According to a Reuters report, Facebook registered a new company, Libra Networks, in Geneva on May 2. This coincides with the slow roll-out of their internal cryptocurrency that will define the company’s first foray into blockchain technology.
Facebook Global Holdings is a stockholder in the new company and it will, according to Reuters, “provide financial and technology services and develop related hardware and software, plans submitted on the Swiss register reveal.”
Facebook’s march towards crypto has been slow and steady. The company’s latest move, the hiring of two Coinbase compliance managers, happened on May 14.
The Wall Street Journal recently reported that Facebook is recruiting dozens of financial firms and online merchants to help launch a cryptocurrency-based payments system using its social network. Last year, Facebook asked U.S. banks to share detailed financial information about consumers. In addition, privacy experts have raised questions about Facebook’s extensive data collection practices and whether any of the data collected by Facebook is being used for purposes that do or should subject Facebook to the Fair Credit Reporting Act.
Facebook declined to comment on the new company. Recent rumors pointed to a tentative $1 billion raise to be used to build out the technology.
The European Central Bank (ECB) has said that cryptocurrencies are currently not a threat to financial stability in the euro zone.
In its latest paper on the subject, published Friday, the ECB said the combined value of crypto-assets is small relative to the financial system, and “linkages” to the financial sector are still limited. Further, there are banks in the EU do not appear to have “systemically relevant” holdings of crypto-assets.
The ECB also said cryptocurrencies do not perform the functions of money. A “very low” number of merchants currently allow buying of goods and services with bitcoin, and there is no “tangible impact on the real economy” or on monetary policy.
The central bank says:
“The high price volatility of crypto-assets, the absence of central bank backing and the limited acceptance among merchants prevent crypto-assets from being currently used as substitutes for cash and deposits, as well as making it very difficult for crypto-assets to fulfil the characteristics of a monetary asset in the near future.”
Regarding the stablecoin concept, the ECB says that cryptos could become less volatile if they were collateralized by central bank reserves. That could bring new issues to address, however: “Such collateralisation could result in additional demand for central bank reserves, which could have implications for monetary policy and its implementation.”
The ECB is also currently not in favor of issuing a central bank digital currency, but is open to exploration due to the evolving digital economy.
“In principle, a CBDC could be designed as a user-friendly risk-free asset that meets the public’s demand for an economy that is both digitalised and safe,” the central bank says.
Crypto-assets also come outside the scope of current EU payment services regulation, it continues. Further, under the current regulatory regime, crypto-assets “can hardly enter EU financial market infrastructures (FMIs).”
The paper states:
“Crypto-assets cannot be used to conduct money settlements in systemically important FMIs. To the extent that they do not qualify as securities, central securities depositories (CSDs) cannot undertake settlement of crypto-assets. Even if crypto-assets-based products were to be cleared by central counterparties (CCPs), these would need to be authorised and to satisfy existing regulatory requirements, albeit at additional costs and with no clear benefits to EU CCPs.”
However, it concludes that, the risks or potential implications of the technology are “limited and/or manageable on the basis of the existing
regulatory and oversight frameworks.”
The paper largely echoes sentiments already made public by the ECB. Back in September, the institution’s head, Mario Draghi, said that the ECB sees no “concrete need” to issue a digital version of the euro. He also previously said that financial institutions in the EU do not appear to be as enthusiastic about cryptocurrencies as the public.
The venture capital arm of Pennsylvania’s economic development office is tokenizing one of its funds.
Ben Franklin Technology Partners of Southeastern Pennsylvania, one of four regional outposts formed by the Pennsylvania Department of Community and Economic Development in 1982, launched the Global Opportunity Philadelphia Fund, or GO Philly Fund, in February with $15 million committed.
Unlike Ben Franklin, which receives funds from the Commonwealth of Pennsylvania and is restricted to investing in the companies based in the Greater Philadelphia area, GO Philly can raise funds and invest globally, but will focus primarily on the Philly area-based companies, Scott Nissenbaum, Ben Franklin’s chief investment officer and a managing partner of GO Philly, told CoinDesk.
Working with the California-based token platform Securitize, GO Philly is looking to raise another $35 million by selling GO Philly Fund tokens to accredited investors.
“GO Philly Fund has been a trailblazer, not only in the blockchain space, but also as an impact fund,” Securitize CEO and co-founder Carlos Domingo told CoinDesk via a spokesperson. “We are proud to be partnering with them as their technology provider.”
Built on top of the ethereum blockchain, the GO Philly Token will be available for purchase by accredited investors at $0.50 apiece, in dollars, bitcoin or ether – but the minimum buy-in is $250,000.
Big investors first
The $50 million fund was created in partnership with a publicly traded IT company, EPAM. GO Philly raised more than $15 million pre-launch: with $5 million from Ben Franklin, $5 million from EPAM and the rest from investment firms including Fulton Financial Corporation, SRI Capital and Provco Group.
These investors have already secured their bags of GO Philly tokens, with the first batch being sold on Feb. 7. Nissenbaum sees that early action as an assurance to new investors:
“There are so many question in this market about what’s real and what’s not. So we decided that we are going to bring big companies first, and then the rest of the entire globe can also buy in.”
GO Philly is expecting to sell 100 million tokens in total, including the portion already sold. The tokens will be “a digital representation of a limited partnership contract” and comply with the SEC’s Rule 506(c), Nissenbaum explained.
The token holders’ money will fund GO Philly’s efforts and earn them a profit if the supported startups flourish.
“All the value we will create in those companies will flow back to the token holders,” Nissenbaum said.
The advantage of the token model, he said, is that, if an investor wants to get out, it’s easier to sell a token than a limited partnership in a venture fund, given that GO Philly is going to create a secondary market for such tokens in the future – though the legal structure of that future entity is not yet disclosed.
However, the tokens won’t have the profit distribution functionality: instead of smart contracts, traditional bank transfers will deliver money to the owners of the digital securities. GO Philly also won’t hold crypto, even though it’s allowing investors to buy tokens with bitcoin and ether. The BTC and ETH will be immediately sold for cash, Nissenbaum said.
The Philly-area Ben Franklin invested $8.1 million into 51 startups in 2018, according to its annual report. Its total portfolio includes 227 companies leveraging $354 million in assets.
Securitize, a Coinbase-backed digital asset platform, recently announced the launch of a “one-stop shop” for various token-related services, with Coinbase Custody, OpenFinance, Rialto Trading and CBlock Capital as the first participants. Earlier the firm partnered with over-the-counter trading platform OTCXN.
A new filing with the U.S. Securities and Exchange Commission (SEC) shows that prominent venture fund Polychain had $591.5 million in assets under management at the end of March.
That’s down considerably since the firm’s August 2018 filing, which showed $967.8 million in assets under management. That’s a loss in value of $376.4 million.
The Wall Street Journal was the first to report that the company was no longer a billion-dollar operation.
Polychain is one of the most elite funds serving startups in the crypto industry. Founded by Olaf Carlson-Wee, the first employee of Coinbase, Polychain was among the earliest funds to invest in tokens rather than companies, as CoinDesk reported in 2016.
Part two of the most recent form describes the company as managing five funds: Polychain Master Fund, Polychain Master Fund II, Polychain Ventures, Dfinity Ecosystem Fund and Polychain Opportunities Fund I.
The document acknowledges significant risks in investing in crypto assets, writing:
“There is no assurance that digital assets will maintain their long-term value in terms of purchasing power in the future, or that acceptance of digital asset payments by mainstream retail merchants and commercial businesses will grow.”
Polychain did not reply to multiple requests for comment.
Enterprise-focused distributed ledger tech startup Digital Asset (DA) has landed another high-profile partner.
Announced Thursday, software virtualization giant VMware is integrating DA’s smart contract language into its own blockchain platform.
Further, VMware, a publicly traded company majority-owned by Dell Computer with more than 24,000 employees, will distribute the Digital Asset Modeling Language (DAML) with its VMware Blockchain platform directly to customers and through partners.
“DAML has been proven to be one of the few smart contract languages capable of modeling truly complex workflows at scale,” said Michael DiPetrillo, senior director of Blockchain at VMware, in a press release.
According to the companies, VMware Blockchain “is deployed in enterprises worldwide,” although further details weren’t provided.
Palo Alto, California-based VMware first revealed last August that it had developed an open-source blockchain designed to be both scalable and energy-efficient, known as Project Concord. In 2017, the firm sought a patent for a system that would use blockchain as part of a wider effort to boost the speed of data transfers. Its main business is providing cloud computing and platform virtualization services to companies.
The team-up is the latest in a string of announcements by New York-based Digital Asset, which is best known for its former CEO, JPMorgan alum Blythe Masters, and its multi-year contract to rebuild the Australian Securities Exchange’s aging CHESS system using DLT.
The startup recently open-sourced DAML and began working with the International Swaps and Derivatives Association (ISDA) to aid the Wall Street trade group’s effort to standardize data in complex financial contracts.
Consider yourself $14.1 million closer to buying your morning coffee with bitcoin.
New York-based payments startup Flexa just raised that amount in a private token sale involving Pantera Capital, 1kx, Nima Capital, Access Ventures and others.
The startup’s token, Flexacoin, is an ethereum-based ERC-20 token that will eventually be used by developers and businesses to stake value on Flexa’s network for merchant payment processing.
While Flexa co-founder Tyler Spalding declined to specify which merchants will accept bitcoin through this app, video tests show users buying Starbucks with it. (A Starbucks spokesperson told CoinDesk it is not working with Flexa.)
Spalding emphasized that Flexa is a business-to-business startup. Shoppers won’t need to hold or interact with Flexacoins at all. Flexa co-founder Trevor Filter said the details related to such governance and participation are still under development.
“The long-term goal is to give over the network to the merchants,” Filter added. “A sort of consortium of their own that allows them to accept crypto.”
Return of the token sale
Stepping back, Flexa is one of several companies to fundraise over the past six months through a private token sale without equity options. The predictions market startup Numerai announced a similar raise in March.
Access Ventures partner TJ Abood told CoinDesk his firm would have been interested in an equity offering as well. But as he’s also satisfied with Flexacoin because it allows his firm to participate in growing the network.
Businesses, from Access Ventures to merchants, can stake Flexacoin to the network and earn token rewards in a model comparable to proof-of-stake systems like Cosmos or Tezos. Flexa plans to launch a custodial crypto wallet app for its network, with users being able to spend crypto at point-of-sale with a type of QR code scan, similar to Apple Pay.
“We wanted the total Flexacoin supply to represent how much money can flow through the system right now,” Spalding told CoinDesk, adding that the network will launch on May 13. “All the participants earn money.”
Unlike Numerai’s token-fueled platform, Flexa’s network is not blockchain-based. Flexa’s approach to ethereum-compatibility, without complete reliance on that network, fit into Abood’s investment strategy.
“We subscribe to the idea of being a user-owner. Any company that we invest in, we immediately look to be a user,” Abood said. “Making use of the developer tools and all the system tools that exist to be able to deliver a superior product, that’s what drives us.”
On the other hand, 1kx cofounder Lasse Clausen told CoinDesk his firm also plans to become a staker because he believes for-profit tokenized networks are inherently better than traditional businesses. Speaking to Flexa’s symbiotic merchant acquisition strategy, Clausen added:
“If Flexa were a traditional for-profit venture, how would merchants be able to trust them that they won’t end up raising fees once they have reached enough network effects?”
Bridges not blocks
Instead of building a blockchain-based network, Spalding described Flexa’s protocol as an “elegant pipe” that processes payments from various cryptocurrency networks, including bitcoin, ethereum, bitcoin cash and litecoin, to the merchant’s own payment processing system for direct bank transfers.
“We wanted to build essentially the Stripe for these type of transactions,” Filter said.
Abood said this merchant-oriented structure could entice mainstream brands that are crypto-curious by offering the ability to accept bitcoin without risk. According to Spalding, Flexa will partner with exchange platforms for liquidity on the back-end. Plus, the Flexacoin collateral could be used to compensate if there’s an issue with blockchain settlement.
“Flexa plays a critical role in blockchain adoption at-large because it is bridging this digital payments landscape into a brick-and-mortar setting,” Abood said. “It’s opening up the idea of spending cryptocurrency to a much broader audience.”
Filter described the Flexa protocol as bolting merchant’s traditional infrastructure to a crypto-friendly bridge, rather than relying on debit cards or credit cards. Since the process uses crypto wallets, there’s no personal information exposed the way a credit card payment would.
“I don’t think that blockchains are good for many things,” Spalding added. “But, they are amazingly powerful for fraud-free payments.”
In the future, Flexa plans to add support for various exchange-issued stablecoins and other crypto assets. Until then, the focus is on partnering with exchanges and merchants to make custom on-and-off ramps via the Flexa protocol.
“A driving source in [mainstream] adoption will be the availability to accept cryptocurrency and that’s a merchant decision,” Abood concluded.
Bithumb, South Korea’s largest cryptocurrency exchange, has posted a net loss of 205.5 billion won ($180 million) for 2018.
CoinDesk Korea reported the news on Thursday, saying that the loss was mainly due to a sharp decline in the cryptocurrency market last year, though the company’s operator BTCKorea also cited infrastructure investments and labor costs as factors.
The figure marks a big swing into the red for Bithumb, having recorded a net profit of 534.9 billion won ($469 million) in 2017.
The exchange’s revenues, on the other hand, grew around 17.5 percent to 391.7 billion won ($343.4 million) in 2018, compared to 333.4 billion won ($292.3 million) the year prior.
The figures also show that the exchange’s operating profit declined 3.4 percent to 256.1 billion won ($224.5 million) last year from 265.1 billion won ($232.5 million) in 2017.
Meanwhile, operating expenses rose from 68.3 billion won ($59.8 million) to 135.6 billion won ($119 million), while non-operating expenses increased sharply from 4.1 billion ($3.6 million) won to 381.9 billion won ($334.8 million).
Bithumb has been going through some tough times. Just two weeks ago, the exchange suffered its latest hack, losing around $13 million in the EOS cryptocurrency and about $6.2 million in XRP. Last year, Bithumb was also hacked for some $30 million-worth of cryptocurrencies, but later claimed to have retrieved $14 million-worth of the hacked funds.
Since the latest theft, Bithumb has disclosed that it holds all customers’s assets in cold (offline) wallets to prevent losses through such attacks.
Amid its financial issues, Bithumb, said last month that it plans to cut its staffing levels by up to 50 percent, from 310 employees to around 150.
LGO Markets, a new bitcoin exchange for institutional traders, has revealed more details about its unorthodox approach to custody, including a forthcoming optional hardware wallet.
Launched in March, New York-based LGO bills itself as a one-of-a-kind exchange that will allow clients to control their coins instead of putting them in the exchange’s wallet. The idea is that clients open a multi-signature wallet with LGO that has three keys, two of which are needed to send a transaction: the client controls one key, LGO the second one and the clearing service provider Altcoinomy has the third.
Now, LGO is getting ready to release its own hardware wallet that clients can choose for storage of these keys, the exchange’s CEO, Hugo Renaudin, told CoinDesk.
The device, basically a plastic card with an embedded microchip, will become available sometime in the second quarter.
“All keys are created and stored in the smart cards, which means that they cannot be retrieved by an attacker,” Renaudin said, explaining how the hardware wallet would work. “LGO’s and Altcoinomy’s keys are linked to a computer script stored in the same respective smart card, which limits their usage to the signature of digital asset transactions authenticated by the client.”
Alternatively, LGO announced Tuesday that it has partnered with crypto storage specialist BitGo, which will offer the exchange’s clients custody through its South Dakota-regulated trust company as well as multi-sig wallet services.
Further, beginning this month BitGo will support LGO’s native token, also named LGO, which was sold in an initial coin offering (ICO) in February 2018 and will eventually be used for paying trading fees at the exchange.
“Both BitGo and LGO Markets are committed to the needs of institutional investors,” Mike Belshe, CEO of BitGo, said in LGO’s press release. “Our vision is aligned as both companies believe strongly in decentralized cryptocurrency markets where exchanges do not act as their own custodians.”
Social media giant Facebook is said to be seeking to raise as much as a billion dollars in outside funding for its cryptocurrency project.
Nathaniel Popper, a technology reporter at The New York Times, tweeted Monday that sources have said Facebook is targeting “big sums – as much as $1b” from venture capitalists to support the stablecoin effort. The company would use the funds as collateral to back the token, one person apparently told the journalist.
It must be stressed that, at this stage, the comments have not been confirmed by Facebook or any potential investors.
Facebook has been developing its own stablecoin for money transfers over WhatsApp, as revealed last December. The stablecoin may be pegged to a “basket of foreign currencies held in bank accounts,” Popper’s further tweeted.
Facebook has also been planning to list its stablecoin on cryptocurrency exchanges, telling platforms in February that it expects to get the product out in the first half of 2019.
While Facebook is far from short of cash, involving outside investors in the stablecoin project could help Facebook present the cryptocurrency project as “more decentralized and less controlled” by itself, Popper’s sources suggested. The company had $44 billion in cash and equivalents as of April 2018, according to CNBC.
Earlier this year, Barclays analyst Ross Sandler estimated that Facebook’s cryptocurrency project could yield anywhere from $3 billion to $19 billion in additional revenue by 2021.
The social media behemoth set up its blockchain team in May 2018, aiming to explore the emerging technology. Since then, the company has been looking to expand the team with new hires. It recently had over 20 open positions related to blockchain roles, including a lead commercial counsel.
Earlier this year, Facebook also hired staffers from Chain space, the startup behind a smart contracts platform.
Cryptocurrency exchange Coinbase has launched a Visa debit card allowing customers in the U.K. and EU to spend their cryptocurrencies directly from their Coinbase accounts.
The San Francisco-based firm announced the news in a blog post on Wednesday, saying that with the “Coinbase Card,” customers will be able to spend their bitcoin (BTC), ether (ETH), litecoin (LTC) and other cryptocurrencies “as effortlessly as the money in their bank.”
The exchange said it will “instantly” convert cryptocurrency to fiat currency, such as the British pound (GBP), when customers complete a transaction using the debit card.
The card supports all crypto assets available to buy and sell on the Coinbase platform, and customers can use them to pay for everyday purchases, such as a meal or booking tickets, according to the announcement.
With previously available products of this type, customers had to pre-load a specified amount of cryptocurrency onto the card in order to spend, Coinbase said.
The exchange has also launched an app for the card on both Android and iOS platforms, enabling customers to select which cryptocurrency wallet they will use to fund their spending. The app also offers “instant” receipts, transaction summaries and spending categories.
For the first 1,000 customers, Coinbase said it will waive the card issuance fee of £4.95 ($6.48).
PaySafe, a U.K. payment processor, is the issuer of the cards, a Coinbase spokesperson told CoinDesk.
In a similar development last month, banking startup 2gether said it was launching a prepaid Visa debit card that allows users to spend cryptocurrencies. With the 2gether card, customers will be able to pay with either euros or any of the following seven cryptocurrencies: BTC, ETH, XRP, bitcoin cash (BCH), EOS, Stellar (XLM) and litecoin (LTC).
Switzerland’s finance watchdog has found that the cryptocurrency mining firm Envion AG, which raised millions through an initial coin offering (ICO), held the sale illegally and “seriously violated” laws.
Announcing the news on Wednesday, the country’s Financial Market Supervisory Authority (FINMA) saidthat Envion unlawfully received public deposits worth over 90 million francs ($90.33 million) from at least 37,000 investors through its token offering early in 2018.
FINMA began investigating Envion in July 2018 for potentially breaking financial market rules. In Wednesday’s statement, the regulator concluded that Envion carried out the offering without the necessary banking license in place.
Envion issued EVN tokens to investors who made payments in U.S. dollars and cryptocurrencies such as bitcoin and ether, and granted them a claim to repayment after 30 years, FINMA said.
This acceptance of public deposits and “bond-like” arrangement falls under the country’s Banking Act and thus requires a banking license, according to the watchdog.
Furthermore, the conditions under which Envion issued its tokens were not equal for all investors, FINMA added. Its prospectus also did not meet minimum statutory requirements and an internal audit unit was not set up as required by law.
It was reported last May that the firm’s CEO, Matthias Woestmann, had claimed that the founders generated extra EVN tokens as part of a money grab. The founders counterclaimed that Woestmann had seized control of the firm and breached his contract.
Envion has been forced to undergo liquidation proceedings by the Swiss Cantonal Court of Zug, which found “organisational shortcomings.” FINMA said it would not be taking supervisory action against the firm as a result.
It is not yet clear if and how investors in the project might be able to claim back their funds. FINMA indicated it is not able to provide information on Envion’s financial state, as the bankruptcy proceedings are controlled by the Bankruptcy Office of Zug.
FINMA said it will continue to take action against unlawful ICOs that “violate or circumvent supervisory law.”
Swiss flag image via Shutterstock
Cryptocurrency gift card provider Bitrefill has added a service allowing users to book Airbnb rentals with five cryptocurrencies.
The Sweden-based firm announced the news over Twitter on Wednesday, saying that customers can now pay for Airbnb gift cards in bitcoin (BTC), ether (ETH), litecoin (LTC), dogecoin (DOGE) and dash (DASH).
However, currently, the Airbnb gift cards can only be redeemed by U.S. residents with a U.S.-based payment method, according to information on Bitrefill’s website. Further, Airbnb gift cards can only be applied for reservations less than 28 nights, the firm said, while customers can purchase the cards in U.S. dollar denominations of $25, $50, and $100.
Bitrefill, which also provides mobile credit top-ups in cryptocurrency, said that the Airbnb offering is a voucher product and that it will provide users with a voucher code and instructions on how to use it.
Last week, the company also announced cryptocurrency support for Netflix subscriptions, with the same five cryptos. It also offers cards for travel services, gaming, VOIP and more, depending on global location.
Bitrefill is also an early adopter of the still somewhat experimental lightning network. In January, Bitrefill told CoinDesk that it aims to make lightning bitcoin payments easy for users with its “Thor” service that allows people to give lightning channels to someone else with no setup on the recipient’s side.
The firm carried out a first real-world transaction test using lightning in December 2017, saying it topped-up a mobile phone almost instantly with zero fees.
Airbnb image via Shutterstock
nChain, the company founded by self-proclaimed bitcoin inventor Craig S. Wright, is looking to hire a patent counsel in London to manage and grow the firm’s portfolio of blockchain-related IP.
The applicant must be a qualified European Patent Attorney, have a keen interest in bitcoin and blockchain and also possess a first degree in computer science, electronics, physics, or mathematics, the job advertisement states.
It goes on to say that the London-based position would conduct “patent drafting” and “global prosecution” for its patents and that the individual would have and “significant responsibility for creating and exploiting commercially valuable IP assets.”
Wright, who is best known for declaring himself (without evidence) to be bitcoin’s pseudonymous creator Satoshi Nakamoto, is also a strenuous collector of patents related to the technology.
A Reuters report two years ago first connected Wright with a company called EITC Holdings Ltd (which later became nChain), and through which he had filed over 50 patent applications in the U.K. related to blockchain technology. Earlier this month Jimmy Nguyen, chairman of nChain’s strategic advisory board, announced that the firm had filed 666 patent applications.
Data provided by the UK Intellectual Property Office shows that EITC has submitted a range of patent applications focused on the technology in recent years, including ones for “implementing logic gate functionality using a blockchain,” an “operating system for blockchain IOT devices” and “methods and systems for the efficient transfer of entities on a peer-to-peer distributed ledger.”
The explosion of R&D related to blockchain potentially creates an environment where “Non-Practising Entities (NPEs),” sometimes referred to as “patent trolls,” can thrive simply by seeking and enforcing patent rights.
To date, there have been no reports of nChain or Craig Wright becoming involved in patent disputes.
nChain did not respond to requests for comment by press time.
Craig Wright image: BBC
Trustology, founded by technologists who previously worked at such banks as BNY Mellon, RBS and Barclays, has launched an iPhone-controlled crypto vault it claims is secure enough for financial institutions.
Announced Wednesday, the first version of TrustVault is available for download at the Apple UK App Store, and initially can be used to store ether, the cryptocurrency native to the ethereum public blockchain. Bitcoin and ERC-20 tokens that run on top of ethereum are to follow soon after.
Trustology closed an $8 million seed round late last year led by ethereum design studio ConsenSys and Two Sigma Ventures, a VC arm of tech-focused hedge fund Two Sigma Investments.
At first blush, TrustVault might look like another crypto wallet phone app. But there’s a lot going on behind the screen: a clever combination of hardware security modules (HSMs) operated by Trustology with verification processes distributed among individuals at secure data centers.
Spelling this out, Alex Batlin, Trustology’s founder and CEO told CoinDesk,
“It allows you the ease of a mobile phone, but really what we always talk about is a TrustVault account. If you mention the phone, people think it’s just a phone app. But that’s a bit like saying my bank account is just the mobile bank app. It looks like a simple app, but the real power is in the service behind that.”
Indeed, like a bank, Trustology identifies its customers upfront, and if the phone is lost, the account can be recovered with the company since the private keys to the crypto wallet are not stored on the device.
Yet involvement of humans in certain parts of the setup process doesn’t mean this is a typical cold storage solution, which can take up to 48 hours to get assets out, Batlin said.
Once the user is on-boarded, TrustVault is almost entirely automated and takes a fraction of a second to move funds, he said, adding,
“The problem with the person scenario is you absolutely reduce cyberattack, but you now increase the physical attack. Because in the end, an individual is just a very slow network connection.”
HODL the phone
For example, Samsung’s S10 touts what it calls “defense-grade Samsung Knox,” as well as storage backed by hardware and so on. But one suspects the goal for Samsung is ultimately the possibility of connecting to Samsung Pay in the future.
For now, TrustVault is only compatible with iPhone because historically it’s the only phone with an enclave secure enough for this type of custody service, Batlin said.
However, Android compatibility is coming soon, he said, in the form of the recently released Google Pixel 3 phone.
“It has something called a Titan M chip which is very secure, more secure than the iPhone. So we will be working on an Android version, but it won’t be for every device; it will only be for the more secure ones,” said Batlin.
The nuts and bolts
Trustology has tried to put everything in hardware. “We took the tried and tested HSMs, which is what banks have been using for SWIFT network and many other very highly secure systems, but we customized the firmware,” said Batlin.
When the app is launched, a cryptographic private key is created in the iPhone enclave, followed by bank-grade know-your-customer (KYC) process which ties the non-extractable key to the user’s identity. Note that this is not the same key that directly controls the user’s funds.
The next step is to create a key account with TrustVault, a request which is signed by the private phone key. A private key is then created inside the HSM and a “policy file,” which associates the key inside the phone with the one inside the HSM.
From there, the user’s public address becomes the equivalent of a bank account, said Batlin.
“To move money you have to be able to sign the transaction with the key inside your phone and send it to us. We then load the appropriate policy file and then only if that key is mapped to the key inside the HSM do we re-sign that transaction with the real key inside the HSM.”
In addition to the minimum viable product (MVP) being launched today, TrustVault is also being offered to financial institutions as a white-label service they can provide to their customers. Batlin said there is demand from top-tier and mid-tier banks.
There will be a range of business models going forward (the early adopter MVP comes at a simple flat £4.99 a month subscription) depending in part on insurance, which Trustology is in the process of arranging, he said.
Joseph Lubin, ConsenSys founder, described Trustology in a statement as “industrial grade security, but available to anyone” and added,
“When it comes to crypto wallets, hot is the new cold.”
While leading cryptocurrency exchanges like Coinbase and Binance feverishly add new tokens, smaller exchanges serving emerging markets are pivoting toward retail applications of the lightning network’s bitcoin scaling solution.
The latest is Singapore-based exchange Zebpay, which now offers lightning wallet options for users who want to send lightning-enabled payments to external wallets.
Bitcoin users can cash out their crypto directly to make a nearly instant payment to any lightning-friendly wallet. For now, Zebpay will enable this feature by handling all the channels to recipients on the back-end.
