware who are estimated to have obtained bitcoins worth more than US$6 million since late 2015 per Sophos, a cybersecurity firm.

https://www.ccn.com/cybercriminals-hit-port-of-san-diego-with-ransomware-demand-bitcoin/

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Institutional Cryptocurrency Dealer SFOX Adds Litecoin Trading

SFOX, a cryptocurrency prime dealer that caters to institutional investors and high-volume professional traders, has made litecoin the fourth cryptocurrency listed on its platform.

The Palo Alto-based company, which was founded in 2014, made the announcement on Thursday, stating that it chose to add support for litecoin trading in response to demand from its institutional client base.

“Because we cater to investors who are accustomed to Wall Street standards, we only add cryptocurrencies we are completely confident in,” said Akbar Thobhani, CEO of SFOX. “Litecoin has utility and liquidity, and is supported by a great team at the Litecoin Foundation. We are happy to deliver on our promises and provide our customers with an option that they’ve been asking for.”

litecoin price

LTC/USD | Bitfinex

Per the announcement, clients will now be able to trade litecoin against both USD and bitcoin, and LTC creator Charlie Lee commented that the move would help increase litecoin’s liquidity and make the coin more accessible to institutional buyers.

“This partnership provides increased liquidity and institutional exposure for Litecoin,” said Lee. “SFOX is backed by several well known investors, which speaks to the company’s business model and team. We look forward to providing support through the Litecoin Foundation to help make this partnership a success.”

Indeed, though not well-known among retail cryptocurrency investors, SFOX has backing from names that are much more familiar. Last month, CCN reported that SFOX had closed a $22.7 million Series A funding round led by Tribe Capital. It also attracted investments from other notable firms and personalities, including Y Combinator, Khosla Ventures, Blockchain Capital, and Airbnb co-founder Nathan Blecharczyk.

SFOX said that has processed over $9 billion in transaction volume since its launch in 2014 and has seen its client base grow 12-fold in 2018, even as the cryptocurrency market has taken a steep dive from its all-time high.

Analysts remain divided on whether litecoin remains a high-growth investment product. Mati Greenspan, senior market analyst at eToro, published an August report speculating that litecoin is “massively discounted” relative to its fundamental value. However, cryptocurrency hedge fund Multicoin Capital recently disclosed that it is short LTC, arguing in a report that the coin faces a number of “negative catalysts” that will likely prevent it from participating in the next sustained market rally.

Featured Image from Shutterstock. Charts from TradingView.

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https://www.ccn.com/institutional-cryptocurrency-dealer-sfox-adds-litecoin-trading/

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70% of Small-Cap Cryptocurrency Tokens Now Worth Less than ICO Raised

More than two-thirds of small-cap cryptocurrency tokens distributed through initial coin offerings (ICOs) are currently worth less than the startups that issued them raised through their crowdfunding sales, a newly-published report has found.

Small-Cap ICO Tokens are Hemorrhaging Value

According to the report, which was compiled by cryptocurrency research firm Diar, the 562 ICO tokensranked outside of the 100 largest cryptocurrency market caps have collectively lost $5 billion in nominal value against what these sales raised for the funding teams, with 70 percent of individual tokens seeing losses.

Remarkably, that massive shortfall does not even include the value of the tokens reserved for the development team or otherwise not made available through the ICO, which in some cases would make that post-ICO performance appear even more dismal, depending on how many of those reserved tokens have entered circulation.

ICO cryptocurrency valuations

Source: Diar

Equally as notable is that 324 tokens that collectively raised $2.3 billion have still yet to convince any one of the hundreds of cryptocurrency exchanges to list them on their platforms. Another 44 tokens that raised a combined $1 billion have been listed on at least one exchange but have virtually no trading volume, including one — Bankera – which raised $150 million.

Per the report, the worst-performing ICO token belongs to Sirin Labs (SRN), a startup developing a “blockchain phone” called the “Finney.” Since raising $158 million through its ICO, SRN has plunged by more than $141 million, a decline of more than 89 percent in just nine months.

Part of the reason for SRN’s poor performance may stem from unexpected competition in the blockchain phone market. As CCN reported, smartphone manufacturer HTC — who in its heyday produced nearly 10 percent of all smartphones globally — also plans to release a blockchain phone, dubbed the HTC Exodus.

Close behind Sirin Labs is PumaPay, which raised $117 million but is now worth just $15 million. Envionand Paragon each raised close to $100 million and now have market caps of just $4 million and $3 million, respectively.

