In this issue:

US Treasury Announces Blockchain Pilot, Major Bitcoin Mining Facility Launches in Texas, Foreign Crypto Exchange Developments

More Blockchain Solutions for Food Safety and Telecom; Utah Voting Pilot Expands

Regulators Address Stablecoins, CFTC and IRS Rules; Telegram Network Postponed

New Crypto-Mining Malware Discovered in Audio Files

US Treasury Announces Blockchain Pilot, Major Bitcoin Mining Facility Launches in Texas, Foreign Crypto Exchange Developments

By: Jonathan D. Blattmachr

There were several developments in the digital capital markets and payments space this week, spanning a variety of topics. First up, Blockstacks announced that its Stacks (STX) token can now be traded on the Binance and HashKey Pro exchanges (U.S. investors may not buy, sell or trade the tokens). The company raised most of its money from a Reg A+ offering in July, the first of its kind involving ERC20 tokens.

The U.S. Department of the Treasury’s Office of Financial Innovation and Transformation announced this week two projects to improve financial management and the government’s interaction with its customers, including a blockchain project that will aim to provide proof of concept of payments in a simulated letter of credit context. In another announcement, a major U.S. financial institution signaled this week that its cryptocurrency custody and trading service platform is in final testing. The company is waiting for final approval from the New York State Department of Financial Services before it fully launches.

Circle announced this week that it is spinning off the Poloniex cryptocurrency exchange into a new company called Polo Digital Assets Ltd. Circle acquired Poloniex just 18 months ago but said it has had issues as a U.S. company trying to run an international cryptocurrency exchange. As a result of the spinoff, U.S. customers will no longer be able to trade on the exchange.

Computer chip manufacturer Bitmain said this week it has launched a 50MW bitcoin mining farm in Texas. The farm, Bitmain’s third in the U.S., has the capacity to grow to 300MW, which would make it the world’s largest mining facility. Finally, ATM manufacturer Bitsmap recently installed crypto ATMs at the Miami International Airport. Travelers are required to declare when they carry over $10,000 in cash or equivalent fiat currency, gold or other assets. This begs the question for some: Is a traveler required to make a declaration if she carries a crypto cold wallet holding more than the equivalent of $10,000? Congress has considered several bills recently that would address this directly. For now, it is an open question.

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More Blockchain Solutions for Food Safety and Telecom; Utah Voting Pilot Expands

By: Diana J. Stern

In its latest food supply chain effort, a multinational technology firm partnered with a U.S. seafood provider to implement blockchain for tracking and tracing wild-caught scallops. Reports indicate that a number of details about the catch and subsequent processing will be recorded on a permissioned blockchain platform, allowing those with access to quickly obtain information about the scallops at any point from catch to market. Seafood distributors, suppliers and retailers are also on board with the project. The seafood provider says it plans to build a connected app that enables diners to scan a QR code on a menu and deep dive into the history of the scallops on deck for dinner.

Earlier this week, Utah County, Utah, announced it is expanding the voting pilot it launched this past summer, as reported on by the Blockchain Monitor. Continuing the work with blockchain start-up Voatz, Utah will allow disabled voters to use their smartphones to cast their ballots in the November municipal elections. The county’s decision to move forward with the initiative came after the National Cybersecurity Center audited votes from the 45 participants who participated in the pilot and found the results were accurate.

Finally, a multinational conglomerate holding company headquartered in Tokyo, a multinational technology corporation and blockchain start-up TBCASoft announced a strategic collaboration to facilitate the adoption of blockchain technology by telecommunications carriers in the Carrier Blockchain Study Group Consortium. The consortium’s first application is the Cross-Carrier Payment System, which aims to allow mobile phone users traveling abroad to pay local merchants with their mobile payment app.

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Regulators Address Stablecoins, CFTC and IRS Rules; Telegram Network Postponed

The Group of Seven (G7), an international intergovernmental economic organization comprised of seven of the largest economies in the world, recently published a report that discusses potential risks and benefits associated with global “stablecoins.” The report notes that stablecoins have the potential to provide access to financial services to unbanked populations and to improve cross-border retail payments but are associated with potentially crippling risks as well, including the potential to destabilize the global economy and facilitate money laundering and terrorism. The report cites the need for a “well founded, clear and transparent legal basis in all relevant jurisdictions” to support mass adoption of global stablecoins. The Financial Action Task Force (FATF), an inter-governmental body established to set standards to protect the integrity of the global financial system, recently issued a press release highlighting the money laundering risks of stablecoins as well. In addition, a bill titled “Stablecoins are Securities Act of 2019” is now under review by Congress. The bill seeks to define “managed stablecoins” as securities within the Securities Act of 1933.

In other regulatory news, the U.S. Commodity Futures Trading Commission (CFTC) Chairman, Heath Tarbert, recently said cryptocurrency assets classified as securities have the potential to become commodities, and vice versa. Meanwhile, the Chief Counsel for the Internal Revenue Service (IRS) confirmed that the agency plans to release additional guidance to clarify unanswered questions related to cryptocurrency. The attorney stated that the agency’s main concern is one of compliance, with too few cryptocurrency investors reporting cryptocurrency transactions on their taxes.

Finally, an anticipated hearing between the SEC and Telegram, a global messaging platform, related to whether the messaging platform’s pending GRAM token launch is a securities offering, has been postponed until February. According to reports, as a result, Telegram will delay the launch of its TON blockchain network.

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New Crypto-Mining Malware Discovered in Audio Files

By: Joanna F. Wasick

Last week, a software company that develops antivirus programs reported the discovery of malicious code hidden in WAV audio files, including malware known as “steganography,” in which hackers hide malware codes in ordinary-looking files. The report notes that when played, some of the WAV files produced music with no discernible quality issues, while others simply generated static. The malicious WAV files enable hackers to steal processing resources from unwitting users and use it to mine cryptocurrency. The report goes on to explain the three methods the WAV file loaders employ to decode and execute the malicious code, and provides in-depth technical details on the WAV file loaders and indicators of compromised (IOCs), including malware sample hashes and C2 infrastructure.

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