“Next comes allowing people to create invoices,” Zebpay CEO Ajeet Khurana told CoinDesk. “Giving them greater control over channel management, state management, recovery, routing. All of this is done by us. We will keep releasing more functionality so that users can actually take control of how they are doing things.”
This stands in stark contrast to the broader industry norm, which often considers lightning too experimental for retail users. Representatives from larger platforms like Coinbase, BitMex, Kraken and OKEx all told CoinDesk they won’t incorporate lightning in the near future.
In contrast to the above-mentioned platforms, Khurana said Zebpay has a smaller monthly user base of a “few hundred thousand” – which could still make the company’s new lightning wallet one of the more widely used options on the market (BlueWallet, by comparison, has seen 20,000 downloads to date).
Demand for the product may also benefit from the fact that nearly a million Indian Zebpay accounts holders can’t cash out in fiat due to an unclear regulatory landscape that discourages Indian banks from cooperating with crypto companies.
“I cannot imagine greater pain for an organization,” Khurana said, referring to the choice to shut downthe Indian fiat-crypto exchange and shift Zebpay’s focus to other markets and services. He described this shift as basically having to “start over” again. Yet despite these challenges, Khurana remains bullish on the global bitcoin industry.
“It is very, very exciting,” Khurana said, adding:
“We are still in the early stages, of [lightning] implementation. But as far as capabilities are concerned, that question of whether bitcoin can actually support the volume of transactions that would emerge from a global monetary system, that [question] has now effectively been put away.”
Lightning now is part of the exchange’s strategic plan for expanding beyond simple exchange services. This wallet functionality is the first step.
Khurana told CoinDesk he is also interested in offering a variety of lightning-enabled services in the future, such as payment processing. This may prove to be especially important since Khurana said the vast majority of Zebpay users at in-person events have indicated they “didn’t have exposure to other asset classes” like stocks or real estate.
Global use cases
Although Zebpay may lead the way for Indian bitcoin users who are learning about lightning, it isn’t the first exchange to prove lightning integration can prove commercially viable.
The Chile-based bitcoin exchange Buda.com, a small exchange facilitating roughly $200,000 in daily transaction volume from around 1,500 monthly users, enabled this same payment feature last October. Buda.com software engineer Alejandro Echeverría told CoinDesk 100 customers have used this lightning feature so far and, from integration to channel management, the additional cost to the exchange has been less than $5,000.
Much like Zebpay’s Indian users, Buda.com’s users in Colombia often find that banks won’t allow them to purchase bitcoin or interact with crypto companies.
Plus, Venezuelan expats in Peru, Chile and Colombia may all need to send bitcoin without relying on Venezuelan banks. Lightning wallets make these transactions much cheaper than regular bitcoin transactions, helping users overcome liquidity issues.
“Some users used Bitrefill to send money to Venezuelan mobile accounts, to top off their family cell phones,” Buda.com co-founder Agustín Feuerhake told CoinDesk. “It’s a lot easier if you have your bitcoin on an exchange than running your own [lightning] node or opening channels.”
Feuerhake went on to say his exchange will add both mobile lightning options and the ability to receive payments within the next few months, followed by an experimental roll-out of merchant payment processing services later this year for small businesses such as hairdressers.
“Most of the users are more concerned with making [bitcoin payments] fast and easy,” Feuerhake said. “We received interest from large merchants. But we will start with smaller businesses with a simpler view of accounting.”
Both Khurana and Feuerhake agreed that the current crypto industry is oversaturated with exchange options. From their perspective, companies that are able to offer services, such as mobile wallets, institutional custody and payment processing, will succeed in the long-run.
“Who among the exchanges will remain competitive?” Khurana asked. “I think these are going to be the ones that innovate.”
Ajeet Khurana image via Zebpay
“Left to their own devices, computer scientists would recreate the Soviet Union.”
That line belongs to Preston McAfee, an economist whose job history includes senior positions at tech giants such as Microsoft, Google and Yahoo. As he explained to an audience at the SXSW conference in Austin, Texas, recently, it refers to software engineers’ tendency to favor centralization as the most efficient design principle for any computing system.
The point, he said, is that decentralized networks, such as those based on blockchain models, can often enable more positive overall social outcomes despite the relative inefficiency of their command-and-control architecture. It’s useful to contemplate this idea, and McAfee’s colorful metaphor, in relation to the current state of play on the Internet.
For the first time since they emerged as the victors of the post-dot-com bubble shakeout at the turn of the century, the platforms that dominate our online lives are running up against the social limits of their centralized models.
A backlash is emerging against “surveillance capitalism” and against the broad strategy of mining users’ data to capture audience for advertisers and to shape consumer behavior. Manifest as both political pressure and user rebellion, it is forcing a design rethink at these companies.
Perhaps the Internet is facing its Berlin Wall moment.
This is ultimately why some of the principles underlying blockchains and cryptocurrency technologies are finding favor in the business development strategies – or at least in the PR signaling – of social media companies.
Warming to Decentralized Models
Facebook especially has attracted much attention in this area.
CEO Mark Zuckerberg recently made a bombshell post outlining a “privacy-focused vision for social networking” that suggested a move to embrace end-to-end encryption of users’ data on Facebook, Instagram and WhatsApp.
In a separate post of a video interview with Harvard Law professor Jonathan Zittrain, Zuckerberg speculated on the prospect of Facebook using a blockchain model to enable decentralized logins without its servers acting as authenticators. All this came around the time The New York Times reported that Facebook is developing a digital currency that its users can trade among each other and exchange on cryptocurrency exchanges.
Meanwhile, Twitter CEO Jack Dorsey appears to have gotten religion when it comes to cryptocurrencies. He has declared that bitcoin will be the “native currency of the Internet,” has invested in Lightning Labs, which is developing payment channels for bitcoin based on the lightning network, and recently announced that Square, the separate payments company that he heads, will hire crypto engineers and likely pay them in bitcoin.
It’s fair to say there is a significant degree of skepticism that social media companies, having made fortunes out of a centralized model that accumulates user data, will change their stripes.
Facebook, in particular, has come under criticism from pundits who argue that it won’t be able to shift its business model. Given data abuse scandals such as the Cambridge Analytica affair, skeptics such as cryptocurrency pioneer David Chaum argue that Zuckerberg’s decentralization and privacy mantra is nothing more than a PR message.
But the departure of certain senior executives, including those who oversaw the development of the centralized data-gathering model and the algorithms that mine that data to deliver audiences to advertisers, has led others to conclude that Zuckerberg is indeed serious.
Winds of Change
One thing’s clear: there’s pressure for change, whether it comes in substance or merely in message.
Much like citizens who reach a breaking point and rebel against political leaders who act in their own interests rather than those of the public, users of these social media platforms are starting to signal that they won’t stand for data abuses.
Obviously, without users, these businesses fail. So, these companies are now contemplating a revised model in which, to paraphrase Bruce Schneier, users are no longer the product but the customer.
It’s an open question whether such companies can make money on a model in which the nodes in the network are free from control by the center. But let’s continue with the McAfee-inspired metaphor and contemplate how governments in capitalist economies accrue power and influence when their citizens are empowered to transact with each other. Similarly, we can imagine how a Facebook or a Twitter that helps its vast number of users conduct peer-to-peer exchanges can extract great value from the expansion of such networks.
Either way, the winds of change are coming to the centralized systems of the Internet. Whether the incumbents survive those changes, or whether they go the way of, say, MySpace is not clear. More important, let’s consider what might arise in their place and how smoothly we transition to the new era.
These are questions for developers of decentralized solutions such as those enabled by blockchain technology. What kind of governance models will be in place so that users are truly able to maintain a healthy degree of autonomy even as new centralizing forces emerge to extract value within the new paradigm?
Remember, the Soviet Union collapsed, but it was hardly replaced by a utopia.
Image via CoinDesk archives
Singapore-based exchange DragonEx says it has been hacked for an undisclosed amount in a number of cryptocurrencies.
DragonEx announced the news on its official Telegram channel on Monday, stating that, on Sunday, March 24, it had suffered a cyberattack that saw cryptocurrency funds owned by users and the exchange “transferred and stolen.” No information has yet been provided on the value of the losses.
On Sunday, apparently as the breach was first being discovered, DragonEx first took its platform offline saying it was upgrading its systems. Later the same day, it announced that it was “still working on system maintenance,” before finally disclosing that it had been hacked yesterday.
“Part of the assets were retrieved back, and we will do our best to retrieve back the rest of stolen assets,” DragonEx said in Monday’s Telegram announcement.
The exchange further said that it has informed several judicial administrations, including Estonia, Thailand, Singapore and Hong Kong about the attack, adding:
“We’re assisting policemen to do investigation. All platform services will be closed and the accurate assets loss recovery situation will be announced in a week. For the loss caused to our users, DragonEx will take the responsibility no matter what.”
In updates on the hack today, DragonEx’s Telegram admin provided wallet addresses for 20 cryptocurrencies to which the stolen funds had apparently been transferred. The list included the top five cryptos by market capitalization: bitcoin (BTC), ether (ETH), XRP, litecoin (LTC) and EOS, as well as the tether stablecoin (USDT) for which six destination addresses were provided.
“We earnestly request help from all our fellow exchanges and other industry strength, please help us to investigate and traced the assets, freeze them and stop the assets flows,” the exchange said.
The admin added that stolen crypto assets transferred by the hackers to the Huobi and gate.ioexchanges have already been blocked.
Japan’s top financial watchdog has granted a license to a cryptocurrency exchange being relaunched by e-commerce giant Rakuten.
The country’s Financial Service Agency (FSA) announced the news Monday, stating that the new exchange, Rakuten Wallet, is now registered with the Kanto Local Financial Bureau as a virtual currency exchange service provider under the country’s Payment Service Act. Rakuten also confirmed the news in a separate statement.
Rakuten Wallet is a wholly-owned subsidiary of Rakuten and replaces an exchange called Everybody’s Bitcoin Inc. that it acquired for $2.4 million last August.
The firm rebranded the exchange offering to Rakuten Wallet on March 1. In its announcement, Rakuten also said it is ceasing the older service at the end of this month and that users can sign up for the new Rakuten Wallet service from April.
The firm also said Everybody’s Bitcoin had been operating as a “deemed” cryptocurrency exchange provider since its launch in March 2017, having applied for a license at the time. The firm received a business improvement order from the Kanto bureau last spring, and has “officially restructured” its management system and upgraded internal systems in order to receive the license for the rebooted entity.
The FSA at the same time issued a license to another exchange called DeCurret, which says it will provide spot trading of four cryptocurrencies from April 16 in Japan. New accounts start opening from March 27. DeCurret’s shareholders include notable firms such as MUFG Bank, Nomura Holdings, Internet Initiative Japan Inc., Daiwa Securities Group and the Dai-ichi Life Insurance Company, among others.
In January, the FSA also granted license to Japanese crypto exchange Coincheck, which suffered a $530 million hack early last year. With the two new approvals, the number of licensed cryptocurrency exchanges in Japan now stands at 19, according to the FSA announcement.
Luxury brand conglomerate LVMH, owner of the iconic Louis Vuitton label, is preparing to launch a blockchain for proving the authenticity of high-priced goods, CoinDesk has learned.
Code-named AURA, the cryptographic provenance platform is expected to go live in May or June with Louis Vuitton and another LVMH brand, Parfums Christian Dior. It will then be extended to LVMH ‘s other 60-plus luxury brands, and eventually those of its competitors.
LVMH has enlisted a full-time blockchain team who have been in stealth mode for over a year, working closely with ethereum design studio ConsenSys and Microsoft Azure, according to two people familiar with the project.
AURA has been built using a permissioned version of the ethereum blockchain called Quorum, which is focused on data privacy and was developed by JPMorgan.
Neither LVMH nor its partners ConsenSys and Microsoft would comment ahead of the project’s official launch. But a source involved in the build told CoinDesk:
“To begin with AURA will provide proof of
Stepping back, LVMH controls over 60 luxury brands including many well-known names like Dior, Dom Pérignon and Hublot. The group reported revenues of $53 billion in 2018.
But it’s not the first to propose an authenticity-tracking blockchain; there have been other luxury provenance platforms and mini consortia, such as Arianee or Vechain.
According to the source involved in the project, LVMH questioned why it would allow third parties to position themselves between its brands and their partners – especially since blockchain is supposed to be a technology for eliminating intermediaries.
The source added:
“This should be done in the form of an industry consortium rather than a third party actor coming into the marketplace.”
As such, LVMH intends to offer the service in a white-label form to other brands including the group’s competitors. So rather than creating an app of some kind, AURA will run behind the brands using it.
“So if you are a customer of a luxury brand, you are not going to see AURA; you are going to see the Louis Vuitton app or the app of another luxury brand,” the source explained.
This all sounds great – in theory. But it can be tricky getting your competitors onto a blockchain platform, particularly if you happen to be as big and influential as LVMH.
To avoid the sort of problems experienced by the blockchain venture between IBM and Maersk, LVMH will donate all intellectual property (IP) to a separate entity and that entity, in turn, will be owned by the participating brands, said the source, who added,
“So Gucci, for example, could decide to join the platform and be a shareholder – in which case their claim to the IP would be as great as Louis Vuitton’s claim to the IP. That is the main difference between this project and the IBM Maersk project. which hopefully makes it much more comparable to Komgo, the trade finance consortium.”
In addition, Quorum’s data privacy tools should ensure that no information will be leaked between brands or their customers.
Further facilitating cooperation among firms, the project is very much in line with luxury-goods industry standards, the source said, and particularly with the recent anti-counterfeiting efforts of the European Union Intellectual Property Office.
It’s not surprising LVMH chose an enterprise variety of ethereum since it’s the blockchain which gave birth to the ERC-721 non-fungible token (NFT) standard. This allows for digital representations which are not only immutable but provide a hallmark of a one-and-only, unique item.
While the most famous example of NFTs is the whimsical game CryptoKitties, this kind of token has serious business potential.
For example, it could conceivably identify an individual handbag and trace the whole journey of its lifecycle from an alligator farm to the store where it was sold for the first time, and then the multiple chains of owners that have owned and sold it.
Another fundamental reason LVMH chose ethereum is that the group sees today’s permissioned version as merely an intermediate step to a grander vision, once the technology matures, said the source, adding,
“They [LVMH] see down the line permissioned and public networks as needing to be interoperable if they are to put the power back to customers. It’s also a way for a global network of distributors and resellers to connect to a network without restriction.”
- Bitcoin’s current trading range of $3,920–$4,055 could be breached to the downside, as last week’s doji candle created at the key 21- week moving average resistance is signaling bullish exhaustion.
- A downside break of the trading range, if confirmed, could yield a sell-off toward the support levels lined up at $3,775 and $3,658.
- On the higher side, a UTC close above $4,055 is needed to put the bulls back into the driver’s seat, although that looks unlikely at press time.
Chart signals of bullish exhaustion suggest bitcoin’s (BTC) narrowing trading range could soon be breached to the downside.
The leading cryptocurrency by market value is sidelined below $4,000 for the fourth straight day, and has been restricted to the narrow range of $3,920–$4,055 since March 17, according to Bitstamp data.
More importantly, prices clocked a high and low of $4,055 and $3,920, respectively, last week before closing Sunday (UTC) largely unchanged at $3,970. The price swing formed what’s termed a doji candle on the weekly chart, which is usually taken to represent indecision in the marketplace.
The candle, however, has appeared following a 20 percent rally from lows near $3,300 seen at the end of January. So, it could be argued that the indecision, as represented by the doji, is predominantly among the buyers.
As a result, the probability of BTC ending the ongoing consolidation with a convincing break below $3,920 appears high.
As of writing, BTC is trading at $3,970 on Bitstamp, largely changed on a 24-hour basis.
As seen above, BTC created a doji candle at the crucial 21-week moving average (MA) resistance, validating the bearish view put forward by that still-downward sloping momentum indicator.
The case for the downside break of the $3,920–$4,055 trading range looks stronger if we take into account the price action seen over the last five weeks.
To start with, BTC hit a high of $4,190 and created a bullish inverted hammer candle in the third week of February – a sign the market is bottoming out. That candlestick is usually followed by a quick move to the higher side.
In the last four weeks, however, BTC has failed to again challenge $4,190, weakening the bullish case.
Daily and 4-hour charts
On the daily chart, the short-term MA studies are now biased toward the bears, with the 5-day MA having dropped below the 10-day MA. Further, with the price well below the March 21 high of $4,055, the bearish outside-reversal candle created on that day is still valid.
So, the sideways channel seen in the 4-hour chart could be breached to the downside in the next day or two.
A range breakdown if confirmed would open the doors for a deeper drop toward $3,658 (Feb. 27 low).
A UTC close well above $4,055 would revive the short-term bullish view and could yield a rally toward $4,200, although gains may be short-lived, as the 21-week MA is still trending south.
- Several major blockchain projects aim to streamline post-trade processing for securities.
- The new systems are still prototypes and need rigorous testing before safely connecting to live infrastructure.
- A former unit of the London Stock Exchange, QA specialist Exactpro, estimates that DLT post-trade systems may still be two years away from such testing.
- The upshot for big post-trade blockchains is the potential for further delays.
If blockchain is supposed to be the new plumbing for the world’s financial markets, then think of Exactpro as the home inspector who checks the pipes for leaks.
A former subsidiary of the London Stock Exchange whose management bought it out in 2018, Exactpro employs some 560 specialists who test trading and clearing systems for traditional securities exchanges, investment banks, brokers and technology firms.
As such, the firm knows better than most the ins and outs of “post-trade,” the back office processing after a trade is complete where buyer and seller change records of ownership and arrange for the transfer of securities and cash.
And in Exactpro’s estimation, distributed ledger technology (DLT) systems are still a few years shy of tough benchmark software tests, which they would have to pass before anyone could use them to handle post-trade processes in the real world.
“I think there are still gaps in technology so we can’t assume that the fabrics already support everything,” Iosif Itkin, co-CEO and co-founder of Exactpro, told CoinDesk. “I think it is still a question of a couple of years before there will be a radical shift from prototyping to software testing.”
What’s more, even when they reach this testing phrase, Itkin is skeptical that they’ll pass at first, telling CoinDesk:
“Based on our experience in post-trade and what we’ve observed with the prototypes, I do have doubts on the outcome of the first rounds of real testing.”
If he’s right, a number of ambitious DLT projects tacking post-trade could have to push their go-live dates further into the future to account for an exacting round of tests.
For example, Digital Asset is busy replacing Australian Securities Exchange’s (ASX’s) CHESS system for cash equities, which had been pushed back until Q2 2021. Meanwhile, the blockchain re-platforming of DTCC’s credit derivatives Trade Information Warehouse is scheduled to go live later this year. And recently, R3 Corda was recently contracted to build the DLT plumbing for Swiss exchange SIX Digital, also slated to go live this year.
So far, Exactpro is only considering the DLT created by R3 (with which it has a partnership), Hyperledger (it’s a member of the consortium) and Digital Asset, and has not focused on any enterprise versions of the ethereum blockchain. (Hyperledger, R3, Digital Asset did not return requests for comment.)
Points of failure
In particular, the most likely points of failure will be where these DLT systems connect to legacy architecture, according to Exactpro, which will present a white paper on its methodology for testing such “hybrid financial software” at the ICST 2019 conference in China next month.
Itkin noted that DLT systems are still largely at the prototype stage and therefore the builders are trying to prove that these things work. The essence of software testing, by contrast, is to try to break it. In other words, pushing an already battle-hardened system to explore its limits is a very different ballgame from proving a prototype can muster a minimum viable product.
“Professional testers always expect that the system will not work,” Itkin said. “Other testers assume that the system will be OK. Good for them. Bad for the live service.”
When Exactpro designs a test strategy for a next-generation post-trade system, as it recently began doing (with non-DLT tech) at Hong Kong Exchanges and Clearing (HKEX), it checks both the functional specifications and also non-characteristic conditions, such as when a huge load is placed on the system, or in the case of a server going down or some other type of service disruption.
Most of the problems, when these systems go live, will happen at the boundary between a distributed ledger and the rest of the platform, Itkin predicts. He pointed out this has also been observed in crypto exchanges, where most of the problems are not within the fabric of the exchange itself, but at the intersection with the “real world.”
Itkin said that when looking at implementing DLT prototypes, his team constantly finds particular parts are not implemented yet. For example, “domain models are absent in most of the areas and software developers need to build them from scratch for every new use-case. In the code, there are still some trade-offs between what is already available and the security/reliability requirements.”
He reiterated that such missing parts are well known to developers and expected to be released in the next versions, adding,
“It is just [that] there is still lots of work to do.”
Itkin added that Exactpro does a fair amount of work in the swaps space and is interested in the possibility of implementing the International Swaps and Derivatives Association’s Common Domain Model on R3’s Corda, adding,
“We are looking at the systems that are most likely to be used as the foundation of the future generation of settlement and clearing systems, and Corda, Hyperledger and DA look like the most probable candidates to serve as the foundation going forward.”
Cryptocurrency mining equipment maker Bitmain’s application for an initial public offering (IPO) on the Hong Kong Stock Exchange (HKEX) has officially lapsed, meaning no such transaction is happening anytime soon.
According to an update on the HKEX’s website, Bitmain’s case has been moved to a group of “inactive” applications and is now labeled as lapsed, six months after the company filed the prospectus on Sept 26.
If it still wishes to pursue a listing, Bitmain can re-file the application, but the company would be required to provide additional financial records beyond what was included in its initial filing.
According to a listing rule from the HKEX, “the latest financial period reported on by the reporting accountants for a new applicant must not have ended more than six months from the date of the listing documents.” However, the last public filing from Bitmain only covers the period ending June 30, 2018, nearly nine months ago.
The application drew wide attention last fall as Bitmain disclosed eye-popping profit growth over the past several years. For instance, just for the first half of 2018, the mining giant brought home a net profit of nearly $1 billion, after having made over $1 billion for all of 2017.
Despite such rapid growth in the bottom line, reflecting the surging cryptocurrency market of 2017, the HKEX was hesitant to approve applications from Bitmain and its mining rivals Canaan Creative and Ebang, due to the industry’s volatility.
Indeed, in line with the market slump of 2018, Bitmain suffered a loss of about $500 million in the third quarter of last year.
It’s unclear at the moment whether Bitmain is contemplating another attempt any time soon to go public. The company published an announcement on Tuesday stating:
“Bitmain’s listing application to HKex in September 2018 has reached its 6-month expiration date. … We will restart the listing application work at an appropriate time in the future.”
The company also confirmed in the same announcement that its co-founders Jihan Wu and Micree Zhan have stepped down as co-CEOs. Haichao Wang, previously a director of product engineering at Bitmain, was officially appointed Bitmain’s CEO, months after news report said a management shakeup was in the works.
But if it does not find another way to go public, the company may be on the hook to repay more than $700 million to its venture capital investors.
$700 million redeemable
As of June 30, 2018, Bitmain had a $715 million liability on its balance sheet labeled “redeemable, convertible and preferred shares,” resulting from its Series A and Series B funding rounds closed over the past two years. This amount accounted for nearly half the company’s total liabilities at the time.
According to the company’s IPO prospectus, the terms Bitmain agreed to with these investors included a redemption clause, which gives shareholders the right to require Bitmain to redeem or repurchase all or part of their shares if either one of two events happens.
One such situation is “neither a qualified [REDACTED] nor a qualified trade sale defined in the terms has occurred by the fifth anniversary of the preferred shares’ issue date,” the document says. The other is the occurrence of a breach by the company or its controlling shareholders that has a “material adverse effect” on the firm’s overall businesses and “has not been cured within 30 days as defined in the terms.”
Shirley Wang, a partner at the law firm of Baker McKenzie FenXun with expertise in debt capital markets, said such redemption clauses are a common and typical way to protect investors and it’s not unusual for investors to initiate a redemption procedure. But the conditions under which redemption rights can be exercised vary from deal to deal, she added.
Shirley Wang, a partner at the law firm of Baker McKenzie FenXun with expertise in debt capital markets, said such redemption clauses are a common and typical way to protect investors and it’s not unusual for investors to initiate a redemption procedure. But the conditions under which redemption rights can be exercised vary from deal to deal, she added.
While it’s unclear what exact type of event was redacted from the passage in Bitmain’s prospectus, a clue can be found in a term sheet for Bitmain’s B+ round, in which the firm raised $440 million.
According to a copy of that document obtained by CoinDesk, investors have the right to redeem all or part of the B+ preferred shares at any time after the earlier of:
“i) 5 years from the closing date (if no qualified IPO), or ii) upon any breach by any Group company or any founder parties of the terms of the transaction documents in connection with the transactions contemplated hereby which amounts of a material adverse effect and is not cured within 30 days.” [Emphasis added]
Under such conditions, Series B+ round investors could require Bitmain to redeem the shares in an amount equal to the purchase price plus “all declared and unpaid dividends” and “an assumed 10% compounded” annual return for each year such shares are outstanding from the closing date, less any amount received by the investors.
This term sheet further specified what a qualified IPO means for Bitmain’s B+ round investors, stating:
“Qualified IPO is defined as an underwritten public offering of ordinary shares of the Company at a public offering price per share (prior to underwriting commissions and expenses) that values the Company at least US$18 billion in an offering of not less than $500 million).”
Although the amount of money Bitmain intended to raise from the IPO was also redacted from the HKEx prospectus, documents obtained by CoinDesk last summer indicated the proceeds would have been as high as $18 billion at a market capitalization of $40 to $50 billion.
Bitmain co-founder Jihan Wu image via CoinDesk archive
The crypto space ain’t what it used to be.
In the good old days when bitcoin was the only “cryptocurrency” around, life was much simpler. Then, a few other “currencies” came along, followed by ICOs and things rapidly got much more complex.
Somewhere along the line, folks started paying as much or more attention to the technology underlying bitcoin as to bitcoin itself. Distributed ledger technology (DLT) or the “blockchain” suddenly became household words (well, with slight exaggeration…).
In the roaring months of 2017, crypto pundits, analysts and funds developed various taxonomies of the rapidly diversifying crypto space: exchange tokens, utility tokens, payment tokens, asset-backed tokens, etc. (My personal favorite was Tetras Capital’s, but there were many.)
However, the blockchain and asset-backed tokens were still part and parcel of the crypto space. I believe that is no longer the case. In fact, I would argue that the crypto space has split into three different spaces (hence “trichotomy”) and that the term “crypto” no longer applies to all of them.
I label these three spaces “trading tokens,” “blockchain” and “asset-back tokens.” Except for the first, I realized that there’s nothing even vaguely innovative about the names. The most important takeaway is probably that the latter two (and certainly the last one) have nothing to do with what most people think of as “crypto.”
As for first, “trading token” is really a more accurate label for what most people refer to as “cryptocurrencies.”
The word “currency” was actually never really applicable to the technology. (In fact, I published an articleon this very theme in July of 2017; “token” is much more appropriate. The word token is hardly new; it’s over 2,000 years old). We often forget where “token” came from in history: amusement parks, subways and, more recently, token rings, LANs, etc.
In IT, a “token” is basically an information packet which is optimized for transfer between computers. If someone feels (hopes) that the data packet has exogenous value, that person may try to sell it.
Others may feel a given token has no such value – even in an identical sector. (So, tZERO tries to sell its near-real-time trade settlement token, but NASDAQ does not.) Hence, the ICO was born. (For more on this topic, in particular on external drivers of price formation, see an article I wrote on that subject).
Of course, whether a crypto token is traded externally or not, it still relies on the blockchain (or a blockchain) or generally similar protocol consensus algorithm. Regardless, these mechanisms all record tokens’ existence, movements and changes. However, the growing percentage of blockchain projects (the largest of which may be the IBM-Maersk effort) do not rely on trading tokens.
This means that they have not identified an independent driver of price formation (among other things) for their token, but readily acknowledge the manifold advantages of the trust and reliability of DLT (blockchain) technology.
Because of this, most DLT investments must be made in seed/VC/PE (“early stage equity”) form, not in the form of trading tokens. This change radically affects the structure of, investment in and returns from (in terms of type, timing and amount) “ICO” (now “STO” or Security Token Offerings – and even the newer IEO or Initial Exchange Offering) v. “blockchain” projects.
