CoinDesk Crypto

Despite sliding in sympathy with stocks this week, bitcoin’s performance remains healthy this year, up 30% so far. 

Bitcoin (BTC) was trading around $9,412 as of 20:00 UTC (4 p.m. ET), gaining 2% over the previous 24 hours. 

At 00:00 UTC on Friday (8:00 p.m. Thursday ET), bitcoin was changing hands around $9,474 on spot exchanges such as Coinbase. The price began to decline, dipping to as low as $9,301, before picking up a bit. The price is well below the 50-day and 10-day moving averages, a bearish technical indicator.

Related: Asset Manager Wilshire Phoenix Files to Launch New Bitcoin Investment Trust

“The fight for the support pivot $9,750 eventually lost. The bears broke through the level and made a major drain,” said Konstantin Kogan, a partner at cryptocurrency fund of funds BitBull Capital. “There is a chance for another decline to $9,000”

Read More: Why Bitcoin Suddenly Dropped 6% on Thursday

However, despite the dip Thursday, Rupert Douglas, head of institutional sales for digital asset brokerage Koine, sees reason for optimism in the crypto markets. 

“Technically this is an important inflection point for bitcoin and I still believe we’re headed higher after several days of consolidation, having shaken out the weak longs,” Douglas said, referring to traders who dabbled in the crypto derivatives market this week.

Related: Bitcoin News Roundup for June 12, 2020

Stocks fell Thursday, a day after Federal Reserve Chairman Jerome Powell gave a dour outlook on the economy. Bitcoin was caught up in the decline. 

Read More: Stocks’ Carnage Drags Bitcoin Down to $9K

When prices in the bitcoin market began to fall, liquidations on BitMEX intensified the movement, squeezing out long positions. Hourly liquidations hit $45 million as of 16:00 UTC Thursday. 

“The correlation with stocks has been tight these last two days. Crypto is acting like a risk-on asset,” said George Clayton, managing partner of Cryptanalysis Capital. “But all of this bitcoin volatility is still within the trend channel,” i.e., par for the course in crypto.

Cryptocurrency stakeholders often scratch their heads watching the stock market. The recent fall in the S&P 500 to where it started the year may seem unhinged to them when bitcoin is up 30% this year, according to MarketWatch data. 

“The bullish technical picture for crypto is still intact. So is the macro picture. I cannot say the same for stocks and that confounding rally to the 2020 highs,” said Cryptanalysis’ Clayton.

Digital assets on CoinDesk’s big board are mixed Friday. The second-largest cryptocurrency by market capitalization, ether (ETH), is trading around $236 and climbed 3% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: Why This Dev Built a ‘Centralized Ethereum’ on Top of Bitcoin’s Lightning

The amount of gas, or small amounts of ether, sent on the Ethereum network to run smart-contract applications has steadily increased in 2020, a sign of increasing usage.

The biggest cryptocurrency winners on the day include decred (DCR) climbing 7%, cardano (ADA) up X% and tron (TRX) in the green 3.7%. The largest loser on the day is iota (IOTA) in the red less than a percent. All price changes were as of 20:00 UTC (4:00 p.m. ET).

Read More: Free Transactions Invite Systemic Attacks on Blockchains, Researchers Find

In commodities, oil is flat, gaining less than a percent as a barrel of crude was priced at $36 as of press time. 

Gold is trading, up less than percent, trading around $1,731 for the day. 

The Nikkei 225 index of publicly traded companies in Japan ended trading in Asia down less than a percent on the day, dragged down by the transportation and mining sectors. The FTSE 100 index of top companies in Europe was essentially flat, up a tenth of a percent as economic data showed U.K. output dropped to 2002 levels. 

“Bitcoin is simply playing along right now. There’s not much else to it,” said Vishal Shah, an options trader and founder of Polychain Capital-backed derivatives platform Alpha5.

In the U.S., the S&P 500 index gained 1.3%. Stocks experienced the largest losses since March for the week.

U.S. Treasury bonds were mixed Friday. Yields, which move in the opposite direction as price, were up most on the 10-year, in the green 6%.

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Currently just a flashy idea, the digital dollar is competing with more prosaic but proven 20th-century methods for the job of getting stimulus funds to every U.S. resident.

That’s the takeaway from Thursday’s House Financial Services Committee (FSC) hearing, where witnesses advocated different solutions to the problem.

Making the case for an electronic greenback was J. Christopher Giancarlo, former chairman of the Commodity Futures Trading Commission (CFTC), now a director with the Digital Dollar Project. 

Related: Drug Dealer Just Sentenced to 25 Years Hoped to Build a Better Bitcoin Miner

As he has in the past, he argued tokenization is a way to future-proof the dollar. Other countries, including China, are working to digitize their currencies, he noted. If the U.S. wants to maintain its leadership role in the global financial system, it too should take on this task, he told lawmakers.

While Giancarlo previously cautioned a digital dollar should not be “cobbled together” during a crisis, he suggested at the hearing that laying the groundwork should be part of the response to the downturn caused by COVID-19.

“Nothing reveals the limits of our accounts-based financial system more strongly than the current COVID-19 pandemic, when tens of millions of Americans are waiting a month or more to receive payments by paperchecks,” he said. 

“We need to start exploring the next level of technology side by side with the existing accounts-based technology, if for nothing else to build greater redundancies in the system but also greater optionality and more tools in our toolbox to use in crises like this,” he added.  

Related: National Science Foundation Funds Research Into Crypto Dollars

But other witnesses kept the focus on the urgency of making stimulus payments quickly to those in need. One round of paper checks has gone out to individuals who filed taxes in the last two years, but many are still waiting for their stimulus dollars.  

“The point I just wanted to drive home [is] we are still in the midst of a crisis and [as] others on the panel said really eloquently, people are suffering today,” said Jodie Kelley, CEO of the Electronic Transactions Association.

“So I wanted to make sure that we recognize the only way to do that is with the tools that we have now,” she said.  

The success of prepaid debit cards and peer-to-peer applications like PayPal and Venmo show they can be used to quickly distribute stimulus dollars to those in need, argued Kelley, whose member companies process more than $8.5 trillion in payments annually. 

“The prepaid debit cards in particular are a preferred way to make payments to lower-income people. They are simple to use and don’t require a mobile phone,” she told CoinDesk after the hearing.

As for using blockchain, Mehrsa Baradaran, a Professor of Law at the University of California Irvine School of Law, said the discussion of that technology is premature.

“How do we get people to meet people where they’re at and make sure our solutions match the problem?” she asked lawmakers. “The problem here is the banking deserts, it’s the unbanked and underbanked, and we have technology to meet those people and I think that’s critical at this juncture.”

Read more: US Senator: ‘I Don’t Think You’ve Persuaded Anyone’ Crypto Creates Financial Inclusion

Baradaran advocated a different, more feasible strategy (at least technologically, if not politically): using the U.S. Postal Service to create local bank branches in partnership with the Federal Reserve. 

“We need to close this cash-digital divide first,” Baradaran said.

Non-tokenized digital dollars could also be easily set up, said Morgan Ricks, a Professor of Law at Vanderbilt University School of Law. Ricks has long touted the concept of a FedAccount, a bank account essentially offered by the Federal Reserve for consumers to have direct access. 

Setting up FedAccounts should be fairly straightforward and easy to accomplish, he told lawmakers: The Fed already offers these services to banks, large financial institutions and government entities. 