ICOs Have Raised as Much as $20 Billion in 2018

2018 ICO fundraising stats

Source: CoinSchedule

Remarkably, slumping returns do not seem to be scaring away investors, even as overall consumer interest in cryptocurrency has reached a relative low-point. Estimates on ICO fundraising vary wildly, but CoinSchedule, which has recorded data from 789 token sales held this year, estimates that blockchain startups have collectively raised more than $20 billion in 2018.

Those particular figures may be somewhat generous — they take Venezuela’s claim that the state-backed petro cryptocurrency raised $735 million at face value, for instance — but, even so, they suggest that not even a bear market and increased regulatory enforcement can quell interest in this nascent fundraising model. If CoinSchedule’s data is even moderately accurate, ICOs have raised more than $1 billion in every month except August and July, a mark that token sales hit only twice in 2017 en route to a yearly total of $6.2 billion (The $4 billion EOS crowdsale began in 2017, but it is credited to 2018 since that is when the ICO concluded).

That said, even as ICOs have collectively raised an impressive sum in 2018, individual projects have often struggled to meet their fundraising targets. According to CoinSchedule, just 20 token issuers have exceeded their targets, while 402 — 51 percent — have raised less than half of their goal.

Investors Willing to Whiff in Search of Home Run

One likely explanation for the enduring popularity of ICOs is that investors are willing to place some bad bets on a variety of tokens in the hope that they will run the table on one or two projects.

Indeed, while ICOs ranked outside of the of the large-cap index have collectively posted dismal returns, those that have managed to crack their way into the list of the 15 largest cryptocurrencies by market cap have provided early investors with massive returns on investment (ROI).

For example, the sales for large-cap cryptocurrency tokens cardano, IOTA, tron, and NEO collectively raised $137.3 million. Even after shedding 80 percent or more from their all-time highs, these tokens have a combined valuation of nearly $6.4 billion, representing an ROI of more than 4,500 percent.

Featured Image from Shutterstock

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https://www.ccn.com/70-of-small-cap-cryptocurrency-tokens-now-worth-less-than-ico-raised/

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Cryptocurrency Exchanges Have Been Used to Launder $88 Million Since 2016: WSJ

Over 46 cryptocurrency exchanges around the globe assisted criminals in laundering more than $88 million over the past two years, a Wall Street Journal report alleges.

Money Laundering Pervasive in Crypto Trading Industry: Report

The Journal’s investigation traced funds from over 2,500 wallets that courts flagged for their involvement in criminal activities. The paper partnered with London-based blockchain forensic company Elliptic to trace funds from wallets to exchanges. Also, to identify intermediary portfolios, which could have belonged to crypto exchanges, the Journal downloaded and compared them to the wallet addresses of suspected exchanges.

ShapeShift AG, the report alleged, was one of the largest recipients of illicit funds to have offices in the U.S., processing over $9 million out of the suspected $88 million over a two-year period. The Switzerland-incorporated-but-U.S.-operated altcoin exchange service lets people trade bitcoins and other digital currencies anonymously. Recently, though, ShapeShift announced that it would oblige with KYC standards from Oct. 1 to “de-risk” itself.

However, the Journal didn’t cut ShapeShift any slack for this change of heart, indicting the exchange for facilitating tainted transactions. Notably, the paper highlighted ShapeShift CEO Eric Voorhees‘ liberal take on anonymity on many occasions — frequently citing his views against AML laws or laws that require exchanges to perform KYC on every customer to catch an occasional criminal — to prove the exchange’s alleged unapologetic involvement in laundering money.

monero

Privacy-centric cryptocurrency monero was often used to help mask transactions throughout the money laundering process, the WSJ said.

The WSJ report also presented evidence from security researchers, supposedly proving that criminals used ShapeShift to exchange bitcoin for monero, an anonymity-centric cryptocurrency. Following the WannaCry ransomware attack, in which hackers from South Korea extorted millions of dollars from governments and businesses, the investigation traced the extorted BTC to ShapeShift. It went on to say that the exchange didn’t change its policy even one year after the attack, and continued to launder criminal funds that eventually became untraceable.

In another example, the Journal mentioned an ICO that raised $2.2 million worth of ethereum from investors and then went missing with the funds. Upon trailing the stolen money, the paper found that one part of the cryptocurrency ended up at Asian exchange KuCoin, and about $517,00 went straight to ShapeShift, where it was exchanged for monero.

