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OneCoin, an infamous cryptocurrency pyramid scheme, makes an uncredited cameo appearance in a recently leaked FBI intelligence bulletin on the money laundering risks of private investment funds.

The main thrust of the bulletin, dated May 1, is that criminals and foreign adversaries of the U.S. “likely” use hedge funds, private equity and other investment vehicles to circumvent financial institutions’ anti-money-laundering (AML) procedures.

One of the four examples given by the FBI analysts involves a “fraudulent cryptocurrency investment scheme.” While the scheme is never named, the story told in the bulletin bears a striking resemblance to the OneCoin case. 

Related: Alleged Leader of OneCoin Ponzi Has Sentencing for Money Laundering Adjourned

Read more: Jury Convicts Crypto Ponzi Scheme OneCoin’s Lawyer on Fraud Charges

For example:

• The FBI says “an identified former partner of a major US law firm assisted others in laundering more than $400 million” in proceeds for the unnamed scheme. In November of last year, Mark Scott, a former partner at Locke Lord, was convicted of laundering that much on OneCoin’s behalf.
• The unnamed lawyer in the FBI memo moved the funds through “a series of purported private equity funds holding accounts at financial institutions, including those in the Cayman Islands and the Republic of Ireland.” Prosecutors described such maneuvers by Scott in those same jurisdictions.
• “The underlying source of funds, the perpetrator of the cryptocurrency scheme, was not disclosed to the bank during the initial due diligence review,” the FBI bulletin says, not naming the bank. Prosecutors accused Scott of hoodwinking the Bank of Ireland in this same way.

The FBI cited public information as well as “a human source with direct access” in its account. The bulletin’s other three examples of money laundering through private funds do not mention crypto.

Reuters first reported on the bulletin Tuesday. The bulletin is unclassified, but “law enforcement sensitive,” meaning it’s not supposed to be shared outside the federal government without FBI permission.

Related: Singapore Man Fined $72K for Promoting Crypto Ponzi OneCoin

While OneCoin was a scam, the veiled references to Scott’s crimes in the FBI bulletin are a salient reminder that banks, not cryptocurrencies, were used to launder the ill-gotten gains.

Read the full memo below.

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The crypto space has reacted positively to the new changes made to the BitLicense, Linda Lacewell, superintendent of the New York Department of Financial Services (NYDFS), said Tuesday.

Discussing recent updates to the state’s contentious crypto regulatory framework as part of the Global Leaders Webinar Series sponsored by Global Digital Finance (GDF) in partnership with Global Blockchain Business Council, Lacewell said some in the space may “curse” the regulator, but the new changes have been received rather well.

“The reaction has been very positive, and beyond positive,” she said.

Related: ING Joins Crypto Industry Body Working to Set Codes of Conduct

The session was hosted by Jeff Bandman, former fintech adviser to the U.S. Commodity Futures Trading Commission (CFTC).

Lacewell said she was not surprised by the industry’s reaction to the updates because the regulator worked on the license in confidence with industry players – both licenced and unlicenced – and experts to understand its shortcomings. 

“We’ve even had some licensees tell us that they’re very excited and interested in pursuing additional licencing with other potential parties that are all partners in the space,” Lacewell said. 

Crypto hub?

Lacewell said when she first took office last year, she immediately assigned personnel to work through a backlog of BitLicense applications that needed reviewing and that she has made numerous application decisions since then.

Related: New York Regulator Adds 3-Strike Rule for BitLicense Applicants

For instance, it took European crypto exchange Bitstamp four years after submitting an application to receive a license. Since Lacewell was appointed in June of 2019, six entities have received NYDFS accreditation.

“But then, beyond that, the area felt a little stale. And I thought to myself, we’re coming up on five years of having this licence and we need to take a fresh look,” Lacewell said. “I was very conscious of the criticisms about the licence and that it wasn’t pragmatic and that it favored a select few and they had to have a lot of money to get into the space.” 

Lacewell added the department had not put out much in the way of guidance to help companies navigate the “complicated application” for the license.

“We knew that, at a bare minimum, we needed to clarify and explain the regulatory regime and the licencing application,” Lacewell said. 

Since then, her office has made a number of changes to the Bitlicense including creating a conditional license designed not to burden startups with the heavy costs of applying for a full BitLicense. Instead, they can partner with existing licensed entities to legally operate in New York. 

The regulator is also allowing licensed companies to self-certify virtual currencies, and has issued guidance on coin listings for licensed platforms. To encourage innovation in the space, NYDFS has entered into a partnership with the State University of New York that would allow anyone to work on innovative projects or ideas by visiting one of the 64 SUNY campuses around the state.  

During the webinar, Lacewell said she wants the industry to work.

“Look, when it first started, people said fly-by-night, crazy idea, flawed [and] worse, right? But there are responsible actors in the marketplace. Any financial service or product can be abused, misused and turned into a bad instrument,” Lacewell said. 

Finally, Lacewell said NYDFS wants innovators in emerging technologies across the board to locate in New York and flourish.

“We want innovators right here in New York, which has been the birthplace of so much invention and ingenuity, historically, and has always set the standard not just for the rest of the country but the world. That’s what it means to be the birthplace of immigration, because change agents come here and we want you here,” Lacewell said. 

Related Stories

• Blockchain Bites: BitLicense at 5, Lawsky’s Fallacy and Hehmeyer’s Pivot
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British bank Standard Chartered has invested in Metaco, a crypto custodian focused on the institutional market.

• The Series A round was oversubscribed, twice, due to high demand; the 17 million Swiss franc ($18 million) raised will primarily go toward expansion to the U.S., Western Europe, and Southeast Asia, according to a press release.
• Metaco’s main product is SILO, which provides financial institutions with a cold storage and exchange service, as well as the ability to tokenize assets.
• Alex Manson, Standard Chartered’s head of ventures, said they had invested in Metaco to improve the undeveloped market infrastructure surrounding digital assets.
• Standard Chartered’s revenue was $15.42 billion in 2019; it’s unclear how much it invested into Metaco’s round.
• The round was led by Giesecke+Devrient, a Leipzig-based specialized printer in currency notes as well as, more recently, a manufacturer in smart cards.
• Other participants included Zürcher Kantonalbank, the fourth largest bank in Switzerland, and Swiss Post, the country’s postal service, which invested in a previous round in 2018.
• Olivier Laplace, director at Swiss Post Ventures and member of Metaco’s board, said the company’s clientele had grown considerably over the past three years.

See also: Swiss Tech Firm Metaco Taps Blockchain Think Tank to Bolster Services

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Bitcoin Core contributor Jeremy Rubin has revealed his work on a new smart-contract language for Bitcoin, which he hopes will increase the “financial self-sovereignty” of users.

Rubin demoed the new language, Sapio, on Saturday at a RecklessVR meetup presentation in virtual reality, with many audience members joining the talk in VR headsets. He plans to release the programming language as a part of his new research organization, Judica.

Stateful smart contracts allow users to lock up money so funds can’t be spent until certain conditions are met or a series of interactive steps have been taken. These contracts are most commonly associated with the Ethereum blockchain, which is very flexible, making stateful smart contracts easy to write.

Related: World Bank Investigates Smart Contracts as Financial Tools, With Mixed Results

Read more: How Do Ethereum Smart Contracts Work?

It’s lesser-known though that Bitcoin also supports several different types of more complex smart contracts, such as requiring more than just one person to sign off on a transaction before it can be spent. But compared to Ethereum, Bitcoin smart contracts are much more complicated and unwieldy to create, or they are stateless – that is, the conditions are met either all at once or not at all. Thus far, this has meant that there have been fewer options for developing smart contracts on Bitcoin.

Rubin hopes to further expand the smart contract use cases for Bitcoin to give users even more control over what they can do with their money. 

