In this issue:
• 2018 Cryptocurrency Recap, Developments in Cryptocurrency Exchanges and Payment Providers
• New Blockchain Capital Markets Platforms Announced With Institutional Investment
• Are Crypto Regulations Getting Tighter or Looser? Depends About Where You’re Asking
• The Curious Case of Cryptopia, and Updates on Threats and Enforcement Actions
2018 Cryptocurrency Recap, Developments in Cryptocurrency Exchanges and Payment Providers
By: Emily R. Fedeles
According to a recent report, despite a lower price compared to the previous year, bitcoin’s total trade volume for 2018 is $2.2 trillion, which is almost four times the volume of what was traded in 2017. Another recent statistic states that BitPay, the largest global cryptocurrency payment processor, processed more than $1 billion in 2018 and grew its B2B business more than 250 percent. BitPay added new features in 2018, such as integrating its wallet with major gift card brands and supporting new cryptocurrencies such as the stablecoins launched by Circle, Gemini and Paxos. BitPay’s payment processing services could extend even further if a proposed New Hampshire bill passes, which would let state-level agencies – including the tax office – accept cryptocurrencies as payment.
There were several announcements from major cryptocurrency exchanges this week. Binance launched a crypto-to-crypto over-the-counter (OTC) trading desk with access to more than 80 cryptocurrencies. Seed CX launched a bitcoin spot trading market for its institutional clients and announced plans to add cryptocurrency trading pairs and trading pairs with foreign currencies, such as euros and Japanese yen. Cryptocurrency exchange Bithumb is seeking to go public in the United States through a reverse merger (also known as a reverse initial public offering), where it would acquire Blockchain Industries, a U.S. public company. The combined entity – Blockchain Exchange Alliance – would become the first U.S.-listed cryptocurrency exchange. And bitcoin wallet and cold storage provider Xapo announced that it is transferring key operations from Hong Kong to Switzerland, citing Switzerland’s friendlier regulatory environment as the driving factor behind the move.
According to recent reports, professors from seven U.S. colleges have teamed up to create a digital currency that they hope can achieve speeds bitcoin users can only dream of, without compromising decentralization. The project, called Unit-e, seeks to create a globally scalable decentralized payments system that solves the challenge of blockchain scalability, which many believe has hindered cryptocurrencies from achieving widespread adoption. In another move aimed at solving the scalability problem, Bitfury has released a suite of tools aimed at driving adoption of the Bitcoin Lightning Network. The nascent Bitcoin Lightning Network promises to enable bitcoin transactions with near-instantaneous confirmation speeds without having to store information directly on the blockchain.
For more information, please refer to the following links:
- BITCOIN TRANSFERRED MORE THAN $3.2 TRILLION IN VALUE LAST YEAR
- BitPay Sees Record Year for Revenue in 2018, with $1 Billion in Transactions
- Crypto OTC Services Now Available on Binance
- Seed CX Launches Spot Bitcoin Trading in Bid for Big-Money Investors
- Lawmakers Pitch New Crypto Tax Payments Bill in New Hampshire
- Crypto Exchange Bithumb Seeks US Listing via Reverse IPO
- Xapo shifting services from Hong Kong to Switzerland
- Distributed Technologies Research Launches Foundation and Introduces Unit-e, a Globally Scalable Decentralized Payments Network
- MIT, Stanford Academics Design Cryptocurrency to Better Bitcoin
- Bitfury Releases Merchant, Developer Tools for Bitcoin’s Lighting Network
New Blockchain Capital Markets Platforms Announced With Institutional Investment
On Jan. 24, tZero, a subsidiary of a major U.S. online retailer, went live with its long-awaited secondary trading platform for so-called security tokens. According to reports, the tZero platform is now open to accredited investors for the secondary trading of blockchain-based tokens issued in so-called security token offerings (STOs). Also this week, a new cryptocurrency custody solution, Anchorage, was launched with backing from several major U.S. tech investors and venture capital funds. According to an article posted on Medium, Anchorage will offer an innovative cryptocurrency custody platform that “combines multi-person integrity with hardware-based systems, allowing us to build a platform that is more secure than cold storage, but has the benefits of keeping the assets accessible.” On the same day, Symbiont.io Inc., a New York-based startup focused on applying blockchain to the capital markets, announced a major funding round from two major U.S. financial institutions and a well-known blockchain investor. In a third announcement, Templum Markets, a blockchain-based platform for issuance and secondary trading of so-called smart securities, and IPwe, Inc., launched a “patent finance market” that seeks to enable companies to “efficiently finance their patented intellectual property.”
According to a notice published by the Securities and Exchange Commission (SEC), a proposed rule change seeking to launch a physically backed bitcoin ETF was withdrawn this week. According to reports, the withdrawal is temporary and was due in part to delayed discussions with the SEC resulting from the ongoing partial government shutdown. Outside the U.S., the Jamaica Stock Exchange and Canadian fintech firm Blockstation recently announced completion of a “live digital currency trading pilot with selected regulated market participants including broker-dealers, market makers and the Jamaica Central Securities Depository (JCSD).” According to the press release, the platform eventually will seek to list security tokens.