“The Fed itself has been processing real-time instant payments for many many decades through the FedWire system,” he said. “The Fed has been opening accounts on its own books since its inception … retail operations are a different matter.”

The Fed could even contract out certain tasks until it has built up its own internal infrastructure, he said.

A large portion of the hearing focused on the tokenized dollar concept, with Rep. Patrick McHenry (R-NC) asking Giancarlo to walk him through how it might aid financial inclusion and subsidy distribution.

In the former regulator’s view, a tokenized dollar could be a way to provide banking services to those who lack them. Here, broadband access is the largest issue that would need to be addressed, he said.

A lack of banking access is “not insurmountable,” if residents of areas underserved by financial institutions have broadband access, Giancarlo said.

The digital dollar “is about on-ramps into the financial system, and making them as simple and accessible as possible,” he said. While he acknowledged that access to mobile devices might be another barrier, he said solving this would make the question of financial inclusion much easier.

Focusing on providing mobile access and a tokenized dollar rather than an expansion of existing banking services, might attract more individuals to the new system, he said.

“There are populations…with folks that are just outside the banking system but are comfortable with bearer instruments,” he said.

Prior to the hearing, Digital Dollar Project director and Accenture manager David Treat told CoinDesk he was encouraged the conversation was happening at all.

He said he expected some stakeholders might only be comfortable with incremental changes to the financial system right now.

“I think we’re at an inflection point now where we’re starting on a journey of modernizing money for our digital world and I think we will all benefit if we collectively recognize that [the] journey will have multiple waves of innovation,” Treat said. 

• WATCH: US Lawmakers Talk Digital Dollar, FedAccounts in Thursday Hearing
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Digital Dollars
On Thursday the House Financial Services Committee (FSC) Task Force on Financial Technology convened on Capitol Hill to discuss the possible role of a digital dollar is distributing COVID-19 relief payments. The watchdogs discussed FedAccounts, or cryptographic wallets held by the Federal Reserve, for commercial banking services.

The National Science Foundation, an independent branch of the federal government, has given blockchain startup KRNC $225,000 to design cryptocurrency features for the U.S. dollar. The startup is pioneering the Proof-of-Balance consensus mechanism to assign voting power and distribute a digital currency to users in proportion to an individual’s existing wealth. 

Following the Money
The Ontario Securities Commission (OSC) issued a report saying QuadrigaCX operated like a Ponzi scheme. The provincial regulator said Gerald Cotten, who died  under mysterious circumstances, traded against his customers using their funds under fake accounts set up on other exchanges. This revelation contradicts Quadriga’s claims that customer funds were lost upon his death, as Cotten was the person to maintain copies of the private keys. 

Related: Blockchain Bites: CBDCs on Capitol Hill, Custody Battles and Smart Drugs

Meanwhile, in the last two days three Ethereum transactions have spent $5.7 million on fees. But a report claims it’s not a bug – an exchange is being blackmailed. (Decrypt)

Elsewhere, the owner of a now-defunct Romanian crypto exchange CoinFlux has pleaded guilty to laundering roughly $1.8 million in a fraudulent scheme involving fake eBay ads and a car wash.

Protocol Level
Pseudonymous developer Fiatjaf has created Etleneum, what he calls a “centralized” version of Ethereum running on Bitcoin’s Lightning Network. Like Ethereum, Etleneum has public “contracts” open for anyone’s use, but protocol is not decentralized. Fiatjaf controls it all – as he is quick to note – as a commentary on the ways Ethereum tries and fails to cede technocratic and social power from a cadre of developers. 

Researchers from Imperial College London and University College London found the overwhelming number of transactions on the EOS, Tezos and XRP Ledger networks either have no value attached or are passing it back and forth within one entity. 

Related: Blockchain Bites: Libra’s Future, Elrond’s ‘Trial by Fire’ and LocalBitcoins’ Volume

Security in technology
Mutual fund giant Vanguard has completed the first phase of a blockchain pilot to issue digital asset-backed securities (ABS). Together with blockchain startup Symbiont, an unnamed U.S. ABS issuer, BNY Mellon, Citi and State Street, Vanguard modeled the full lifecycle of an ABS settlement on blockchain.

Additionally, in separate statements, Algorand and Tezos Foundations said the blockchain networks are trying to stay on the right side of the Financial Action Task Force’s (FATF) “Travel Rule,” by linking up with analytics companies Chainalysis and Coinfirm, respectively, to help bake regulatory compliance into their eponymous blockchains.

Expansions?
Crypto wallet and bitcoin custodian, Xapo is discontinuing support for credit card payments for digital asset purchases, ahead of its transition into a digital bank later this year. As of yesterday, users would not be able to add funds to their account through credit cards.

Gemini is planning to expand its services to Singapore with the appointment of former Goldman Sachs executive Jeremy Ng as its new Managing Director of Asia-Pacific.
Crypto derivatives platform Seed CX will be axing its exchange arm to focus solely on its Zero Hash product, a custody and settlement service that accounts for 95% of the firm’s revenue.

On Thursday, bitcoin tumbled 6.37% to about $9,100 in tandem with a 5.7% sell-off on  the Standard & Poor’s 500 – rekindling an ongoing debate over the cryptocurrency’s use as a store of value. The slide in stocks came a day after the Federal Reserve provided an unexpectedly dour assessment of the outlook for the U.S. economy, and investors speculated that a possible uptick in new cases might slow the pace of the recovery. Some investors may have also sold bitcoin, still seen as a risky asset despite its 30% gain year-to-date. Since March, bitcoin’s price has shown a weak but consistent correlation with both gold and stock prices, and is now trading well below its price average for the past 50 and 100 days, typically a bearish signal.

Coinbase announced Wednesday it may list Bancor’s BNT token as well as 18 others, which gave the asset’s global trading price a slight bump. The token project itself saw a resurgence in May, facilitating nearly $10 million worth of trading volume and rising from roughly $0.20 a token at the start of the month to $0.85 by the end. Bancor’s growth, despite the broader economic crisis in 2020, may be due to a systems upgrade in April as well as the team’s role in forging a data strategy for Israeli Prime Minister Benjamin Netanyahu’s campaign. Still, BNT tokens are now selling for far less than they were during the initial sale in 2017.

Money Reimagined: The Fed, Hertz, a Bonkers Stock Market and why ICOs Still Matter
“Regulation is both unavoidable and necessary. But it absolutely should not function as protective armor for a capital market system that harms our economy’s capacity to optimize capital allocation,” says Michael Casey in the latest edition of his weekly newsletter.

The Breakdown: Fed EditionOn the latest episode of The Breakdown, NLW looks into the Federal Reserve’s role in creating inequality.

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Paul Calder Le Roux, an admitted drug dealer with a background in encryption, planned to build a bitcoin miner had he beaten the rap.

In a last-ditch attempt to avoid incarceration, Le Roux wrote a letter to District Judge Ronnie Abrams, of the Southern District of New York (SDNY), this week detailing his personal history and addressing his alleged crimes. He was indicted on drug charges in 2012, pleaded guilty two years later and has been sitting in detention since. On Friday, he was reportedly sentenced to 25 years in prison, though he can appeal this decision.

Even if Le Roux wins an appeal, he would still face extradition to the Philippines, where he is wanted on a murder charge dating back to 2010. Should he be released by courts in both the U.S. and Philippines, however, he has planned his next step.