New possibilities for Bitcoin smart contracts

Sapio could work for Bitcoin smart contracts today. But most of the types of smart contracts Rubin envisions aren’t available on Bitcoin yet.

Related: DeFi Insurer Nexus Mutual Maxed Out by Yield-Farming Boom

He built Sapio specifically around CHECKTEMPLATEVERIFY (CTV), a change that, if adopted, could bring more smart contract features to the Bitcoin network, namely allowing users to secure their bitcoin in new ways.

In his talk, Rubin described CTV as a “a simple covenanting system for bitcoin.” The idea of covenants, which has been around for a long time, is to add security measures, such as baking in extra rules to a batch of bitcoin, preventing the owner of the bitcoin from sending to all but a few addresses.

“In practice, it means it allows you to do some more complex smart contracting [determining] how bitcoin can be spent when a coin is created,” Rubin said.

One use case for covenants is bitcoin “vaults.” Usually once a private key is taken, a malicious actor can scurry away with the associated coins. But locking up your funds in such a vault adds restrictions on the movement of bitcoin in the case of a mistake or another security issue. 

“I think vaults are one of the most important use cases that CTV is going to bring to the table. They bring an immense amount of financial sovereignty tools to a wide audience,” Rubin said, adding that this technology opens up the opportunity for users to do this by themselves without a third-party service provider.

Read more: The ‘Great Lockdown’ Is Boosting Demand for Bitcoin Custody Solutions

Vaults are currently possible in bitcoin, but could be much easier to create with CTV, Rubin argued.

While Rubin is most excited about vaults, CTV opens up a variety of other use cases, such as congestion control. CTV could help bitcoin users wait out high fees for a time where the blockchain has less transaction traffic, and, as such, lower fees.

Now that Rubin has created Sapio, a smart-contract language specifically for CTV, these use cases will become easier for developers to program and thus, easier for everyday users to implement.

Bitcoin as a ‘judiciary’

Rubin’s newly born research organization Judica will focus on this bundle of technologies. It plans to release tools it hopes will “massively expand the Bitcoin economy,” Rubin told CoinDesk in an email. 

The word “Judica” is Latin for “judgment”: Rubin sees Bitcoin as a judiciary, and he wants to push it to grow in this role. 

“If you look at the relationship between the market and the government, usually free-market absolutists will say that the government merely is an interfering agent and will go away. But if you take a closer look, the functionality of the courts is actually critical to the development of the economy. Without reliable courts or some judicial system (private arbitration counts, too), transacting with relative strangers is far too risky which severely limits economic activity.”

Bitcoin comes in and makes this all easier. “The ability to enforce contacts through a legal system (rather than through personal force) enables an economy to flourish,” he said.

But he argues Bitcoin is too limited in what it can do today.

“The Bitcoin blockchain serves the role as a judiciary, but right now the types of contracts it can resolve is fairly limited and it’s difficult to develop more advanced contracts,” Rubin added.

As a part of Judica, Rubin plans to release Sapio “along with designs for a myriad of smart contracts” implemented in the smart-contract language. As Judica is still in its early stages, Rubin said he’s looking for grants, funds and fellow team members to join in. 

Shipping CTV and Sapio

But it’s unclear when (and if) CTV will be deployed, Rubin explained in his talk. It’s a bigger Bitcoin change, so it might take time before the opcode is usable.

“I don’t know exactly when it’s going to happen. I’d like to see it sooner rather than later,” Rubin said.

Because Bitcoin is decentralized, there is no central authority to make decisions. As such, developers don’t always agree about the way forward. 

“If you ask each developer when [CTV will be deployed], you’ll get a very different answer,” Rubin said in his lecture. “There are a reasonable amount of people who say it’s three years from now – at least.” 

Rubin has been championing CTV, which, if successfully activated, would add these abilities to Bitcoin. Most changes to Bitcoin – large or small – are implementation details or local policies. However, because CTV changes a global consensus rule, it would be delivered via a “soft fork,” even though the actual code changes required for CTV are small. As such, it would require enough network participants to support it in order to activate smoothly. So, Rubin isn’t sure when the change will become available.

Read more: Hard Fork vs Soft Fork

Many bitcoin developers are more cautious, only giving their blessings to changes that have been vetted to a certain degree. 

But, in Rubin’s opinion, a timeline of three years is far too lengthy. He called this timeline “sad” and said, “It’s hard for me to make the case that this is important stuff to work on if it’s not really usable until at least three years from now.”

“Some people are, like, ‘Ship it and see if we can get it in in six months.’ I fall more in that camp,” he said, suggesting that changes should be made quickly while Bitcoin is still in its early stages and is more malleable. “I argue that Bitcoin is so early and experimental that we need to be pushing really quickly. Other people feel that Bitcoin is more ossified and needs to move really slowly.”

Rubin thinks that this sort of change is important to Bitcoin’s future. 

As he said in his presentation, “We need a lot of new [features], so that when we say ‘Bitcoin fixes this,’ it actually means what we think it does.”

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Markets globally are mostly flat Tuesday, and bitcoin is trading sideways along with them.

• Bitcoin (BTC) trading around $9,264 as of 20:00 UTC (4 p.m. EDT). gaining 0.43% over the previous 24 hours.
• Bitcoin’s 24-hour range: $9,099-$9,275
• BTC above 10-day and 50-day moving average, a bullish signal for market technicians.

The price of bitcoin is stuck in the $9,200 price range as low volumes continue to plague the markets, said Katie Stockton, an analyst for Fairlead Strategies. “Bitcoin has been tethered to its 50-day moving average recently after having suffered a loss of short-term momentum in June.” Bitcoin’s 50-day moving average is around $9,240 as of Tuesday. 

Read More: Bitcoin Volatility Metrics Are Like November 2018 All Over Again

Related: What It’s Really Like to Live on Bitcoin in the Middle East

Stockton says anything above that level would be a sign of bullish sentiment. “We would view a decisive move above the 50-day MA as an incremental positive because it would help prevent intermediate-term momentum from turning negative,” she added. 

The summer doldrums for the bitcoin market likely started not long after the May 12 halving, said David Lifchitz, chief investment officer for Paris-based quantitative trading firm ExoAlpha. 

“Bitcoin has been trading very technical post-halving since mid-May, essentially bouncing into a $8,100-$10,400 band,” Lifchitz said. “Since mid-June, Bitcoin has gone nowhere moving in a very narrow range of $9,000-$9,400,” he added. 

Read More: Bitcoin Halving 2020, Explained

Related: Bitcoin Volatility Metrics Are Like November 2018 All Over Again

Sasha Goldberg, senior trading specialist for crypto firm Efficient Frontier, said markets overall might not be pricing in the long-term economic impacts of the coronavirus yet. “Right now it seems that the markets are disconnected from what’s going globally. I think bitcoin will continue to stay in the range of $8,900-$9,400,” he said.

Still, bitcoin is up almost 30% this year. Sweden-based over-the-counter trader Henrik Kugelberg said economic uncertainty bodes well for bitcoin as investors look for places to sock away money. “People are anticipating a real bad global fall, with the actual toll of the first six months not seen until Q4,” he said. “I believe more and more asset managers are at least shifting some portfolio percentages into bitcoin.”

Uniswap dominating DEXs

The second-largest cryptocurrency by market capitalization, ether (ETH), was up Tuesday, trading around $241 after climbing 1.3% in 24 hours as of 20:00 UTC (4:00 p.m. ET). For the year, ether is up 75%, and part of that story has been the growth of decentralized finance (DeFi). 

The decentralized exchange, or DEX, Uniswap, which has been deployed since late 2018, is seriously taking on early mover advantages. With over $33 million in daily volume, Uniswap is conquering almost 60% of the DeFi market. 