For more information, please refer to the following links:
- Introducing Anchorage, the world’s first crypto-native custodian
- Nasdaq, Citi Join Novogratz in Funding Blockchain Firm Symbiont
- Templum Markets and IPwe Launch Patent Finance Market for Fortune Global 500 Companies and SMEs
- Cboe Exchange Withdraws Proposal for VanEck-SolidX Bitcoin ETF
- Notice of Withdrawal of a Proposed Rule Change to List and Trade Shares of SolidX Bitcoin Shares Issued by the VanEck SolidX Bitcoin Trust
- Jamaican Stock Exchange and Blockstation Complete First Stage of Live Digital Currency Trading Pilot
- Jamaica Stock Exchange Plans to List Security Tokens
- tZERO Security Tokens Begin Live Trading
Are Crypto Regulations Getting Tighter or Looser? Depends About Where You’re Asking
This week, a host of news on the crypto regulatory front has come out, some making investing more onerous, some making it better. A recent report from the Organisation for Economic Co-operation and Development (OECD) traces the process of initial coin offering (ICO) fundraising and the potential risks for offerors and buyers. The report highlights many ICO benefits, including cost savings, direct access to investors and the active participation of buyers. The identified risks include potential conflicts of interest; lack of standardized, vetted disclosure; and high volatility and counterparty risks. The OECD calls for a “delicate balance” in developing a regulatory scheme that will “not deprive the ICO mechanism of its speed and cost benefits.” At the same time, “ICOs are, by nature, not the right solution for every project,” and the possibility for ICOs to be “a mainstream financing option” is limited.
The UK’s Financial Conduct Authority (FCA) has issued guidance regarding digital assets and their potential interaction with various regulatory schemes, including MiFID II. While the guidance is not binding, the FCA hopes it “will enable firms to understand whether certain crypto assets fall within the regulatory perimeter,” giving those companies greater certainty about this space. According to the guidance, certain types of digital assets, such as security tokens, fall under the FCA’s purview, while others, such as bitcoin and litecoin, do not.
In the Netherlands, a proposed licensing requirement would end anonymous crypto trading. Under the potential new regs, crypto exchanges and wallet providers would be required to monitor their customers’ trades and report suspicious activity and certain information about the customers themselves. The new licensing scheme is being proposed because the Dutch financial authority is concerned that crypto carries “high financial crime risks.”
Wyoming legislators have introduced a bill to provide further legal clarity to draw blockchain business to the state. Among other things, the proposed legislation would authorize banks to opt into a digital asset custody supervisory regime designed to meet the SEC’s standards for digital assets’ “qualified custodians.” Virtual currencies would also have the same legal status as fiat currency under the UCC, providing further protection to asset holders.
For more information, please check out the following links:
- Wyoming Introduces Bill Offering Cryptocurrencies Legal Clarity To Attract Blockchain Business
- UK FCA: Guidance on Cryptoassets
- UK Financial Watchdog Plans Oversight of Security Tokens, Some Stablecoins
- Proposed License Requirements End Anonymous Crypto Selling and Buying in the Netherlands
- Dutch Financial Authorities Plan Licensing Scheme for Crypto Exchanges
- Dutch Report: Cryptos: Recommendations for a Regulatory Framework
- OECD: Initial Coin Offerings (ICOs) for SME Financing
- OECD: ICOs Have Financing Benefits But Aren’t a Mainstream Option
The Curious Case of Cryptopia, and Updates on Threats and Enforcement Actions
By: Brian P. Bartish
After the massive hack on the cryptocurrency exchange Cryptopia last week, a blockchain data analytics platform provider is estimating that more than $16 million in ether and ERC20 tokens were stolen from more than 76,000 wallets in the highly atypical hack, where attackers likely gained access to thousands of private keys. In another sign of hackers becoming more sophisticated, security researchers recently published findings on a new variant of monero-mining malware that has the built-in ability to block rival mining software and disable cloud security agents, including those of a number of leading cloud service providers. Last Thursday, the victim of the theft of $24 million in cryptocurrency released the name of the suspected thief, a suspect previously arrested for SIM-swapping, alleging that this individual stole more than $80 million in cryptocurrency.
On Jan. 18, Switzerland-based exchange ShapeShift released a Compliance Transparency report detailing a 175 percent increase in law enforcement requests for data, including crypto addresses and transaction IDs. Law enforcement, however, continues to struggle in keeping criminal activity on the dark web at bay, as a recent report noted that dark web cryptocurrency activity continued to grow even as the economic transaction value of cryptocurrency fell. In fact, one industry analyst cited six of the eight most common cryptocurrency transaction types as demonstrating some kind of criminal or nefarious purpose.
Turning to fraud and consumer protection, the Monetary Authority of Singapore recently issued a warning to an ICO issuer not to proceed with a planned STO, as the issuer violated the conditions of a prospectus exemption by advertising the STO, leaving potential investors uninformed and subject to risks of fraud. In Taiwan, authorities charged a group of seven with violating the nation’s Banking and Multi-Level Marketing Supervision acts in connection with a years-long scheme that attracted more than $51 million and defrauded more than 1,000 people. And a South Korean court recently handed down jail sentences to two executives from the crypto exchange Komid, including a three-year sentence to the CEO, for deceiving investors through the use of fake accounts, a trade bot and millions of false transactions that helped to bring in approximately $45 million in fees.
For more information, please check out the following links:
- Some overdue transparency into the Cryptopia exchange hack
- Malware Used by “Rocke” Group Evolves to Evade Detection by Cloud Security Products
- This Malware Has a Worrying Trick to Mine Monero on Cloud Servers
- Crypto Investor Names Primary Suspect in $24 Million SIM Swapping Case
- Crypto Crime Series: Decoding Darknet Markets
- The Eight Most Popular Cryptocurrency Transaction Types Are Not What You Expect
- Law Enforcement Requests to Shapeshift Rose 175% in Second Half of 2018
- MAS halts Securities Token Offering for regulatory breach
- Taiwan indicts Bitcoin traders for violations of banking act
- Crypto CEO Sentenced to 3-Year Jail Term for Faking Trading Volume