So radically in fact, that the DLT/blockchain space is essentially totally separate from the trading token space. It’s the second prong of our crypto “trichotomy”. (And note that “crypto” no longer even really applies to this second space.)
The third space is asset-backed tokens.
This space is quite interesting because, in reality, tokenization is simply another form of securitization which has no inherent relationship to “crypto” per se. One could have tokenized (“atomized”) ownership in this fashion at any time in the past and done so without the blockchain. The constraints weren’t legal – and, in fact, there might have been few or no constraints other than cost – but DLT certainly makes it easier and more viable.
Now we come to the truly interesting part: scale.
It seems quite clear that trading tokens will reach an aggregate value of single-digit trillions (in US dollars). In December of 2017, the total trading token space (as measured by market capitalization) reached about 80% of that level. It will probably reach it in 2020 or thereabouts. I have my doubts that it will ever (and if so, not soon), reach 11 digits (US$10 trillion or more).
The blockchain, however, seems destined to easily reach double-digit trillions in value. If one simply looks at the value of logistics chains being put on the blockchain, one reaches well over half of that value. The provenance of virtually every asset where determining provenance is important (from diamonds and art to wine and all types of collectibles) will easily put one over the top.
Adding financial transactions to the mix blows through 11 digits quite easily. Triple-digit trillions may be possible but, again, not any time soon, if ever.
Asset-back tokens – which, as you may recall, used to be a single, rather orphaned category of cryptocurrencies (orphaned because their value was actually tied to something while the value of other ICOs and tokens seemed to limited only by human imagination and foolishness) – may actually end up being the large of the three branches, easily reaching triple-digit trillions.
Real estate alone, much of which seems to be destined for the blockchain, hits that value. If a material portion of financial assets (securities of all types) come tokenized, it’s a no-brainer to reach 12 digits. And notice that one can discuss asset-backed tokens without ever once using the word “crypto.”
The child will clearly outgrow its parent.
The one potential flaw in the analysis is the potential for double counting between the second and third categories. Title to real estate (and probably all real estate) will almost certainly be recorded on the blockchain. Much (but not all) of it may also be tokenized. If we count the value of real estate in both categories, the second will, perforce, exceed the first.
In the end, it doesn’t really matter how the taxonomy is specifically developed, the main point is the same: “crypto” has already given rise to technology and concepts that are much bigger than “cryptocurrencies” ever were and it is probably impossible to overestimate the importance that the blockchain and the tokenization of real assets will have on our world – any negative connotation which “crypto” has picked up recently be damned.
Three crowns image via Shutterstock
Duke University is teaming up with blockchain startup Citizens Reserve on an educational initiative aimed to develop students’ interest in blockchain technology.
Citizens Reserve, a firm led by a team of former Deloitte blockchain employees, told CoinDesk Friday that it will jointly create a new incubation lab on Duke campus for students to work on real blockchain projects and host blockchain-focused events.
The company will also support the university in putting together a curriculum on blockchain technology, as well as in connecting students with blockchain experts and helping them find jobs in the sector when they graduate.
“As a Duke MBA alumnus, I am excited to spearhead this program, and help the next generation of blockchain advocates and leaders succeed,” said Yonathan Lapchik, chief innovation officer at Citizens Reserve.
“Many industries, including finance, supply chain, and healthcare, are already exploring the potential of blockchain technology, so it is more important than ever to provide students with the tools needed to develop the skills, connections, and knowledge employers will seek from tomorrow’s workforce.”
Citizens Reserve launched a supply chain platform called SUKU in September, leveraging both the ethereum and quorum blockchains. Participating students in the program will be able to work on active incubation lab blockchain projects through the platform, according to the announcement.
“The lab will come equipped with tools, such as mining rigs, that will enable students to explore various blockchain mechanisms,” the firm added.
Campbell Harvey, a finance professor at Duke University’s Fuqua School of Business, will serve as the faculty advisor to the program.
Harvey said that “it is crucial that academic institutions be willing to collaborate with thought leaders in the blockchain industry, and we look forward to working with Citizens Reserve in this regard. Duke is very proactive in external collaborations and we are excited about the opportunity for our students to get hands on, industry-relevant experience.”
Duke University already offers an “Innovation and Cryptoventures” course, launched by Harvey back in 2014. He also recently helped found the Duke Blockchain Lab, a student-led organization, providing a connection to the professional blockchain community.
Duke University image via Shutterstock
BMW Group Asia, Intel and Nielsen are now corporate partners of the Singapore government-supported block chain accelerator Tribe.
Tribe Accelerator announced the news Friday, saying that the three firms will share their knowledge and subject expertise in their respective fields with Tribe’s startups in order to help build an “inclusive” ecosystem “ready for industry 4.0.”
BMW Group Asia, for instance, will provide “masterclasses” and mentoring sessions on how blockchain solutions can be implemented in a mass market situation.
“We hope we can help each of these startups develop their proof-of-concepts and reach the next stage of their development,” said Carsten Sapia, vice president – group IT and head of the Asia Pacific region, BMW Group Asia.
Intel Corporation, on the other hand, will offer business and technical mentorship to startups.
“Intel technologies like Intel Xeon Scalable processors and Intel SGX can help improve privacy, security, and scalability of blockchain solutions,” said Intel’s blockchain program director Michael Reed.
Meanwhile, Nielsen will provide “a sandbox with the objective of providing participants with a safe, controlled environment to test new technologies and accelerate the adoption of their solutions.”
Tribe Accelerator managing partner Ryan Chew said:
“To move forward as a society, we need to encourage experimentation, and once the benefits of block chain technology become evident, mainstream adoption will undoubtedly follow.”
Last month, Tribe also partnered with ethereum development studio ConsenSys to further the blockchain ecosystem in Singapore.
Tribe Accelerator was launched last December as part of venture capital firm TRIVE Ventures, in partnership with South Korea’s ICON Foundation and PwC Singapore’s Venture Hub. Enterprise Singapore, a government agency set up to develop the startup ecosystem, is supporting the accelerator.
BMW image via Shutterstock
- Bitmain is planning to deploy 200,000 units of its own mining equipment in China to take advantage of cheap hydroelectric power this summer.
- The equipment is conservatively estimated to cost $80 million, but it may be more profitable right now for Bitmain to mine crypto itself than try to sell all this inventory.
- The move signals a broader shift in the market, with miners preparing to invest again following last year’s contraction in capacity.
Bitmain, the largest manufacturer of cryptocurrency mining equipment by market share, is scaling up its capacity to mine ahead of an expected drop in electricity costs in China this summer.
According to mining farm operators in China’s southwestern provinces familiar with Bitmain’s plan, the Beijing-based company will be deploying about 200,000 units of its own mining equipment in the area to take advantage of the low electricity costs during the summer resulting from excess hydropower.
Though the rainy season in southwestern China, including Sichuan and Yunnan, will not arrive until May, Bitmain has already started discussions and making deals with farms to host its equipment so that it can be fully prepared, the sources said.
The firm will mostly use its new products such as the AntMiner S11 and S15, the sources added, with some older models like the AntMiner S9i/j. (The latest models S11, S15 and T15 are all marked as sold out on Bitmain’s own online shop.) It’s unclear which proof-of-work cryptocurrencies the company will mine using the machines.
Still, that’s a non-negligible opportunity cost, for a firm whose revenue comes predominantly from equipment sales rather than self-mining.
The S9j and S11 retail for $400 and $500 on its website, respectively, so 200,000 units of those models would be worth around $80 million to $100 million if Bitmain could sell all the inventory. And that doesn’t include the S15, which is priced at around $1,000.
But under current conditions, self-mining with S9j, S11 and S15 might still be a somewhat safer bet than trying to sell all those machines in a bear market, according to the miner profit index tracked by the world’s third-largest mining pool f2pool.
The index shows that a single S9j, S11, and S15 can generate a daily profit of $0.87, $1.8 and $2.88, respectively, based on bitcoin’s current price and a benchmark electricity cost of $0.05 per kilowatt hour.
While it’s unclear what electricity deal Bitmain can get eventually, mining farm operators said the cost in the summer on average is around $0.037 per kilowatt hour. Taking that into f2pool’s index equation, each S9j, S11 and S15 could return a daily profit of $1.29, $2.24, or $3.38, respectively.
Even assuming the 200,000 machines will all be the lower-end S9j, the capacity could potentially bring home a monthly profit of about $7.7 million for Bitmain.
When reached by CoinDesk, a spokesperson for the company declined to comment.
The imminent scaling up of Bitmain’s operations signals a notable market shift.
Last year, amid an overall cryptocurrency market slump, more than 600,000 bitcoin miners were estimated to have shut down at one point. This led to an increasing supply of second-hand mining equipment that was sold at a discount, such as the AntMiner S9.
The decline of mining activity last year had also been reflected in changes at Bitmain’s existing proprietary mining operations.
According to the archive page of Bitmain’s hash rate disclosure blog, on Oct. 9, 2018, all Bitmain-owned hardware that was mining the SHA265 algorithm-based bitcoin generated a hash rate of about 2,339 quadrillion hashes per second (PH/s).
Assuming Bitmain’s self-mining hash rate all came from the AntMiner S9 – each having a hash rate of about 14 trillion hashes per second (TH/s) – that suggests the company had about 170,000 machines running at the time. (1PH/s equals 1,000 TH/s.)
But as of March 5, the hash rate of Bitmain’s operations had decreased to 1,692 PH/s, implying, under the same assumptions, that the company unplugged about 50,000 miners over the past several months and had around 120,000 sets of equipment running in early March.
The hash rate of the bitcoin and bitcoin cash networks on that date was about 44,973 PH/s and 1,500 PH/s, respectively, meaning Bitmain’s proprietary mining contributed around 3.6 percent of the SHA265 algorithm-based networks’ combined computation early this month.
Now, it looks as though things are about to change. With excess electricity generated by hydropower stations in China’s mountainous southwest that could be as low as $0.037 per kilowatt hour, the opportunity to mine profitably again has attracted an influx of miners to the region.
Assuming Bitmain’s new capacity will all be using its new AntMiner S11 with a 19.5 TH/s hash rate, the 200,000 units of planned new capacity means the company could be adding another 3,800 PH/s of computing power.
Currently, the bitcoin network hash rate is around 48,000 PH/s, according to data from Blockchain.info, so all else equal, Bitmain’s investment could increase the amount of computing power devoted to securing the network by 7.9 percent.
Bitmain is planning to deploy 200,000 units of its own mining equipment in China to take advantage of cheap hydroelectric power this summer.
The equipment is conservatively estimated to cost $80 million, but it may be more profitable right now for Bitmain to mine crypto itself than try to sell all this inventory.
The move signals a broader shift in the market, with miners preparing to invest again following last year’s contraction in capacity.
The imminent scaling up of Bitmain’s operations signals a notable market shift.
Last year, amid an overall cryptocurrency market slump, more than 600,000 bitcoin miners were estimated to have shut down at one point. This led to an increasing supply of second-hand mining equipment that was sold at a discount, such as the AntMiner S9.
The decline of mining activity last year had also been reflected in changes at Bitmain’s existing proprietary mining operations.
According to the archive page of Bitmain’s hash rate disclosure blog, on Oct. 9, 2018, all Bitmain-owned hardware that was mining the SHA265 algorithm-based bitcoin generated a hash rate of about 2,339 quadrillion hashes per second (PH/s).
Assuming Bitmain’s self-mining hash rate all came from the AntMiner S9 – each having a hash rate of about 14 trillion hashes per second (TH/s) – that suggests the company had about 170,000 machines running at the time. (1PH/s equals 1,000 TH/s.)
But as of March 5, the hash rate of Bitmain’s operations had decreased to 1,692 PH/s, implying, under the same assumptions, that the company unplugged about 50,000 miners over the past several months and had around 120,000 sets of equipment running in early March.
The hash rate of the bitcoin and bitcoin cash networks on that date was about 44,973 PH/s and 1,500 PH/s, respectively, meaning Bitmain’s proprietary mining contributed around 3.6 percent of the SHA265 algorithm-based networks’ combined computation early this month.
Now, it looks as though things are about to change. With excess electricity generated by hydropower stations in China’s mountainous southwest that could be as low as $0.037 per kilowatt hour, the opportunity to mine profitably again has attracted an influx of miners to the region.
Assuming Bitmain’s new capacity will all be using its new AntMiner S11 with a 19.5 TH/s hash rate, the 200,000 units of planned new capacity means the company could be adding another 3,800 PH/s of computing power.
Currently, the bitcoin network hash rate is around 48,000 PH/s, according to data from Blockchain.info, so all else equal, Bitmain’s investment could increase the amount of computing power devoted to securing the network by 7.9 percent.
To be sure, it’s unclear at this stage how much the hash rate of the whole bitcoin network will be in the coming wet season. But some have estimated it could climb up to 70 quintillion hashes per second (EH/s), above the network’s all-time-high around 60 EH/s, because of the new investments being made by Bitmain and other miners.
Drop in the bucket
That said, it’s important to note that proprietary mining, which once accounted for a significant slice to Bitmain’s revenues, has shrunk in percentage terms to a sliver of the total.
According to financial results disclosed by Bitmain when it filed for an initial public offering on the Hong Kong Stock Exchange last September, self-mining revenue dropped from 20.3 percent of the total in 2015 to 7.9 percent in 2017 and was just 3.3 percent for the first half of 2018.
Meanwhile, the company’s top line has increasingly relied on the sales of mining hardware, which increased from 78.6 percent of total revenues in 2015 to 80.5 percent in 2017, and reached 94.3 percent for the six months ending June 30, 2018.
However, the bear market for crypto has taken its toll, especially in the second half of last year.
According to unreleased financial data previously reported by CoinDesk, Bitmain suffered a net loss of around $500 million during the third quarter of 2018.
As of June 30, 2018, Bitmain had opened 11 mining farms located in Sichuan, Xinjiang, and Inner Mongolia with an aggregated capacity to store about 200,000 sets of mining hardware.
These farms are used for self-mining and hosting others’ miners, and are separate from the ones where the company is now deploying its machines.M
The company disclosed that its self-mining hash rate in July 2018 was about 1692 PH/s, meaning Bitmain had about 120,000 machines running at the time.
Facebook’s block-chain recruitment drive continues, as the social network looks to hire a lead commercial counsel for its initiatives with the technology.
A new job posting at the company’s career page says the position will be responsible for “drafting and negotiating a wide variety of contracts related our blockchain initiatives, including partnerships needed to launch new products and expand such products internationally.”
Another part of the job is advising clients on legal risks, business strategies and other business issues. The commercial counsel will also structure Facebook’s relationships with key partners and the commercial aspects of the products and programs.
The candidate should be able to “manage numerous deals” and have a proven lawyer’s qualification: a J.D. degree and membership in at least one U.S. state bar are a must.
But the job also requires serious tech expertise: “5+ years of legal experience, including 4+ years of technology transactions experience,” particularly with block chain or payments technology and related legal issues. “Strong interest in mobile and alternative payments” is preferred.
Facebook’s ambitions related to block chain-enabled payments have been known for a few months: a February report by the New York Times revealed that the social media giant has been working on a token for payments across the company’s media platforms, which include Whats-app and Instagram.
According to NYT’s sources, the cryptocurrency, expected to be released in the first half of 2019, will be a stablecoin pegged to a basket of several fiat currencies.
Another possible use of the blockchain tech Facebook might be looking at is an integrated identity solution, mentioned by the CEO Mark Zuckerberg in a recently posted video interview with Harvard Law professor Jonathan Zittrain.
“Basically, you take your information, you store it on some decentralized system and you have the choice to log into places without going through an intermediary,” Zuckerberg said.
Further signaling Facebook’s interest in this technology, it has posted more than 20 blockchain-related jobs this year.
Facebook icon via Shutter-stock
Payments startup Square plans to hire a number of engineers and a designer to work on its crypto initiatives, according to tweets from CEO Jack Dorsey.
Dorsey, who also founded and runs Twitter, announced Wednesday evening that Square plans to hire three or four engineers and one designer “to work full-time on open source contributions to the bitcoin/crypto ecosystem.” A Square spokesman said there was no additional information to share beyond the tweets.
Perhaps more notably, these new hires have the option of being paid in bitcoin, Dorsey said.
All work will be open source, and according to Dorsey, the new hires will not be focusing on Square’s own commercial interests, but rather, “on what’s best for the crypto community.”
“Square has taken a lot from the open source community to get us here. We haven’t given enough back. This is a small way to give back, and one that’s aligned with our broader interests: a more accessible global financial system for the internet.”
Square’s Cash App already supports bitcoin purchases and sales, and Dorsey previously announced that it would support the Lightning Network, a layer-2 solution aimed at facilitating small, fast transactions.
Jack Dorsey image via U.S. House of Representatives
Facebook has set up a blockchain team that will operate from its Tel Aviv development center and the social media company is hiring a product manager for the blockchain sector. Facebook has advertised the post on Facebook itself and on LinkedIn.
According to the ad, the company is “Setting up a new team with the aim of discovering new ways to leverage blockchain technology. This is a small team that is quickly growing. The blockchain team is a startup within Facebook.”
There have been reports over the past few days that Facebook plans issuing its own cryptocurrency over the next year that will allow users to send money to their contacts via Whatsapp. “The New York Times” reported that Facebook has had talks with the cryptocurrency exchanges about selling the currency to consumers.
Facebook has over 50 engineers working on the secret project in separate offices from other Facebook employees in order to protect secrecy. In December “Bloomberg” reported that the value of the cryptocurrency would be linked the value of the dollar in order to reduce volatility, while the “New York Times” said it would be linked to several major currencies and not just the dollar. It added than an integration of Facebook, Messenger, WhatsApp and Instagram would enable increasing the number of users able to use the cryptocurrency.
Facebook also recently launched a division for initiatives in the blockchain sector and cryptocurrency based technologies and appointed David Marcus, a former president of PayPal to head the division.
Source: Globes, Israel business news
Australia unveiled a national block-chain strategy and road map, with federal government funding boosting AU$100,000. The news was announced on March 18 in a joint press release from two Australian ministries. Karen Andrews, Minister of Industry, Science and Technology, announced on Monday the strategy and the funding to support a “burgeoning” industry.
The $ 100,000 funding will be used for Australian companies ‘ bankroll attendance at the third Austrade Consensus Mission in New York in May, described by Andrews as “a landmark event for the block chain industry.”
It comes just weeks after the Digital Transformation Agency’s advice urging agencies to “pragmatism” about the government’s use of blockchain.
It is expected that the roadmap will focus on policy areas such as “regulation, skills and building capacity, innovation, investment, and international competitiveness and collaboration,” the government said.
In 2018 – 19 the country’s digital transformation agency included AU$700,000 for previous blockchain investments from Australia’s liberal national government, led by Prime Minister Scott Morrison to look at the benefits of using blockchain for government payments and AU$350,000 for Australia Standards to promote station development.
The Australian Minister of Trade, Tourism and Investment, Simon Birmingham, also highlighted the potential of Blockchain business technology. Australia’s willingness to integrate Blockchain into its various sectors gives it leverage over other countries. Birmingham believes their businesses can remain ‘ before the game. ‘
In addition, the Minister of Industry, Science and Technology, Karen Andrews, took to Twitter and opened her Australia mission. She says ‘ I want Australia as far as blockchain technology is concerned to lead the world. ‘
This new funding will specifically enable Australian companies to participate to a blockchain conference of the Australian trade and investment commission at the New York City Consensus later this year by sponsoring the Department of Industry, Science and Technology.
It will be developed in consultation with industry and academic experts as well as the Digital Arm Data61 of CSIRO, which will incorporate their findings on the blockchain.
Data61 has led many of the government’s investigations into the practical applications of blockchain to date, including working with the Commonwealth Bank to bring programmable money to the NDIS.
Minister Birmingham stressed in the media release that the government’s endorsement of blockchain will help ensure that ” In one of the fastest – growing technology sectors of the world, Australia and its technology companies remain leading the way.”
Unlike the other nations, the Australian Govt appears to be the most active in bringing up the country’s blockchain revolutions. Subsequently, Simon Birmingham further outlined Australia’s upcoming mission and said it would connect Australian blockchain companies and startups respectively with customers and investors. By expanding their business globally, this would push Australian companies to explore the global market potential.
IBM signed a 5-year deal with the Australian administration in July 2018 for AUD 1 billion ($ 740 million) to improve the data security and automation of federal departments using blockchain and other new technologies.
The national assembly in Switzerland in a motion passed on the 20th of March instructed the Federal Council to start adapting the existing laws for cryptocurrency regulations. Public representative Giovanni Merlini introduced the motion in the Swiss federal assembly. Merlini seeks the federal government to start taking measures towards cryptocurrency regulations in the country. To move towards proper regulations, he has proposed in his motion that the existing legislative structure shall be used to build a base for cryptocurrency regulations. The existing regulation base would have to extend the jurisdiction of the current authorities to the cryptocurrency sphere. The motion was quickly approved receiving as many as eighty-three votes of confidence in the assembly. Following the motion, the federal finance minister of Switzerland Ueli Maurer expressed that the motion would supersede the currently planned change in the regulations. The motion, however, is in line with the Maurer vision to change the existing laws of the country in order to extend their operational jurisdiction to cover cryptocurrency and blockchain based legislative measures. The motion brought up in the assembly is another step towards providing protection to the citizens against cryptocurrency frauds, criminal activities, and money laundering. Swiss government would now have to decide whether to define a new boundary for cryptocurrency organizations or include them in existing financial structure. Switzerland has been working on the regulations since late last year, and the move is a major step towards proper implementation of the law in the country.
Following a 3 percent increase in the price of bitcoin, several traders expected the dominant cryptocurrency to undergo a minor pullback.
For over three months, bitcoin has remained in a relatively tight range between $3,700 to $4,000, breaking out of the $4,000 resistance on two occasions year-to-date.
As such, when bitcoin initially climbed beyond $4,000 and achieved $4,056, some traders foresaw the asset facing some resistance in the $4,000 region.
However, according to Satoshi, MBA, a cryptocurrency technical analyst, the 15-month correction of the cryptocurrency market is approaching its final phase and with bitcoin down about 80 percent from its all-time high, a gradual accumulation phase could be next.
The analyst said:
How can possibly not be bullish right when we’re at the bottom of this bear market. Accumulating as much BTC as I can here to be honest. When bitcoin approaches its new all time high again, I’ll be bearish.
As bitcoin experienced a minor drop in value, major crypto assets that recorded large gains in recent months such as Ethereum and Litecoin also demonstrated small losses in the range of 1 to 3 percent.
On March 16, a cryptocurrency trader known as Hsaka said that Litecoin is due for a retrace following a 170 percent rally since late December, within a three-month span.
Traders are keen on the near-term price movements of cryptocurrencies following an overall retrace on March 17 and whether digital assets can retain their momentum in the weeks to come.
Previously, when bitcoin was hovering at around $3,800, Satoshi, MBA told CCN in an interview that alternative cryptocurrencies demonstrated large gains in recent months, which may lift the overall sentiment of the cryptocurrency market.
“Most coins have very bullish set ups right now, virtually all of them sitting on annual support. When BTC moves sideways, liquidity will move into alts. Recently we’ve seen huge moves, 40%, 80%, even 150% overnight gains by some alternative cryptocurrencies,” the analyst told CCN.
Earlier this week, the Chicago Board Options Exchange (Cboe), one of the largest futures market operators in the global market, reportedly disclosed its intent to cancel bitcoin futures in the near-term.
Some investors grasped it as an indicator for a decline in institutional demand for bitcoin. But, one cryptocurrency researcher suggested that it is a Cboe-specific problem that Cboe has to examine and address in the future, not a general issue pertaining to bitcoin futures.
“In conclusion. Cboe clearly lost the battle of the bitcoin futures and needs to re examine things to be competitive. A failed , I’ll planned and rushed to market product is not the same as ‘hur dur institutional fail’,” the researcher said.
With the level of developer activity in the cryptocurrency market recovering, Blockchain Capital general partner Spencer Bogart noted that the legitimacy of the cryptocurrency industry has solidified.
“The development progress in this crypto bear market absolutely dwarfs the last one Last time, broad consensus was ‘crypto is going away’ (remember ‘blockchain not Bitcoin’? That was cute…) This time, everyone knows crypto is here to stay. The behind the scenes progress is [rising],” he said.
Kaleido’s software-as-a-service blockchain solution now works on Microsoft Azure as well as Amazon Web Services (AWS).
According to an analysis by Keybanc reported by CNBC, that now gives Kaleido clients access to more than 80 percent of cloud infrastructure clients, with support for the top two providers of cloud services. According to the company, this means that potential future Kaleido clients don’t need to worry about which their business partners use.
“Our customers’ digital ecosystems can now grow and scale wherever and however the participants require,” Steve Cerveny, Kaleido Founder and CEO, said in a release. The news means that Kaleido clients should have less friction adopting its products, because they don’t need to worry about persuading business partners to move from Microsoft’s cloud infrastructure to Amazon’s (or vice versa).
Launched in May 2018, ConsenSys-backed Kaleido was built to make it easier for large organizations to move from blockchain pilots to production. Originally created as a collaboration between AWS and the Brooklyn-based venture studio, it was launched with support for businesses consortia in mind.
In its announcement, Kaleido cited building blockchain networks with established brands, such as T-Mobile, Sony, Fox, UnionBank and others.
One Kaleido client, Komgo, provides information for commodity traders, so that single source of truth is available to all market participants. By running on both Azure and AWS, Kaleido makes it easier for potential participants in the network to choose to use Komgo as a source of information, according to blockchain firm.
“As networks on-board new members and scale, these sorts of capabilities from Kaleido are critical to remove friction and tear down barriers to adoption,” Souleïma Baddi, CEO of Komgo, said in the release.
Indeed, as ZDNet reported, many potential enterprise customers have chosen to use more than onemajor cloud service provider, meaning interoperability between cloud services is key to broadening blockchain adoption.
Kaleido’s Cervezny noted:
“We’ve built our platform across the leading public clouds including Microsoft Azure and Amazon Web Services to give our clients the ability to create global, cross-cloud networks. Our customers’ digital ecosystems can now grow and scale wherever and however the participants require.”
The Basel Committee on Banking Supervision, a group of international banking authorities, has warned that the growth of cryptocurrencies poses a number of risks to banks and global financial stability.
The committee – part of the Bank for International Settlements (BIS), widely considered the central bank of central banks – published a statement on Wednesday, saying that potential risks for banks include liquidity, credit and market risks, operational risk (including fraud and cyber risks), money laundering and terrorist financing risk, and legal and reputational risks.
Although banks currently have “very limited” direct exposure to cryptocurrencies, institutions should still “at a mimimum” carry out extensive due diligence and disclose any exposure to crypto assets to minimize the risks, the committee said.
Banks should further have a “clear and robust” risk management framework to deal with the “high degree” of risk posed by cryptocurrencies.
The risk management framework should be “fully integrated” into banks’ overall risks management processes, including those relating to anti-money laundering (AML), combating the financing of terrorism (CFT) and evasion of sanctions, the committee said.
A “comprehensive” assessment of the risks should be incorporated into their internal capital and liquidity adequacy assessment processes, it added.
Additionally, supervisory bodies should be informed of actual or planned cryptocurrency exposure, along with assurance that the institution has fully assessed and mitigated the risks.
Finally, the committee said that it is working with other global standard-setting bodies and the Financial Stability Board (FSB) to arrive at guidance on “prudential treatment” of banks’ exposure to cryptocurrencies in order to “appropriately” reflect the risks.
Last June, BIS said in its Annual Economic Report that it’s hard to see if cryptocurrencies solve any specific economic problem yet. “Transactions are slow and costly, prone to congestion, and cannot scale with demand,” it said at the time.
Long-time Grin coder “Ignotus Peverell” will receive financial support to work on the cryptocurrency, a move that makes him the nascent project’s third paid team member.