Related: WATCH: US Lawmakers Talk Digital Dollar, FedAccounts in Thursday Hearing

“I plan to start a business selling and hosting Bitcoin miners,” he wrote in the letter to the judge filed June 11.

The letter provides some background on what bitcoin is and how it works, including how coins are mined through the use of ASICs, powerful chips designed for the task. Le Roux claimed he acquired related expertise working for the U.K. signals intelligence agency known as Government Communications Headquarters (GCHQ).

“I have a custom design for an ASIC chip that utilizes special optimizations in the underlying computer code or algorithm known as (‘SHA’), I obtained this knowledge about the mathematical properties of SHA while working as a contract programmer at GCHQ in London in the early 2000’s,” Le Roux wrote.

“These optimizations have allowed me to create an ASIC chip design, and therefore ASIC miners, that are an order of magnitude faster at Bitcoin mining than any current design,” he wrote. “To this end I plan to put my knowledge and skills to a better, and legal use.”

Related: Bitcoin News Roundup for June 8, 2020

The Bitcoin white paper was released in 2008 and the first coins were mined the following year. ASICs emerged a few years after.

Over recent years, speculation has abounded alleging that Le Roux might be, or have ties to, Satoshi Nakamoto, the pseudonymous creator of Bitcoin.

Last year, journalist Evan Ratliff published an article exploring this connection, based on a court filing by Ira Kleiman against self-proclaimed Satoshi Craig Wright.

“Paul Le Roux had the technical skills to create bitcoin – that much I’d concluded the first time around,” Ratliff wrote.

Ratliff stops short of declaring outright that Le Roux is Satoshi, and notes there are many other programmers who fit the bill.

Le Roux does not appear to have claimed he is Satoshi, either.

He was sentenced to 25 years in an SDNY hearing Friday, according to Matthew Russell Lee of Inner City Press, who frequently posts updates from the courthouse.

Before the conviction was handed down, a prosecutor said Le Roux’s plan to enter bitcoin mining “gives pause,” though such a business “could be operated legally.”

Le Roux cooperated with prosecutors, Lee reported.

Read Le Roux’s full letter below:

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Mason Privatbank Liechtenstein AG has become the latest private bank to offer digital asset custody through a partnership with Hong Kong-based Hex Trust.

The Liechtenstein bank has high-net-worth clients across Asia and Europe that have an interest in investing in digital assets such as cryptocurrencies, stablecoins and security tokens, said Chief Markets Officer Hubert Buechel. As such, the bank has chosen to adopt Hex Trust’s least invasive level of integration, because of how few trades the bank’s clients are interested in making.

“We don’t have any day traders in our client base,” Buechel said. In the future, the bank may connect with Hex Trust through a SWIFT integration or allow the trust company to build application programming interfaces (APIs) that connect directly to the bank’s core.

Related: Custody Battle Pits Institutional Boomers Against Crypto Upstarts

Read more: Liechtenstein Bank Opens Up Cryptocurrency Investment for Clients

Buechel came to the bank last July from a multi-year stint at Bank Frick, a Liechtenstein-based family bank that became one of the first banks in the world to allow clients to directly invest in cryptocurrencies. Mason Privatbank Liechtenstein is aiming to cater to both crypto-focused investors and asset managers who are looking to diversify their portfolios, Buechel added. 

Hex Trust will also connect the bank’s clients to third-party providers who can provide crypto lending, staking, borrowing and trading. With the bank’s parent company, Mason Financial Holdings, based in Hong Kong, this will be the first bank that has an Asian presence that Hex Trust is working with, said Hex Trust CEO Alessio Quaglini.

“Our goal is to create interconnectivity between the traditional asset world and the digital asset ecosystem,” Quaglini said.

Related: US Marshals Service Seeks Firm to Custody and Sell Crypto Seized From Criminals

Read more: R3 Teams With Custodian Hex Trust to Help Asian Banks Sell Security Tokens

In the back half of 2020, Hex Trust plans to further expand its reach through Europe with an office in Italy and Germany. 

Hex Trust also holds a trust or company service provider (TCSP) license under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance in Hong Kong. The custodian is entering the Monetary Authority of Singapore sandbox and applying for the capital markets custody license in Singapore. 

It’s also been provisionally authorized by Germany’s Financial Supervisory Authority (BaFin) to provide crypto custody services and is applying for the crypto custody license in Germany as well. 

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Russia’s Supreme Court for the first time used a blockchain-based system to record votes in a plenary session on Friday.

According to a press release, judges used the Polys app from Kaspersky Lab to record the results of voting on six issues before the court. The session was the latest to take place as a web video conference as part of Russia’s anti-coronavirus measures.

“This voting system is based on a blockchain and is using transparent encryption,” the press release says, adding that the system received a “high appraisal” from the judges of the Supreme Court in the “landmark” vote. The system has been recommended for use in the next plenary session in July.

Related: Bitcoin News Roundup for June 11, 2020

The Supreme Court’s press office did not respond to CoinDesk’s request for further information by press time.

Kaspersky has been expanding its presence in the blockchain space recently, and is also assisting a project for blockchain-based voting in Moscow. According to a 2017 announcement from the cybersecurity company,

Polys is based on Ethereum and was developed with help from Parity Technologies, a tech startup launched by Ethereum co-founder Gavin Wood.

“Blockchain is increasingly being implemented by a vast number of industries and we believe that decentralising the voting procedure will ensure a fair process and create a high level of trust in the system,” said Parity co-founder Jutta Steiner.

Related: Russia’s Economy Ministry Calls for ‘Controllable Market’ Rather Than Crypto Ban

Kaspersky pledged to open source the Polys code back in 2017, however, the project’s GitHub page is still currently empty. Kaspersky did not immediately comment by press time.

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The former CEO of Mt. Gox – the bitcoin exchange at the center of one of the most notorious hacks in crypto – has had his conviction upheld by Japan’s high court.

On Thursday, Tokyo’s the court threw out an appeal from Mark Karpeles, who had been found guilty last year for manipulating electronic data, upholding the original conviction and sentence of two and a half years in prison, suspended for four years.

Karpeles was originally arrested in August 2015, roughly 18 months after an unknown hacker made off with more than 850,000 bitcoins from Mt. Gox. At the time the amount was valued in the hundreds of millions, but would be worth more than $8 billion, today. Around 15% was later recovered and now constitutes the Mt. Gox estate, which is still being fought over by the exchange’s creditors.

Related: Crypto Exchange Owner Admits Laundering $1.8M in Online Auctions Fraud

See also: Mt. Gox Deadline Extended Again After Creditors Criticize Refund Proposal

Prosecutors had originally accused Karpeles of embezzling user funds, breach of trust and manipulating electronic data, and demanded he serve 10 years in prison. The Tokyo District Court found him innocent on the first two counts, but guilty on manipulating electronic data in order to harm his clients.

The legal team representing Karpeles, which has always claimed he is innocent of all charges, contend that prosecutors didn’t know how crypto exchanges operated and were merely using him as a fall guy.

“Today’s verdict was unfortunate, and I am reviewing its contents alongside my lawyers and will decide how to proceed from there in the coming days,” Karpeles said following the ruling, in a report from the Associated Press.

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• Mt.Gox

Two blockchain platforms, both proof-of-stake, are trying to stay on the right side of the Financial Action Task Force’s (FATF) “Travel Rule.”