Efficient Frontier’s Goldberg said other DEXs rely on Uniswap because of the platform’s diversity of offerings, which helps its volume numbers. “Uniswap has other services like flash loans and they are powering some other DeFi projects,” Goldberg told CoinDesk. “I also believe that some DEX’s are hedging their positions in Uniswap.”

Other markets

Digital assets on the CoinDesk 20 are mostly in the green Tuesday. Notable winners as of 20:00 UTC (4:00 p.m. ET): 

• chainlink (LINK) + 13%
• qtum (qtum) + 11%
• dogecoin (doge) + 6%

Read More: CoinDesk Quarterly Review, Q2 2020

Notable losers as of 20:00 UTC (4:00 p.m. ET): 

• lisk (LSK) – 2%
• 0x (ZRX) – 1%
• monero (XMR) 0.15%

Read More: BitGo Looks to Rally Exchange Clients Around FATF Travel Rule Product

Equities:

• In Asia the Nikkei 225 ended the day down 0.87% as losses in transportation stocks led the Japanese index lower.
• In Europe the FTSE 100 closed flat, up only 0.06%, on concerns about the coronavirus continuing to affect the economy. 
• The U.S. S&P 500 index gained 1.4% as reports of slowing coronavirus cases in hot-spot states boosted stocks.

Read More: Fidelity to Custody Bitcoin in Kingdom Trust Retirement Accounts

Commodities:

• Oil is in the green 1.6%. Price per barrel of West Texas Intermediate crude:  $40.02 
• Gold is flat Tuesday, up 0.37% at $1,809 per ounce

Read More: Bitcoiners Not Worried Fed Money Printer Has Stopped Going ‘Brrrr’

Treasurys:

• U.S. Treasury bonds were mixed Tuesday. Yields, which move in the opposite direction as price, were down most on the two-year bond, in the red 2.5%.

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Multiple bills that threaten encryption are moving through the U.S. Senate and could pose a threat to technology that protects users’ privacy, industry pros say.

These bills include the Lawful Access to Encrypted Data (LAED) Act and the Eliminating Abusive and Rampant Neglect of Interactive Technologies (“EARN IT”) Act. While the Lawful Access to Encrypted Data Act was only recently introduced to the Senate, the EARN IT act has been in the works for months, and has been amended a number of times. 

Privacy advocates and product designers say such legislation would also curtail people’s privacy to a huge degree, fundamentally change existing technology and have an impact on everything from messaging and file sharing to privacy coins. 

Related: CoinSwap and the Ongoing Effort to Make Bitcoin Privacy ‘Invisible’

“The government basically would have mass surveillance powers into all of our communications,“ said Zcoin Project Steward Reuben Yap, referring to the LAED Act. “It’s saying, ‘Let’s drop the pretense and let’s just go for it.’ I think it’s really scary. It’s not just about cryptocurrencies as a whole though, it’s really about freedom.”

The bills in question

Sponsored by three Republicans, the LAED Act seeks to end encrypted communications by building in a backdoor for law enforcement to use. The bill lays out a legal framework for law enforcement to access encrypted data with a court order. 

The explicit goal of the EARN IT Act is to curb the spread of child exploitative content online, such as child sexual abuse imagery, though its impact could be far wider. In an initial draft, this was going to be done through stripping tech companies of liability protections for the content that is posted on their platforms. These protections currently exist in Section 230 of the Communications Decency Act, which prevents social media companies such as Facebook, Twitter and Reddit from content liability. 

Under an earlier draft of the EARN IT Act, companies would lose Section 230 protections if they didn’t follow the recommendations of a federal commission on child exploitative content. This could render companies like WhatsApp, which offers end-to-end encryption, liable for communications on the platform, unless they revoked end-to-end encryption.

Related: Binance Labs Leads $1M Seed Round in Crypto Tor Alternative HOPR

“They communicate using virtually unbreakable encryption. Predators’ supposed privacy interests should not outweigh our privacy and security,” said Attorney General William Barr at an event the day the bill was introduced.

There is no way for Ethereum, Bitcoin and other cryptocurrencies to comply.

Barr has long been a critic of encryption, dating back to his days in the George W. Bush Administration. 

The most recent version of the bill gets rid of the commission idea, delegating power to state legislatures to bring lawsuits against companies. It also adds an amendment that explicitly protects encryption. But organizations such as the Electronic Frontier Foundation (EFF), Center for Democracy and Technology and Internet Society claim the bill might respect encryption in name, but not in practice. 

Tools like client-side scanning, which could be used to check for child exploitative content, employs software to check files that are being sent against a database of “hashes,” or unique digital fingerprints. If it finds a match to certain kinds of images, they could be blocked, with the recipient notified, or the message could be forwarded to a third party without the user’s knowledge. Organizations such as EFF have said this violates encryption on a fundamental level.

“Tech companies’ increasing reliance on encryption has turned their platforms into a new, lawless playground of criminal activity,” said Republican Sen. Tom Cotton of Arkansas and one of the sponsors (with Sens. Lindsey Graham and Marsha Blackburn) of the LAED, in a public statement.

“Criminals from child predators to terrorists are taking full advantage. This bill will ensure law enforcement can access encrypted material with a warrant based on probable cause and help put an end to the Wild West of crime on the Internet.”

See also: EU’s Europol: Bitcoin Privacy Wallet ‘Not Looking Good’ For Law Enforcement

Child sexual abuse imagery is proliferating at an alarming rate on the internet. In 2019, tech companies reported nearly 70 million pieces of exploitative child content to authorities. Criminals also often use encrypted communications. EncroChat, a encrypted communications platform, protected criminals and their communications from the police, until law enforcement managed to infiltrate it. 

But weakening tools that protect everyone’s privacy may not be the best solution, say privacy advocates.  

The impact on tech and cryptocurrency

Yap, of Zcoin, said many kinds of technology could be impacted by the bill’s broad sweep. 

The LAED Act is aimed at electronic devices and operating systems. Providers of “remote computing services” are included, presumably to cover cloud computing services like Dropbox.

However, Yap said the bill’s definition of remote computing services can be stretched to include cryptocurrencies as well, because financial transactions are conceivably just another form of electronic communication.

“Given the trajectory of this legislation, people in the cryptocurrency industry, especially those like Zcoin [that] are privacy-focused, will very likely be affected,” said Yap. 

“It could mean that ‘providers’ of a privacy cryptocurrency that provided service to more than 1,000,000 users in the US are required to insert a backdoor.”

Privacy is not safe in their hands.

Ian Dixon, a Nevada-based programmer who previously mined bitcoin and runs a validator on a privacy-oriented blockchain network, said the bills are repackaged attacks on privacy, just with different language. 

“It doesn’t really seem possible to enforce, but it would essentially make blockchains illegal in general,” said Dixon. “There is no way for ethereum, bitcoin and other cryptocurrencies to comply.”

Matt Hill, the co-founder of Start9 Labs in Colorado, which develops decentralized internet tech, says he sees both pieces of legislation as falling into the same bucket, even if they are different in flavor. 

“The ultimate meaning is the same, which is that if you are a service provider of privacy or encryption, you are going to be subject to the whims of politics,” said Hill. 

“We hope politicians and our political system stays rational, and upholds individual rights to privacy, but if they don’t you are going to be subjected to force, whether it’s building a backdoor or handing over user data.”

See also: Public Opinion Shifts on Big Tech and Privacy During Pandemic

Hill said that even if these bills don’t pass, the very fact they’re sitting on the table and being taken seriously should be enough of a warning sign  for us to start thinking outside the political box.

“Privacy is not safe in their hands,” said Hill. “So we have to protect privacy with technology, as opposed to with laws.”

This is privacy-by-design tech, the kind that Start9 Labs develops, including a server that lets users run their own private networks and cut out middlemen who would otherwise have access to their data. 