In a weekly developer meeting Monday, developers voted to fund Peverell for his work on Grin with roughly $10,000 per month. With 4,919,040 GRIN tokens in circulation, according to CoinMarketCap, the estimated market capitalization of the cryptocurrency is well over $13 million.
Grin, being a relatively new blockchain, went live in mid-January in a bid to implement the privacy-enhancing protocol “MimbleWimble,” designed to obfuscate transaction details such as amount and account addresses. Named after a tongue-tying curse in J.K. Rowling’s best-selling Harry Potter books, the name Ignotus Peverell itself is a pseudonym that references a character within the series.
In the context of the Grin community, Peverell was one of the original creators of the Grin project who back in 2016 started the first implementation of the mimblewimble protocol on GitHub.
A user by the name of “Antioch Peverell” – another Harry Potter character reference – was similarly voted up by the community in late February. Before this, user “Yeastplume” was the sole full-time funded Grin developer.
“There’s no [official] roles. We just continue to work on what we see fit, which so far seems to be working okay.”
Emphasizing in a public Gitter channel that being funded for Grin development work was “risky employment,” Yeastplume later characterized the financial support as more akin to donations.
Monday’s governance meeting also confirmed the “contract and payment” of security auditing firm Coinspect.
Having decided to conduct a third-party review of Grin’s “cryptographic and consensus-critical code,” community members unanimously voted to employ Coinspect over other auditors such as Quarkslab and NCC last month.
Now, having paid a fee up-front to the company of roughly $17,000, Grin community members expect a draft report by April 20. “It’s going to come quickly. They’ve also already produced one excellent vulnerability report,” stated Ignotus Peverell.
As stated on a Github, the estimated cost of the audit is roughly $80,000.
Funds are sourced from the “Grin General Fund,” which back in December of last year raised 17.28 BTC, with an estimated worth at press time of $66,500 specifically for the purposes of this security audit.
After U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton backed a colleague’s analysis that tokens like ethereum may not be securities this week, panelists at the TOKEN2049 event are raising questions over one criteria suggested by the regulators.
Asked whether and how regulators have the power to define a threshold that William Hinman, SEC director of corporation finance, described last year as “sufficiently decentralized,” Gabor Gurbacs, Digital Asset director at VanEck, said he believes it doesn’t make sense to say “if something is sufficiently decentralized, it’s not a security.”
Gurbacs’ firm has been closely working with regulators in the U.S. in its attempt to launch trading of the first bitcoin-based exchange-traded fund (ETF). He explained that, to a certain extent, even the traditional financial market could be seen as decentralized, such as the exchange-traded fund system or other capital market functions. “But they all fall under the security law,” he said.
Using the basis of being “sufficiently decentralized” to determine whether a crypto asset is a security was brought up by Hinman during a speech in June 2018, during which he said:
“If the network on which the token or coin is to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract.”
In a letter responding to Congressman Ted Budd and industry advocacy group Coin Center dated March 7, Clayton said he agreed with Hinman’s analysis that found ethereum, the world’s second-largest cryptocurrency, likely does not qualify as a security.
In the TOKEN2049 panel, Sandra Wu, founding partner of Hong Kong-based venture firm Origin X Capital, also weighed in, saying that while Hinman’s comments explained a stance on projects that issue tokens as a centralized organization, it does not clearly explain the case for projects like ethereum where tokens were issued from an organization that, arguably, has grown more decentralized since.
“What about everything in between (the two situations), where you have the birth of a network but it takes time (for the ownership of the tokens) to become sufficiently decentralized? The SEC has not given guidelines on everything in between.”
Gurbac also reiterated that the SEC has, in fact, still not given a formal ruling that ethereum is not a security, and that he doesn’t think there will be a decision soon. That’s also a reason why his firm exclusively focuses on pushing an ETF with bitcoin as an underlying asset, which is treated as a commodity by the commission.
“Make no mistake the chairman of the SEC never said ethereum is not a security. Director Hinman only said … right now, it may not be a security,” Gurbacs said, concluding:
Coinbase has launched a new feature allowing user to directly transfer cryptocurrency holdings on Coinbase.com to accounts in the firm’s Wallet app.
The San Francisco-based cryptocurrency exchange announced the news in a blog post on Tuesday, saying that users will be able to link their accounts once the app gets updated in the “next few days.”
“Once your Coinbase account is linked, you can easily transfer crypto to your Wallet app with just a couple of clicks, anytime you need it,” the exchange said.
Coinbase explained that with the Coinbase.com account, users can buy cryptocurrencies and the exchange itself stores the keys centrally. However, with the Wallet app, users safeguard their own private keys.
The new feature is optional. After the app update is released, users will receive an in-app notification to “Connect to Coinbase” to link the accounts if they so choose.
The account linking can be turned on or off at a later date from the Settings menu, the exchange said, adding that the feature would add convenience for Coinbase users that regularly transfer funds from their Coinbase.com account to a software or hardware wallet.
Coinbase is also planning a future update that will allow cryptocurrencies to be directly sent to users’ Coinbase.com accounts from the app.
Also in February, Coinbase announced that Wallet users would be able to back up their private keys on personal cloud storage platforms Google Drive and Apple iCloud.
Popular South Korean actor and businessman Bae Yong-joon has invested an undisclosed sum in blockchain-based seafood trade startup Seamon.
Revealing the news, Seamon head Lee Jung-hoon said that, while he cannot disclose the amount of Bae’s investment, it is “a meaningful amount” worth “more than tens of millions” of South Korean won. One hundred million won is worth around $88,510 at press time.
Lee further said that Bae has long been interested in the food businesses, including marine products. So, when Lee asked Bae to be an advisor to the Seamon project, he instead “signed an investment contract last month.”
Seamon is developing a blockchain-based seafood transaction and smart contract system, according to information from its white paper. The project aims to make global seafood transactions “as transparent as possible, reduce unnecessary expenses, and achieve the faster and safer international transactions.”
The team is also creating a cryptocurrency called Seamon coin, which will be used in payments and as a store of value. It is also planning to launch an exchange called SeamonX for seafood trading market in Q3 or Q4 of this year, the white paper indicates.
The project aims to address common problems with the international trade in marine products such as defaulting on payments, or late payments. With marine products, this is a particularly vital issue to solve, as their freshness quickly expires, the report says.
Importers will be able to purchase Seamon coins from SeamonX and exchange them for products, making payments in real time. Exporters will be able to exchange the tokens for fiat currencies like the U.S. dollar, or the stablecoin tether (USDT), Lee said.
Seamon coin is already listed on the BCEX exchange with the ticker symbol SMEX, according to CoinDesk Korea. The exchange will also carry out a free distribution, or “airdrop,” of about 5 billion won ($4.42 million) in tokens from March 25.
CoinDesk Korea also adds that the news marks Bae’s first known investment in a blockchain startup. His net worth is estimated at around $135 million.
Medici Ventures, the blockchain investment arm of Overstock, has acquired a 5.1 percent equity stake in blockchain banking startup Bankorus.
Announcing the news on Monday, Overstock said Bankorus’ blockchain platform allows individuals and institutions to “securely” buy, sell, store and lend digital assets.
“The addition of Bankorus to Medici Ventures’ portfolio of companies will further our work in building the foundation of a blockchain-based technology stack for society,” said Jonathan Johnson, president of Medici Ventures.
“Bankorus has built a revolutionary blockchain banking platform that dovetails nicely with Medici Ventures’ goals of eliminating middlemen, democratizing capital, and rehumanizing commerce by helping individuals access and control their own digital assets.”
Founded in 2013, Beijing-based Bankorus has adopted the mission to unlock more than $60 trillion in traditional assets held by high-net-worth individuals and redirect it into cryptocurrencies. The firm aims to turn traditional and illiquid assets such as real estate, art, hedge funds and bonds into liquid digital assets through its security token marketplace.
With the new acquisition, Medici Ventures’ global portfolio of companies now stands at a total of 20.
In December, Medici also purchased a 29.6 percent stake in digital securities firm Chainstone Labs for about $3.6 million.
Medici’s own security token marketplace, tZERO, went live in January with its own tZERO Preferred (TZROP) token as the sole listed asset initially. Trading volume was light, however, and the token’s price dropped sharply soon after the launch.
Last month, Overstock CEO Patrick Byrne told CoinDesk he expected volumes to soar after the year-long lock-up period for the token ends in August and the platform opens up to retail investors. Currently,
Canaan Creative, one of the biggest cryptocurrency mining equipment manufacturers in China, has closed a new funding round.
Securities Times, a Chinese financial news publication, reported Monday that the company, known for its Avalon line of mining devices, has raised “several hundred million U.S. dollars,” valuing the firm at over $1 billion.
When contacted by CoinDesk, the firm declined to comment. However, two sources close to the company confirmed the raise without disclosing further details.
The news comes months after Canaan’s application for an initial public offering (IPO) on the Hong Kong Stock Exchange failed to advance to a listing hearing and subsequently became invalid. It was reported in January that the firm might be planning another IPO application in New York.
The funding effort also comes amid the decline in the overall cryptocurrency market, especially over the second half of 2018, which has had an impact on crypto mining equipment makers in terms of product sales.
For instance, Canaan’s two major rivals, Bitmain and Ebang, both filed for IPOs in September and June 2018 respectively.
However, in a renewed filing at the end of December, Ebang disclosed that it experienced “significant decreases in revenue and gross profit” for Q3 2018. Similarly, Bitmain also posted about $500 million loss in an updated financial record filed with the Hong Kong Stock Exchange as part of its IPO application.
If Bitmain does not graduate to a listing hearing by March 26, six months after the initial filing, its IPO application too will lapse.
It’s been a fairly uneventful weekend for Ethereum (ETH). Bitcoin’s inability to break above $4,000 appears to place a damper of momentum within the wider market. A break seems imminent — but in which direction?
Ethereum is steadily consolidating into a tighter range, notching lower highs and seemingly on the verge of dropping below the 12 and 26 EMA on the 4hr chart. The 4hr and daily chart show Ethereum remains above the ascending trendline with demonstrated support at the 50-MA ($133.40), $132 and $130.
The 12 EMA has crossed below the 26 EMA in the face of declining volume and a retest of the 50-MA and 23.6 percent Fib retracement level seems more likely than not. Dips to swing lows at and below $130 have attracted buyers.
Ethereum price longs are reapproaching all-time highs and near the level and there is a history of longs unwinding above 510,000. If the ETH price is able to overcome the $138 and $140 resistance and longs increase, then the possibility of traders taking profits from the recent swing lows increases.
Therefore, traders might exercise caution when buying into strength and entries near the swing lows could be a more sensible strategy.
Switzerland’s primary stock exchange SIX could soon list another cryptocurrency-based exchange-traded product (ETP), which will track the price of XRP, the third largest crypto asset by market capitalization.
Hany Rashwan, co-founder and CEO of the Swiss company Amun AG – which already offers several crypto ETPs – told CoinDesk in an interview that his firm has received approval from SIX to issue the XRP-linked ETP with the ticker name AXRP, adding:
“We can comfortably say that we expect to release the world’s first XRP ETP within the next two months.”
Besides XRP, Rashwan said that Amun has also obtained clearance to issue ETPs linked to four more single crypto assets, including bitcoin cash (BCH), litecoin (LTC), stellar lumens (XLM) and EOS.
While the exact time to launch these products is not yet fully finalized, and will based on buyer interest, he said the firm plans to list all the eligible and approved crypto ETPs on SIX by the end of this year.
The SIX exchange listed its first ETP that tracks a basket of the top weighted crypto assets in November 2018. That product was issued by Amun for retail and institutional investors under ticker name “HODL” – slang in the cryptocurrency community for holding rather than selling assets.
Since its listing, the total monthly trading volume for HODL has taken over that of XETC – an ETP that tracks crude oil – and became the top traded ETP on SIX in December and January, according to data provided by the SIX exchange (see chart below).
However, the price per share for HODL – which tracks BTC, ETH, XRP and LTC – has dropped from $15 in November to around $13 currently, reflecting the overall crypto market decline. In February, its market turnover also dropped to second place, with about $4 million changing hands.
Monthly market turnover for top 3 ETPs on SIX (in CHF)
In the past few weeks, Amun has also issued bitcoin and ethereum ETPs on the SIX exchange. Rashwan added that to date, most of the buyers for its crypto ETPs are based in Switzerland, while it also has demand from overseas investors with access to the Swiss markets in compliance with their nations’ securities laws.
According to listing rules enforced by SIX, since ETPs are passive investment instruments with no active trading strategies involved, they are not treated as collective investment schemes that are subject to the approval or supervised by Switzerland’s market regulator, the Federal Financial Market Supervisory Authority (FINMA).
That said, structural features of crypto ETPs must nonetheless fulfill requirements with respect to investor protection efforts, based on SIX’s practice circular for listing derivatives.
For instance, Rashwan explained, each unit of Amun’s crypto ETPs has to be collateralized and backed by an identical amount of crypto assets which is checked continuously.
“The collateral also has to be kept at an independent qualified custodian. The calculation of the price is checked multiple times a day by several parties,” he said.
Amun stores its collateral with Kingdom Trust, a custodian for both traditional and crypto assets registered with the Securities Exchange Commission in the U.S., and is planning to add more custodians in different jurisdictions as it plans to list more crypto ETPs.
SIX’s circular indicated that only the top 15 cryptocurrencies by market capitalization on CoinMarketCap at the time of application can be considered for trading. It further specifies only cryptocurrencies that are “based on open-source software that function according to the principles of blockchain” are permitted as underlying instruments.
“Tokens, in the sense of units from a project, which are often issued as part of an initial coin offering, are not permitted as underlying instrument,” the stock exchange states.
Looking ahead, Amun is also planning to launch an ERC-standard token administrated by its own platform and running on the ethereum blockchain that it will use for tokenizing ETPs.
The goal is to allow both itself and third parties to tokenize both crypto ETPs and traditional ETPs, such as those that track gold, so that the tokens can be traded on securities token exchanges.
Currently, the SIX also building its own digital exchange in a bid to use distributed ledger technology to speed up settlements and trade tokenized assets. It recently chose R3’s Corda Enterprise platform to develop the infrastructure, with a plan to launch the SIX Digital Exchange in the second half of 2019.
“I don’t think we will have a real licensed and regulated securities token exchange with a professional partner in a reputable country until late this year or early next year – that’s my guess. But when that happens, we will be ready with three to five tokenized ETPs, including our own and others’.”
Ben Jessel is head of enterprise blockchain at Kadena, a next-generation blockchain company offering both public and private blockchain solutions.
The world of blockchain and banking was set alight last month by the announcement that JP Morgan has created its own stablecoin. It was a rare move that has simultaneously excited the banking and enterprise blockchain community as well those in the cryptocurrency world. But is this excitement justified?
The story, as with most blockchain developments, isn’t so clear-cut. It has certainly been the case lately that when JP Morgan innovates (especially around blockchain) the market listens with interest.
In the last few weeks, blockchain innovation managers’ phones across Wall Street investment banks have been ringing with executives inquiring about JP Morgan’s stablecoin and how they should be responding.
Banking is where blockchain began, and over several years has started to gain adoption, albeit at a far slower pace than industry observers were expecting. Many institutions have committed to being “fast followers,” leaving a handful of institutions to be the first to embrace the cutting-edge technology – and its expensive mistakes. When a purported technological breakthrough occurs – as JP Morgan’s announcement suggests, those on the sidelines start to question whether now is the time to jump in and be first in the fast-follower line.
Upon first examination, the JPM coin development is exciting; it signals a major Wall Street organization – one whose CEO had expressed open skepticism to cryptocurrencies – beginning to blur the lines between institutional banking and the brave new world of cryptocurrency.
However, the reality is more complicated.
What JP Morgan has achieved is more a feat of marketing than one of technological innovation. To see why, we need to understand the primary objective and the benefit of a stablecoin.
What, how and why?
JP Morgan’s stablecoin seeks to solve two problems in financial markets today: the expensive and inefficient process of settlement and the volatility involved in holding money in cryptocurrency.
Settlement is the process of paying crediting and debiting bank accounts between financial institutions in exchange for the transferring of a security, such a stock, bond or derivative. With over $1.6 quadrillionbeing settled by the DTCC a year, settlement is a major aspect of financial markets.
And settlement for banks today is an expensive business for many reasons.
For one, payments are rarely made in real-time, which means that in many cases funds that should be paid are not actually made available until the end of the day. In some cases, money isn’t available until days later. When billions of dollars are tied up and cannot be put to good use, it ends up being an expensive and wasteful liquidity trap. For instance, syndicated commercial loans can take an average of seven days to settle.
This settlement challenge becomes compounded when considering global banks with complex operations.
A large multinational bank may simultaneously be in credit to a counterparty one in country, and in debt for the same amount to the same counterparty in another. Because banking operations are so broad and complex, these banks often are not able to “net out” their position – they will hold collateral to pay for a debt or exposure. So, not only are banks holding on to debts and not receiving credits for a day and sometimes multiple days, they also may be holding onto collateral for debts that they do not realize they do not actually have.
Furthermore, maintaining pockets of liquidity across different countries in anticipation of the need for settlement (or “float”) can be costly too as often this money sits idly by in reserve.
Banks adopting the casino model
Blockchain offers the opportunity to reduce settlement time and costs, and enable institutions to be able to settle instantaneously as opposed to at the end of each day (or longer in the case of equities) by settling in digital cash rather than crediting and debiting each other’s accounts at the end of the day.
This digital cash is often referred to as a “settlement coin.” A good analogy is to consider the use of gambling chips at a casino in Las Vegas.
On the strip, the major casinos have an agreement to honor the chips of all other’s chips – enabling someone to exchange $100 into chips at the Bellagio, use them to play roulette at the Venetian, and then cash out at the MGM Grand. In the case of financial institutions, the chip is a digital cash in the form of a “settlement coin.”
Instead of paying at the end of the day by crediting and debiting an actual account, a balance is held in these digital tokens, with each trade that occurs simultaneously leading to the trading of these chips. At any point, each bank can “cash in” these settlement tokens on a one for one basis for actual cash.
The benefits include reducing settlement complexity, speeding up settlement time and providing the ability to better manage “intra-day” liquidity, which means they can put their assets to work in a more efficient way and make them more money.
One such initiative is the Utility Settlement Coin, which is a UBS backed innovation that projects annual industry savings of $65 and $80 million.
The scourge of digital money
One of the challenges facing digital money concerns volatility: the rate that digital money can be exchanged for can fluctuate significantly due to aspects like demand and “market events.”
Bitcoin has been significantly volatile, having run up from $2,000 to over $19,000 before crashing down to $3,000 all within the space of the year. This makes holding money in digital cash a risky proposition and not something that banks would have the appetite to do.
This has resulted in the innovation of the stablecoin, which is a mechanism whereby digital cash can be “pegged” to the value of an asset, which is always redeemable at a fixed price. For example, a US dollar pegged stablecoin will always be redeemable for one USD.
However, stablecoins also have issues. A stablecoin can only be pegged if there are sufficient assets and reserves behind it.
In the same way that George Soros famously broke the bank of England, with enough financial firepower, it is possible to break the peg of a stablecoin. Also, stablecoins have been in tarnished with scandal, most recently with a project called Tether which may not have had the financial reserves that it claimed to have.
Putting the pieces together
JP Morgan’s stablecoin neatly connects the dots between the aspects of settlement and volatility management by providing digital cash that can be used and enabling the ability to redeem the coin at a stable rate.
While this may sound like a significant achievement, all JP Morgan’s stablecoin actually provides is the ability for a counterparty to be paid by JP Morgan in exchange to being provided a digital certificate.
It is actually the anathema to the idea of creating an ecosystem whereby all participants can utilize a universally accepted and redeemable digital cash. Instead, it is a mechanism where JP Morgan will redeem a token, that it issues on its platform only. This is akin to only being able to buy, gamble and cash in your gambling chips at the Venetian casino.
And far from being a technology innovation, this is something that at its most fundamental is old technology masquerading as a new innovation. At its most fundamental, JP Morgan is promising to credit the account of a user when presented with a digital certificate that has a redemption value of a dollar.
The ability to digitally invoke the payment mechanisms of a bank has existed for some time – it is called an API, where an API (or Application Programmable Interface) is merely a way of digitally interacting with an online service such as a payment processing interface of a bank.
But that doesn’t mean JP Morgan’s innovation should be dismissed. Any innovation in the blockchain for financial services – a world of anachronistic business processes and notoriously old technology, where a fax machine still is considered a vital part of how business is done today – should be cautiously applauded.
So, keep up the good work JP Morgan. The industry is rooting for you.
The NEM Foundation is mapping out its survival plans in real time after obtaining a funding injection of roughly $8 million last month and laying off most of its staff.
The request to release 210 million XEM (the native token of the NEM blockchain) from reserves was approved by key members of the community on Feb. 20. In a post published Friday, NEM Foundation leadership laid out how the first installment of 25 million XEM (about $1.05 million at the current price) will be spent.
“I think this is a vote of confidence that the industry is moving forward and that we’re ready to pivot to a very new way of working,” NEM Foundation president Alexandra Tinsman told in an interview Friday.
The move comes after major cutbacks at the foundation, which at its peak in 2018 employed 150 and had a physical presence in 20 countries.
Tinsman confirmed Friday that the foundation had laid off about 100 people – a mix of consultants and full-time staffers – over the past month. The funding proposal published in early February estimated that “88 staff (69%) will be made redundant” by the planned restructuring.
“It’s in the best interest of companies to be fiscally responsible with their platform, their products and their teams,” Tinsman said. “We need to be product-focused and that’s what we’ve done. This is a sign of good things to come.”
NEM is launching soon its Catapult blockchain engine, which is designed to power both private and public networks. “The tech itself is doing things that no other blockchain has done before,” NEM Foundation interim CTO Jeff McDonald told on Fr
Stepping back, the NEM Foundation announced in January that it was in dire financial straits. The newly elected Tinsman told at the time that the foundation was facing layoffs and severe budget cuts “due to the mismanagement of the previous governance council.”
The NEM platform is primarily used to facilitate the development of enterprise blockchain apps. Its XEM token is currently the world’s 19th largest cryptocurrency, according to CoinMarketCap.
NEM Foundation president Alex Tinsman speaks at SXSW 2018, photo via NEM/Facebook
The German Ministry of Finance has recommended that the country recognize blockchain-based securities as a legitimate form of financial instrument and regulate them as such.
In a paper published Friday, the agency said securities can be issued in electronic form and shouldn’t have to be documented on paper. “German law should generally be opened up for electronic securities, i.e. the currently mandatory documentary embodiment of securities (paper form) should no longer apply without restriction,” the paper said, according to a Google translation from German.
Legislation should create a framework for regulating these digital instruments, with the flexibility to adjust the rules to the quickly changing reality of blockchain tech, the ministry added. “In view of the fact that the technical standards and requirements can change rapidly, authorization should be provided to regulate the specific technical details by legal regulation.”
The initiative should start with electronic bonds, and only later move to digital shares, the government said, since the amount of regulation necessary for the latter would delay the timely introduction of any electronic securities. All such securities in the country should be registered in a single central registry administered by a government-supervised agency, the document goes on, “in order to avoid the possibility of manipulation,” the paper said.
Also, “separate regulations should be provided for the acquisition and transfer of electronic securities as well as good faith protection.” If digital securities are used to trade on the country’s trading venues they should be registered with the country’s central security depository (CSD), the ministry said. Retail investors should generally be able to buy tokenized securities only through an intermediary financial institution, the paper said.
Notably, the document said digital securities can utilize blockchain but do not necessarily have to:
“The use of blockchain technology should not be privileged, especially with regard to the state-of-the-art development of the sometimes high energy requirements of public blockchain technologies and their climatic effects.”
The paper also touches the matter of so-called utility tokens, contemplating that these might be exempt from the requirements placed on securities issuers.
“As a rule, utility tokens do not constitute securities, investments or other financial instruments under the German Securities Trading Act and in most cases will not be electronic bonds in the future,” although “it could be determined by law that a public offer of utility tokens may only take place if the provider has previously published an information sheet,” the document says.
Legislation on the way
The ministry’s recommendations come as a draft bill on security token offerings (STOs) is in the works at the German parliament.
“The technology sounds very interesting, but people don’t really understand it,” Senator Thomas Heilmann, a member of the Christian Democratic Union (CDU), Germany’s ruling political party, told adding that the CDU faction in the parliament supports his initiative.
The bill now exists in the form of “discussion materials” and has been discussed by German lawmakers and government bodies behind closed doors, said Richard Lohwasser, the CEO of blockchain startup Lition, which has been advising Heilmann on the new legislative proposal.
As it stands, without comprehensive regulation of security tokens in Europe, dealing with them can mean a whole range of problems: holding a token doesn’t mean holding equity from a legal standpoint, dividend payments are not legally compliant, and if a token gets sold the buyer doesn’t acquire legal rights to receive dividends, Lohwasser explained.
As a financial center of Europe, Germany can secure also a leadership position in tokenized finance, the Finance Ministry’s document states. The country might also set the tone for the future E.U.-wide security token regulations.
The implications can be important for the global blockchain community, not only Germany, Lewis Cohen, a lawyer at the New York-based law firm DLx Law told, concluding:
“Even if the German capital markets are not that significant right now, especially from the point of view of companies here in the U.S., the fact that policymakers in Germany are taking active steps to encourage the use of security tokens will be noticed, and lessons will be learned, around the world. The German experiment, if you will, is important for creating a model, in which the wider blockchain community can learn what works well and what doesn’t work as well.”
A notably blockchain-friendly member of the U.S. Securities Exchange Commission (SEC) has pushed back on an industry lobbyist’s call for a coordinated national strategy for the technology.
The Digital Chamber of Commerce’s National Action Plan calls on the federal government to “make blockchain technology a priority,” by publicly supporting development in the space, adopting a formal light-touch regulatory approach, creating clear policies and regulations based on what the technology does (rather than the type of technology used) and preventing a “regulatory patchwork” by coordinating state and federal efforts.
“If we want the United States to be a leader in advanced technology we have to take action,” Perianne Boring, who founded the Chamber, said in her opening remarks at the organization’s D.C. Blockchain Summit this week. “It is time the United States introduced a national strategy for blockchain.”
Boring brought the action plan up again the next day, during a fireside chat with SEC Commissioner Hester Peirce, whose dissenting vote to approve a bitcoin ETF earned her the nickname “crypto mom” last year. And Peirce sounded lukewarm at best about the idea.
“What types of action would you like to see the government take?” Boring asked Peirce of the plan. The Commissioner’s response focused on the need for innovation to come from the private sector, rather than having the federal government facilitate large-scale cooperation across the country.
“People think ‘oh wouldn’t it be great if we coordinated this from the government’ and that has gotten us into lots of problems in the past,” Peirce said, adding:
“We need to have clear regulatory guidelines, that’s something I think you’ve been very forthright in calling for, which I think is really important. We do need to let people know where they stand, but then within that we need to let people do what they want to do and try not to have too much government partnership with the private sector.”
The government should just set up those guidelines and “let the innovation happen on its own,” she added.
‘Come in and tell us’
That said, Peirce encouraged the technologists and entrepreneurs in the room to pipe up.
What innovators can do is reach out to the SEC and other government agencies and let them know where specifically they need clarity, Peirce said, adding that, “you all need to come in and tell us where the pain points are, where the old regime doesn’t fit, and then we can move forward with guidance.”
In her comments, the Commissioner explained that she would like to see Commission-level guidance issued which clearly outlines where the legal lines are and how blockchain projects might interact with those lines, “but we need from you examples of where that would be helpful.”
Part of the hangup between developers in the blockchain space and the SEC may be the speeds at which each group typically works. Relative to the SEC’s perspective, the agency is “moving quickly,” but from a blockchain project’s point of view, the regulator may be moving very slowly, Peirce said.
She highlighted the SEC’s FinHub division, which is focused on interacting with blockchain and other fintech startups. On the branch’s website is a submission form, which Peirce hopes technologists will use. To date, only a handful of projects have actually provided feedback:
“We’ve gotten … maybe five or six letters and I was pretty disappointed by that. It does take work on your part but we really need people to be writing in.”