In separate announcements on Thursday, the Algorand and Tezos Foundations said they had linked up with two analytics companies, Chainalysis and Coinfirm, respectively, to help bake regulatory compliance into their eponymous blockchains.

It’s been very nearly a year since the Financial Action Task Force (FATF), the global anti-money laundering (AML) watchdog, updated its guidance for nations to stipulate that crypto companies must store and disclose information about senders and receivers, above a certain transaction threshold.

Related: Free Transactions Invite Systemic Attacks on Blockchains, Researchers Find

In Algorand’s case, Chainalysis will provide a know-your-transaction (KYT) solution, allowing its foundation to monitor large volumes of on-chain activity for the native ALGO token and report any suspicious transactions to the authorities.

While Algorand emphasizes that the new integration will enhance trust and security, the specter of regulation is never too far away. As it says in a press release, the new integration will enable the foundation to “fulfill their regulatory obligations to report suspicious activity.”

In a statement, Fangfang Chen, the Algorand Foundation’s chief operating officer, said the integration would allow it to meet regulatory requirements in Singapore. “We needed a compliance partner that could not only help us adhere to regulations in Singapore where we are based but also global regulatory best practices,” she said.

Over the past 12 months, some national regulators have transposed FATF’s “Travel Rule” into local law. The U.S’ Financial Crimes Enforcement Network (FinCEN), one of the first regulators to implement the Travel Rule back in May 2019, has continued with a minimum threshold of $3,000.

Related: Russia’s Economy Ministry Calls for ‘Controllable Market’ Rather Than Crypto Ban

Singapore announced in January that parties involved in crypto transactions worth more than 1,500 Singapore dollars (around US$1,100) would have to be ready to disclose identities.

Chainalysis told CoinDesk that while the integration was not a “comprehensive solution to Travel Rule compliance,” it would help the Algorand Foundation meet some of the requirements, including picking out transactions that trigger the Travel Rule, as well as identifying relevant senders and receivers.

“FATF’s guidance states that automated transaction monitoring and customer risk scoring are essential components of an effective anti-money laundering program,” a spokesperson said in an email. “Chainalysis provides the transaction monitoring software required to hold a license in Singapore and comply with regulatory requirements in other FATF jurisdictions.”

See also: Algorand and Blockstack Are Building a Multi-Chain Smart Contract Language

Tezos’ tie-up with Coinfirm’s is broader, allowing its foundation and commercial entities such as exchanges to monitor activity on the protocol. Rather than a partnership, it’s more that Coinfirm’s AML Platform will be available for Tezos and XTZ transactions.

Generally, though, Tezos’ deal with Coinfirm runs along the same lines as Algorand’s integration with Chainalysis.

“One of the largest roadblocks for the growth of blockchain protocols and cryptocurrencies in the global regulated market has been focused on AML compliance regulations,” reads a press release. “AML has become a required feature for protocols and related assets who want a leadership position in the market and the capability to operate in regulated markets globally.”

Speaking to CoinDesk, Coinfirm CEO and co-founder Pawel Kuskowski said FATF, and broader AML compliance, were among the main motivations behind Tezos’ integration with its AML platform.

“It will allow entities using XTZ and its ecosystem to become FATF compliant under AML requirements…while paving the way for them to further implement Travel Rule dedicated solutions,” he said. “Overall, the greatest inhibiting factor when it comes to the growth of protocols is AML-related regulations.”

For protocols to work in regulated markets, they have to meet set guidelines. “The Tezos integration [with Coinfirm] allows for XTZ to operate according to AML guidelines in regulated markets including FATF AML guidelines,” Kuskowski said.

The Tezos Foundation declined to comment for this article.

See also: Tezos Becomes Latest Blockchain to Tap Chainlink for Oracle Services

The Travel Rule was met with trepidation when first unveiled. Many in the industry were concerned it could spell the end for cryptocurrency transactions by eroding user privacy and making the compliance burden on exchanges and other companies too much to bear.

But while there have been some negative effects, such as options exchanges Deribit being pushed out of the Netherlands, in other ways it may be good for the industry: Germany’s second-largest exchange, Boerse Stuttgart, said the strong AML rules have made crypto attractive to a growing institutional audience.

And it isn’t only Tezos and Algorand that have made themselves FATF compliant. Soon after the Travel Rule guidance was announced, Coinfirm inked a deal with Ripple to tag transactions on the XRP ledger that may have been laundered through mixer services.

Cryptocurrency intelligence provider CipherTrace has also rolled out its own solution, allowing wallet services and exchanges to securely share information about their customers to comply with the Travel Rule.

A year on, and with the Travel Rule now being enacted into local laws, it appears that instead of scurrying away, the crypto industry is simply adapting to the new regulatory landscape.

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The owner of a now-defunct Romanian crypto exchange called CoinFlux has pled guilty to laundering roughly $1.8 million in a fraudulent scheme involving fake eBay ads and a car wash.

Vlad-Calin Nistor and 14 other defendants, including the owner of a car wash, have all entered guilty pleas at the Eastern District Court of Kentucky for their involvement in a racketeering conspiracy and cyber fraud scheme that defrauded millions of dollars from U.S. residents by selling goods that didn’t actually exist.

Beginning in 2013, the defendants began posting fake advertisements on sites such as eBay and Craigslist for items such as cars. Often using stolen identities, the group would pretend to be U.S. military personnel who needed to sell their goods before beginning a tour of duty. They even set up a fake call center to assuage any concerns victims had about the advertisements.

Related: Japan’s High Court Rejects Former Mt Gox CEO’s Conviction Appeal

After the victim had sent payment, the group would begin the process of transferring the money out of the U.S. and back to Romania. Most of the time, this was done by converting illicit funds into crypto, usually bitcoin, and transferring it to Nistor and his crypto platform CoinFlux, where it would then be exchanged into the local currency.

Per a release from the U.S. Department of Justice (DOJ) on Thursday, the ringleader was Bogdan-Stefan Popescu, the owner of car wash in Bucharest, Romania’s capital. He provided instructions for Nistor and Coinflux for transferring the illicit funds out of bitcoin and into selected bank accounts, which were usually set up under the names of his employees and family members.

“Through the use of digital currencies and trans-border organizational strategies, this criminal syndicate believed they were beyond the reach of law enforcement,” said Michael D’Ambrosio, assistant director at the U.S. Secret Service’s Office of Investigations.

See also: France Charges Alleged BTC-e Operator Alexander Vinnik Following Greek Extradition

Related: Coinbase Outlines Tech Plan to Help Avert Future Outages

Back in December 2018, Nistor was arrested on an international warrant on charges of money laundering, fraud, and involvement in organized crime. He, alongside the other defendants, was promptly extradited to the U.S. the following month. At the time of his arrest, Nistor’s lawyer argued to Romania’s Court of Appeal that he had no way of knowing that the bitcoin in question came from criminal proceeds.

CoinFlux advertised itself as a 24-hour marketplace that provide a local fiat gateway for Romanian traders. The exchange had been preparing to celebrate its third anniversary with zero transaction costs, less than a week before Nistor’s arrest.

Five days later, following Nistor’s arrest, CoinFlux’s Twitter account said they were in “the unpleasant situation to temporarily stop any digital currency exchanges.” In a follow-up post, CoinFlux’s marketing head said an “unexpected investigation” meant their banks accounts had been frozen and they had been temporarily locked out of their site.