“Even spoofers who robbed ShapeShift’s own would-be customers by setting up a copycat ShapeShift website that stole their money used the real ShapeShift to launder their funds,” the report’s authors wrote, citing publicly-visible online data.

ShapeShift CEO Criticizes ‘Misleading’ Report.

The Journal provided ShapeShift with all the suspected addresses and ShapeShift banned them from using the exchange. Veronica McGregor, the chief legal advisor to ShapeShift, further commented that they are preparing to comply with the existing AML and KYC regulations in the wake of future crypto regulations. She also separated their CEO’s “philosophy” from the way ShapeShift would or should govern, saying “he’s not pro-money laundering.”

On his part, Voorhees sharply criticized the WSJ report, stating its facts are cherry-picked and that the reported tainted trades amount to only 0.2 percent of ShapeShift’s overall volume.

“We are aware of the poorly-researched piece written against us by someone at WSJ. The implications are disingenuous and misleading,” he wrote on Twitter. “Author cherry-picked data, excluding facts contrary to vilification narrative. $9m figure is less than 0.2% of our volume over the time-period. Meanwhile global money laundering through banks is 2-5%.”

Erik Voorhees?@ErikVoorhees

7h

1/2 We are aware of the poorly-researched piece written against us by someone at WSJ. The implications are disingenuous and misleading. pic.twitter.com/IIyOjactGk

Erik Voorhees?@ErikVoorhees

2/2 Author cherry-picked data, excluding facts contrary to vilification narrative. $9m figure is less than 0.2% of our volume over the time-period. Meanwhile global money laundering through banks is 2-5%. Op-ed forthcoming.

3:02 PM - Sep 28, 2018

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https://www.ccn.com/cryptocurrency-exchanges-have-been-used-to-launder-88-million-since-2016-wsj/

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Coinbase Launches Poor Man’s Crypto Index Fund for Retail Buyers

Coinbase is unveiling a suite of new initiatives designed to expand its market share.

The latest update called “Coinbase Bundles,” refers to the pre-packaged collection of five cryptocurrencies available for purchase on Coinbase. The Bundle consists of Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Litecoin (LTC), and Ethereum Classic (ETC).

A bundle of five cryptocurrencies can be purchased for a meager sum of $25. With the current market cap employed in calculating a diversified portfolio of cryptocurrencies available for purchase with a couple of taps, Coinbase will save customers a lot of hassles.

The exchange hopes to introduce the new update to its U.S., E.U, and U.K markets in the coming weeks. At the moment, the digital asset platform has not set a maximum purchase size for a Bundle, but there are daily purchase limits on a per customer basis, at the moment. When a customer buys a bundle, it will be stored on their Coinbase wallet, where it can be purchased, sold, sent or received as an individual asset.

The digital asset platform will also host Information Asset Pages on the top 50 digital currencies on its platform, along with a new section, called “Coinbase Learn,” which will educate first time traders to cryptocurrency. The Vice President and General Manager of Coinbase Consumer Dan Romero stated that the ability of people to understand, explore and choose cryptocurrency would go a long way in determining the possibility of an open financial system coming to reality.

“We expect that millions of people will make their first cryptocurrency purchase in the coming years. But all too often, getting started can be overwhelming for people learning about crypto for the first time.”

The Information Asset Pages will provide customers with all information about the top 50 cryptocurrencies based on market cap. Customers can learn about cryptocurrencies that are neither available for purchase nor sale on Coinbase. The page also furnishes its users with information on historical trading data, current market cap and referral links to project websites.

Romero said the new Coinbase Learn section would be exclusively set aside to enlighten newbies on cryptocurrency. It also provides answers to frequently asked questions.

Taking time to acquaint others about cryptocurrency is no mean feat. It is fair to say there is no particular database containing all the fundamental principles responsible for the technology. This new section about to be launched by Coinbase will teach and educate newbies about cryptocurrency. Responses to the frequently asked questions stemmed from customer research and were cross-checked with individuals new to the virtual currency.

Coinbase recently announced an overhaul to their digital asset listing process to make it faster to list more assets that are compliant with local laws on a “jurisdiction-by-jurisdiction” basis. It also added support for ethereum classic and raised the daily buy limits for users to $25,000 and eliminated the sell limit.

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https://www.ccn.com/coinbase-launches-poor-mans-crypto-index-fund-for-retail-buyers/

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