Start9 Lab’s tech is built such that it can’t hand over any user data, even if legally compelled to, because it doesn’t have it. It builds the tech but doesn’t run the services on it. Given its products are open source, they can continue to run and protect user privacy, even if the company is shut down. 

See also: How Apple’s COVID-19 Policy Limited a Public Health App in Taiwan(Opens in a new browser tab)

Encrypted communications are regularly used by people such as dissidents and journalists, and are often a means of protecting sources or organizing in authoritarian countries. There is a risk that if the U.S., which has long held itself up as an example of freedom and democracy, moves to eliminate end-to-end encryption, other countries would also follow suit, and use such legislation to crack down on dissent. 

Finally, backdoors inevitably get used by bad guys, not just law enforcement. 

“There’s no such thing as a backdoor just for good guys,” said Daisy Soderberg-Rivkin, a fellow focusing on children and technology at the R Street Institute, a policy think tank in Washington, D.C. “This opens up users’ information to a whole mess of bad actors.”

UPDATE: The section about the EARN IT Act’s potential impact on services like WhatsApp has been updated.

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British startup Cryptograph launched this summer with its first round of auctions, raising more than $50,000 so far, with two days still to go.

• Prominent crypto developers and entrepreneurs including Gitcoin CEO Kevin Owocki, ShapeShift CEO Erik Voorhees and Parity co-founder Jutta Steiner auctioned digital autographs and notes related to their work. The digital doodles are used to generate non-fungible tokens (NFTs).
• The top earners so far include Ethereum creator Vitalik Buterin (whose notes sold for 77.35 ether (ETH), or roughly $18,719), Ethereum Foundation researcher Vlad Zamfir (25 ETH, roughly $6,050) and Tezos co-founder Kathleen Breitman (5 ETH, roughly $1,204).
• According to Buterin’s auction page, the autographed NFT includes his own “hand-drawn representation of this groundbreaking Quadratic Funding formula.” The bid for his digital autograph will go towards Gitcoin’s open-source grant programs.
• Ownership of the autographs, displayed in a virtual gallery, is publicly verifiable. Plus, contributors will be able to distribute funds across multiple charities.

Read more: Devcon Shows Ethereum’s ‘World Computer’ Is a Movement, Not a Product

Correction (July 14, 21:08 UTC): Vitalik Buterin’s notes raised 77.35 ETH, not 40 ETH as was previously reported.

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An Andreessen Horowitz (a16z) alum is launching a new venture firm focused on building a crypto-powered “ownership economy.” 

Jesse Walden, who focused on blockchain investments at a16z, announced his Variant Fund in a blog post published Tuesday.

Walden said the new fund is focused on the idea that the people who make platforms and products strong can share in their growth. He wrote:

Related: Kraken Adds 3 DeFi Tokens – COMP, KAVA, KNC

“Crypto exposed the power of ownership as a tool to drive users to contribute to protocols they use in deeper ways. Now, the opportunity is to follow the pattern, and build more accessible products (and protocols) that bootstrap adoption & participation through better economic alignment with users.”

He cites examples like Compound, which is distributing a large portion of its governance tokens to users; Reddit, which is starting to sort out how tokens fit into the Web 2.0 giant’s business model, and other examples.

In an email to CoinDesk, Walden said the fund is backed by a16z’s Chris Dixon and Marc Andreessen, Union Square Ventures and Compound’s Robert Leshner – “mentors I respect and have built relationships with over the years as both an entrepreneur and investor.”

Variant Fund has made investments already, Walden said, but they’ve yet to be announced.

Founder’s roots

Related: Market Wrap: Stocks Make Gains While Bitcoin Sticks to $9,200

Walden co-founded Mediachain, an a16z-backed blockchain startup that tracked ownership rights of online images and other intellectual property. After the firm was acquired by Spotify in 2017, Walden worked for the music-streaming giant for nine months before decamping to a16z.

“To help build the ownership economy, I’ll partner with entrepreneurs and communities at the earliest possible stages,” Walden wrote.

Read more: Mediachain is Using Blockchain to Create a Global Rights Database

Longtime political watchers might draw a connection between the “ownership economy” thesis and former President George W. Bush’s “ownership society” messaging.

In 2003, the president bemoaned a past where only a very few held equity in major companies, celebrating a present where it was possible for almost anyone to hold a share. 

What President Bush probably didn’t anticipate at that time was a future where people could own a company that exists only on the web and, like Bitcoin, has no one in particular in charge. As Walden described in another blog post from January, Variant appears built to help founders head in that direction.

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Syrian developer Ghass Mo has been living off freelance bitcoin gigs from Kurdistan, Iraq, for nearly two years. 

“I get paid in bitcoin for doing work on open-source projects related to the cryptocurrency industry,” Mo said. “The first programmer I met was Amir Taaki. … I learned a lot from him and he was supporting me.”  

It’s impossible to say how many people are like Mo, inspired by a chance meeting with a bitcoiner to embark on an educational journey toward financial sovereignty. These cases are often isolated, at least in the developing world. Yet, they are increasingly familiar to people who work with digital nomads. They are showing bitcoin can work as intended, as a global currency without borders. 

Related: Bitcoin Volatility Metrics Are Like November 2018 All Over Again

Read more: Bitcoin in Emerging Markets: The Middle East

Mo left Syria in his early 20s because of the civil war and became an unbanked migrant worker to support his family. This may sound bleak but Mo has a lot in common with the other developers he now works with online. 

He is a quiet man, a self-taught developer who rarely leaves his chosen Batcave except for shopping and rare outings. Mo has a perpetual five o’clock shadow and a minimalist home office setup, with just a few laptops, a monitor and always a cup of Arabic coffee. He’s never met most of the people he works with online, nor does he know of any local bitcoin meetups. He spends his evenings reading about Rust and studying at home with books like “Mastering Bitcoin.” 

“The ongoing war in Syria and lack of stability affected me,” he said. “Sometimes I spend months trying to finish an online course, translating every single word [from English]. … The people [I know] interested in this field of study could be counted on one hand.” 

Getting by

Related: Market Wrap: Stocks Make Gains While Bitcoin Sticks to $9,200

Like many other freelance developers earning bitcoin across the Middle East, Mo liquidates his bitcoin through a local exchange to pay for daily expenses. A local grad student who founded the Kurdcoin exchange, who asked to stay anonymous, has been operating a hawala-adjacent business for customers like Mo since 2017. 

Hawala is a traditional money network used to send value across the Islamic world for hundreds of years, long before bitcoin. Thanks to partnerships with long-standing hawala businesses, bitcoin has merely become another option offered by such money changers. This is very accessible to local people with a wide range of computer skills and access.  

“Facebook is our primary source for discovery for new clients. Word of mouth is the second,” said the anonymous exchange founder. “We also sell hardware wallets ourselves. We recently started this service, we’ve sold 10 in Iraq, and it’s increasing.”  

Read more: How Bitcoin Fits Into Lebanon’s Banking Crisis 

Mo and users like him can message the Kurdcoin accounts on social media, including Telegram, Twitter or Instagram. The exchange is supported by a staff of 10 people. Clients can pay online with bitcoin and pick up their cash at almost any local hawala business from Syria to Kurdish Iran. Mo also uses bitcoin to send money to his family. 

It was a great feeling when I realized I could buy food and other stuff using bitcoin.

“After the lockdown, due to the coronavirus, the borders between Iraqi Kurdistan and Rojava [Syria] have been closed,” Mo said. “Sometimes there are difficulties in transferring money and the fees increase several times.”

Local demand is much higher now, the exchange founder said, for the bitcoin that freelancers like Mo bring to the local market. 

Kurdish markets

“We’ve had some months where we did $10 million in volume and months with $500,000,” the exchange founder said of Kurdcoin’s volumes. 