“Our expectation is that we will gain control back, within the next days,” the post said.

See also: Alleged Architects of $720M BitClub Ponzi Request Jail Release Over Coronavirus Risk

Under U.S law, those found guilty of racketeering can be fined up to $25,000 and face up to 20 years in prison, as well as forfeit all their ill-gotten gains. A guilty plea can bring the penalty down to 10 years. All 15 defendants now await sentencing.

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In a redux of trading from the early days of the coronavirus crisis in March, bitcoin tumbled Thursday in tandem with a sell-off on Wall Street – rekindling an ongoing debate over the cryptocurrency’s use as a store of value.

Prices for bitcoin fell 6.37% to about $9,100, as the Standard & Poor’s 500 Index of large U.S. stocks lost 5.7%.

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Related: Why Bitcoin Suddenly Dropped 6% on Thursday

The slide in stocks came a day after the Federal Reserve provided an unexpectedly dour assessment of the outlook for the U.S. economy, and investors speculated a possible uptick in new cases might slow the pace of the recovery. Some investors may have also sold bitcoin, still seen as a risky asset despite its 30% gain for the year to date.

“I think the general negative sentiment of traditional markets affects bitcoin,” Sasha Goldberg, senior trader for Efficient Frontier Markets, a digital asset quant fund, told CoinDesk’s Daniel Cawrey.

Thursday’s plunge in bitcoin prices was nowhere near the 39% wipeout on March 12, when it became clear to investors across all markets just how devastating of a toll the coronavirus was likely to take on the economy.

The day’s session kindled chatter anew among cryptocurrency analysts over whether bitcoin is mostly uncorrelated with traditional assets, or whether it should trade as an inflation hedge like gold, or in sync with riskier assets like stocks. 

Related: Blockchain Bites: CBDCs on Capitol Hill, Custody Battles and Smart Drugs

“The institutionalization of crypto (i.e. same firms that trade stocks and other assets, trading crypto), will lead to higher correlation, especially during extreme risk on/off scenarios such as margin calls,” said Denis Vinokourov, head of research at Bequant, a London-based prime brokerage to cryptocurrency investment firms.  

Thursday’s price decline came just a day after the Fed indicated that joblessness would remain elevated for at least three years. That means Fed officials expect to keep interest rates close to zero through 2022, while pumping at least $120 billion a month of freshly created money  into the financial system for the foreseeable future. If bitcoin is an inflation hedge, then loose monetary policy should theoretically be good for the price. 

Larry Kudlow, one of President Donald Trump’s top economic advisers, told Fox Business Network in an interview Thursday that the Federal Reserve’s balance sheet’s “gonna rise by about $10 trillion by year-end.” Just in 2020 alone, the Fed’s total assets have climbed by about $3 trillion to $7.2 trillion.   

“You know, I don’t know why the market has sold off,” Kudlow said Thursday.  

Earlier in the day, Stack Funds, a provider of cryptocurrency trackers and index funds, had written in a weekly report that “there was a higher probability for bitcoin to swing upside in the coming week.” It went so far as to predict that bitcoin might be on the cusp of a “potential move upside to $40,000,” or more than quadruple the current price level. 

Instead bitcoin took a nosedive as the mood darkened on Wall Street. 

“Bitcoin, along with the entire emerging digital asset class, are very much considered risky assets,” Mati Greenspan, founder of the research firm Quantum Economics, wrote Thursday in an email to subscribers.

Bitcoin is trading well below its price average for the past 50 and 100 days, typically a bearish signal.

As reported by Cawrey, the U.S. Dollar Index rose 0.4% off its three-month lows Thursday, potentially indicating that investors were looking to classic safe-haven assets, which include cash as well as gold. Prices for the yellow metal were down Thursday, but less than 1%. 

Since March, bitcoin’s price has shown a weak but consistent correlation with both gold and stock prices. According to Greenspan, that might be a sign of bitcoin’s increasing adoption by investors.  

“The fact that bitcoin had any reaction at all to the Fed yesterday is a clear sign that either a) institutional money is playing a much larger role in the market these days, or b) retail traders are getting more savvy and reacting more to their surroundings,” Greenspan wrote. “Either way, the market is growing up fast.”

BTC: Price: $9,444 (BPI) | 24-Hr High: $9,810 | 24-Hr Low: $9,108

Trend: Bitcoin is back up near $9,450 at press time, having put in a low of $9,112 during the U.S. trading hours on Thursday. 

The cryptocurrency fell by over 6% as stock markets across the globe cratered on renewed growth concerns and fears that a second wave of the coronavirus pandemic would wreak further economic havoc. 

The risk sentiment, however, looks to have stabilized somewhat over the last few hours with futures tied to the S&P 500 gaining over 1%. European equities, too, are reporting modest gains. Bitcoin could rebound further if the stock market recovery gathers pace.

However, the odds look stacked in the other direction.

The U.S. bond market has priced out the prospects of a V-shaped economic recovery. Meanwhile, a second wave of coronavirus seems to have hit the U.S. states of Texas, Florida and California, even as some emerging market economies are still experiencing their first waves. 

There are also concerns that the stock market has risen too far from the lows seen in March on the back of unprecedented liquidity injections by central banks across the globe, and has lost touch with the reality that the economy may take years to recover. As a result, equities are likely to remain under pressure in the short term and keep bitcoin on the defensive. 

The cryptocurrency’s technical charts are also painting a bearish picture. Thursday’s decline validated a bearish divergence of the three-day chart’s relative strength index and marked a downside break of the eight-day restricted trading range between $9,350 and $10,000. 

The range breakdown, coupled with sub-zero reading on the MACD, indicate scope for a drop to support at $8,630 (May 27 low). On the higher side, $10,000 is still the level to beat for the bulls.

• Bitcoin Stuck Below $10K as Stocks Drop
• First Mover: Fed Sees No Inflation Through 2021, but Bitcoiners Are Betting on It Anyway

The week-long calm in the bitcoin market ended with a sudden $800 price drop on Thursday.

The over-6% drop saw the top cryptocurrency by market value register its biggest single-day decline in two weeks, according to CoinDesk’s Bitcoin Price Index. Prices briefly hit lows near $9,100, a level last seen on May 27.

There’s three likely factors as to why this happened:

Related: First Mover: Bitcoin Recouples With Wall Street as Stocks Tumble, Fear Trade Returns

Global equities cratered and traditional safe havens like U.S. government bonds and the Japanese yen gained value as comments by the U.S. Federal Reserve that the economy may take years to recover gave a reality check to investors hoping for a V-shaped recovery. 

Bitcoin initially showed resilience by holding above $9,700 during the Asian and European trading hours. However, the sell-off in U.S. equities was too big to ignore for the crypto market traders – some of whom likely offered bitcoin on the fear that financial markets could be about to witness another round of panic like that seen in March.

The Dow Jones Industrial Average (DJIA) fell by 1,800 points on Thursday, reviving memories of multiple 1000 point drops seen during the first half of March. 

Read more: ETH Whale Pays $5.2M in Fees for 2 Mysterious Transfers Totaling $82K [Updated]

Related: Market Wrap: Stocks’ Carnage Drags Bitcoin Down to $9K

A few observers had warned of an impending price drop in conversation with CoinDesk during Thursday’s European trading hours. At that time, bitcoin was trading near $9,800.

