In this issue:
On Friday, Sept. 27, the SEC and CFTC charged 1pool Ltd. aka 1Broker and its CEO with offenses related to its actions to solicit U.S. investors to purchase swaps and commodity transactions, allow investors to open trading accounts by providing only a username and email address, and require customers to fund their accounts using bitcoin. According to the complaint, 1Broker’s actions violated federal securities laws requiring broker-dealer registration and customer identity verification.
A Colorado judge recently sentenced 25-year-old Filip Lucian Simion, leader of the drug trafficking group ItalianMafiaBrussels, to 11 years in prison for selling MDMA (known as Ecstasy) on the Darknet and using cryptocurrencies to launder the proceeds. In a DOJ press release, the U.S. Attorney for Colorado warned, “Let there be no mistake. As the internet has grown, so has the long arm of the law.” In France, authorities recently arrested a French intelligence agent who was selling state secrets in exchange for bitcoin.
A recent Wall Street Journal investigation identified almost $90 million laundered through 46 cryptocurrency exchanges since 2016. By following the assets from those who had reported hacks, blackmail schemes and other stolen cryptocurrencies, the investigators were able to pinpoint where the cryptocurrencies became untraceable after entering an exchange. And a new report from ICORating analyzing 100 crypto exchanges trading for more than $1 million concluded that approximately $1.3 billion had been hacked from 31 of these exchanges.
In Brazil, antitrust regulators recently sent questionnaires to 10 crypto exchanges whose bank accounts were closed to investigate potential violations of bank account reporting requirements. In Australia, DigitalX, an ICO investment advisory firm, is being sued by investors who purchased ICOs on DigitalX’s advice. According to DigitalX, the investors are asking for $1.833 million plus damages.
In legislative developments, the U.S. House of Representatives recently approved a bill to establish a task force that would develop tools and programs to detect terrorists and their use of cryptocurrencies. The bill, which is currently being considered by the Senate, also proposes to award up to $450,000 to people with information on this subject.
For more information on the above, please see the following links:
- Leader of Darknet ItalianMafiaBrussels Drug Trafficking Organization Sentenced to 11 Years’ Imprisonment
- SEC Charges Bitcoin-Funded Securities Dealer and CEO
- CFTC Charges Trading Platform with Illegal Transactions Margined in Bitcoin
- France Accuses Intelligence Agent of Selling State Secrets for Bitcoin
- Brazil: Antitrust Watchdog Sends Questions to Crypto Exchanges After Bank Account Closures
- Australia: Clients File Claim Against Publicly Listed ICO Advisory Firm DigitalX
- Exchange Security Report by ICORating
- How Dirty Money Disappears Into the Black Hole of Cryptocurrency
- US Lawmakers Move Forward on Crypto Task Force Proposal
A Swiss asset manager and commodities trader recently announced the launch of a blockchain-based token that will be backed by a basket of copper, aluminum, nickel, cobalt, tin, gold and platinum. In a similar move, startup Abra has announced plans to launch the Bit10 token, which will be priced based on a basket of the top 10 cryptocurrencies by market capitalization. In Austria, the government recently announced that it intends to auction off 1.5 billion euros in bonds that will be issued on the Ethereum blockchain. And in Italy, the Italian Banking Association recently announced that it successfully completed the first phase of testing a new blockchain-based interbank payment system.
In the payments space, this week Ripple announced that it has integrated its technology with a cross-border payments application of a major global bank based in Europe, and that three additional financial services firms have integrated its technology. Ripple also announced that a remittance application built in partnership with several Asian banks has now gone live. The blockchain payments startup also recently announced a $100 million social giving campaign and the launch of a Washington, D.C.-based lobbying group.
In developments related to cryptocurrency exchanges, Gemini announced that it has secured insurance coverage for cryptocurrency assets held in its custody through a global consortium of industry-leading insurers. And a new cryptocurrency exchange platform, ErisX, has been announced, which will be backed by leading institutional trading firms. The ErisX exchange intends to let investors trade bitcoin, ether, bitcoin cash, litecoin and cryptocurrency futures. This news comes as a recent Bloomberg article reported that hedge funds have now replaced high net worth individuals as the biggest participants in high-value cryptocurrency transactions conducted through private sales. In related news, an article published this week in the Wall Street Journal described concerns over software bots running on cryptocurrency exchanges that may be manipulating the price of bitcoin.
For more information on this post, please see the following:
- Tiberius Offers Crypto Coins Backed by Seven Commodities
- Abra Is Launching a Crypto Token Tied to an Investment Fund
- Austria to Be First European Country to Issue Government Bond on Blockchain
- $80 Billion Banco Santander Uses Ripple For Payments, Will Many Banks Follow?