Plus, business is up compared to the token-boom peak of late 2017. 

“There are many, many new customers coming,” the founder said. “There are 10-20 new leads for our exchange every day … some months we’ll have 1,000 prospective clients.”

He’s long since abandoned the failed token project that inspired the exchange’s name. Many people weren’t as lucky as Mo, to learn about bitcoin from a trusted mentor. Those who learned from token “scams,” the exchanger said, are now returning to his platform for bitcoin. 

Read more: Despite Bitcoin Price Dips, Crypto Is a Safe Haven in the Middle East

The exchange operator said he’s working with a team of lawyers and 10 advisers from abroad to try to establish a regulated way to conduct business in Kurdistan. Much like the American cannabis industry operates in a gray zone between state and federal laws, the Kurdish bitcoin industry operates despite vague restrictions issued by the Central Bank of Iraq. In the meantime, established hawala businesses handle the know-your-customer (KYC) process.

Loyal users

It’s been lucky that bitcoiners like Mo remain regular customers during the pandemic. 

Before the coronavirus crisis, the exchanger said more than half of his clients were from the southern, Arab regions of Iraq. They came to Western Iraq (Kurdistan) to buy or sell bitcoin. Now, with travel restricted, such business is done online. Multi-currency remittances have picked up due to the lockdown and both Iranian and Syrian currencies collapsing. 

“From the West of Iran, the Kurdish part, some people were also thinking of opening a Kurdish exchange,” the exchanger said about growing demand for bitcoin. “Banking here is underdeveloped in Iraq, probably one in 20 people has a bank account they actually use. … Almost all of our daily transactions are in cash. You buy a house with cash.” 

This cash economy suits unbanked migrants like Mo, who still manages to get enough freelance work to support himself and live comfortably in Iraq. Although electricity and WiFi access is reliable in Iraq, a vast improvement over Syria, he’s still unable to run or use local data centers. 

“I rely on providers abroad,” Mo said. “I’ve had to work several part-time jobs as a graphic designer and web developer to provide financial support for my family. … I’ve finished 10 online courses at Edx, four at Udemy and read more than 10 books about programming and bitcoin.”

He said learning about bitcoin dramatically changed his life over the past two years. 

“It was a great feeling when I realized I could buy food and other stuff using bitcoin,” he added. 

Related Stories

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A 29-year-old Texas man is in A-1 trouble after being charged Monday with siphoning nearly $1 million in Payment Protection Program loans meant for a barbecue company into a cryptocurrency trading account.

• Joshua Thomas Argires received a $956,600 loan for “Texas Barbecue” and allegedly transferred those funds into a Coinbase account where they “generated a profit” by investing in crypto, according to a criminal complaint unsealed Monday in U.S District Court for the Southern District of Texas. The complaint didn’t disclose the size of the alleged profit or which cryptocurrencies were allegedly traded.
• USPS investigators discovered Texas Barbecue had no documented employees, no online reviews and no bank account until 4 days prior to the loan request, according to a criminal complaint.
• Argires suggested that Texas Barbecue’s Coinbase account was how employees were paid, saying: “I don’t really manage that aspect of” the business. Investigators assert that Argires had exclusive control of the Coinbase account, and that Texas Barbecue never had any employees to pay.
• Charges against Argires, who allegedly collected more than $1.1 million in fraudulent PPP loans total, include wire fraud, making false statements to a financial institution, bank fraud and engaging in prohibited monetary transfers.
• In addition for his Texas Barbecue loan, Argires also received PPP funds for a company called Houston Landscaping, which also had no employees, the complaint reads. The funds obtained for Houston Landscaping were not deposited in Coinbase but were held in a bank account and depleted by ATM withdrawals, according to the complaint.
• PPP records indicate that a “Texas Barbecue” with identical information to Argires’ outfit received a loan from PrimeWay Federal Credit Union in Houston. PrimeWay could not immediately be reached for comment.

Read the unsealed criminal complaint below:

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• BitClub Programmer Admits Mining Scheme Stole $722M in Bitcoin

Binance announced the rollout of its crypto debit card, the U.K.’s central bank is thinking hard about a digital currency and the taxman cometh. Here’s the story:

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Top shelf

AML Compliance
BitGo is offering API support for the Financial Action Task Force’s (FATF) “Travel Rule,” which stipulates the originators and beneficiaries of financial transactions over $1,000 be identified and that their personal data must “travel” with those transactions. BitGo’s offering seeks to remove the headache of identifying wallets and transferring personally identifiable information between clients that use the San Francisco-based firm’s technology or custodial services.

Related: First Mover: Bitcoiners Not Worried Fed Money Printer Has Stopped Going ‘Brrrr’

Binance Card
Binance has announced the first major rollout of a debit card allowing users to pay for goods and services in crypto. Users in the European Economic Area (EEA) will be able to apply for a card from August; those in the U.K. will be able to do so afterwards. The service is powered by Swipe, the online payments juggernaut. Users can spend crypto – currently bitcoin, Binance Coin, Swipe Coin, and Binance USD – at any merchant that supports Visa payments.

Retail Interest
Retail interest in Chainlink, which acts as a bridge between cryptocurrency smart contracts and off-chain data feeds, is now at the highest level it has been in well over a year. According to Google Trends, worldwide queries for the word “Chainlink” on the search engine reached a score of 100 in the week ended July 12, more than double what it was the preceding week. A score of 100 indicates it is the maximum number of searches observed for a term during a given time frame.  

Ethereum Reboot
Ethereum developers are aspiring to launch Eth 2.0 in 2020. The sum of account balances maintained by the network’s nodes – called the state – continues to grow larger and larger as applications and projects transact. Adoption is good, but runaway growth is bad. Independent developer Alexey Akhunov may have a solution – one pulled from Cosmos, the interoperability blockchain. His new proposal, dubbed “ReGenesis,” posted on EthResearch on June 24, would bring stateless client research to the current Ethereum chain (also known as Eth 1.x) by “nuking” certain nodes’ states and swapping them with a math proof on a rolling basis.

CBDCs
The U.K.’s central bank is discussing the possibility of launching a digital currency. Speaking during an online event, Bank of England Governor Andrew Bailey told a group of U.K. students on Monday his institution was having talks over the plan, as reported by Bloomberg Tuesday. Bailey said ongoing investigations would look at a central bank digital currency (CBDC), which would have implications across “payments and society.” Calling it a “very big issue,” he anticipated the CBDC could be a real possibility in several years, once the coronavirus has passed.

Quick bites

• Canadian Prime Minister Justin Trudeau’s half-brother was paid by the federal government to speak at a blockchain conference last year.
• What do Ethereum developers do when there’s no conferences to attend? 
• Paradigm is sponsoring a Bitcoin Core developer. (The Block)
• Bitcoin environmental impact grows following post-halving dip. (Decrypt) 

Tax Day

Related: Blockchain Bites: It’s Never Been Harder to Mine Bitcoin

The deadline to file and pay your taxes in the U.S. is tomorrow, and hodlers are as confused as ever. 

CoinDesk’s Nikhilesh De looks into how the Internal Revenue Service’s public guidance on crypto tax reporting fails to account for much of the innovative financial tools enabled by decentralized tech. Passive income earned through staking, highly leveraged margin trading and crypto earned through airdrops or hardforks all have antecedents, but retail investors taking advantage of these products are still in the dark about they have to do. That’s because the IRS hasn’t clarified the precise tax implications or forms associated with these services, tax pros say.  

“What the IRS has made clear is taxpayers need to file if they made (or lost) any money as a result of exchanging their crypto for fiat or another cryptocurrency, if they gained any crypto as a result of airdrops or hard forks, or if they gained funds as a result of staking or mining,” De writes. 