“A switch to ‘risk-off’ in global markets could lead to further downside pressure for major cryptocurrencies,” Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds, told CoinDesk. 

Big on-chain transactions, especially ones related to controversial wallets and addresses, can create panic in the cryptocurrency markets. That’s because, in the past, malicious entities have liquidated stolen coins in the market, causing sudden price declines.

On Thursday, hackers moved over 400 BTC (or $4.1 million worth of cryptocurrency) stolen from the cryptocurrency exchange Bitfinex to unknown wallets, according to twitter bot Whale Alert.

These transfers happened in 20 transactions during the Asian hours and were noted by the crypto market community. A few investors then began speculating about a price dump. At that time, bitcoin was hovering around $9,900. 

Another big transaction worth $1.3 billion executed by an unknown wallet also elicited a similar response from the investor community. 

Fears that so-called “whales” are preparing to dump large numbers of coins may have caused some bulls to exit the market. Further, savvy traders may have taken short positions in anticipation of the big dump, likely accentuating bearish pressures.

Technical traders had a strong reason to sell bitcoins, as the charts were reporting uptrend exhaustion. 

The cryptocurrency has failed multiple times to establish a lasting foothold above $10,000 since the May 11 mining reward halving. Markets often test dip demand following multiple rejections at key resistance. 

A bearish divergence of a key three-day chart indicator was also suggesting scope for a price pullback.

Thursday’s price decline has only strengthened the case for a deeper pullback. The slide to $9,100 marked a downside break of the eight-day restricted trading range of $9,350–$10,000. 

Additionally, the daily chart’s relative strength index has dropped into the bearish territory below 50. Analysts see strong support around $9,100, which, if breached, would invite stronger selling pressure. 

Read more: First Mover: Bitcoin Recouples With Wall Street as Stocks Tumble, Fear Trade Returns

First support comes from the weekly downtrend resistance line which bitcoin broke and has been “sitting above the last few weeks,” said Chris Thomas, head of digital assets at Swissquote Bank. “This week the level is around $9,000-$9,100, hence [we’re] likely to see good buying here, then $8,700 & $8,200, otherwise, the next downside zone is $6,500-$7,000.”

At press time, bitcoin is changing hands near $9,440. The price bounce from Thursday’s low may be associated with the 1% gain in the S&P 500 futures.

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

• Bitcoin News Roundup for June 11, 2020
• Three Arrows Capital Now Holds More Than 6% of Grayscale’s $3.6B Bitcoin Trust

Crypto wallet and bitcoin custodian, Xapo is discontinuing support for credit card payments for digital asset purchases.

In an emailed announcement on Friday, Xapo said its users would not be able to add funds to their account through credit cards beginning June 11. Additionally, bank transfers will only be supported above a certain minimum amount, depending on the user’s location.

“If you make a transfer, the app will detect your country of residence and specify the minimum amount,” the company email said.

Related: Custody Battle Pits Institutional Boomers Against Crypto Upstarts

“Rest assured, these changes will not affect your Xapo BTC wallet services, and your BTC will remain safe and secure with us (as always). BTC transfer in and out will not be affected at all,” the email added.

The changes come after Xapo announced on May 5 it would be transforming into a digital bank late in 2020. It will also move its operations from California to Gibraltar, which offers a regulatory framework for cryptocurrency firms but sets a high standard for approvals.

See also: Custody Battle Pits Institutional Boomers Against Crypto Upstarts

Earlier this month, a lawsuit was brought against Xapo and crypto exchange Indodax for allegedly holding stolen bitcoin. The crypto trader behind the legal action is attempting to force the exchanges to hand over nearly 500 bitcoin (currently worth around $4.7 million) he claims to have lost in a hack.

• Lawsuit Accuses Xapo, Indodax of Negligently Holding Stolen Bitcoin
• Xapo
• It’s Tough Getting Approved in Gibraltar, Says Green-Lighted Crypto Derivatives Exchange

The National Science Foundation has given blockchain startup KRNC $225,000 to design cryptocurrency features for the U.S. dollar.

The National Science Foundation, an independent agency of the U.S. federal government, awarded a $225,000 grant to private blockchain startup KRNC to design crypto features for the dollar at a time when the digital dollar is a topic of national debate.

Key Retroactivity Network Consensus, or KRNC, is a protocol that would allocate a scarce cryptocurrency like bitcoin to fiat dollars. The digital currency will be distributed free of charge to users in proportion to their already existing wealth, so anyone who holds dollars can interact with decentralized applications without having to purchase cryptocurrencies such as bitcoin or ether. 

Related: Coca-Cola Distributor Offers Bitcoin Payment Options for Aussie Vending Machines

To receive the funding, the KRNC proposal was reviewed by a panel of external industry experts and evaluated for its merit and commercial potential. Anna Brady-Estevez, the National Science Foundation program manager for the grant, said the agency had no mandates for specific end-uses for any of its awards to small businesses.

“We focus on projects where there is meaningful technical work to be done with the potential to drive competitive advantage and impact commercially,” Estevez said. 

Read more: Digital Dollar Project Calls for 2-Tiered Distribution System in First White Paper for US CBDC

According to Estevez, the project showed potential in developing a new technology that enhances the security of financial transactions. 

Related: WATCH: US Lawmakers Talk Digital Dollar, FedAccounts in Thursday Hearing

“Our funding of this protocol shouldn’t be misconstrued as an endorsement of any initiative to upgrade the U.S. dollar or make it more like bitcoin or any other cryptocurrency for that matter,” Estevez said.

According to KRNC CEO and chief scientist Clint Ehrlich, the protocol is based on a concept of his own invention: Proof-of-Balance. 

“Bitcoin, which runs on the principle of Proof-of-Work, is wasteful,” Ehrlich said. “It requires people to waste money and computing power solving pointless problems.”

KRNC would take the approach of measuring the assets that people already own, like the dollar, and assigning voting power in proportion to an individual’s existing wealth. 

One feature KRNC is particularly interested in including in its cryptocurrency is scarcity, inspired by bitcoin often likened to gold. Ehrlich plans to ensure the scarcity of his digital gold by freezing the supply at the time of launch. 

“If today, there is $15 trillion when the currency is launched, it will be possible to only ever unlock 15 trillion [crypto] dollars,” Ehrlich said. 

Users who wish to acquire digital gold can deposit fiat money in banks during the period of allocation and be assigned free currency. Once the currency is assigned, users are free to purchase goods and services or trade the gold in the same way as bitcoin. Users can also choose to spend or trade the digital gold separately from their fiat money, or use it as a weighted dollar. 

“They’re getting the fiat dollar and the gold so that if there is a shift in the price of either one they’re protected from the risk of that volatility,” Ehrlich said.

According to Ehrlich, Bitcoin’s Proof-of-Work and honest majority system works like an auction where whoever pays the highest cost through mining is in control of the blockchain.

“Currency is asymmetric so even if an adversary tries to purchase a larger stake, as long as the initial majority of all the fiat money is owned by honest agents the system can remain secure. It’s a way to provide superior security at zero cost,” he said. “The playing field is not limited to a few buyers and minors but the billions of people who own fiat money.”

• Japan’s Biggest Banks Are Talking About Building a Digital Payments System
• Digital Dollar Project Calls for 2-Tiered Distribution System in First White Paper for US CBDC

Crypto derivatives platform Seed CX will be axing its exchange arm to focus solely on settlements.