- Ripple Event Reveal: 3 Companies Are Now Using XRP for Real Payments
- SBI Ripple Asia’s MoneyTap App Has Launched in Japan
- Ripple Announces Ripple for Good, Social Giving Will Top $100 Million
- New Ripple-Led Advocacy Group to Pay DC Lobbyists in XRP
- Italian Banking Association Completes First Test of Blockchain-Based Interbank System
- Gemini Obtains Digital Asset Insurance via Aon
- Eris Exchange to Create Crypto Market Backed by DRW, Virtu
- Institutional Investors Are Using Back Door for Crypto Buys
- Bots Are Manipulating Price of Bitcoin in ‘Wild West of Crypto’
Recently, a group of 15 U.S. lawmakers requested clarification from the Securities and Exchange Commission (SEC) about its position on Initial Coin Offerings (ICOs), specifically with regard to when ICOs should be considered securities sales. The lawmakers’ letter expresses concern that the lack of clarity about the SEC’s position could drive ICO business out of the U.S. The letter arrives in the wake of a recent report finding that ICOs still appear to be lucrative ventures. According to the report, companies that have conducted ICOs “appear to have already sold as much Ethereum as they raised (in USD terms).” The report also found that ICOs that successfully closed in 2017 generated nearly $727 million in net profits.
Another recently released report found that German ICO investors have suffered losses of nearly 90 percent of their capital – resulting in losses of value even greater than Bitcoin and Ethereum. In South Korea, the chairman of South Korea’s National Policy Committee has called for his country’s legalization of ICOs and the development of a regulatory framework. The chairman’s position is in sharp contrast with efforts of South Korean regulatory bodies that have thus far opposed the legalization of ICOs.
In a recent report on venture capital funding of blockchain projects, research group Diar found that the number of deals involving cryptocurrency startups has nearly doubled since last year and that these startups have raised nearly $3.9 billion as a result of venture capital investment. The report suggests that the surge in deals and venture capital fundraising could be due to the major fluctuations in token values that have occurred over the past year.
For more information about the state of ICOs and startup funding, see the following links:
- S. Lawmakers Ask SEC to Clarify ICO Regulations
- 15 Congress Members Ask SEC to Clarify Cryptocurrency and ICO Guidelines
- ICOs Have Sold Almost as Much as They Raised
- Investors in German ICOs Have Suffered Losses as High as 90%
- South Korea’s Policy Chief Calls for Legalization of ICOs
- VC Investment in Blockchain Startups Is Up 280% So Far This Year
- US Cryptocurrency Exchanges Move at Different Speeds
On Oct. 1, two of the three largest enterprise blockchain communities, the Hyperledger Project (Hyperledger) and the Enterprise Ethereum Alliance, announced plans to join forces. The alliance between the two communities aims to build common standards and data formats between the two platforms that will serve as a basis for all other implementations and corresponding customizations. If implemented effectively, this could be a major step toward interoperability between the Ethereum and Hyperledger blockchains.
The world’s largest telecom firm recently announced plans to launch a blockchain-as-a-service platform that will track the movement of goods from production to consumption. The platform boasts use cases across industries including manufacturing, retail and healthcare and can also be paired with other blockchain platforms and “internet of things” tools to enhance automation and monitoring capabilities.
Another global software company recently announced new services that will promote the integration of blockchain platforms into existing business infrastructures. The company plans to launch two new consortia that aim to spur blockchain innovation between customers and partners by identifying industry-spanning blockchain use cases, areas for cross-industry collaboration and further benefits of blockchain networks. One consortium will focus exclusively on the pharmaceuticals and life sciences industries while the other will focus on the agribusiness, consumer products and retail industries.
According to a major national bank, blockchain will eventually be a multibillion-dollar opportunity for technology companies that plan to pair blockchain with existing cloud computing operations to improve supply chain operations. The bank’s analysis is based on the assumption that 2 percent of servers will be used to run blockchain, at $5,500 per server, per year. In another recent report, a technology research company predicts that blockchain technology in the United States manufacturing sector will grow significantly from 2020 to 2025. According to the report, the market for blockchain technology in the manufacturing industry is expected to be worth $30 million by 2020 and grow at a compound annual rate of 80 percent to $566 million by 2025.
In international developments, the ID2020 Alliance recently launched two pilot programs that will explore the use of digital identities as a means to provide resources to vulnerable populations. One pilot enables access to better healthcare outcomes by linking electronic medical records to individual users through iris recognition. The other pilot facilitates the transfer of liquid petroleum gas subsidies through a biometrically validated digital wallet, thus modernizing the delivery of resources to users who may not have access to a mobile device. In Sierra Leone, the United Nations and microlending nonprofit Kiva are seeking to build a blockchain-based identity and credit-score system. With 80 percent of the country’s citizens lacking identity documents and a mechanism to prove their creditworthiness, modernizing Sierra Leone’s Credit Reference Bureau through this blockchain-based system could transform the country’s financial inclusion landscape and accelerate economic development. And in the U.K., the national property register is moving into the second phase of its research project on the use of blockchain and distributed ledgers for land registration and the purchase and sale of property.
To read more about the topics covered in this week’s post, see the following:
- Two of Blockchain’s Biggest Consortiums Just Joined Forces
- AT&T Launches Blockchain Solutions Targeting Supply Chain and Healthcare
- SAP Boosts Blockchain Integration and Customer Flexibility, Launches New Industry Consortia
- ID2020 Announces New Pilot Projects
- Microlending Non-Profit Kiva, UN and Government Partner on Blockchain Financial Inclusion Program for Sierra Leone
- UK Takes Another Step Toward Blockchain Property Register with R3
- Blockchain could be a $7 billion market and a major boost to Amazon, Microsoft, Bank of America says
- Report: Blockchain in Manufacturing Market Will Be Worth $500 Million by 2025
- Blockchain: Manufacturing Market Forecast until 2025