Mobile finance app Revolut has launched a new feature allowing users to “auto-exchange” cash and cryptocurrencies.
The firm announced Tuesday that its over 4 million users can now automatically exchange, say, U.S. dollar (USD) to bitcoin (BTC) or ether (ETH) to XRP, based on a pre-set target rate. Fiat-to-fiat exchanges are also possible.
Once a target rate is set in the app – either above or below current rates – Revolut said the exchange will trigger once the target has been reached. It warns, though, that the achieved rate could be “slightly different” from the target due to exchange rate fluctuations.
“If the rate never hits your target, no currencies will be exchanged,” the firm said.
With the move, the app has effectively added the “trade trigger” feature available on more professional trading platforms, rather than offering simply a buying and selling service at the current market or platform rate.
“Auto-exchange is perfect for trying to get the best exchange rate ahead of your holiday or protecting yourself from market volatility,” Revolut added in an email to customers on Thursday.
The feature comes with some limitations, however. You can exchange only up to €10,000 ($11,198) per day to or from any cryptocurrency, the firm said. There is also a daily cap of 30 auto-exchange transactions.
Also, at times of high volatility, if the exchange rate moves more than 0.75 percent on either side of your target rate for fiat currencies, or more than 5 percent on either side of your target rate for cryptocurrencies, Revolut said it won’t carry out the exchange.
Revolut started offering cryptocurrency trading services in July 2017 with the addition of bitcoin initially. Later, in December 2017, the firm added litecoin and ether support and in May of last year it added XRP and bitcoin cash.
Last December, the firm received a banking license from the European Central Bank. Revolut said at the time that the license will ultimately allow it to offer users an account to manage all their finances from a single place through its upcoming venture Revolut Bank.
Japan financial group Nomura has invested in Y Combinator-backed smart contract auditing startup Quantstamp.
U.S.-based Quantstamp announced Wednesday that it is setting up a subsidiary in Japan following a “significant” investment from Nomura Holdings and Tokyo-listed internet group Digital Garage.
Chuzaburo Yagi, senior managing director in charge of innovations at Nomura Holdings, said:
“As blockchain technology is adopted in the financial world, smart contracts will play an increasingly important role. Security assurances through auditing and certification will become increasingly indispensable.”
Quantstamp’s new limited liability subsidiary in Japan aims to help the country’s startups and corporations in using “secure” blockchain technology. Smart contracts are self-executing pieces of code that can be implemented on blockchains to enforce specific sets of rules.
The market for smart contract-based applications is “strong” in Japan and will “only be growing,” said Quantstamp’s co-founder and CEO Richard Ma.
Founded in 2017, Quantstamp provides an automated tool for developers and users that helps “identify and secure vulnerabilities” in smart contracts, as well as auditing services for large-scale blockchain projects aimed to ensure security. It joined seed accelerator Y Combinator back in 2017.
Quantstamp said its services have so far been used to secure more than $500 million of transaction value.
Last May, Nomura partnered with cryptocurrency wallet startup Ledger and investment firm Global Advisors to explore building a digital asset custody solution.
While, in January 2018, Digital Garage subsidiary Crypto Garage announced that it is working with bitcoin infrastructure startup Blockstream to test the issuance of a Japanese yen-pegged stablecoin.
LedgerPrime, a digital asset investment firm led by former Wall Street whizzes, has closed on $12 million of institutional capital and secured commitments for another $8 million.
The proprietary trading firm, which began trading in the spot and derivatives markets for cryptocurrency in the fourth quarter of 2017, is owned by Ledger Holdings Inc., which is also the parent company of crypto futures platform LedgerX.
“The raise is reflective of LedgerPrime’s track record and success through the 2018 crypto
Based in New York, LedgerPrime specializes in quantitative trading strategies and is led by Tang, a former proprietary derivatives trader at global bank UBS, and CTO Johannes van Zeijts, a physics Ph.D. and former portfolio manager at Quantbot Technologies.
Other team members are former academics who have used machine learning and algorithmic strategies at financial institutions such as SAC Capital Advisors and Bank of America, LedgerPrime said.
Reflecting the unusual intersection of worlds LedgerPrime inhabits, bitcoin core developer Bryan Bishop and former JPMorgan dealmaker James Greenberg are advisors to the firm, according to its website.
All over the world, the real estate industry is taking note of how profitable it is to sell real estate with Bitcoin. For example, leading Turkish real estate agency Antalya Homes reports that it sold nine properties using Bitcoin as payment in 2018.
BUYING REAL ESTATE WITH BITCOIN ALLOWS BUYERS TO AVOID TRANSACTION FRICTION LOSSES
Accepting cryptocurrencies reflects Antalya Homes’ mission of embracing global trends by offering buyers “more flexibility for ease of purchase.” In the press release of March 5, 2019, Bayram Tekce, Chairman of Antalya Homes stated:
Payment with cryptocurrency enables a more reliable and faster transaction performance such as money transfer between bank accounts without any exchange loss. It is very profitable to purchase real estate for those who want to utilize their cryptocurrency investments in the real estate sector.
Antalya Homes accepts Bitcoin (BTC), Ripple (XRP), Bitcoin Cash (BCH), and Ethereum (ETH) as payment for property sales.
Tekce also indicated that — given that the housing market in countries like Turkey continues to increase in value — by using cryptocurrencies, “investors can shift their investment to a less risky and safer area, and multiply their savings.”
The Antalya Homes website explains that, given the volatility of the value of the cryptocurrencies, the exact amount of cryptocurrency required for the payment is calculated using the exact stock exchange value at the time of the payment. Moreover, buyers have the option of paying just a percentage with Bitcoin and the rest with fiat currency.
REAL ESTATE SALES IN BITCOIN ARE INCREASING IN POPULARITY
Buying property with Bitcoin is becoming trendy all other the world. In addition to Turkey, homes have been purchased using Bitcoin in Dubai, the UK, and in several US states, such as California, Florida, and Delaware.
Even palaces are for sale in Bitcoin. For example, Rick Hilton, Chairman of Hilton and Hyland, offered a Roman mansion, called the Palazzetto, for USD 38 million through a Bitcoin auction.
Indeed, it is now possible to use Bitcoin to buy a home, farm, acreage, or vacation property almost anywhere on the planet. For example, Bitcoin Real Estate offers a site where sellers can showcase their property across the globe. Bitcoin Real Estate says:
We are here to promote the use of Bitcoin for purchasing real estate. You can sell your property, and the buyer pays in Bitcoin digital currency then you receive US Dollars, Euros, etc
France expects to collect $452 million in 2019 through a new digital tax that targets 30 Big Tech companies, including Facebook, Google, Amazon, and Apple.
On March 6, the French government introduced a 3% digital-services tax on tech giants that earn hefty revenues in France through targeted ads or digital marketplaces.
The tax will apply to tech companies whose annual global revenues top $850 million, and at least $28 million in France. The new tax applies retroactively going back to January, according to the Wall Street Journal.
The measure comes up for debate in April but is expected to pass easily because President Emmanuel Macron’s tax-happy party controls the majority in the French Parliament.
EUROPE WANTS ITS CUT OF SILICON VALLEY PROFITS
France’s digital tax is part of a broader movement by European countries to profit from the revenue windfall that tech juggernauts like Facebook, Google, Apple, and Amazon earn in their countries as economic activity increasingly moves online.
Facebook’s ad revenue from 2018 alone topped $33.8 billion. So it’s no surprise that European nations — whose economies are flailing this year — want their share of that money.
Facebook’s US and non-US advertising revenue from 2014 to 2018 (in billion US dollars) | Statista
FRANCE: IT IS TIME TO IMPOSE DIGITAL TAXES
French finance minister Bruno Le Maire says it’s only fair that France collects taxes from these mammoth corporations because they make truckloads of cash by exploiting French consumers’ personal data.
Le Maire took a veiled shot at Facebook, which has been under fire for allegedly selling users’ personal data to third parties without their consent for years. Facebook faces a potential “record-setting fine” by the U.S. Federal Trade Commission for the epic data breach.
These giants [like Facebook] use your personal data and make significant profit from it, without paying their fair share of tax.
They pour their products onto markets without even paying value-added tax, or hardly any other tax at all. It is intolerable.
A taxation system for the 21st century has to built on what has value today, and that is data.”
GERMANY, SPAIN AND UK MULL NEW TAXES
Bruno Le Maire has been lobbying other European countries to impose digital taxes on Silicon Valley tech giants that profit from the European market, UPI reported.
Germany, Spain, and the United Kingdom are also considering introducing their own digital taxes to collect money from Silicon Valley’s mega-corporations.
Le Maire says it’s time for all countries to impose digital taxes because today’s taxation system is outdated and has not kept up with the meteoric spike in the massive, multi-national internet economy.
“Countries across the planet now understand they must impose a digital tax. It is a question of fairness.”
U.S. TECH LOBBYISTS CLAP BACK
Amazon and Apple have not commented on the forthcoming French digital tax. However, Google and Facebook say they will pay any taxes they owe in every country they operate in.
Not surprisingly, tech lobbyists are pushing back. The Computer & Communications Industry Association (CCIA) is a US-based lobby group that represents Facebook, Amazon, Google, and other tech companies.
Christian Borggreen, CCIA’s vice president for Europe, slammed the proposed French digital tax, saying it discriminates against tech companies. Moreover, he claims that levying the tax will ultimately hurt consumers because the companies will be forced to raise prices on their goods to offset any new taxes.
“France should lead efforts to achieve international tax reform, rather than taking unilateral actions that risk undermining global efforts.”
The venture capital arm of ethereum development studio ConsenSys is continuing to invest in the blockchain and cryptocurrency space with the backing of two early-stage startups.
ConsenSys Ventures announced Thursday that it invested $1.15 million investment in zero-knowledge proof (ZKP) cryptography startup Ligero, while Philippines-based cryptocurrency exchange PDAX received an undisclosed sum.
Gupta said in the announcement:
“We continue to see privacy and the accessibility of exchanges to be two of the major pain-points for broader adoption of digital assets and blockchain technology. Both of these companies are taking unique approaches to solving these problems.”
PDAX is regulated by both the central bank of the Philippines and the country’s securities regulator, and is expected to launch its platform in Q2 of this year, according to ConsenSys Ventures.
The Philippines sees a high volume of remittance inflow and “a steadily increasing percentage is being coursed through cryptocurrencies,” it added.
“Not only do we hope to enable lower cost and facilitate faster processing for remittance and other P2P [peer-to-peer] payments, but we are also seeking to address long-standing inefficiencies in the Philippine financial markets,” said PDAX co-founder and chief strategy officer Yang Yang Zhang.
Ligero, on the other hand, aims to launch a platform that will “enable private smart contracts, decentralized exchanges, and private machine learning on and off blockchains.” The firm is building a “scalable” protocol for secure multi-party computation and ZKP.
“A ZKP guarantees privacy for only one participant; if you want to collaborate on sensitive data among many actors, you need multiparty computation,” said Ligero co-founder and CTO Muthu Venkitasubramaniam.
In January, ConsenSys also invested in three other blockchain startups: Iceland-based “e-money” blockchain startup Monerium, Paris-based crypto wallet and trading platform Coinhouse and Tenta, which is building an encryption-centric browser.
Last November, the firm also led a $2.1 million seed round for ethereum privacy startup AZTEC, and in October invested $6.5 million in blockchain startup DrumG Technologies, founded by a former R3 executive.
Lawmakers in Colorado want the U.S. state to study the potential of blockchain technology in water rights management.
Republican senator Jack Tate, along with representatives Jeni James Arndt (Democratic) and Marc Catlin (Republican), filed senate bill 184 on Tuesday, proposing that the Colorado Water Institute should be granted authority to study how blockchain technology can help improve its operations.
The institute, an affiliate of Colorado State University, should study various use cases of blockchain tech, including water rights database management, the establishment of water “banks” or markets, and general administration, according to the bill.
The study would be carried out only after the institute has received enough money, and would be allowed to solicit and accept donations from private or public institutions for the purpose. The findings should later be reported to the general assembly, the lawmakers said.
The Colorado Water Institute has the mission to “connect all of Colorado’s higher education expertise to the research and education needs of Colorado water managers and users.”
Colorado has a “complex regulatory scheme for the distribution of water rights and the use of water in the state,” according to the Open Energy Information (OpenEI) website, which was established by the U.S. Department of Energy.
Eyeing a similar use case for tech, IBM last month collaborated with two organizations – the Freshwater Trust and SweetSense – to track California’s Sacramento San Joaquin River Delta in “real-time” and manage groundwater usage with blockchain and IoT.
Brad Garlinghouse, the CEO of San Francisco blockchain startup Ripple, gave JP Morgan Chase qualified praise Wednesday for creating its own stablecoin, before dismissing the product’s likelihood of adoption by other banks and questioning its usefulness.
During a fireside chat at the Chamber of Digital Commerce’s D.C. Blockchain Summit in Washington, Garlinghouse said he thinks it’s “great” to have major financial players like JP Morgan “leaning in.”
But, he quickly added:
“That’s the only nice thing I’m going to say about this.”
Indeed, Garlinghouse, whose company has been courting financial institutions to use its distributed ledger technology (DLT) for payments – including products that utilize the cryptocurrency XRP – promptly cast doubt on the prospects for the recently announced JPM Coin.
At another conference last week, Garlinghouse recalled, “This guy from Morgan Stanley was interviewing me, I said ‘So, is Morgan Stanley going to use the JPM Coin?’ And he said ‘probably not.’ So, well is Citi going to use the JPM Coin? Is BBVA? Is PNC? And the answer is no.”
Hence, he suggested, a bank creating its own stablecoin risks recreating the very problems that DLT is supposed to solve.
“So, does that mean we’re going to have all these different coins? Are we back to where we are with lack of interoperability? I don’t get it.”
Garlinghouse even started to sound like a blockchain industry critics when he wondered aloud what the point would be of tokenizing fiat currency when it remains on the books of a single entity.
“If you give them a dollar for deposits, they’ll give you a JPM Coin that you can then move within the JPM ledger. Wait a minute, just use the dollar!” he said. “I don’t understand. If you’re just moving within the JPM ledger, and it has to be dollar-to-dollar, one-to-one backing, I don’t understand what problem that solves.”
He wrapped up his comments about the subject on a diplomatic note, however, concluding:
“Now, back to my first answer, if it solves the first [problem] of JPM leaning into crypto, yay. That’s all I got.”
A new report claims that cash is “on the verge of collapse” in the UK, with cash transactions expected to almost vanish in the next decade.
Meanwhile, bitcoin transaction volume is surging towards an all-time high and mainstream vendors like Starbucks and Krogers are considering methods of cryptocurrency payments.
The outdated cash infrastructure is set to be eclipsed. And bitcoin is positioning itself to replace it.
CASH IS “ON THE VERGE OF COLLAPSE”
The UK report, titled Access to Cash Review, says the country’s cash system will become almost obsolete in the next 15 years. It comes as digital payments overtook cash for the first time in the UK last year.
The number of Bitcoin ATMs in the UK doubled in 2018. Source: CoinATMRadar
Some British retailers and vendors already refuse to accept cash for many reasons. It’s a huge burden to cash up every day and take money to the bank. Cash is slower to process and easier for employees to steal. Storing cash on site also means higher insurance premiums.
Digital money is faster, safer, and cheaper. The shift is inevitable.
CASH IS “PRACTICALLY UNHEARD OF” IN CHINA
The UK is following in the footsteps of China and Sweden which are quickly becoming the first cashless societies.
In Sweden, less than 1% of all payment value takes place in cash. Even public restrooms are digital-only.
In China, the rapid rise of WeChat and Alipay payments means cash is “practically unheard of” in urban areas. Even street buskers hold out QR codes to accept tips and payments.
BITCOIN TRANSACTIONS NEAR RECORD HIGHS
While cash payments are tumbling, bitcoin is surging. According to Blockchain data, bitcoin hit 367,000 daily transactions on February 28th. That puts it at similar levels to December 2017’s bitcoin frenzy, and just short of its all-time high.
As Etoro’s senior market analyst Matti Greenspan told Bloomberg:
“What I’ve been watching lately are the number of transactions on the Bitcoin blockchain and the total volumes across crypto exchanges, both of which are holding at their highest levels in more than a year…Even though we’re still officially in a bear market there is plenty of cause for optimism.”
MAINSTREAM BITCOIN PAYMENTS ARE COMING
The bitcoin transaction volume is supported by strong mainstream interest in crypto payments. Starbucks has just clarified its plans on its rumored bitcoin acceptance:
“Our role as the flagship retailer for Bakkt is to consult and develop applications for customers to convert their digital assets into US dollars, which can then be used in our stores.”
In other words, Starbucks may soon accept bitcoin with into US dollars. Elsewhere, US grocery store Kroger has ditched Visa credit card payments and is reportedly considering bitcoin payments via the lightning network.
POWERED BY THE LIGHTNING NETWORK?
As a future payment system, bitcoin has always been plagued by criticisms over speed and fees. But the infrastructure for fast, cheap cryptocurrency payments is growing rapidly.
The Lightning Network recently opened up record capacity and reported the lowest transaction fees in three years. The second-layer solution for fast bitcoin micropayments is the groundwork for enormous bitcoin payment scaling.
The era of cash is over. The era of bitcoin is just beginning.
Lisa Ellis, an analyst at independent research firm MoffettNathanson, holds a positive outlook on the future of cryptocurrencies. The industry insider, who has knowledge of how the traditional markets and payments processing system work, wrote a note to her clients about the effect digital assets could have on payment networks such as Visa, Mastercard and PayPal.
Ellis is a partner and senior equity analyst at the firm and has worked at Sanford C. Bernstein and McKinsey. Her background includes 2 decades of technology experience in verticals as mobile applications, cloud services and outsourcing.
Her perspective adds to the growing throng of incumbent voices who see cryptocurrencies as a legitimate upgrade of current systems.
Her note to the clients described how digital assets directly challenge these systems and contrast with them as they are decentralized:
Cryptocurrency systems (e.g., Bitcoin, Ethereum, Ripple) are potentially disruptive to private payment systems. Their core design characteristics –- which are aimed at enabling ‘freedom of money’ — are in direct contrast to the characteristics of most traditional, private payment systems.
Though Ellis believes that there is a lot of disruptive potential in this technology, she does not think that the change is going to arrive soon.
She thinks cryptocurrencies are more likely to commoditize rather than disintermediate current payment systems entirely. Ellis also stated that if existing businesses do not embrace the technology, they stand to lose — especially with respect to businesses dealing with B2B and person-to-person payments.
While global adoption of crypto may not be around the corner, the point she made about businesses adopting decentralized technology is a strong one — there is a lot to be gained for those who leverage the technology and a lot to be lost for those who don’t.
Perhaps that’s why investment banks like JPMorgan Chase have launched their own cryptocurrency for clients, and why PwC and other such firms are looking into the technology themselves.
She also wrote:
Why would I ever buy coffee with Bitcoin?…[It may eventually happen] as ludicrous as it sounds.
With Starbucks working with Bakkt to accept Bitcoin for coffee, that future may not be as far as Ellis thinks.
The government of Argentina is set to invest in early-stage blockchain startups backed by the venture arm of cryptocurrency exchange Binance.
The country’s Ministry of Production and Labour announced Wednesday that it will match investments of up to $50,000 into every Argentinian blockchain project that receives funding from Binance Labs via the second season of its incubator program, and crypto exchange LatamEX.
The ministry plans to invest in up to 10 blockchain projects each year for a period of four years, and will make the investments through Founders Labs, a local blockchain accelerator.
The co-investment contract was signed after Binance Labs selected Argentina’s capital, Buenos Aires, as one of the hubs for its season two of the incubator program, according to the announcement.
Ella Zhang, head of Binance Labs, said in the statement:
“We are very excited to support blockchain projects, entrepreneurs and developers through our Buenos Aires chapter, to advise and mentor them, to find product-market fit, and provide them with in-time access to global blockchain technology development to solve local problems.”
While the bear crypto market has hit firms in other regions, CoinDesk recently reported that blockchain and crypto projects in Argentina are booming, thanks to a history of banks restricting customer access and an inflation rate that hit 47 percent in 2018.
“The sector is growing, it’s growing very well. It’s providing a lot of jobs. People are using these technologies for real survival needs and finding themselves in a better world than if they had to trust the government,” Santiago Siri, founder of blockchain startup Democracy Earth Foundation and investor in several Argentinian crypto startups, told CoinDesk at the time.
With Argentina plagued by currency crises, the government needs to develop “a stability-seeking strategy that partly includes bitcoin,” wrote Michael J. Casey, chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative, last September.
A new security token trading venue is coming out of stealth mode with a novel strategy to help small U.S. companies go public with a minimal compliance burden.
Announced Wednesday, ABE Global plans to launch sometime this summer and aims to list over 100 tokens by the end of the year. Two of its three founders are Wall Street veterans who built trading businesses and sold them to well-known institutions.
One of them, CEO John Pigott, founded a fixed-income marketplace called ValuBond, later known as BondPoint and now a part of Intercontinental Exchange, the parent of the New York Stock Exchange (NYSE). The other, ABE’s COO, Joel Blom, was part of the founding team of the online brokerage Thinkorswim, which was eventually bought by TD Ameritrade.
Along with Roderick Psaila, the CEO of Maltese lender AgriBank, they started ABE in 2016, but the company has been flying under the radar until now. Last August it completed a $3 million funding round with investors including Distributed Global, Galaxy Digital and Gumi Ventures.
“We’ll be doing the next institutional round probably in the next two months,” CEO Pigott told CoinDesk. “But we’ve got plenty of capital for what we’re going to do in the next year or two.”
But what stands out about ABE is the way it intends to make tokenized securities available to a broad swath of buyers.
While the initial coin offerings (ICOs) of the 2017 boom marketed their tokens to the public without even telling regulators what they were up to, and security token offerings (STOs) have limited their audience to accredited investors and notified the SEC they were conducting registration-exempt offerings, ABE is trying a third way.
If it works, it could reopen a type of fundraising largely closed to small companies since the dot-com crash of the early 2000s.
According to ABE’s founders, the main advantage of the new Atlanta-based exchange will be its network of branches in different jurisdictions, the key one being Malta. “The regulators there have shown interest in supporting the new technology, they have educated themselves and they are really sophisticated about it,” Blom told CoinDesk.
The Maltese subsidiary is now in the process of obtaining an exchange license that will allow it to list various assets, including tokens, stocks, bonds and “most legacy financial instruments,” supporting trading 24 hours a day, Pigott said.
Other branches, ABE Americas and ABE Asia, will offer the tokens listed in Malta in the form of depositary receipts (DRs). A financial instrument dating at least as far back as the 1920s, DRs allow investors in one country to trade the stocks of companies listed in another. For example, the Chinese e-commerce giant Alibaba’s American Depositary Receipts (ADRs) trade on the NYSE.
In this case, each token issuer will conduct an initial public offering (IPO) on ABE Europe, where the tokens will be listed as equity. But once wrapped in depositary receipts, they can also be traded on ABE’s marketplaces in other jurisdictions. “This enables token issuers to access current brokerage accounts with no change in custody, settlements and account holdings,” said Pigott.
In the U.S., the ADRs will trade on ABE Americas, an alternative trading system (ATS) subject to lighter regulation than national securities exchanges — the company has applied for an ATS license from the SEC, Pigott said. Likewise, ABE Asia will hold licenses “similar to the ATS authorization”: a recognized market operator in Singapore, an ATS in Hong Kong, and a proprietary trading system in Tokyo.
It’s an unorthodox use of ADRs, to say the least.
“It is conceivable that a digital security could be listed on a non-U.S. exchange and follow this route and it’s really a logical step in the evolution of our financing systems towards digital securities,” Margaret N. Rosenfeld, a partner at the K&L Gates law firm, told CoinDesk. “This would require the ADR facilities to agree to the deposit and new forms of depositary contracts with elements specific to digital securities, as well as the exchanges and the SEC to sign off on this. Very interesting legal puzzles involved, but all doable. It would be exciting to work on something like this.”
However, she noted ADRs are an instrument that only non-U.S. companies can use.
Pigott acknowledged ABE is planning to use ADRs “in an innovative way” which nobody has tried before. However, he insisted it is legal in the U.S.
In any case, the ADR issuers will need to file a particular form with the SEC, so if the regulator has objections to the idea, it will become clear at the stage of filing. Even if it won’t fly with the SEC, ABE’s depositary receipts will be available in Europe in Asia, Pigott added.
Bringing small-caps back
If all goes according to plan, ABE will enable U.S. firms to raise capital on public markets at a much lower cost.
While the average IPO cost, according to PwC, in 2017 was more than $4.2 million in various fees, at ABE it will be between $200,000 and $500,000, depending on the size of the STO, the startup says.
One type of firm ABE will court is owners of real estate looking to fractionalize and sell shares in their properties.
“It offers a very clear departure from the era of ICOs, and it appeals to one of the global advantages of tokens,” Pigott told CoinDesk. “For example, there are a lot of Singapore investors that would like to hold the U.S. real estate, and a lot of American investors that would buy real estate in Singapore.”
The other focus of the new trading platform will be so-called small-cap companies (those with a market capitalization of between $300 million and $2 billion). Many of them are growing very fast, Pigott said, and until the 1990s, 400 to 800 of those companies would launch IPOs every year, but after 2000, when new, stricter regulations came in place, “that market got crushed by 95% and has never recovered.”
“As a consequence, you have these unicorns financed by venture capital firms and never have a $100-200 million dollar round for a private company, and it’s very odd,” Pigott said. “What we ended up with now is only accredited investors can access these companies.”
Calling American small-cap companies “one of the best wealth creation vehicles the world have ever seen,” he believes the new asset class of tokenized securities can re-open the broad world of investments to this segment of the U.S. population, with an ultimate goal “to connect the token economy with the global investment economy.”
While ABE will be entering an increasingly crowded STO field, including the already launched security token trading platforms tZERO and OpenFinance, the founders are not discouraged, with Blom concluding:
“It’s not a good idea if you don’t see other people pursuing it.”
Coinbase is taking steps to clarify statements made in the wake of its controversial acquisition of blockchain analytics firm Neutrino, a startup subsequently linked to Hacking Team, a group that aided governments known for human rights abuses.
Specifically, Christine Sandler, Coinbase’s director of institutional sales, justified the Neutrino acquisition during an interview with Cheddar last Friday by saying the exchange’s previous analytics provider was “selling client data to outside sources.” Coinbase now says Sandler misspoke.
A spokesperson told CoinDesk Tuesday that the exchange “never shared our customers’ personally identifiable information with any third-party blockchain analysis vendors.”
Although Coinbase declined to specify which former partner Sandler was referencing or what type of data was being commercialized in ways it objected to, it’s important to note that blockchain analytics companies sell aggregate wallet data (without names or identifying personal information) as their core proprietary product.
The standard norm across the industry is for analytics providers to collect anonymous transaction data and commercialize access to that information for customers seeking to investigate suspicious activity.
For example, Chainalysis co-founder Jonathan Levin explained to CoinDesk that firms often receive wallet and transaction information without names or other account information and use it to help customers across the ecosystem identify bad actors. He said they do not receive personal customer data and never sell data to external companies.
The competing analytics firm Elliptic confirmed in a blog post that it worked with Coinbase and wasn’t provided with “any personally identifiable information about their users.” It did provide other exchanges and clients with addresses and transactions associated with financial crimes, according to the blog post.
Although, the question of whether Coinbase would adopt a similar model, or look to other ways to monetize user data after its acquisition of Neutrino, was arguably ambiguous.
During an interview in February, Coinbase’s director of engineering and product, Varun Srinivasan, said the Neutrino team would continue serving external customers, turning other companies’ transaction data into a proprietary Coinbase offering.
A Coinbase spokesperson told CoinDesk on Tuesday that it will not “share broad sets of transaction and address information with vendors if it is beyond their immediate scope of work” as part of any offering.