Announced Thursday, Seed CX intends to focus on its Zero Hash product, the company’s custody and settlement service. Zero Hash began offering back-office settlement functions for bitcoin forwards contracts in September of last year.

“As a start up [sic], you inherently gravitate towards opportunity and that often leads you to take on more, rather than less. However, it is equally important to begin to refine the business focus as certain opportunities develop into a ‘real venture growth business,’” CEO Edward Woodford wrote in a Medium post.

Related: Number of Institutions Buying Crypto Futures Doubled in 2020: Fidelity Report

Read more: Seed CX Subsidiary Adds Crypto Derivatives Settlement for Institutions

According to Seed CX, Zero Hash now accounts for 95% of its revenue, leading to the decision to pivot the company’s focus as it aims to become the leading provider of “digital asset settlement infrastructure.”

As part of the shift, the company will concentrate on two main areas for clients: regulation and technicals.

“Through our API, platforms can own the complete client experience whilst not taking on any regulatory overhead. This is similar to how ‘Banking as a Service’ (BAAS) provides access to traditional rails,” the company wrote.

Related: Bitcoin Options Growth Outpaces Futures, Swaps

On the technical side, Zero Hash will enable groups to submit two-sided transactions, depending on the product (spot, derivatives or loans) and will handle end-to-end complexities with a particular blockchain to achieve “greater capital efficiency through netting.”

The firm also teased some fundraising news.

“We are on course to profitability, are well capitalized and will be announcing an additional round of fundraising this month, with investors including Bain Capital. We have settled close to a billion dollars notional in the past months,”

In September 2018, Seed CX announced a $15 million Series B led by Bain Capital.

Read more: Bain-Backed Crypto Exchange Seed CX Is Expanding to Asia

The startup expanded into Europe in February of this year with the addition of eight order books for its spot-trading market. That will now be closed as the company looks towards settlements in the derivatives and spot markets.

• Crypto Derivatives Exchange OKEx Launches Options on Ether
• Bullishness Building in Bitcoin Options Market, Data Suggests

Gemini, the U.S.-based crypto exchange and custodian, is planning to expand its services to Singapore with the appointment of Jeremy Ng as its new Managing Director of Asia-Pacific.

Ng’s appointment as Gemini’s Asia managing director makes the firm eligible to apply for a license with the Monetary Authority of Singapore (MAS) under Singapore’s 2019 Payment Services Act. According to the act, a qualifying requirement for a license application is that at least one of the firm’s directors should be Singaporean or a permanent resident of Singapore, where Ng resides.

Previously the Asia CEO of Leonteq, a firm specializing in structured financial products, Ng has worked in the financial services sector in Hong Kong and Singapore for about 20 years. In an emailed statement to Coindesk, Gemini said that Ng would report directly to Gemini President Cameron Winklevoss.

Related: Gemini First US Exchange to Integrate With Samsung’s Blockchain Wallet

“We look forward to building a presence in this major Fintech hub and the Asia Pacific region with Jeremy leading the way,” Winklevoss said in the statement. 

According to Gemini’s press release, Ng’s appointment is part of the firm’s continued global expansion plan. Gemini had also recently appointed senior level executives as part of this plan in Europe. 

A Gemini spokesperson said that the exchange’s new locations would reflect where the firm sees the most opportunity for cryptocurrency. 

“Singapore has been an important part of the crypto movement since the industry’s early days and we recognize the region’s thoughtful approach to regulation,” the spokesperson said. Gemini had also recently announced a partnership with Samsung Blockchain Wallet, which would allow users in the United States and Canada to buy, sell and trade cryptocurrency using Gemini’s mobile app. 

• Genesis Trading Buys Crypto Custodian Vo1t in Bid to Become Prime Broker
• Exchange Run by Ex-Morgan Stanley Team Drops Trading Fees for Subscription Model
• JPMorgan Bank Takes on Coinbase, Gemini as Its First Crypto Exchange Customers

The problem with paying gas to run transactions is that it discourages lots of transactions. The advantage of paying gas to run transactions, though, is that it discourages lots of transactions.

This contradiction is captured well in a new paper examining transactions on EOS, Tezos and XRP Ledger (XRPL) over a seven-month period ending in April. Researchers from Imperial College London and University College London found the overwhelming number of transactions on these three networks either have no value attached or are passing it back and forth within one entity. 

Titled “Revisiting Transactional Statistics of High-scalability Blockchain,” by Daniel Perez, Jiahua Xu and Benjamin Livshits, the report explains these findings in detail.

Related: Ripple Says XRP Lawsuit Fails to Show CEO Committed Fraud

“Our analysis reveals that only a small fraction of the transactions are used for value transfer purposes,” the authors write. “In particular, 96% of the transactions on EOSIO were triggered by the airdrop of a currently valueless token; on Tezos, 76% of throughput was used for maintaining consensus; and over 94% of transactions on XRPL carried no economic value.”

Read more: A Mysterious Airdrop Called EIDOS Is Clogging EOS to Make a Point

The authors’ latest version came out Wednesday, following up on two prior versions, with this one including several more months of data. It immediately sparked discussion, with its findings that high-throughput blockchains don’t necessarily have a lot of payment activity.

It also illuminated the fact that transparency doesn’t necessarily equal legibility. 

Related: ‘Careless’ Users Are Ruining Ethereum’s Privacy: Paper

So many records can pile up on a blockchain that needed information can become needles in a very large haystack. As Perez, a Ph.D. candidate at Imperial College London told CoinDesk in an email, “When the level of spam activity is very high, the size of the history gets disproportionately large given the amount of useful activity on the network. This makes such blockchains much more difficult to analyze and reason about.”

That said, the authors’ analysis is based on a careful examination of each blockchain, looking at the kinds of transactions and characterizing what kind of work they represented. Then they looked at the biggest users of the networks, which generally corresponded to most of the usage, and dug deeper into what was going on in their transactions.

As the authors note, there has been a dearth of academic investigation into blockchains besides that of Bitcoin and Ethereum. This analysis of EOS, XRP Ledger and Tezos covers the period from October 1, 2019 to April 30, 2020, using data collected by the open source tool, Blockchain Analyzer. Here’s what they found for each chain.

Last November, CoinDesk reported on a mysterious airdrop on EOS that gave users an incentive to make as many low-value transactions as they could, called EIDOS, which overall made the blockchain more expensive to use, making it look very much like a denial of service (DoS) attack (also evidenced by the fact that “DOS” is part of the airdrop’s name).

The researchers found that most of the transactions taking place on EOS, at least through the end of April, were related to the EIDOS stunt.

The authors write, “Before the arrival of the EIDOS token, approximately 50% of these are transactions to betting games. … The launch of EIDOS increased the total number of transactions more than tenfold, resulting in 96% of the transactions being used for token transfers.”

To recap: The EIDOS smart contract sends a token to any EOS wallet address that sends it any amount of EOS. The smart contract instantly returns any EOS sent along with the token. The smart contract rewards transactions, not value, so it doesn’t matter how much EOS gets sent. It sends the same number of tokens back no matter what.

EIDOS was worth a little less than $0.02 when we last reported it on it. It currently trades for about $0.0008, according to CoinGecko.