“Sometimes the IRS publishes final regulations more than a decade after taxpayers wish they were available. But it does make for unpredictable outcomes and forces individuals and businesses to file more in hope than expectation that they’ve acted correctly,” Kirk Phillips, a certified public accountant and author of “The Ultimate Bitcoin Business Guide: For Entrepreneurs & Business Advisors,” wrote in an op-ed.

While the IRS is working to create a guide for tax obligations, Phillips notes historically much “de facto tax guidance” comes from audits and tax court. There’s an irony in this as one public advocate, the IRS’s own Taxpayer Advocate Service, now claims a letter sent to crypto holders last summer may have violated taxpayers’ right to privacy and the right to be informed.

Another irony: Despite Bitcoin’s initial anti-state ideological underpinnings, the current tax landscape is likely one of the biggest barriers to mainstream adoption today. 

Market intel

Volatility Bands
Bitcoin’s ongoing low-volatility range play is reminiscent of the price doldrums observed ahead of a sudden 40% price crash in the second half of November 2018. This time, however, the price squeeze may end with a bullish move, as the spread between volatility bands and the 20-day moving average suggests. “A prolonged period of low volatility consolidation often ends with a violent move in either direction,” CoinDesk’s Omkar Godbole notes. But the macroeconomic climate – seen by monetary and fiscal stimulus and Bitcoin’s tripling from March lows – could precede a strong move to the higher side. 

It Hit
An index of 50 low-capitalization cryptocurrencies, the so-called Shitcoin Index, is up 114% so far this year. Launched in 2019 by FTX, the index was trading at an all-time high of $1,065 Monday after making all-time highs for the past three consecutive trading days. The novel futures product has outperformed bitcoin by 88 percentage points this year.

Opinion

Minecraft of Finance
Camila Russo, founder of The Defiant and author of “The Infinite Machine,” the first book on the history of Ethereum, out today, thinks Ethereum has achieved much of what it set out to do five years ago: become a “Minecraft of crypto-finance.” From token issuance to decentralized exchanges through to novel derivatives platforms, Ethereum is the base layer to an alternative and open financial system. “The next five years will be about strengthening these scaling solutions and making these financial applications more robust and secure,” she predicts. You can read an excerpt of her new book here: 

Podcast

The Real Story Behind Tesla’s Crazy Rally
Elon Musk is now richer than Warren Buffett and Tesla comprises more than 25% of the value of the entire auto market. In the latest episode of The Breakdown, NLW looks at the narratives behind this stock-market phenomenon including Musk’s cult of personality, the Robinhood effect and whether Tesla is a tech company. 

Crypto Memeing Related Stories

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• First Mover: Kyber Token’s Eightfold Increase Reveals Bet on Future Market-Share Growth

Riding the surge of interest in yield farming, cryptocurrency exchange Kraken is listing three tokens from the world of decentralized finance (DeFi).

• Compound (COMP), Kava (KAVA) and Kyber Network (KNC) will be listed by Kraken starting July 15, the company announced Tuesday in a blog post.
• COMP is the governance token that kicked off DeFi’s recent boom. Following its June 15 debut, the token was promptly added by Coinbase and others.
• Kava is a DeFi platform backed by Binance, Huobi and OKEx.
• Kyber Network is a decentralized exchange (DEX) whose KNC token became the runaway hit of early 2020. The firm recently announced the creation of a new type of yield farming, in which it would share trading fees with KNC token holders.
• In addition to the three DeFi tokens, Kraken announced it will also list Storj (STORJ), a token that powers a blockchain-based data storage network.

Read more: Kyber Network Is Bringing Yield Farming to DEXland

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• Market Wrap: Stocks Make Gains While Bitcoin Sticks to $9,200
• Compound Tops $1B in Crypto Loans as DeFi Farmers Keep Digging for Yield
• First Mover: Twelve-Fold Gains for Aave’s LEND Token Might Be More Than DeFi Hype

Enterprise blockchain firm Digital Asset announced Tuesday that VMware is investing in the firm’s Series C funding round. 

• In an announcement on its website, Digital Asset said VMware joined Samsung Venture Investment Corporation and Salesforce Ventures as an investor in the firm’s funding round, which was announced in December.
• Brandon Howe, vice president and general manager of VMware blockchain, has also joined Digital Asset’s Board of Directors. 
• Initially marketed as a private blockchain provider for financial institutions, Digital Asset has shifted its focus to DAML, an open-source platform to help deal with smart contracts.
• The firm had also announced its platform has been integrated with VMware Blockchain, Amazon Web Services, Aurora’s database and Hyperledger Fabric, among others. 
• While the firm’s announcement did not disclose the amount of funding received from VMware, its Series C disclosure at the end of last year indicated it had managed to raise $35 million at the time. 

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Payments giant PayPal told the European Commission earlier this year it is actively working in the cryptocurrency space.

• PayPal detailed in a March 20 letter to the European Commission it had taken “unilateral and tangible steps” in the crypto space.
• Sources told CoinDesk in June that PayPal was planning on rolling out cryptocurrency buying and selling services but the company declined to comment at the time.
• PayPal’s letter, advice on how the European Union can better regulate the emerging asset class, said that it believed cryptocurrencies could address “pain points” in the financial system.
• The San Jose, Calif., company, which says it has 300 million active users worldwide, said it joined Facebook’s Libra Association in mid-2019 to learn about crypto and blockchain; it left the Association that October.
• The payments giant recommended the European Commission ensure crypto-related activities come under the scope of the bloc’s existing anti-money laundering regulation.
• It also said future European regulation should remain technologically neutral.

See also: PayPal’s Financial Crimes Division Is Seeking a Blockchain Expert

See the full letter below:

Related: Blockchain Bites: PayPal’s Push, FATF’s Rules and ‘Overstated’ Libra Fears

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Gemini says it’s become the first cryptocurrency exchange to offer support for hardware security keys on iOS and Android mobile devices.

• On Tuesday, the regulated U.S.-based company, founded by Tyler and Cameron Winklevoss, said supporting hardware security keys will allow users to authenticate their Gemini accounts through a cryptographic proof of a user’s identity.
• Users are now able to use their mobile devices to sign in via USB and near-field communication (NFC) security keys.
• Mobile devices will authenticate via an internet standard known as Web Authentication (WebAuthn), a type of security interface designed for validating multiple users of internet applications using public-key cryptography.
• The extra feature is in addition to Gemini’s current security layers including TouchID and Windows Hello.
• According to the firm, only owners of the physical hardware key may gain access to their accounts, even if their passwords are compromised or in the event they fall victim to a SIM-swap attack.
• The new security stems from a partnership between Gemini and Yubico via its Works With Yubikey program.
• Yubikey’s hardware can be utilized cross-platform via Gemini’s mobile app as an additional layer of defense.
• In order to take full advantage of the keys, the companies said a user will need to register at least two hardware keys, including one that is supported by the user’s mobile device.
• Gemini recently became the first exchange to integrate with Samsung’s blockchain wallet, allowing Canadians and U.S.-based citizens to buy and sell crypto through Gemini’s mobile app.

See also: Israeli Firm Develops Tech Allowing Crypto Users to Retrieve Funds Sent in Error

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Crypto custodian Kingdom Trust is offering customers bitcoin cold storage from Fidelity Digital Assets.

The storage will be offered on Kingdom Trust’s Choice retirement account, a hybrid self-service retirement platform where investors can buy, sell or hold stocks, exchange-traded funds (ETFs) and digital assets in one tax-advantaged account. 

Kingdom Trust CEO Ryan Radloff hopes the partnership with Fidelity will nudge the investment giant closer to serving retail crypto investors.