The statements follow Coinbase CEO Brian Armstrong’s blog post Monday in which he said that the company intends to “transition” out Neutrino employees associated with Hacking Team. However, at press time, this appears to have done little to quell user concerns.
Speaking to the widespread backlash over the news, former Coinbase user Eduardo Hernández, CEO of the investment startup Cryptico, told CoinDesk: “The lack of transparency is terrifying.”
While it’s unclear how many users have left the exchange, Hernández is one out of five former Coinbase users who told CoinDesk they closed their account after the Neutrino acquisition.
He said Armstrong’s blog post lacked accountability since the post emphasized the Hacking Team co-founders have “no current affiliation” with the controversial software provider.
Another former Coinbase user, who goes by his Twitter handle @Lowbtc, told CoinDesk he is concerned about his personal data because Coinbase has a track record of allegedly failing to punish misbehaving employees, referring to an ongoing lawsuit in California that claims exchange employees engaged in insider trading.
Fortune reported an internal investigation of the alleged insider trading at Coinbase concluded without any repercussions because leadership asserted no wrongdoing took place.
Speaking to that broader context, @Lowbtc, who opened his Coinbase account in 2013 and closed it promptly after the Neutrino acquisition, said:
“On top of the ethical failure, I also consider this a massive security risk, letting those people have access to customer data. It’s really frightening to think who has gained access to Coinbase customer data over the years.”
The fund for ETH-derived risk launched a few days after the approval and release of a Bitcoin ETP in February.
Switzerland’s largest market operator, SIX Exchange, has launched trading for an exchange-traded product (ETP) based on the price risk of Ethereum (ETH). Called Amun Ethereum ETP (AETH), the offering was proposed earlier by Swiss-based financial products provider Amun AG.
At the end of February, SIX also opened trading for a similar product, Amun Bitcoin ETP.
The concept behind the products is simple – tracking the price of ETH without leverage. The ETP is composed entirely of ETH as an underlying asset, and Amun claims to be keeping the underlying funds in cold storage. However, withdrawals in ETH are not possible, and trading for AETH is dollar-denominated. Amun also claims to have the highest grade of whitelisting and secure custody with a multi-sig cold wallet.
European markets are friendlier to crypto-derived investment products. For more than a year now, NASDAQ Nordic has carried two exchange-traded notes by XBT Provider, which track the prices of BTC and ETH.
However, these markets have relatively low volumes, and the news has failed to lift the prices of digital assets. A potential US-based Bitcoin exchange-traded fund (ETF) is seen as more likely to spark a bullish sentiment. For now, however, no such ETF has been approved, and a new review period has started running for the CBOE Van Eck ETF, which was turned down multiple times in the past year. The decision on a US-based ETF is expected toward the end of the first quarter.
Amun also offers a product based on a basket of digital assets under the HODLticker. The product tracks BTC and ETH, along with Litecoin (LTC), Bitcoin Cash (BCH), and Ripple’s XRP.
The relatively quick launch of the products is due to their approval under a more liberal regulatory regime. The Amun prospectus was banned from distribution in the US, as well as to retail investors in the European Economic Area (EEA). The product is also not protected by provisions in the Swiss Federal Act on Collective Investment Schemes, meaning investment is highly risky and might lead to a total loss of funds.
In the last 24 hours, the Bitcoin price has slightly dropped from $3,860 to $3,770, struggling to demonstrate strength at the $4,000 resistance level.
Despite the lack of momentum on the price trend of Bitcoin, several crypto tokens in the likes of Binance Coin (BNB) and Enjin Coin (ENJ) have recorded 15 percent gains against the U.S. dollar and BTC.
Crypto Market Valuation Up $2 Billion (Source: Coinmarketcap.com)
A cryptocurrency trader known as “Satoshi, MBA” said that the strength of tokens and small market cap cryptocurrencies show the overall bullish trend of Bitcoin.
WHY THE PERFORMANCE OF CRYPTO TOKENS IS CRUCIAL FOR BITCOIN
Historically, most tokens and small market cap cryptocurrencies have tended to record intensified losses in the direction headed by BTC.
When Bitcoin records a minor loss, tokens tend to record intensified losses against the USD and when the dominant cryptocurrency rises in price, tokens demonstrate large gains on the upside.
However, in the past 24 hours, while Bitcoin recorded a minor drop of around 2 percent, a handful of tokens recorded gains in the 10 to 20 percent range.
BNB, for instance, has become the 8th most valuable cryptocurrency in the global market, overtaking Stellar and TRON.
Within a 7-day span, the price of BNB surged from $9.5 to $13.4, by more than 41 percent against both Bitcoin and the USD.
7-Day Performance of BNB (Source: Coinmarketcap.com)
The resilience demonstrated by tokens and the stronger hand of investors playing with higher-risk trades suggests that investors have become more confident in the short-term trend of the crypto market.
The analyst told:
Yes, I would say the sentiment is still overall bullish, we’re near the end of the bear market. Whether we drop some in the short term, I don’t think it changes the overall picture.
The way back to all time highs won’t be straight line. We’ll have bumps along the way. This BTC sideways movement will be very bullish for alt coins too.
Throughout the past week, Bitcoin recorded a relatively large pullback following an extensive period of stability.
The abrupt downward movement of BTC had minimal impact on the price trend of tokens and crypto assets that recorded 40 to 150 percent gains have been able to maintain their momentum.
Ultimately, the willingness of investors to take high-risk, high-return trades could prevent BTC from potentially testing new lows in the low $3,000 region and gradually climb upwards from the tight $3,300 to $4,000 price range.
“Most coins have very bullish set ups right now, virtually all of them sitting on annual support. When BTC moves sideways, liquidity will move into alts. Recently we’ve seen huge moves, 40%, 80%, even 150% overnight gains by some alternative cryptocurrencies,” the analyst added.
TRADERS EXPECT BITCOIN BOUNCE
In the upcoming days, traders generally foresee BTC rebounding to the high $3,000 region once again after its downside movement was stopped at the $3,700 mark.
The sentiment in the cryptocurrency industry has improved in recent weeks with reports suggesting that Starbucks is set to integrate Bitcoin payments in the next 18 months as a part of its deal with Bakkt.
“Interesting. But probably well worth it on the long term. The Starbucks angle was the most interesting thing about the Bakkt announcement. BTC needs more use cases and more retail adoption,” fintech analyst Richard Johnson said.
With a growing number of financial institutions committing to the cryptocurrency sector and more investors willing to engage in higher-risk trades, traders expect an upside movement in crypto markets in the upcoming days.
Chorus Mobility emerged as the winner out of twenty-three participants from fifteen countries worldwide.
The Mobility Open Blockchain Initiative – MOBI – recently announced the top three winners of phase I of the three-year MOBI Grand Challenge (MGC).
The top prize went to Chorus Mobility for the project on negotiating road space and right of way payments for autonomous vehicles to reduce congestion.
“The goal of the MOBI Grand Challenge is to accelerate the adoption of blockchain and distributed ledger technologies for transportation. By bringing blockchain solutions to a global stage we are igniting worldwide interest in solving the problems of urban mobility, while making it greener, safer, and more efficient,” said MOBI Founder and CEO, Chris Ballinger.
Twenty-three teams competed over four months to create blockchain or distributed ledger related solution to address mobility issues affecting today’s world. Held at the BMW Group IT Center in Munich, the award event featured finalist presentations and public demonstrations of potential uses of blockchain and related technologies in coordinating vehicle movement and improving transportation in urban environments.
First place winning team Chorus Mobility worked on a project to address growing congestion in urban cities. Their platform allows autonomous vehicles to coordinate driving routes, infrastructure utilization, and allocate rights of way based on demand and availability. The aim is to create a system for self-driving vehicles to safely communicate, so that traffic can move more efficiently. This has tremendous potential to improve safety and reduce the cost of mobility.
“Chorus Mobility is proud and honored to place first in the MOBI Grand Challenge Hackathon. We see this success as a confirmation of the validity of our vision to Solve Traffic with Blockchain and Autonomous Vehicles Software,” said William Vorobev, CEO and Founder of Chorus Mobility. “We deeply share MOBI’s ideas on the future of mobility and continue working hard on our joint mission to improve traffic safety, decrease the number of congestions and lower the cost of mobility by utilizing the latest breakthroughs in distributed ledgers and consensus protocols.”
In what appears to be a first-of-its-kind transaction, two developers working in separate countries have successfully sent a bitcoin lightning payment over radio waves.
Organized over Twitter this past weekend, the transaction was sent by Rodolfo Novak, co-founder of bitcoin hardware startup CoinKite, to developer and Bloomberg columnist Elaine Ou. The completed payment effectively moved real bitcoin from Toronto, Canada, to San Francisco, California.
While radio technology is most commonly used for broadcasting music or talk radio, it’s actually capable of much more than that. As the two developers showcased, radio can also be used to boost the resilience of the bitcoin network.
“Bitcoin is making ham radio cool again!” Ou tweeted after sending the transaction to Novak, referencing “ham radio,” the use of radio by hobbyists who fiddle with radio technology.
But sending bitcoin over radio isn’t just fun. Some researchers argue it actually has a necessary use case.
In fact, the idea itself is the brainchild of Nick Szabo, inventor of the smart contract. Ou and Szabo presented the idea in 2017 at the Scaling Bitcoin conference in San Francisco, arguing at the time that it could help bitcoin build resistance to partition attacks researchers argue could potentially be used to attack the network.
The idea is that, while the internet can potentially be censored, it’s not the only form of technology that can be used to send data from one part of the world to another, “in case China decides to censor bitcoin via the Great Firewall, or places like North Korea where there is no internet at all,” as Ou put it in an email to CoinDesk.
Technology infrastructure startup Blockstream licensed satellites that beam bitcoin to users around the world for similar reasons. Still, there are limits to the concept.
“It was a fun demo, but obviously unrealistic because we coordinated everything online before sending the radio signals,” Ou acknowledged.
“The equipment is currently the hard part: You need a radio that supports these frequencies. The cheapest way is with a software-defined radio, which is about $200 for something that can transmit low-power
The company behind cryptocurrency project Dash is to reduce its staffing levels in a cost-cutting effort brought on by the “crypto winter.”
Dash Core Group (DCG) CEO Ryan Taylor announced late last month that the firm has decided to lay off four employees across several business areas – eight percent of its staff – to “reduce costs and align them with the available budget.”
As a result, the human resources department will no longer exist, two people will be leaving the strategy section and the business development team will be reduced by one person. The layoffs will come into effect on March 7.
“This was not a decision we took lightly and we’ve been actively finding ways to reduce the budget over the past several months.”
DCG seems to have a total of 49 employees currently, according to information on its website.
The affect of the cryptocurrency bear market over the last year has also seen some of DCG staff taking voluntary salary cuts and losing employee benefits in order to “maintain the company’s financial health” without increasing the overall budget, Taylor said. There has also been a hiring freeze in place for over six months at the firm.
“Our monthly payments for January invoices yielded an average of ~$67 / Dash, which is the lowest price we’ve experienced since ‘crypto winter’ began,” Taylor said. “We remain committed to keeping our proposal requests below 60 percent of the available budget.”
With the staff changes, DCG further announced some operational changes to its business functions. For instance, human resources-related duties be will be shifted primarily to the firm’s chief financial officer, Glenn Austin. Strategy projects will transition to each of the relevant functions and Taylor himself will be taking a key role in business development.
Notably, last December Taylor maintained that DCG’s business is “sustainable.”
He said at the time:
“DCG is not at risk of shutting down anytime soon, or of any significant cuts in staffing levels in the near term. We have a significant buffer in place to withstand the impact of the market bottom, whenever that comes.”
The firm is the latest to announce layoffs in the blockchain space as low crypto prices adversely affect business models. Last month, smart contract auditing firm Hosho cut 80 percent of its staff after business slowed in 2018. And, in January, blockchain project Nebulas axed 60 percent of its team, while the NEM Foundation also announced planned staffing cuts.
Mining giant Bitmain also announced layoffs in December, as did
Tagomi, a startup that bills itself as crypto’s answer to Wall Street prime brokerages, has raised another $12 million in a funding round led by Paradigm.
Other participants in the round announced Monday include Pantera Capital, Four Arrows and Multicoin Capital. Tagomi previously secured backing from Digital Currency Group, Peter Thiel’s Founders Fund, Collaborative Fund and others. The firm has raised a total of $28 million to date.
Jennifer Campbell, a Tagomi co-founder, told that the latest funding round, whose participants included the firm’s institutional investor clients, “is a strong validation of our business model.”
In traditional finance, prime brokerage refers to a bundle of specialized services offered by investment banks and securities dealers to their hedge fund clients. Tagomi is “agency-only,” meaning that the firm offers consulting services for its clients to determine “how best to execute a trade or fund strategy,” Campbell explained, adding:
“Importantly, it also means that we can optimize for best execution – our clients are sophisticated investors who care strongly about execution and price transparency.”
The brokerage offers trading services for bitcoin, ethereum and other digital assets, and went live in December.
Margin, lending and shorting
With the new funding, the firm said it plans to expand its operations to support increasing client demand. It also plans to work to improve its trade execution and transparency.
Campbell added that Tagomi plans to continue building out its global coverage, as well as margin, lending, shorting and other prime broker services for its customers.
“We are excited to bring all the technical advances of the securities markets to the digital asset space, and drive the evolution towards a more mature market structure,” she said.
In a statement, Paradigm founding partner Matt Huang said he viewed Tagomi’s offering as “the next step in the evolution of how digital assets trade.”
Tushar Jain, a managing partner at Multicoin, told through a spokesperson that Tagomi co-founder and CTO Greg Tusar’s “record speaks for itself,” citing his 20-year career in working with trade and execution products, the two previous brokerages he’s built and his time with Goldman Sachs and KCG Holdings.
“The fact that he recognizes the opportunity in crypto and has elected to build core infrastructure for it speak volumes for the industry. We’re proud to support him and as his team as they lay the rails for the next crypto bull market,” Jain added.
After launching an Ethereum-based version, the Tether stablecoin has directly expanded to one of the hottest new networks, TRON.
Tether (USDT) is on track to become a multi-platform stablecoin as it launches a version capable of moving through the TRON (TRX) network. The TRC20 token will exist alongside the Bitcoin’s Omni layer and ERC-20 iterations. However, the token-based version on Ethereum (ETH) is much less active, and the major trades are using the Omni-based version, with around 2 billion USDT in circulation.
The new TRC20 token will be available within TRON-based distributed apps and for trading. It is still unknown what the total number of units will be and how the assets will be created.
Tether CEO Jean-Louis der Velde said:
“We are pleased to announce this collaboration with the Tron Foundation. This integration underlines our commitment to furthering innovation within the cryptocurrency space as we continue to anticipate the needs and demands of the digital asset community.”
Based on Stablecoinswar data, the influence of Tether remains high, with the asset commanding more than 95.6% of the market, leaving a fraction for alternative stablecoins such as TrueUSD (TUSD), Paxos (PAX), and Gemini Dollar (GUSD). At the moment, USDT activity is extremely high, accounting for over 27% of all trades. The asset also broke once again the record for influence over the BTC markets and is now responsible for more than 79% of all BTC trading, essentially taking over the leading coin and displacing fiat trading over the course of a year.
The presence of USDT on the TRON network means access to one of the fastest-growing ecosystems, with more than 1.5 billion accounts and a constantly rising number of users for the distributed apps. USDT may directly influence decentralized exchanges on TRON.
TRX is also heavily affected by USDT, with more than 49% of volumes against the stablecoin. However, its market price has been bound within a range of $0.02 to $0.03 for months as speculation lifts the asset to a limited degree.
As per the request of the Reserve Bank of India, the country’s central banking institution, local banks have been disallowed from dealing with crypto businesses such as Bitcoin exchanges since 2018.
With no immediate plans of the Supreme Court of India to reverse the decision of the country’s central bank, crypto companies have been pushed out of the local market.
Consequently, Bitcoin investors have lost access to fiat-enabled exchanges and have resorted to peer-to-peer exchanges to convert cryptocurrencies, which could be impractical and unsafe, especially for face-to-face deals.
However, a recent decision of the government of Bahrain to encourage cryptocurrency firms in India to come into the country and operate their businesses with proper resources could pressure India to potentially legalize and open its cryptocurrency market in the future.
BAHRAIN IS PUTTING THE PRESSURE ON INDIA IN CRYPTO
On March 3, The Economic Times reported that Bahrain has invited cryptocurrency companies in India to relocate to Bahrain as a part of the country’s initiative to establish a fintech hub.
The Bahrain Economic Development Board (EDB) is set to provide crypto businesses with a wide range of resources including proper banking solutions and practical regulatory frameworks to support growth and innovation.
Dalal Buhejji, a senior manager at the EDB, said:
Central Bank of Bahrain has put in the right ecosystem to support growth and innovation. We have seen different new regulations coming out recently to support open banking, crypto asset trade regulation and draft regulation on robo advisory.
According to the EDB, the government intends to focus on the growth of open banking, blockchain, crypto assets, robo advisory, and remittance to facilitate the expansion of its financial service sector, which already makes up for a large portion of the country’s GDP.
The approach towards cryptocurrency regulation by Bahrain directly counters that of India, which took the route of imposing a blanket ban on all cryptocurrency dealings and businesses.
In late 2018, the Reserve Bank of India banned every commercial bank in the country from providing services to cryptocurrency businesses, cracking down on the local crypto exchange market.
RBI deputy governor BP Kanungo said at the time:
“We have decided to ring-fence the RBI regulated entities from the risk of dealing with entities associated with virtual currencies. They are required to stop having a business relationship with the entities dealing with virtual currencies forthwith and unwind the existing relationship within a period of three months.”
SOUTH KOREA WAS FORCED TO LEGALIZE BITCOIN FOR SIMILAR REASONS
The government of India has shown no interest in regulating and legalizing cryptocurrencies as an asset class in the past several years.
Although the Supreme Court hearings have led some companies and investors to become optimistic about the prospect of the country’s cryptocurrency sector, no progress has been made so far.
But, the pressure from other markets and governments like Bahrain on India could lead the country to reconsider its stance on cryptocurrencies as it could drain the region out of billions of dollars in potential deals.
South Korea, which has recently become a cryptocurrency and blockchain powerhouse, was previously skeptical towards regulating cryptocurrencies.
The country ended up legalizing the asset class to protect investors and to prevent companies from moving out of the country to other markets like Japan, Singapore, and Hong Kong.
Vishal Gupta, co-founder at DABFI, said that the RBI could provide the cryptocurrency sector with some relief in the long run.
“These have become dead assets for people who are holding onto them. This is going to have huge repercussions. If you disallow trading there is no exit to this. I personally believe they [RBI] will give some relief,” he said.
The Lightning Torch transaction relay using Bitcoin’ and the Lightning Network has crossed the border to Iran, days after complaints about censorship among participants.
SATOSHIS OVER CENSORSHIP
Lightning Torch, which involves Bitcoin users passing around a transaction on the Lightning Network, adding funds and sending it forward, has gained significant interest since it began its journey in January.
The brainchild of the Twitter user known as hodlonaut, over 230 people have now held the ‘Torch,’ which emanates the Olympic Flame.
Despite being designed to prove the borderless, decentralized qualities of both Bitcoin and Lightning for payments, the project faced rare criticism last week after one participant refused to send the transaction to a recipient in Iran.
That recipient was Coinex executive Ziya Sadr, who appeared to gain community support after Peach Inc. senior software engineer Vijay Boyapati claimed political factors prevented him from involving him.
“Very sad that two peaceful people cannot transact with each other across the world because of the state,” Boyapati commented at the time.
UK FACILITATES HOP TO IRAN
Since then, however, other Torch holders have broken ranks over the issue, and Ziya has now had the chance to receive the transaction.
According to the project’s monitoring website, it was UK-based Bitgeiniog who facilitated the move after receiving the payment from Bitcoin industry media resource Bitcoin Magazine. Ziya has since transferred it to another Iranian.
“[L]et’s keep the Censorship Resistance trend going,” he wrote, suggesting that developers of web browser Tor should be next in line to get involved.
Beyond the Torch, the Lightning Network continues to expand a-pace within Bitcoin. Statistics from monitoring resourcd 1ML.com confirm that overall capacity increased almost 20 percent in february, while the number of nodes and channels went up 19 and 39 percent respectively.
Lightning also goes far beyond payments. Last week, reported on how Blockstream had used its Lightning
Crypto finance startup Circle Internet Financial is reportedly looking to raise a further $250 million in funding.
A report from The Information on Saturday, citing a source with knowledge of the matter, said that Circle is seeking to raise the funding via a combination of equity and debt financing.
They added that the reason for the move is that the firm’s business has been affected by the prolonged cryptocurrency bear market. Circle has not confirmed the source’s claim, The Information said.
The Goldman Sachs-backed firm has previously raised at least $246 million, according to Crunchbase.
Circle raised $110 million in a Series E funding round last spring that effectively valued the startup at nearly $3 billion. The round was led by Chinese crypto mining giant Bitmain, with Accel, Blockchain Capital, Digital Currency Group, IDG, Pantera and others also participating.
Jeremy Allaire, the firm’s CEO, told at the time that the round would help the firm position itself as a conglomerate of cryptocurrency services.
The company offers several services, including crypto buying via its Circle Invest app, an over-the-counter (OTC) trading desk launched for institutional clients last September and cryptocurrency exchange Poloniex, which it acquired in February 2018.
Circle also has a dollar-pegged stablecoin called USD Coin (USDC) that it developed with help from the CENTRE affiliate consortium. It was seeking to register as a federally licensed bank in the U.S. back in June.
With its March investment round, Circle became a part of the “crypto unicorn” club, alongside U.S.-based cryptocurrency exchange Coinbase.
A lawmaker from the U.S. state of Utah has introduced a bill that would stop blockchain firms from being classed as money transmitters.
Republican senator Daniel Hemmert filed senate bill 213 last week, proposing that any person who “facilitates the creation, exchange, or sale” of certain blockchain-related products should be exempted from the state’s Money Transmitter Act.
The bill also aims to create a legislative group called the “Blockchain Pilot Project Evaluation Task Force” to study the potential of the technology in government services.
The 12-member task force would also recommend a pilot project using the technology in Utah at a state or municipal level and examine commercial applications of blockchain for “future economic development in Utah.”
Finally, it will prepare a report, including any proposed legislation, to the Business and Labor Interim Committee and the Legislative Management Committee, on or before Nov. 30.
In a similar move, Pennsylvania clarified that crypto exchanges and service providers do not require a money transmission license to operate in the state in January.
However, North Carolina state took the opposite stance in 2016, passing an update to the state’s Money Transmitters Act that mandated that companies working with bitcoin and other cryptocurrencies obtain a money transmitter license.
Benjamin Sauter and Jake Chervinsky of Kobre & Kim LLP are litigators and government enforcement defense attorneys who specialize in disputes and investigations related to digital assets. This article is not intended to provide legal advice.
As we enter the second year of this so-called “crypto winter,” the stablecoin market is hotter than ever.
In recent months, stablecoins – digital assets pegged to the value of fiat currencies like the U.S. dollar – have exploded in size and variety thanks to high-profile offerings from companies like Circle, Paxos and Gemini. Even traditional banks are joining the action, with JP Morgan recently announcing its own stablecoin-like product called JPM Coin.
Thus far, stablecoins have largely avoided public scrutiny and criticism from agencies like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), which have focused their attention on the many issues arising out of the 2017 initial coin offering bubble instead. Yet, as stablecoins see greater capital inflows and industry adoption, the SEC and CFTC will likely take a harder look at their compliance status.
Unfortunately for stablecoin proponents, agencies like the SEC and CFTC are often quick to assert their jurisdiction over new financial innovations, even if their intervention may not serve the best interests of an emerging industry.
Stablecoins promise many of the same benefits as other cryptocurrencies – like cheap transactions and rapid settlement – without the price volatility typically found in the crypto markets. Through that combination, stablecoins could satisfy the demand for high-quality fiat currencies in parts of the world with limited access to the global financial system, like Iran or Venezuela.
Stablecoins also could be useful for crypto exchanges that want to offer fiat-based trading pairs while reducing their engagement with legacy financial institutions.
To maintain their one-to-one peg with fiat currencies, most stablecoins use either a fiat-collateralized, crypto-collateralized, or algorithmic model. Fiat-collateralized stablecoins are backed by actual fiat currencies held in reserve by the stablecoins’ issuers, whereas crypto-collateralized stablecoins are backed by digital assets locked in smart contracts.
Algorithmic stablecoins, by contrast, aren’t backed by collateral at all. Instead, they use various mechanisms to expand or contract their circulating supply as necessary to maintain a stable value.
It was this type of stablecoin that apparently caught the SEC’s attention last year.
A basis for concern
In April 2018, an algorithmic stablecoin project called Basis made headlines when it raised $133 million from several prominent funds and venture firms. But, only eight months later, Basis shut down unexpectedly and returned its remaining capital to investors. The reason for the shuttering, according to Basis CEO Nader Al-Naji: “We met with the SEC to clarify a lot of our thinking [and] got the impression that we would not be able to avoid securities classification.”
It’s not hard to see why the SEC might view Basis through the lens of a securities offering.
The Basis protocol was designed to maintain stability by auctioning “bond” and “share” tokens to investors who would profit as long as Basis held its peg. Tokens like these could qualify as “investment contracts” under U.S. law, and thus may fall within the definition of a security. Apparently, the Basis team decided that the regulatory requirements imposed by that classification were too onerous to overcome.
Despite Basis’ startling end, there hasn’t been much discussion in the crypto industry about how U.S. securities and commodities laws might apply to stablecoins.
In fact, most industry players seem to take for granted that fiat-collateralized stablecoins are safe from regulatory scrutiny. That assumption may prove dangerous.
Stablecoin regulation under federal law
Most dollar-backed stablecoins are created in roughly the same way: purchasers deposit dollars with a stablecoin issuer, and in exchange, the issuer mints and returns an equivalent amount of the stablecoin. The process also works in reverse: stablecoin-holders can send a stablecoin back to its issuer in exchange for an equivalent amount of dollars.
Given how these stablecoins are redeemed, the SEC might characterize them as “demand notes,” which are traditionally defined as two-party negotiable instruments obligating a debtor to pay the noteholder at any time upon request.
According to the Supreme Court’s 1990 decision in Reves v. Ernst & Young, demand notes are presumed to be securities under Exchange Act Section 3(a)(10) unless an exception or exclusion applies.
For its part, the CFTC might take the position that stablecoins are “swaps” under Commodity Exchange Act Section 1(a)(47)(A). That provision defines swap to include an “option of any kind that is for the purchase or sale, or based on the value, of 1 or more interest or other rates, currencies, commodities, or other financial or economic interests or property of any kind.”
Under that definition, the CFTC might characterize stablecoins as options for the purchase of, or based on the value of, fiat currencies.
Of course, individuals and companies dealing with stablecoins will have good arguments as to why the “demand note” and “swap” classifications shouldn’t apply. For example, issuers could invoke the Reves court’s “family resemblance” test for demand notes, or challenge the CFTC’s jurisdiction over retail foreign currency options, depending on the circumstances. The regulators, however, may take a different view.
What could this mean for stablecoins?
If stablecoins are classified as regulated securities or swaps, there could be serious consequences for a large segment of the crypto industry. For example, stablecoin issuers might have to register their offerings and comply with all the ensuing regulatory requirements. Similarly, a company or fund that conducts or facilitates stablecoin transactions might have to register as a broker-dealer.
Plus, the SEC and CFTC aren’t the only regulators that may take an interest in stablecoins.
Only time will tell how other state and federal entities, such as the New York Department of Financial Services (NYDFS) or the Financial Crimes Enforcement Network (FinCEN), will approach the regulation of stablecoins, particularly if they’re used to evade trade sanctions or other transaction reporting obligations.
For now, it’s clear that anyone who issues or uses stablecoins should give considerable thought to their potential risk under U.S. securities and commodities laws.
Twitter CEO, Jack Dorsey, took another step towards financial sovereignty yesterday when he tweeted about his new toy, a Casa Bitcoin full node.