Related: Nomura-Backed Crypto Custody Venture Launches After 2 Years in the Works

“I think having Fidelity grow is so important for bitcoin and the market’s maturity that I’m willing to sacrifice a few basis points of margin for that,” Radloff said of the new business arrangement. “We think this is meaningful for a lot of people that already have Fidelity retirement accounts but have really been waiting for Fidelity Digital Assets’ mandate to mature from just an institutional one to institutional and retail.”

Read more: ‘Focus on Retirement’: Crypto Custodian Rolls Out Hybrid IRA Offering

While Fidelity Digital Assets continues to be solely focused on institutional customers, this is one of the first sub-custody service agreements that the fund manager has made public. In an emailed statement, Fidelity clarified that the sub-custody relationship means that customers will access the service only through Kingdom Trust.

“Since our market entry less than two years ago, we’ve seen significant progress in the infrastructure supporting investors in digital assets, and an evolution in the range of investors adopting digital assets into their portfolios,” Fidelity Digital Assets Head of Sales and Marketing Christine Sandler said in a press statement.

Related: This Liechtenstein Bank Can Now Custody Crypto

Kingdom Trust customers still have just three ways of handling custody: They can hold their own private keys with a solution powered by Casa, hold them in cold storage custodied by Fidelity or lend out or stake their digital assets via Kingdom custodial accounts. 

Kingdom Trust also expects to work with Fidelity on other digital assets in the future, Radloff added.

“We custody 20,000 unique assets, and most of those are alternative assets,” Radloff said. “Bitcoin is the first asset that we are doing jointly with Fidelity Digital Assets, but I do not expect it to be the last.” 

Since the launch of Choice in May, more than 10,000 people have joined the product’s waitlist, according to Radloff.

Related Stories

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Shyft Network is rolling out its blockchain-based solution to help crypto companies comply with the identity and data sharing requirements mandated by the Financial Action Task Force (FATF).

Announced Tuesday, Shyft is releasing its Veriscope system to identify virtual asset service providers (VASPs) and VASPScan, a kind of block explorer for identifying VASP transactions.

The FATF’s Travel Rule requires firms dealing in virtual assets to share personally identifiable information (PII) and know-your-customer (KYC) data between a transacting originator and beneficiary, concurrent with the transfer itself, for transactions above $1,000.

Related: BitGo Looks to Rally Exchange Clients Around FATF Travel Rule Product

Shyft, which was recently chosen by Binance as the preferred way of addressing the Travel Rule, has been working on this problem for close to three years, according to the platform’s co-founder, Joseph Weinberg, with some 30 VASPs having tested the tech over the past few months. 

Read more: Binance Throws Weight Behind Shyft Network in ‘Travel Rule’ Standards Race

For many solution providers, the main problem being addressed is how to move data, noted Weinberg, whereas Shyft has focused on building a discovery layer.

“It’s really end to end, like a decentralized version of SWIFT,” said Weinberg. “We are basically taking the entire central clearing and transaction order base, and are using the blockchain as a way to allow all the counterparties to onboard, register and go through their own discovery creation process.”

Related: Binance Rolling Out Crypto Card for EU, UK Markets

As a first step, firms can join the Shyft network by identifying themselves with a public address, which creates a public registry of companies on the network. Then, to identify an unknown counterparty to a transaction, a known VASP creates an attestation, which means broadcasting a request for information regarding the undiscovered counterparty’s public address.

“The exchange is raising its hand on the network and saying, ‘Hey, everybody, we are about to send a transaction to this address.’ They are asking, ‘Does anyone own this address, is this a VASP address?’” said Weiberg. “If no one has responded to this address, it’s assumed it is a non-custodial address” outside of the exchange ecosystem.

Centralized vs. decentralized

Shyft does monthly calls with the FATF to discuss approaches to solving the Travel Rule, and the regulator is impartial when it comes to decentralized versus centralized approaches to the problem, Weinberg told CoinDesk. 

“I think there’s a lot of the ecosystem right now that is trying to make an attempt at centralization,” he said. “To be honest, I don’t think the FATF really cares, they just want to make sure they can measure for effectiveness.”

Read more: Inside the Standards Race for Implementing FATF’s Travel Rule

Shyft is also gearing up for “jurisdictional coalitions” of VASPs that may have particular data sharing requirements or privacy regulations. “I will say the first coalition we are working on right now is in Singapore, and a lot of the VASPs that we are starting off with are in Singapore,” said Weinberg.

A reliable counterparty discovery engine could also open the forbidden realm of decentralized finance (DeFi) to institutional players, Weinberg added.

“Institutional capital can’t play in DeFi, and the reason why is that they don’t know who their counterparty is,” said Weinberg. “They are not allowed to participate in any liquidity pools, which means all this institutional money can’t go into a MakerDAO or something like that.”

Weinberg could not say exactly what big exchanges are following Binance’s lead, but a look at the Shyft website shows Peter Warrack, chief compliance officer at Bitfinex, and Craig Sellers, Tether co-founder and CTO, among the firm’s advisers.

“This will be driven by the providers of the most liquidity, which isn’t the U.S. VASPs,” said Weinberg. “The biggest ones in the world are firms like Binance, BitMEX, Bitfinex. I also think they are more like the champions of the ethos of crypto, which is about keeping things open and not allowing too much centralization, right?”

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Bitcoin’s ongoing low-volatility range play is reminiscent of the price doldrums observed ahead of a sudden 40% price crash in the second half of November 2018.

This time, however, the price squeeze may end with a bullish move, on-chain metrics and macro factors suggest.

The leading cryptocurrency by market value has spent the better part of the last three months trading the range of $9,000–$10,000. While sellers pushed prices below $9,000 on a few occasions, they failed to establish a foothold.

Related: First Mover: Bitcoiners Not Worried Fed Money Printer Has Stopped Going ‘Brrrr’

As a result, the Bollinger bandwidth, a price volatility gauge, has declined to 0.04, the lowest level since Nov. 12, 2018, according to data source TradingView. 

Bollinger bands are placed two standard deviations above and below the 20-day moving average (MA) of price. Meanwhile, the Bollinger bandwidth is calculated by dividing the spread between the volatility bands by the 20-day MA. 

Volatility, as represented by Bollinger bandwidth, topped out at 0.89 following the March 12 crash, dubbed Black Thursday, and has been on a declining trend ever since.

A similar pattern was observed in 2018 (above right), when the bandwidth fell from 0.5 to 0.04 in the two months to Nov. 12. The cryptocurrency had been locked in the narrow range of $6,000–$6,800.

Related: Market Wrap: Stocks Make Gains While Bitcoin Sticks to $9,200

A prolonged period of low volatility consolidation often ends with a violent move in either direction. That’s what happened in 2018, two days after the bandwidth slipped to 0.04. The cryptocurrency dived below $6,000 on Nov. 14 – two days after the bandwidth hit a low of 0.04 – then went on to hit lows below $3,500 by Nov. 25. The fall marked a 41% drop over two weeks. 

Back then, though, the broader market structure was bearish. The cryptocurrency had charted lower highs in the first half of the year, having topped out at $20,000 in December 2017. 

The latest consolidation, on the other hand, was preceded by a bullish structure. The cryptocurrency bottomed out at $3,867 in mid-March and has charted multiple higher lows over the past four months. 

Also read: CORRELATION: Crypto’s Most Enigmatic Metric

In addition, on-chain data shows holding sentiment is quite strong at the moment. For instance, over 62% of BTC haven’t moved in over a year, according to Glassnode, a blockchain analytics firm.

Meanwhile, the unprecedented monetary and fiscal stimulus launched by the global authorities to counter the coronavirus-induced economic slowdown is widely expected to boost demand for bitcoin, often touted as digital gold and a hedge against inflation. As such, the ongoing consolidation may end soon with a strong move to the higher side. 