MI CASA ES SU CASA
The Casa Node is a plug-and-play solution for running your own full Bitcoin and Lightning Network node at home. Running a Bitcoin full node allows you to validate the blockchain and verify your own transactions. Aside from this, it also increases decentralization and hence the security of the network.
Lightning Network relies on interconnected nodes to route payments, so running one increases the network capacity and usability. Owners of nodes can also earn fees for routing payments, but bear in mind these are lightning payments, so the fees are very low.
HIT THE NODE, JACK!
Dorsey was clearly excited to receive his new piece of kit, tweeting firstly a picture of the unboxing, and then images of the set-up. Eagle-eyed readers may also have noticed the Bitcoin FUD dice in the unboxing shot
The Twitter and Square CEO
A BUSY FEBRUARY
Of late, Dorsey’s Bitcoin evangelism seems to be going into overdrive. February alone saw him participate in the Lightning Torch initiative, decry all alt-coins, accept LN tips on Twitter, and announce his desire for Lightning integration in the Cash app.
Not content with this, he also found time to appear on the Joe Rogan Experience podcast, again plugging Bitcoin as the currency of the internet.
At this rate, he’s fast becoming the sort of high-profile Bitcoin advocate people hoped Elon Musk would be. He’s certainly a more credible option than Alex Jones.
2018’s bear market, which we are still experiencing today, has taken its toll on the majority of crypto investors. Many people have already capitulated, selling their crypto holdings and leaving the scene. However, not all hope is lost, and there are still plenty of us believers still here.
One such believer in Bitcoin’s long-term value is the prominent crypto trader and top author on TradingView, MagicPoopCannon. The top trader recently stated that he sees Bitcoin (BTC) going to at least $100,000 within 4 years, and surpassing $1,000,000 in the long term.
Bitcoin (BTC) Price Poll
Shortly after MagicPoopCannon shared his positive outlook on Bitcoin, he took to Twitter with a poll, asking his 20,000 plus followers what they think Bitcoin’s long-term value will be.
According to the poll results, the vast majority of his followers agree that Bitcoin has a bright future and will eventually see unprecedented prices. The poll received nearly 3,000 votes, 42% stating that Bitcoin’s price will reach $100,000 to $1M+ long term.
30% of voters weren’t quite as bullish, as they see Bitcoin reaching the previous all-time high of $20,000 and potentially going up to $100,000. As for the remaining voters, 13% see Bitcoin remaining in the price range of $3,000 to $20,000, with 15% of voters having essentially lost all faith, seeing Bitcoin’s long-term price below $3,000 and worthless at $0.
MagicPoopCannon – Highly Reputable Trader and Technical Analyst
While nobody knows where Bitcoin’s price will eventually end up, we can look at what top crypto analysts think will happen and take their ideas and analyses into consideration.
For instance, MagicPoopCannon’s technical analysis has proven to be quite accurate over the past couple of years, and the prominent trader has generated a considerable following, with over 50,000 followers on TradingView and over 10 million views across his trading ideas.
The popular trader earned a name for himself after making a multitude of correct calls for the short, medium, and long-term views of Bitcoin’s price. One of the best examples of a great call of his was Bitcoin’s break of the critical $6,000 support.
MagicPoopCannon called for a break below $6,000 back in May 2018, while the actual break took place in mid-November 2018 – a full 6 months prior to the drastic price breakdown.
Now, the prominent crypto trader is claiming that Bitcoin already reached its bottom on December 14, 2018, at the price of $3,150. He states that Bitcoin is in a period of accumulation that could last months before the next bull run is in full force.
It may come as something of a surprise but, in certain circles, Bitcoin still has a somewhat poor reputation. Between high-profile hacks and assassins on the dark-web, many high-profile Bitcoin-evangelists are, to put it mildly, interesting characters. Now we can add conspiracy-theory propagation mouthpiece, Alex Jones, to Bitcoin’s illustrious list of champions.
Outspoken conspiracy-theorist and dietary-supplement peddler Alex Jones recently appeared on the Joe Rogan Experience podcast, where he called cryptocurrencies ‘the future.’
In typical anti-establishment fashion, Jones sowed mistrust about the government-controlled fiat-based economy, saying:
We have a private federal reserve that’s all fiat – I’m not judging anybody, I’m just saying: be careful.
Jones’ support for cryptocurrency is perhaps unsurprising, as last year he was de-platformed by the majority of social media and PayPal. This came as part of the wave of PayPal banning of purportedly right-wing outlets such as Gab and The Hacker News towards the end of 2018.
As a poster boy for Bitcoin, there’s a risk that his supporting message will drown in the background noise.
For example, he also told Rogan that eight years ago George Soros had offered him $5 million to pump Bitcoin. This, he claimed, was worth $38 million at the peak of 2017’s bull-run, but he refused it. This may just be a miscalculation of value or timing; the approximately 2,000 bitcoin which were worth $38 million at peak was actually worth $5 million just 21 months ago.
But true or not, this quite incredible claim pales into insignificance compared to some of the outlandish things Jones has said.
WHAT IF STEPHEN HAWKING WAS SATOSHI NAKAMOTO?
Bitcoin needs a champion with both credibility and popularity to truly become mainstream. If we found out that Stephen Hawking was Satoshi Nakamoto, it would do the trick. Hawking’s reputation as a clever person would convince many a person thus far untroubled by thoughts of Bitcoin that it was a good idea.
Heck, for the UK at least, even cut-price Hawking — TV physicist, and ex-pop star, Brian Cox — saying that Bitcoin is ‘kinda good’ would probably do the trick.
We had high hopes for Musk, but he seems intent on blowing both his credibility and his popularity of late.
There are plenty of credible sports and entertainment stars who have expressed their love of cryptocurrency. All we need is one or two of them to promote a sustained pump to get the world listening again.
A judge has ruled that an ongoing class action lawsuit against Ripple must remain in federal court, potentially giving the payments firm a slight advantage going forward.
U.S. District Judge Phyllis Hamilton, of the Northern District of California, ruled Thursday that a class action lawsuit filed against Ripple and affiliated subsidiaries and individuals would not be shifted back to lower courts after lawyers for the company first moved to district court last year.
This is a “minor but meaningful victory” for the firm, said Kobre Kim attorney Jake Chervinsky on Twitter.
Stephen Palley, a partner at Anderson Kill, previously told that typically, corporate defendants in cases feel more comfortable with federal courts as lower court juries and judges are locally selected and thus could be more sympathetic to plaintiffs.
Chervinsky agreed, noting that “Ripple fought hard” to keep the case at the federal court level.
The case centers around XRP. The plaintiffs in the case allege that Ripple issued the cryptocurrency as an unregistered securities offering, a claim Ripple has frequently denied.
Ripple Labs, its subsidiary XRP II, CEO Brad Garlinghouse and a number of other individuals have been named as defendants in the case.
Despite Ripple’s win on the jurisdictional question, “the case won’t go to trial for years, if it goes to trial at all,” Chervinsky told via email. The lawsuit will have to move past several other stages, starting with a likely motion to dismiss.
“Ripple will argue that the complaint fails to state a legally cognizable claim as a matter of law, even assuming all the allegations in the complaint are true,” he said.
If a judge rules against such a motion, or if Ripple decides not to file one, the plaintiffs can then file for class certification. Right now, Chervinsky explained, “the lawsuit is styled as a class action but technically does not become one until and unless the Court grants a motion for class certification.”
Only then can the discovery process begin, which would include plaintiffs and defendants exchanging documents, answering questions and conducting depositions.
The case would still have to sort through motions for summary judgment before the judge can determine whether a trial is necessary.
It is entirely possible the case may end prior to this, however. Ripple and the plaintiffs may choose to settle the case, though Chervinsky does not believe this can happen in the immediate future due to procedural roadblocks.
In particular, any settlement prior to class certification would result in individual payouts to the plaintiffs currently attached to the lawsuit. This would not prevent any future lawsuits from being filed against Ripple, and the investors suing the firm would likely not recover much of the funds.
Should the parties settle after class certification, members of the class would waive their rights to another lawsuit, which the company would likely prefer.
“As a result, there isn’t much incentive for Ripple or the plaintiffs to settle the case before the class certification stage,” Chervinsky said.
He noted that while this case has been before the court system since May 2018, very litigation has actually occurred. “Ripple still hasn’t had to file a substantive response to any of the plaintiffs’ complaints,”Chervinsky said, adding:
“This demonstrates a few points: (1) Ripple’s litigation team seems comfortable delaying the case as long as possible; (2) assuming Ripple’s strategy is to delay, they are so far executing that strategy with great success; and (3) it will probably be a very long time – on the order of months or years – before this dispute is finally resolved.”
According to Thursday’s ruling, the parties now have two weeks to meet and determine how they might want to proceed. The plaintiffs have 30 days to file an amended consolidated complaint, while Ripple has 30 days to file a motion to dismiss or notify the court that it does not intend to do so.
Read the full ruling here:
Ripple Denial of Motion to … by on Scribd
Ripple CEO Brad Garlinghouse image via CBInsights
Cryptocurrency exchange Binance is hoping to boost the number of people testing its upcoming decentralized exchange (DEX) platform by giving away $100,000 in tokens.
Announcing the news on Twitter on Friday, Binance CEO Changpeng “CZ” Zhao said:
“To test the hell out of @Binance_DEX, we are giving away roughly $100,000 USD equivalent, in REAL $BNB, as reward for our testnet trading competition.”
The initiative, he said, would help the exchange launch the mainnet, or live version, of Binance DEX more quickly.
According to Binance’s website, the funds will be made available as prizes in a simulated trading competition kicking off next Thursday.
Exchange users who hold at least one Binance Coin token (BNB) in their account will be eligible to participate in the event. Each account can register up to 20 Binance Chain addresses and will receive 200 virtual BNB tokens for each address to use as starting funds for the competition.
The firm noted that the Binance Chain testnet will be reset before 08:00 UTC on March 7, clearing all existing asset balances. Once complete, trading for the competition will commence.
Binance is dividing the competition into two different events, with prizes in BNB for each.
Firstly, there’s the “Token Competition for Healthy Price Volatility,” which will see users compete to issue and list tokens on the testnet.
“The addresses that own tokens will be ranked in terms of the sum of each token price’s volatility over every five-minute interval on the ‘Token’/BNB trading pair during the competition period,” the exchange says.
There are three prizes up for grabs, ranging from 1,000–3,000 BNB.
Secondly, there an “Absolute Return Competition” event that will be ranked according to the absolute returns users achieve with their trading strategies on specific tokens. This one offers 20 prizes ranging from 50–1,000 BNB.
The BNB token is trading at just over $11 at press time, according to CoinMarketCap data.
Binance announced on Feb. 20 that the DEX was open for public testing, allowing users to create wallets and interact with the trading platform’s interface. At the same time, it revealed a blockchain explorer for the testnet of its Binance Chain network, which supports the DEX.
Developers in the ethereum community are seeking a new specialist to help coordinate major software upgrades.
Following the departure of core developer Afri Schoedon from the open-source project in late February, ethereum developers discussed the issue of who would take his place in coordinating hard forks, or system-wide software upgrades, in a meeting Friday. Schoeden left just last week after favorable remarks he made about another blockchain project sparked social media outcry.
The role as highlighted by Ethereum Foundation community relations manager Hudson Jameson would consist of “[deciding] on hard dates for submitting [Ethereum Improvement Proposals] for consideration, deciding on those EIPs, implementation and testing and then finally what day the hard fork would be.”
“Of course, they wouldn’t be a dictator in this regard, but they would be the one to come up with suggestions or different options to bring to the table,” added Jameson during the call.
Rather than delegating the role to a single individual, ethereum core developers agreed that the role of hard fork coordination could be split between two to three individuals.
Highlighting that a number of candidates have already stepped up to offer their support, Jameson concluded that the task of assessing applicants would be delegated to a group of ethereum volunteers called the “Ethereum Cat Herders.”
The group was initially started back in January by developer Lane Rettig, Jameson and Schoedon “for the broader purpose of coordination and project management” within the ethereum ecosystem.
Coordinating the ‘ProgPow’ Audits
Having successfully implemented two hard forks yesterday, ethereum core developers are now preparing for the next system-wide upgrade called Istanbul, as well as a possible upgrade to a new mining algorithm known as ProgPoW.
On the latter subject, Jameson gave an update explaining that blockchain testing platform WhiteBlockwould be responsible for conducting benchmarking experiments comparing the performance of various ethereum mining devices on ProgPoW. A second audit is also in the works to test whether specialized mining hardware can be built and deployed to take advantage of the proposed mining algorithm.
At this time, the Cat Herders have not finalized a company to proceed with the second audit.
Jameson also noted during today’s call that over half of the miners in the ethereum ecosystem – 55 percent to be exact – are in favor of ProgPoW according to stats from an ongoing “hashvote” using blockchain analytics site, EtherChain.
As Jameson explained, hashvotes are specifically targeted at ethereum miners in the ecosystem who by leveraging an extra data field during their operations can indicate whether or not they favor the proposal.
However, as pointed out by core developer Alexey Akhunov, these results may depict a somewhat skewed interpretation of miner signaling, saying:
“There is another interpretation which could be useful of this 55 percent number…Essentially if those 55 percent who turned out all voted in favor that gives you essentially a lower bound on how many GPUs are currently mining in the network.”
The comments show that discussion on implementation of the proposal are still ongoing.
Have you ever visited a culture-rich country and found yourself lost in the crowd, not knowing what the best utilization of your vacation would be? Don’t worry, you are not alone.
Almost all of us have faced this, particularly in countries like Japan that are flooded with content like experiences, events, cuisines, ethnicities, and cultural history.
To solve all these hurdles that tourists often face while traveling to Japan and for creating a unique platform capable of fair ticket distribution, the Japan Content Token (JCT) project has commenced. From all things popular to the hidden classics, from the world heritage sites to the local wonders, this project lets users have access to all the critical content.
What further enhances the user experience is that the JCT project has been built using the distributed ledger technology, blockchain.
With such technical advancements, it adds various values of transparency, fairness, and security along with other process efficiencies. Unlike other blockchain projects, the Japan Content Token is the first one to be backed by real businesses, a robust development system, and a team with extensive experience and expertise.
The ecosystem that such a diverse pool of “content” can create along with all the untapped resources that are provided to the tourists is unimaginably efficient. Particularly reaching out to the rapidly growing economies of Asia, the synergies that can be created are huge and unique.
With 2020 Olympics scheduled for Tokyo, there are extreme gains that can be leveraged via the JCT platform.
Tourists visiting Japan and leveraging the Japan Content Token will have access to tickets, reservations rights, and extra credits. On top of all these benefits, the project also allows a resale of tickets and reservations. The platform that the project uses for ticket distribution is JaCKET. All the content is backed by DiscoverJapan, one of the most popular and reliable magazines for tourists as well as natives alike.
There is a lot that this project has to offer, and it is further validated by the founding team.
From people with content-rich expertise to blockchain industry experts, there is a unity in diversity. It is also supported by prominent venture capitalists who have several investment success stories to share. The team is leveraging its knowledge and experience to leverage blockchain and smart contracts for enhanced security, fair pricing, and tamper-proof transactions.
GIC Private Limited, a Singapore government-owned wealth fund, reportedly backed Coinbase’s $300 million funding round last year.
The news comes via a Bloomberg report on Thursday citing “people familiar with the matter.” This was possibly GIC’s first investment in the crypto space, the sources added.
The fund has more than $100 billion in assets in over 40 countries across various asset classes, the report adds, though the Sovereign Wealth Institute puts the total far higher at an estimated $390 billion.
Crypto exchange Coinbase announced the $300 million Series E equity round last October. At the time, neither the exchange nor GIC disclosed the fund’s participation.
The funding was led by Tiger Global Management, while Y Combinator Continuity, Wellington Management, Andreessen Horowitz, Polychain and others also participated. Coinbase said at the time that the raise gave it a “post-money valuation of over $8 billion.”
Large investment funds are increasingly starting to dip their toes in the digital assets space. Just last week, the University of Michigan, which has an endowment valued at about $12 billion, disclosed that it committed $3 million to Andreessen Horowitz’s cryptocurrency fund back in June. The university also said that it is considering further investment in the fund.
Yale University, which boasts second-largest endowment among educational institutions globally, also reportedly invested in Horowitz’s fund at the time, as well as backing Paradigm’s $400 million crypto fund last October.
Earlier this month, two public pension funds in Fairfax County, Virginia, backed Morgan Creek Capital’s crypto-focused venture fund that raised $40 million.
Further, Cambridge Associates, a pensions and endowments consultant, recently said that it’s time for institutional investors to consider getting into cryptocurrencies.
Square, the payment network from Twitter CEO Jack Dorsey, turned more Bitcoin revenue in Q4 2018 than at any time since it began support for the cryptocurrency.
Q4 BEATS BITCOIN RECORD
Data from the company’s Q4 earnings report this week confirmed its Bitcoin sales topped $52 million, beating Q3’s $43 million and far outstripping the $37 million from Q2.
Users of Square’s Cash app have been able to buy and hold Bitcoin since last year, a service which has proven surprisingly popular among the product’s mainstream US consumer base.
The figures are a boon for Dorsey, who this week hinted at impending integration of more Bitcoin technology into Square Cash.
“For the year ahead we continue to focus on three things and we will continue to strengthen our omni-channel offering,” Dorsey told CNBC in a statement February 27.
That means that we add strength to in-person payments, to mobile payments and also to online. We’re really excited about everything we’re doing in financial services.
BALANCING THE BOOKS
Revenue versus profit for Square remains tight on Bitcoin; the cost of buying up the cryptocurrency accounts for almost all the sales revenue due to the de facto lack of spread for users.
While not a source of profit in itself yet, Bitcoin functionality remains a preoccupation for Dorsey.
This month saw the Twitter mogul publicly state his enthusiasm for and plans to leverage Bitcoin’s Lightning Network within Square.
“We would love to make [Bitcoin] as fast and efficient and transactional as possible, and that includes looking at our seller base and register,” he told the Stephan Livera podcast.
“It’s not an ‘if;’ it’s more of a ‘when[.]’”
Dorsey further participated in the Lightning Torch transaction relay, reiterating his belief in Bitcoin as his bet of choice within the cryptocurrency industry. He added that he did not hold any other cryptocurrencies or hard forks of Bitcoin.
The hidden miner, which was sometimes even used to monetize news content on sites such as Salon, is closing ahead of a Monero protocol change in March.
Several economic factors led to the decision, including the rapid drop of XMR market prices, which makes the coin less attractive as a payout.
“The drop in hash rate (over 50%) after the last Monero hard fork hit us hard. So did the “crash“ of the crypto currency market with the value of XMR depreciating over 85% within a year. This and the announced hard fork and algorithm update of the Monero network on March 9 has led us to the conclusion that we need to discontinue Coinhive,” the team explained on its blog.
The Monero network will fork once again with a still unannounced change to the mining algorithm, creating the need for Coinhive to adapt anew. Monero is now dedicated to regular hard forks as ASIC or other specialized chip-based miners are catching up faster.
The Coinhive dashboard will be available until April 30 so that users with balances accrued could initiate payouts.
XMR market prices stagnated at $49.43, crashing from peaks of near $500 in January 2018. In the meantime, Coinhive mining had somewhat successful periods as it competed with ASIC and other mining devices, meaning lower payouts. Coinhive also had a bit of a poor reputation for slowing down websites.
Some news outlets, such as Salon, announced their usage of Coinhive but only performed a short-term test. Coinhive mining usually noticeably slows down consumer electronics and wears out CPUs.
The pending shutdown may also mean a drop in hidden
Blockchain-based home equity loan startup Figure Technologies has raised $65 million in a Series B round backed by Morgan Creek.
Announcing the news on Wednesday, Figure said the round was led by venture capital firms RPM Ventures and DST Global, with Ribbit Capital, DCM Ventures, Digital Currency Group, Nimble Ventures and others also participating.
The Series B investment brings the firm’s total equity funding to over $120 million, the firm said, adding that the new investment will go toward helping the firm strengthen its product offerings.
Founded last year, the firm launched its home equity loan product in October, which utilizes its native blockchain protocol called Provenance. The firm claims to provide loan approval in “as little as five minutes” and funding within five days.
Figure co-founder and CEO Mike Cagney said that the round “validates” its market potential, adding:
“We launched the fastest HELOC [home equity line of credit] in the market, and we originate, finance and sell every one of our loans on the Provenance blockchain, an industry first.”
Figure said in its announcement that it turned to blockchain tech for its “security, efficiencies and cost advantage” for loan origination, financing and sales.
A number of funds, banks and dealers are already using Provenance, it added. By mid-2019, Figure expects several other loan originators to use the platform by mid-2019. Other use cases, such as putting investment funds on the blockchain, will also be explored this year.
Figure said it has funded more than 1,500 HELOCs for customers across 36 U.S. states since September.
Mobile payments firm Square has reported over $166 million in revenue from bitcoin sales last year.
The company filed its financial results for Q4 2018 with the U.S. Securities and Exchange Commission (SEC) on Wednesday, disclosing that it made overall net revenue of $3.3 billion last year, 5 percent of which came from the cryptocurrency buying service within its Cash App.
While bitcoin sales brought in precisely $166,517,000, the cost of purchasing the cryptocurrency for the year was about $165 million. That left the firm with a net profit from bitcoin sales of 1.69 million.
Looking at Square’s quarterly figures, the bitcoin business was notably better in the second half of last year.
Specifically, the firm took $95 million in bitcoin revenues in the second half, compared with about $71 million in the first half. Profit for the second half was $1.047 million, and was $643,000 in H1.
The firm further disclosed that the carrying value of bitcoin held by the firm was $0.2 million as of Dec. 31, 2018. The firm said it assesses the carrying value at each reporting date and records an impairment charge if the carrying value exceeds the fair value. However, loss on bitcoin for the year 2018 was “insignificant.”
Square added bitcoin buying and selling option to its Cash App back in November 2017, initially only to a small number of users though. Later, in August 2018, the firm expanded the facility to all 50 U.S. states. The firm received a “BitLicense” from the New York Department of Financial Services (NYDFS) last June, that allowed it to offer crypto services in the state.
Cryptography company Curve revealed its Institutional Digital Asset Wallet Service today, which aims to provide financial institutions and enterprises with a storage solution that makes their cryptocurrencies and digital assets instantly available — while also providing total autonomy and eliminating the need for private keys.
Curv claims that it is eliminating the need for somewhat-complicated private key access to institutional players looking to add cryptocurrencies and digital assets to their portfolios. The company says it is doing this via “a simple, distributed way to secure and sign transactions.”
More specifically, Curv uses “proprietary multi-party computation (MPC) protocols” that signs transactions “in a fast, secure, distributed” manner that “protect[s] against cyber breaches, physical damage, and insider collusion.” This solution is a software-only service based on cloud technology that offers “a flexible, enterprise-grade policy engine that allows institutions to define risk profiles and enforce granular controls for all employees, machines and wallets, assuring compliance with organizational policies across all digital assets.”
One may be forgiven for thinking the above information is simply a collection of impressive-sounding industry buzzwords which essentially states that ‘institutional investors don’t need to hold their own private keys.’
The statements made in the official press release are equally generic, with Curv founder and CEO Itay Malinger stating:
We are focused on unleashing the potential of blockchains with our revolutionary approach to digital asset security. We give customers a way to securely integrate and manage all their digital assets, so they can easily transact and thrive in the digital world.
Though hard details are not provided in the company’s press release, it did manage to raise $6.5 million in seed funding from the likes of Team8, Digital Currency Group, and others.
The product will be available as a subscription in less than one month, on Mar 25, 2019. Maybe then we will actually be able to see what it is.
New Zealand-based cryptocurrency exchange Cryptopia has given an idea of the losses arising from a hack on its platform last month.
After being almost silent since the breach, the firm published a series of updates via Twitter on Wednesday. Most notably, Cryptopia provided an update on how much of the total assets held by the platform was lost in the cyber-attack, saying:
“We are continuing to work on assessing the impact incurred as a result of the hack in January. Currently, we have calculated that worst case 9.4% of our total holdings was stolen.”
It did not provide an idea of that amount in monetary terms.
Cryptopia went offline on Jan. 15 saying it had suffered a “security breach which resulted in significant losses.” The exchange did not provide any specific information at the time and has since said it cannot comment while an investigation by the New Zealand Police is underway.
A blockchain data analytics firm estimated after the attack that as much as $16 million in ether and ERC-20 tokens could have lost. Notably, hackers still had control over Cryptopia even after the police had been brought in and reportedly stole an additional 1,675 ether from 17,000 wallets – an amount worth about $181,000 at the time.
In Wednesday’s tweets, the exchange said it is “securing each wallet individually” to ensure it is “fully secure” when resuming trading.
Cryptopia also warned:
“As a result of the new wallets please immediately refrain from depositing funds into old Cryptopia addresses. We have more updates to come tomorrow, keep an eye on our page.”
New Zealand Police said on Feb. 7 that it expected to complete the inspection of Cryptopia’s premises by mid-month. Cryptopia confirmed in a tweet on Feb. 14 that the police had given them access back to its building, while the investigation was continuing.
Detective inspector Greg Murton of the New Zealand Police said at the time that the case is “progressing well and advancing on several fronts,” adding:
“The focus is on identifying those behind this offending and retrieving the stolen cryptocurrency. This investigation is expected to take a considerable amount of time to resolve due to the complexity of the cyber environment.”
Two Japanese tech giants have teamed up on an initiative using blockchain to provide educational records that cannot be faked.
Announced by Sony on Wednesday, Sony Global Education, Fujitsu Ltd. and the Fujitsu Research Institute have launched a field trial to evaluate the utility of blockchain tech in the management of course records and exam grades. Also collaborating on the trial is Human Academy, an educational institution that serves foreign students.
The trial will see foreign students aiming to study in Japan take a course preparing them for the Nihongo Kentei language proficiency test.
Students will use Fujitsu’s Fisdom*2 digital learning platform as part of the course, with data including study logs and test grades being immutably stored and managed on a blockchain. The data will be provided to students as an “unfalsifiable” digital certificate, Sony said.
Growing numbers of foreign workers and students are coming to Japan, and many must provide the results of Japanese classes and exams taken before arriving in the country to take start employment or education.
However, Sony said that it’s not always easy to confirm foreign students’ course results.
“In terms of language ability, this has led to issues as appropriate instruction suited to a person’s ability was not provided after coming to Japan, and the institution was subsequently unable to offer job search support,” the company explained.
Educational data provided over a blockchain can potentially provide educational institutions with a more reliable idea of a prospective student’s ability at speaking Japanese, Sony explained, as well as verification that the student actually took the course.
The news marks Sony’s latest initiative to utilize blockchain in education. In 2017, the company developed a new educational platform in partnership with IBM that uses blockchain to secure and share student records.
It filed for a related patent the same year, setting out how nodes on an education blockchain network could be run by teachers, students or other parties that might need access to those records. “Educational experiences” would be cemented on the chain after being signed by the relevant users and could be exchanged, transacted and transferred via the blockchain as a “smart property.”
Capital markets blockchain startup Nivaura has raised a total of $20 million with the closing of its second seed extension round led by the London Stock Exchange Group (LSEG).
Announced today, other investors in the latest round include Santander InnoVentures, the Spanish bank’s VC arm; law firms Linklaters and Orrick; Transamerica Ventures, part of pensions and asset management giant Aegon; MiddleGame Ventures; Digital Currency Group; and Spencer Lake, formerly head of global markets at HSBC.
Nivaura closed the original seed round in October 2017 and the first extension round in January 2018. The firm did not provide a breakdown of the three rounds but said the one that just closed was “significantly larger than the preceding two,” meaning most of the $20 million is freshly raised. The proceeds will be used to increase headcount “significantly across all areas” (including hires in machine learning and natural language processing) expand into the U.S. and Asia, and invest in further R&D, Nivaura said.