However, if the global stock markets begin to slide on renewed coronavirus concerns and China-U.S. tensions, bitcoin could instead witness a big move to the downside. The cryptocurrency has recently developed a record positive correlation with the S&P 500, Wall Street’s benchmark equity index. 

Disclosure: The author holds no cryptocurrency assets at the time of writing.

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As the crypto options market explodes, crypto exchange Gate.io opens its new options trading feature and rival Huobi preps for a launch later this year.

• Chicago’s Gate.io said Tuesday that their first bitcoin options contract had been released with short-term expiries of up to twenty-four hours.
• This comes as crypto options volumes went from $200 million in August 2019 to over $3 billion in May 2020, according to data site CryptoCompare. Following the halving, options volumes settled at $2.5 million last month.
• In contrast, trading volumes in the crypto spot and futures markets have fallen by over a third as volatility has spiraled to a yearly-low.
• Singapore-based exchange Huobi – which already offers futures and perpetual swaps – also said Tuesday that it plans to launch bitcoin options contracts sometimes in Q3; contracts for other cryptocurrencies could soon follow.
• The contracts are currently in alpha testing, the exchange said in a statement.

See also: Bitcoin Options Market Faces Record $1 Billion Expiry on Friday

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It would be an understatement to say bitcoin has been a big disappointment for traders and investors over the past few months.

Ever since the coronavirus ravaged financial markets in March and sent the Federal Reserve scrambling to pump trillions of dollars of emergency liquidity into global financial markets, cryptocurrency analysts have speculated that a resulting surge in inflation would eventually push up bitcoin prices. The community even celebrated a meme, “Money printer go Brrr,” satirizing the U.S. central bank’s efforts.

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

Related: Bitcoin Volatility Metrics Are Like November 2018 All Over Again

Yet since late April, bitcoin prices have barely increased – hovering around $9,000, which is up from around $7,600 at the start of 2020, but still well off the year’s high of $10,500, reached in February. At a time when the largest cryptocurrency was supposed to shine, it’s been pushed out of the limelight by rallies in tech stocks and gold, not to mention price zooms in a cadre of lesser-known digital tokens like Chainlink’s LINK , Cardano’s ADA and Aave’s LEND.

Bitcoin investors, though, are undaunted. They still see the cryptocurrency as a hedge against everything from inflation to turmoil in the global financial system to widespread bankruptcies, which by themselves could prompt new rounds of stimulus and money printing. The bet is that the apocalyptic economic scenario remains entirely possible during the remainder of this already-tumultuous year.

“Capitalism is either breaking, or is already broken, and investors know it even if they are still playing the game,” the cryptocurrency investment fund Arca wrote Monday in a weekly update. “We believe Bitcoin will remain the best insurance policy against currency collapse and a complete unwind of the financial system as we know it.”

Last week, the Fed’s balance sheet shrank by $88 billion, the most in 11 years, falling below $7 trillion as foreign central banks repaid emergency dollar loans known as “liquidity swaps.”   

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Theoretically such a decrease might be seen as bearish for bitcoin: The U.S. central bank’s money printer was essentially working in reverse as market funding strains eased. That might imply lower inflation in the future.

“This is part of the Fed’s success story in stabilizing markets,” Bloomberg News trumpeted in an email. Cryptocurrency analysts were more focused on developments in the fast-growing arena of “decentralized finance” than they were about bitcoin.

Even Federal Reserve officials acknowledge that further stimulus might be needed, with coronavirus cases rising across the southern and western U.S., threatening the prospect of a quick economic recovery. 

Bank of America predicted in a report last week that the Fed’s balance sheet will climb by the end this year to about $7.6 trillion, which would be a new record.

But Marc Cabana, an interest-rates strategist for the bank, said in a phone interview that the “risks to our forecast are to the high side,” since it’s not unlikely that the U.S. central bank would pump in a fresh round of emergency liquidity if traditional financial markets took a turn for the worse. 

“The U.S. appears to have the virus under control in no way, shape or form,” Cabana said. “If market conditions deteriorate, they would respond. If it was another very acute and rapid deterioration in liquidity conditions, it can be quite fast.”

In the U.S., extra unemployment checks of $600 are set to expire at the end of July, and lawmakers are debating a fresh round of stimulus. According to Reuters, U.S. House of Representatives Speaker Nancy Pelosi says the Trump administration’s call to limit the next relief package to $1 trillion “doesn’t come anywhere near” to meeting the need. 

“Anything less than a further $1 trillion to $1.5 trillion would be a damp squib,” Ian Shepherdson, of the economic forecasting firm Pantheon, wrote on Sunday. 

Corporate bankruptcies are mounting, with the two-century-old clothier Brooks Brothers succumbing last week. Big banks like JPMorgan Chase are preparing to report second-quarter results this week that analysts say will likely be marred by billions of dollars of loan-loss reserves.  

The U.S. government’s budget deficit totaled $864 billion in June, nearly as much as in the entire fiscal 2019, the Treasury Department said Monday. 

Economists at Deutsche Bank, the German lender, who have predicted that the U.S. deficit could total $4.5 trillion for all of fiscal 2020, say they expect the Federal Reserve’s balance sheet to expand to $8.3 trillion by the end of this year. 

“It seems inconceivable to me that the Fed and other central bank balance sheets will do anything other than explode over the next decade and perhaps beyond,” Strategist Jim Reid wrote Monday in e-mailed comments. 

Mike Novogratz, CEO of the digital-currency firm Galaxy Digital, told Bloomberg Television last week that the buoyant U.S. stock market is “unhinged from reality ” and that he’s been investing in gold and bitcoin. 

Meanwhile, the cryptocurrency-data site Glassnode, in an email on Monday, highlighted an arcane analytical metric known as the “stablecoin supply ratio” that is supposedly bullish for bitcoin. There are signs that bitcoin is becoming more broadly distributed among a larger group of investors. And a key measure of the Bitcoin blockchain’s security rose Monday to a record level, a sign of ongoing investment by network operators.

Notoriously volatile bitcoin prices haven’t moved by more than 1% for five straight days. Christine Sandler, head of sales and marketing for digital assets at the money-management giant Fidelity Investments, told First Mover last week that greater price stability could induce more big institutional investors to consider an allocation to bitcoin.    

“Perhaps this tamping of volatility will lead the thundering herd to crypto,” Sandler said. 

For bitcoin investors, even the doldrums can seem bullish. 

Tweet of the day Bitcoin watch

BTC: Price: $9,181 (BPI) | 24-Hr High: $9,340 | 24-Hr Low: $9,155

Trend: Bitcoin’s restricted trading environment continues, with its 30-day volatility falling to 23.5% – the lowest level since March 2019. 

Some believe the cryptocurrency is on the brink of embarking on a new bull-market cycle in the month(s) ahead as prices are holding above the 50-week moving average (MA). 

Indeed, the bulls have maintained a strong foothold above the 50-week MA over the past eight weeks. In addition, signs of seller exhaustion near $9,000 have emerged on the weekly chart over the past two weeks. As such, a move higher cannot be ruled out. 

Major resistance is seen near $9,930, which is the upper end of a pennant pattern defined by trendlines connecting the December 2017 and June 2019 highs and March 2017 and February 2019 lows. 

A weekly close (Sunday, UTC) above that level would imply a bullish breakout from the 2.5-year-long pennant pattern and open the doors for a stronger rally toward $13,880 (June 2019 high). Analysts at cryptocurrency exchange Kraken think $10,500 is the level to beat for the bulls. That’s a logical target, as a move above $10,500 would invalidate a bearish lower high on the weekly chart created in February. 

Meanwhile, on the lower side, $8,900 – the low of a doji candle created in the first week of July – is key support. If breached, the 50-week MA support at $8,598 would be exposed. 

At press time, bitcoin is changing hands near $9,180, representing a 0.36% decline on the day. 

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