The company’s big idea is using public blockchains to automate the entire life cycle for the issuance of financial instruments – bonds, equities, derivatives – so that humans don’t need to touch anything and a corporate can do a self-service issuance.
Nivaura CEO Dr. Avtar Sehra said that, this year, Nivaura plans “a series of high-profile, large-scale projects with high-caliber partners to demonstrate our platform as a valuable solution across the full spectrum of capital markets primary issuance activities,” adding:
“We’re seeing growing appetite from major financial institutions for practical innovation that goes beyond buzzwords and conceptual PoCs in ‘digital investment banking.’”
Nivaura is also beefing up its board, adding Nikhil Rathi, the CEO of the London Stock Exchange, and Lake, who is also joining as an advisor.
“The investment strengthens our existing relationship with Nivaura and underlines the Group’s partnership approach in innovating to support our clients in accessing global investment pools,” Rathi, who is also head of international development for the exchange’s parent company LSEG, said in a press release.
The investment also represents a deepening of Nivaura’s ties with LSEG. Previously, the exchange operator worked with Nivaura on the issuance of tokenized securities as part of the regulatory sandbox program of the U.K. Financial Conduct Authority (FCA).
Through this work, Nivaura has acquired expertise in arcane but important regulations such as the European Union’s Markets in Financial Instruments Directive (MiFID) and the FCA Client Assets Sourcebook (CASS), which apply both to traditional market infrastructure as well as using tokenized instruments and blockchains.
“What we are doing is not magical. We are technologists and financial engineers, but we also understand regulation very deeply. We work within the existing regulation rather than try to drive change in regulation because that’s very hard. To change legislation takes decades.”
Figuring out how tokenized securities can be traded in Europe under the Central Securities Depositories Regulation (CDSR) has meant Nivaura needed to also increase its legal firepower. To that end, it’s made a senior hire: Richard Cohen, a seasoned debt capital markets lawyer, is moving from Allen & Overy to become Nivaura’s general counsel and head of strategy.
Sehra explained that working with CSDR and MiFID is very complex in and of itself and the firm needed to bolster specific expertise in compliance, as well as in financial instruments, to complement what it does with technology and engineering.
“We re-engineered some of our key workflows to make tokenized instruments compliant under CSDR. Then it doesn’t matter which blockchain you use – a private or public one – ultimately the token created on that chain will comply under CSDR and can be traded on a regulated trading venue,” he said.
The work Nivaura has publicized so far with tokenized securities has all been done on public blockchains, first the bitcoin blockchain and then later using ethereum.
Sehra pointed out the official position of the company is blockchain-agnostic, just as traditional market participants are not beholden to any single clearing house.
“Like, we don’t say you can’t go into Clearstream if you use Euroclear,” said Sehra, adding that clients can use a software development kit (SDK) to plug into any clearing system they like, blockchain-based or otherwise.
Currently, the business that’s generating revenue for Nivaura is its workflow management and automation platform for primary capital markets, couched in traditional market infrastructure, noted Sehra.
But while that work pays the bills, the company is preparing for the financial industry’s transformation, he said, concluding:
“The blockchain aspect we are considering, it’s not something banks and other firms will want to use right now. But ultimately we think that’s where the future is and that’s why clients are working with us.”
Ether price volatility could spike in the days ahead, courtesy of an upcoming ethereum upgrade scheduled for Thursday.
The Constantinople hard fork, a planned two-part upgrade to the world’s second-largest cryptocurrency, is scheduled to occur once block 7,280,000 on the ethereum blockchain is mined. At the time of writing, ether’s block height is 7,272,826, meaning the fork should occur in the next 24 to 48 hours, given that roughly 4,200 blocks have been mined per day for the past two weeks.
However, the change could draw the interest of more than just developers and users, as historical data shows ether price volatility tends to spike hours before a software upgrade.
For instance, ether price volatility picked up with the Byzantium hard fork release on Oct. 16, 2017, with the resulting uncertainty forcing traders to sell ETH and unwind their long positions leading to a 20 percent price slide
As shown in the chart above, traders on that date were unwilling to invest amid a change to the underlying ethereum protocol.
The Chaikin Money Flow (CMF), used to gauge momentum as well as buying and selling pressure, demonstrated a break into bullish territory (a move above 0) on Nov. 14, 2017 after a brief visit below when prices went through a 20-day consolidation period.
Overall, it took a total of 34 days for ether’s price to break above the sideways channel after the fork occurred, so if history repeats itself, ether prices may be destined for a multi-week sideways trend after the Constantinople upgrade takes place.
Still, it’s also worth noting current trading conditions and the overall bear market for cryptocurrencies at present.
ETH/USD witnessed a considerable sell-off Sunday when its price dropped 17 percent after having clocked a three-month high earlier in the day. The CMF on the daily time frame was still printing a value above zero, so a bearish view is not yet confirmed as per the indicator.
However, if bears continue to drag price lower, the sell-off would likely be short and fast unless the amount of selling volume increases substantially, in which case it would add credence to the fall and put the price at risk of falling below the prior support level $123.
If the Constantinople fork aftermath resembles that of what transpired in ether markets following the Byzantium fork, ether prices should not exceed a drop beyond 20 percent. It’s also possible that delays in the scheduled update could impact the market, and traders may want to be prepared accordingly.
The Constantinople hard fork was delayed in January of this year due to unforeseen mistakes during testing, a move that caused a slight drop in the ether price, as reported by MarketWatch at the time.
Disclosure: The author holds no cryptocurrency at the time of writing.
SoFi, a millennial-focused online lending platform, will allow its customers to buy cryptocurrency through a partnership with Coinbase starting in the second quarter, CNBC reported Tuesday.
“Our target audience wants to see what the price of cryptocurrency is, and to buy it,” SoFi CEO Anthony Noto was quoted as saying in the CNBC report. “They have a desire to do that and in many cases they already are.”
SoFi did not specify which cryptocurrencies would be available for purchase when the service launches, according to CNBC.
In addition to enabling such purchases, the partnership will let SoFi customers track the prices for various cryptocurrencies, similar to an arrangement Coinbase has for retail customers of Fidelity Investments, though the latter tie-up does not allow crypto trading. (Fidelity separately plans to launch trading of digital assets for institutional clients through its own platform this year.)
SoFi was founded in 2011 with a goal of making college more affordable to students with consolidation loans provided by alumni, according to The New York Times. In that sense, it has roots in peer-to-peer finance. The company later branched out into mortgages and investment products.
Coinbase and SoFi both declined to comment.
The 100 largest wallets (holding 10,000-100,000 BTC) excluding exchanges accumulated over 150,000 bitcoin in the past two months.
DO THE BART
In all the woe and misery of the crypto-winter, we can often find some
Last week saw some interesting movement in bitcoin, with the price $3857.16 -0.15% jumping first to $4000, then again on Saturday to briefly hit $4200. Unfortunately, Sunday saw a reversal, with price dropping back to $3800. Still a good $200 more than it had been trading at, but not the breakout hoped for.
Of course, it wasn’t all bad news, as those who sold at the peak, or with cash to spare, could buy back in at the lower price. Which is exactly what the Bitcoin whales (holders of large amounts of bitcoin) did. In fact, that’s pretty much what the whales have been doing for this entire bear market.
In the past two months alone, holders of the 100 ‘fattest’ bitcoin wallet addresses have managed to accumulate over 150,000 additional coins, or well over half a billion US dollars.
52 CARD PICKUP
The five largest wallets belong to exchanges (Bittrex, Bitfinex, Bitstamp, Huobi, and Binance) which all hold over 100,000 bitcoin. In the two months from December 17, 2018 to February 25, 2019, these added 2879 BTC, making a total holding of 573,958 BTC.
According to data from BitInfoCharts, the next 100 largest wallets (holding 10,000-100,000 BTC) accumulated over 150,000 BTC in the same period. In fact, at
CALL ME ISHMAEL
So where have all these additional bitcoin come from? Well, according to the data the only bracket whose wallets have less BTC is from 1,000 – 10,000. One would imagine that the bulk of this move comes from wallets accumulating bitcoin and moving up into the next bracket.
Unless the whales had recently sold at the peak, they would have been financially better off buying at $3600 a week earlier than at $3800 after the drop. Nevertheless, whenever there are unexplained price movements, it is perhaps somewhat comforting that we can always blame the whales. Bloody whales!
Blockchain startup Electroneum has just launched a dirt-cheap Android smartphone that mines cryptocurrency.
Announcing the news on Monday, the firm said its new M1 is a Google Mobile Services (GMS)-certified smartphone that comes with a cloud mining technology integration enabling users to earn crypto through an app.
The $80 smartphone, however, will at launch mine only Electroneum’s native token ETN, with a claimed monthly return of “up to $3.” Once set up, mining can be carried out offline, the firm said.
The ETN tokens earned by users can be utilized to pay for services such as mobile top-ups, online services and shopping. It’s also tradable on exchanges, with 1 ETN worth around $0.0073 at time of writing, according to data from CoinMarketCap. It has a market capitalization of around $65 million currently.
The M1 offers 4G, 8 GB–32 GB of storage and two SIM slots, and is powered by a Quad Core 1.3 Ghz processor. Cameras are a less than overwhelming 5 megapixels (rear) and 2 megapixels (front).
The device is apparently being offered at the price of “reconditioned handset” because Electroneum is looking to target developing countries and grow the adoption of blockchain and cryptocurrencies. In some countries, the firm may price the phone even lower, at around $60.
“To start with we will be selling the M1 in South Africa, as this is our first launch market,” Nick Cook, head of operations at Electroneum. “The M1 will be sold through local vendors.”
Cook further said that the device will also be sold over Amazon in South Africa in the coming weeks.
Electroneum’s founder and CEO, Richard Ells, said in a separate statement shared:
“South Africa was an obvious choice for us. We carried out a large survey in the country and found that 97 percent of those who responded said they would like to use ETN to pay for mobile airtime and data.”
Electroneum has partnered with cybersecurity firm HackerOne, which is also used by the U.S. Department of Defense, to secure its network, Cook told.
Accenture has announced a prototype blockchain-based supply chain app designed to reward business practices that conserve natural resources.
Announced today, the consulting firm said it’s working with Mastercard, blockchain startup Everledger and humanitarian aid organization Mercy Corps to encourage the introduction of the so-called “circular supply chain.”
A circular supply chain is a way to organize production so that the materials get recycled as much as possible, with discarded goods captured and components and materials re-used.
Accenture envisions its app will allow consumers to easily track the provenance of the goods they are buying and see if a producer has a certification for sustainable practices. Consumers could also use the app to send tips as a reward for responsible producers.
This reward can be sent in a form of a blockchain-based token or a fiat transfer powered by Mastercard payment rails, Accenture’s global blockchain lead David Treat told.
He added that Accenture is aiming to enroll small farms across the world and allow them to register their certificates of ecologically conscious practices on a blockchain as a part of their digital identity, allowing consumers to see who produced the goods they are buying and how that business is managed.
The company is also working with farmers’ associations in Africa and South America that might want to participate in the system, Treat said. The associations will be responsible for maintaining cloud-based nodes on behalf of their farmers.
Mercy Corps plans to contribute its experience working with farmers’ communities across the globe to the project, Ric Shreves, a senior advisor to the Technology for Development team at the NGO, told.
“In this stage of the project, we are exploring possible agricultural programs in our current program portfolio to pilot Circular Supply Chain. We think it will be best suited for boutique consumer goods, for example single origin coffee, as opposed to bulk goods.”
Accenture has built a prototype on Hyperledger Fabric, Treat said, and is looking to onboard more partners to participate. Mastercard can contribute its expertise in blockchain and payment systems, as well as access to communities it’s already working with. However, the role of the payments giant in the new joint project is not yet finalized, he said.
Tara Nathan, executive vice president for humanitarian issues and development at Mastercard, said in Accenture’s announcement: “Through our work with smallholder farmers in Kenya, India, Mexico and elsewhere, we’ve deployed digital solutions helping to drive commercially sustainable social impact – and we understand that collaboration is essential for this journey,”
Billionaire investor Warren Buffett thinks blockchain technology “is important,” but remains far less bullish on bitcoin.
Speaking to CNBC’s Becky Quick, the chairman and CEO of the multinational conglomerate Berkshire Hathaway reiterated his long-held views on bitcoin, calling the way some people perceive the cryptocurrency “a delusion.”
“It’s ingenious and blockchain is important but bitcoin has no unique value at all,” Buffett said. “It doesn’t produce anything, you can stare at it all day and no little bitcoins come out or anything like that.”
Acknowledging that bitcoin and blockchain were explained to him by others, Buffett added:
“People get their hopes up that something like that is going to change their lives, and it’s a very ingenious thing to figure out how to have a limited supply and make it harder and more expensive to create them as you go along and all that sort of thing but it doesn’t, the function … blockchain does not depend on [bitcoin].”
He did not elaborate on why he sees blockchain as being important.
Buffett did, however, note that JPMorgan Chase is launching its own dollar-pegged cryptocurrency, the JPM Coin. It is unclear how the so-called Sage of Omaha feels about this particular use case.
Like Buffett, JPMorgan CEO Jamie Dimon has long been a bitcoin detractor, famously calling it a “fraud”in 2017 (though he later said he regretted the comment, despite continued reservations).
‘Rat poison squared’
Buffett’s views on bitcoin are well-known: as far back as 2014, he was warning investors to avoid the cryptocurrency.
Last May, he referred to bitcoin as “rat poison squared,” noting that it was a “nonproductive asset” during the annual Berkshire shareholder meeting.
Bitcoin’s price is dependent on individuals wanting to pay more for each coin than was previously paid, he said.
Similarly, he predicted that bitcoin would come to “a bad ending” in January 2018, and emphasized that Berkshire would not hold a position in bitcoin futures.
Japanese telecom SoftBank is exploring blockchain tech as a way to improve upon current centralized and fragmented ID and authentication services.
The firm announced Tuesday that it has partnered with U.S.-based blockchain startup TBCASoft for the initiative and has created a working group within an existing blockchain consortium of telecom carriers, the Carrier Blockchain Study Group (CBSG).
SoftBank aims to utilize TBCASoft’s application framework, the Cross-Carrier Identification System (CCIS), to enable blockchain-based identification and authentication services.
TBCASoft’s CCIS system uses zero-knowledge proof (ZKP) cryptography and distributed ledger technology (DLT) that enables the issuing, storing and authentication of users’ identification in a private and secure way, SoftBank said.
The effort aims to address the problems that users of current identification and verification services need to place trust in a centralized organization, and must disclose their personal data to multiple entities which is stored on different internet databases.
The CCIS system can give users “freedom from creating multiple accounts and remembering countless passwords to protect their personal information from identity theft,” the company said.
SoftBank vice president Takeshi Fukuizumi explained:
“We envision that individuals should create encrypted digital identities, instead of using and storing multiple usernames and passwords on databases here and there with various qualities of privacy protection. We have been working with TBCASoft on solving identification and authentication problems, and have an answer with CCIS.”
TBCASoft and SoftBank are also looking to collaborate with other telecom operators under the CBSG consortium for the initiative.
The CBSG consortium was launched back in September 2017, with other major operators including U.S.-based carrier Sprint and one of Taiwan’s largest telecom operators FarEasTone. The consortium has already successfully tested blockchain systems for mobile payments and topping up prepaid phones across different carriers using TBCASoft’s platform.
Similarly, SoftBank and TBCASoft previously worked with with Nasdaq-listed Synchronoss Technologies to complete a blockchain proof-of-concept that allows peer-to-peer mobile payments across different carriers.
Cryptocurrency non-profit, the Fusion Foundation, and the Automotive eXchange Platform (AXP) are joining forces to bring the U.S. second-hand car market and its insurance and financing to a blockchain.
The first step in the partnership, according to a Monday announcement, is to integrate Fusion’s blockchain platform and digitize AXP’s current database of 10.5 million automobiles, so they can be properly tracked and audited.
The auto industry has long struggled with a lack of transparency and widespread information inaccuracies from titles all the way through financing, said Max Kane CEO and co-founder of AXP, adding,
“There’s a million vehicles on the road that have ‘washed’ titles, which means there is fraud there. The insurance industry is hit with billions in fraud because of missing information, drivers providing the wrong information and inaccurate reporting.”
The AXP network encompasses some 25,000 independent car dealers across the U.S. and this extends to relationships with counterparties in finance and loan origination, Kane said.
John Liu, chief product officer at the Singapore-based Fusion Foundation, said the pilot, which is now underway, could be extended to state-based government agencies and the Department of Motor Vehicles (DMV). The system, which will go live by the first half of this year is expected to handle $60m–$100m of car financing loans, he said.
Fusion is known for having raised over $40 million in an oversubscribed token sale a year ago (many investors were turned away and the sale had to be stopped after 24 hours). The firm has ambitious goals when it comes to tokenizing assets, having previously partnered with firms involved in asset management and car financing – opening up a potential $12.3 billion in assets, Reuters reported.
Fusion’s founder, DJ Qian, said the blockchain his company has built was inspired by ethereum and will have both public and permissioned components. “We didn’t want to reinvent the wheel,” he said.
Lui added that “spinning up a node will be as easy as in something like bitcoin or ethereum,” but said only a select group of validators will be running such nodes to begin with.
“We don’t need the government or dealers to worry about running a node yet. We want them to use an application that they are familiar with. The number of nodes will be as much as we need to support a secure blockchain.”
If employers want to compensate workers in an unconventional way, they may think about doing so with bitcoin. It’s an option some companies have pursued, but it’s not always as straightforward as some enterprises may assume.
WORK WITH A SPECIALTY COMPANY OR ACCOUNTANT
Bitwage is a company that has specialized in the emerging desire that employers have to pay their workers in bitcoin.
Taking this approach does not require employers to go through an onboarding process, and employees get their wages in less than 48 hours no matter where they are. The company made headlines recently by adding the option for U.S.-based employers who receive W-2s to opt for getting paid in bitcoin.
As of 2017, about 200 employers used Bitwage, and approximately 95 percent of those used the service to pay international workers.
BitPay is another company that got into the bitcoin payroll realm. In 2014, it launched an application programming interface (API) that allowed employers to pay people in bitcoin. However, the current version of the BitPay website doesn’t mention that offering anymore. That likely means Bitwage is the only option for now.
Alternatively, some companies that set up the possibility for people to get paid in bitcoin consulted with accountants who knew the cryptocurrency landscape and helped employers navigate it. If employers are looking for the most straightforward way to go about this type of payment, working with a company like Bitwage is the best bet.
POTENTIAL REASONS TO HOLD OFF FOR NOW
Although the option to pay people in bitcoin exists, some caveats could make them want to stick with traditional forms of payment. For example, if companies have remote workers in other countries, the tax implications for bitcoin vary depending on where a person pays taxes.
Also, as the above section shows, assistance is still limited if employers have questions about how to get started. Some businesses may decide that trying to pay their employees with bitcoin $3986.02 -0.01% is more trouble than it’s worth.
That’s an especially likely conclusion to make if a company leader doesn’t believe there is sufficient interest in bitcoin payments. At Coinbase, for example, people can choose that payment type, but less than half participate.
When employers want to give their workers other options for getting paid, setting up an employee share ownership plan (ESOP) could be a more viable choice. It offers several advantages, including letting employees own stakes in a company through a trust fund and having the ownership amount go up as seniority grows.
Student loan payoffs are another popular but unconventional way to compensate employees. The perk could be especially attractive if loan debt is a significant source of stress for workers.
WHICH COMPANIES HAVE PAID IN BITCOIN?
It should be evident by now that idea of getting paid for work in bitcoin is still an emerging option that many companies are still only exploring. However, some pioneering enterprises have moved forward by offering it to their employees.
One is GMO Internet Group. It’s a Japan-based internet company that announced the option for people to get their wages in bitcoin would start as of February 2018.
There’s also Earn, which gives gig economy workers the chance to get paid in bitcoin for completing tasks. Working for Bitcoins is a similar site that helps freelancers find clients that will pay them in bitcoin.
STILL NOT A MAINSTREAM CHOICE
When employers want to pay their workers with bitcoin, a company such as Bitwage will likely be the most seamless way to do it.
Although some companies let people receive bitcoin payments, the option is still not common in the workplace.
Enterprises should keep that in mind as they consider whether now is a good time to investigate paying in bitcoin or if they should wait to see if a larger adoption rate occurs.
Fidelity Digital, the digital assets arm of Fidelity Investments, has become the first financial institution to receive the so-called bitcoin payments ‘torch’ that is being relayed from user to user around the globe via Bitcoin’s Lightning network.
FIDELITY BECOMES FIRST BANK TO TAKE THE #LNTORCH
With more than 27 million customers, Fidelity manages $7.2 trillion dollars in total assets. It’s the United States leader in 401(k) retirement savings plans and is one of the largest 403(b) retirement plan providers for not-for-profit institutions.
The investment giant announced it had received the #LNTorch on Friday, February 22nd from Tokyo-based and self-proclaimed ‘Bitcoin Maximalist’ who’s “interested in mining/trading,” Twitter user @Wizwho received it from Bitcoin entrepreneur, Charlie Shrem.
“Who wants to be the next torchbearer?” tweeted Wiz. “Reply with a LN invoice for 3.64M sats and I’ll choose who I deem to be the most trustworthy.”
The 3.64 million satoshis equate to about $142 USD at current market BTC price.
Fidelity Digital Assets then replied:
We and our research team at the Fidelity Center for Applied Technology have received the #LNTorch from @Wiz.
“Who should we pass it to? #LNTrustChain,” Fidelity asks, which is expected to launch its Bitcoin custody service next month.
FIDELITY BECOMES 229TH TORCH BEARER
Lightning Torch has gained a surprising level of recognition in the few weeks it has existed. The initiative involves passing a lightning payment between nodes, with each receiving user adding 10,000 satoshis ($0.34) and passing on to a new node.
Fidelity Digital Assets becomes the 229th entity overall to get the torch, according to the official tracker website. Previous bearers included BitMexResearch, Binance CEO ‘CZ’ Changpeng Zhao, and TRON’s Justin Sun.
But, more importantly, Fidelity becomes the first financial institution to get its hands on the digital ‘torch.’
This may not be surprising, however, as Fidelity has been spearheading the institutional plunge into cryptocurrencies over the past few months. In October 2018, the investment giant announced it would open cryptocurrency trading to its 27 million customers.
Therefore, participation in this payment relay will likely provide some valuable experience for Fidelity Digital assets that is looking “to create a full-service enterprise-grade platform for digital assets,” according to its founding head, Tom Jessop. He adds that:
…[f]amily offices, hedge funds and other sophisticated investors are starting to think seriously about this space.
It will also be interesting to monitor whether this nascent, albeit rapidly growing second-layer network, will be able to handle the relayed BTC payment as it changes hands and snowballs.
(Though, perhaps that may be the entire point of this whole thing, i.e. bringing awareness to this new technology as it’s already producing some unique use-cases.)
According to monitoring resource 1ML.com, there are currently 6561 reachable nodes and 29,777 channels on Lightning, offering a total payment capacity of 718.25 BTC ($2.85 million). The figures represent an impressive monthly growth of 26 percent in network capacity.
WILL ELON MUSK BE NEXT?
Bitcoinist reported that participants in the ongoing transaction relay have been urging Tesla CEO Elon Musk to paste an invoice and receive the torch.
This follows after Twitter CEO Jack Dorsey became the bearer to much fanfare earlier this month while hinting that Bitcoin Lightning payments may be coming to Twitter. (But you can kind of try this already.)
Cryptocurrency exchange ShapeShift is shifting around its management team ahead of a major revamp.
The startup is looking for a new chief financial officer to succeed Justin Blincoe, who is taking on a new role at the company, chief marketing officer Emily Coleman told CoinDesk.
“ShapeShift is constantly evolving as an organization, and we are preparing for our next phase of dramatic growth,” Coleman said. “To do this effectively, we are working to bring in new expertise and talent. Mr. Blincoe is helping lead this initiative, and will ultimately move into a different senior finance role at the company, while remaining CFO in the interim.”
Coleman didn’t provide further details as to what Blincoe’s future role would be.
Last week, ShapeShift announced the beta launch of a new version of the exchange that would offer greater interoperability with ShapeShift’s other products, namely the hardware wallet KeepKey and the pricing tracker CoinCap. For now, it’s available only to a select group of users.
The changes are coming amidst challenging times: ShapeShift is among the many blockchain startups that had to make severe staff cuts during the crypto winter. In January, CEO Eric Voorhees announced the company had laid off 37 employees, a third of its staff, calling it “a deep and painful reduction, mirrored across many crypto companies in this latest bear market cycle.”
In addition to the harsh market conditions, ShapeShift has recently suffered some reputation blows after it introduced KYC in September and later was featured in a Wall Street Journal article claiming the exchange was instrumental in money laundering practices — allegations Voorhees called “factually inaccurate and deceptive.”
The Thai government is moving to allow blockchain-based securities to be issued and traded in the country.
According to a report from Bangkok Post on Friday, Thailand’s National Legislative Assembly has approved an amendment to the Securities and Exchange Act legalizing the issuance of tokenized securities such as stocks and bonds.
As a result, the nation’s Securities and Exchange Commission (SEC), has amended the act – a change that will come into effect later this year. The SEC will reportedly issue detailed guidelines and rules for tokenized and electronic securities in the coming months.
SEC deputy secretary-general Tipsuda Thavaramara said in the article that the legislative effort clears the way for tokenisation platforms in the future, and will help develop the digital asset ecosystem.
The amendment will also allow businesses to be licensed to operate as depositories of securities and digital tokens. Previously this was business restricted to Thailand Securities Depository Co Ltd, a subsidiary of the Stock Exchange of Thailand (SET), the Bangkok Post said.
Crypto businesses in Thailand are regulated under the Emergency Decree on Digital Asset Businesses B.E. 2561 (2018).
Whether a security token offering will be regulated under the royal decree or the securities act will reportedly be decided by the SEC. It “will depend on features of rights and obligations associated with that token,” said Pariya Techamuanvivit, director of corporate communication department at the SEC, in Friday’s report.
The Ministry of Finance already issues digital asset business licenses, awarding the license to four crypto firms and rejecting another two in January. The SET was reported to be planning to apply for a license from the ministry to operate a new digital assets exchange platform the same month.
Jesse Lund, IBM’s VP of Blockchain and Digital Currencies, as the VP of the blockchain division is bound to have some optimistic thoughts on the cryptocurrency space. But in an interview at Think Conference, he made a particularly bullish prediction for Bitcoin.
The interview, a lengthy one with entrepreneur Fred Schebesta, touched upon several subjects in the discussion. But the most notable statement arrived when Lund was asked about the future of cryptocurrencies.
I have a long-term outlook.… It goes back to that discussion about the utility of the network with a higher price. I see Bitcoin at a million dollars someday. I like that number because if Bitcoin’s at a million dollars, then the satoshi is on value parity with the US penny. And that means there’s over $20 trillion of liquidity in this network. Think about $20 trillion in liquidity and how that changes things like corporate payments.
That’s no small sum – even the most ardent of Bitcoin enthusiasts like Tim Draper have more conservative targets for Bitcoin, $250,000. Lund’s short-term outlook is a little different though, saying that Bitcoin’s value by New Year’s Eve should be closer to the region of $5,000.
IBM has begun using Stellar’s token XLM (for which Grayscale Investments has launched a trust), and Lund believes that it will be ideal for cross-border settlements:
Once that happens, and that happens really fast, then we send the value along with it. That transfer of value is made possible by digital instruments, settlement instruments, of which Lumens is one. So we see Lumens as a viable settlement instrument in this ecosystem of cross-border payments.
IBM uses the Stellar protocol in its World Wire product, which hopes to make cross-border payments happen in near real-time. Indeed, cross-border payments are considered to be one of the most applicable areas for cryptocurrencies and IBM is looking to be a part of this change.
IBM is on the whole very enthusiastic about blockchain, also working with SeaGate to reduce hard drive counterfeiting. Lund also said that IBM is keen on working with different assets, seeing benefits in an ecosystem of assets that assist cross-border payments.