Read more: Tron Dapps Saw $1.6 Billion in Volume in Q1 2019, Driven By Gambling

Additionally, the authors also found that most of the transactions on one of EOS’s large apps, WhaleEx, look suspicious. The WhaleEx website says it is the “#1 Decentralized Exchange in the World,” yet the authors looked at its transactions and found:

“Firstly, and most obviously, we notice that in more than 75% of the trades, the buyer and the seller are the same. This means that no asset is transferred at the end of the action. Furthermore, the transaction fees for both the buyer and the seller are 0, which means that such a transaction is achieving absolutely nothing else than artificially increasing the service statistics, i.e. wash-trading.”

WhaleEx could not be immediately reached for comment.

Block.One, the creators of the EOSIO software that runs EOS among a few other blockchains, declined to comment directly to CoinDesk. Instead, they directed CoinDesk to a new Medium post by CTO Dan Larimer, which does not directly address the questions about EIDOS and WhaleEx, but instead dwells on how the report’s authors define throughput.

The paper makes a theoretical argument that the true throughput on each of these chains is very low in terms of transactions with actual value, a point which Larimer disputes. In other words, Larimer emphasizes what EOSIO software could be used for. Potential aside, the researchers’ findings are about what it is currently used for.

Larimer writes:

“How the media chooses to report on this paper will reveal whether or not they have integrity to differentiate technological capability and recognize EOSIO as being the most demonstrably scalable.”

Again, Block.One declined to further comment.

XRP is periodically beset by spam. The authors write:

“The ledger experienced two waves of abnormally high traffic in the form of Payment transactions in late 2019, the first between the end of October and the beginning of November, the second – at a higher level – between the end of November and the beginning of December.”

Why such traffic occurs, however, is unclear. “It remains something of a mystery how such an expensive form of ‘spam’ benefited its originators.”

Ripple’s CTO David Schwartz addressed this point when a prior draft of this paper was under discussion. He wrote in May:

“If you have a cheap, high-capacity public blockchain that was designed for maximum censorship resistance, it’s going to get a lot of spam. There’s no real disincentive and no authority to stop you. What are you willing to give up to stop it given that it doesn’t do much harm?”

That said, they also found that most XRP holders do very little. “The distribution of the number of transactions per account is highly skewed. Over one third (71 thousand) of the accounts have transacted only once during the entire observation period, whereas the 35 most active accounts are responsible for half of the total traffic,” they wrote, though such Pareto distributions are not unusual, especially when money is concerned.

Ripple has not yet provided further comment to CoinDesk on this latest draft.

On Tezos, the authors find that most activity on the network is related to governance and staking. 

They write, “Tezos has a high number of ‘endorsements,’ which are used as part of the consensus protocol, and only a small fraction of the throughput are actual transactions.” Further, a large portion of the transactions appear to be bakers (the validators) making payments to users who have delegated XTZ.”

Later, the paper notes:

“Tezos has not yet come close to maximizing its actual capacity.”

It does not, however, find suspicious or malicious transactions in any real volume on Tezos. TQuorum, an entity that promotes Tezos, had not yet provided comment as of press time.

As most people who follow cryptocurrency know, the Bitcoin blockchain debuted what’s come to be known as the internet of value. The paper’s analysis then is based on how frequently users actually transfer value, as opposed to making other kinds of transactions. 

It raises questions about whether it is wise to design a blockchain so that valueless transactions are free or nearly free. The authors write:

“While on XRPL the consequences of such a spam attack are limited, on EOSIO they forced the network to enter congestion mode, causing regular users to be unable to use the network because transactions which used to be free started to cost a fee.”

In short, the authors write, “The massive potential of those blockchains has thus far not been fully realized for their intended purposes.”

Read the full paper below:

• XRP
• EOS

Markets are taking the U.S. Federal Reserve’s less-than-optimistic economic forecasts quite hard, and that’s leading crypto traders to hit the sell button. 

Bitcoin (BTC) was trading around $9,258 as of 20:00 UTC (4 p.m. ET), slipping 6.4% over the previous 24 hours. 

At 00:00 UTC on Thursday (8:00 p.m. Wednesday ET), bitcoin was changing hands around $9,890 on exchanges like Coinbase. By 06:00 (2 a.m. ET), its price began to decline, dipping to as low as $9,049. The price is now well below the 50-day and 10-day moving averages, a bearish technical indicator.

Related: Bitcoin News Roundup for June 11, 2020

Read More: Bitcoin Stuck Below $10K as Stocks Drop

Traders are being confronted with a sea of red across almost all assets Thursday. Fed Chair Jerome Powell’s speech on the economy didn’t inspire any optimism about the next few quarters. “The virus and the forceful measures taken to control its spread have induced a sharp decline in economic activity and a surge in job losses,” Powell said in remarks Wednesday.

“You can’t print your way out of this,” said Zachary Reece, managing partner of digital asset firm Lotus Investment Strategies Global. “I fear we are taking the opposite approach and will see the downfall of the United States dollar.” 

Read More: Fed Sees No Inflation Through 2021, but Bitcoiners Are Betting on It Anyway

Related: Three Arrows Capital Now Holds More Than 6% of Grayscale’s $3.6B Bitcoin Trust

Indeed, the U.S. Dollar Index rose 0.4% off its three-month lows Thursday after Powell’s comments. That could signal investors are starting to look at classic safe havens like gold.

“I think the general negative sentiment of traditional markets affects bitcoin,’  said Sasha Goldberg, a senior trader for Efficient Frontier Markets, a digital asset quant fund. “We’re now seeing the following events priced in the market – riots in the U.S., the China-U.S. trade war, coronavirus uncertainty – among other events that happened lately.”

Bitcoin has increased its correlation to gold in 2020, particularly after March’s crash. The 90-day coefficient is close to 0.35, up from 0 back in January. A coefficient of 1.0 means two assets move in perfect tandem while a coefficient of -1.0 means they move in opposite directions. A coefficient of 0.0 implies that returns on the two assets have no relationship.

Gold is one asset trading flat, down by less than a percent at around $1,727 for the day. “In my view gold is the safe haven for old-school investors and bitcoin for more modern-thinking ones,” said Henrik Kugelberg, a Sweden-based over-the-counter cryptocurrency trader. 

Cryptocurrency stakeholders have long insisted bitcoin is its own asset class, not tied to any other. However, it seems like it is increasingly operating with the traditional markets, at least for now.

Bitcoin isn’t the only cryptocurrency taking a hit. Digital assets on CoinDesk’s big board are red Thursday. Ether (ETH), the second-largest cryptocurrency by market capitalization, is trading around $230 and slipped 7% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: ‘Whale’ Just Sent $130 in Cryptocurrency With a $2.6M Transaction Fee

Weekly Ethereum-based decentralized exchange (DEX) volume is picking up, slowly recovering from March’s coronavirus-induced crash when traders pushed volumes over $400 million for a short time.

The biggest cryptocurrency losers on the day include neo (NEO) down 10%, tron (TRX) in the red 10% and iota (IOTA) slipping 9.7%. All price changes were as of 20:00 UTC (4:00 p.m. ET).

Read More: Cryptos on Coinbase’s Exploratory List See Prices Jump 17% on Average

Oil isdown quite a bit, slipping 7% with a barrel of crude priced at $36 at press time.

In Europe, the FTSE 100 index of top companies in Europe fell 4% Thursday as job cuts were announced at several companies. In Asia, the Nikkei 225 index of publicly traded companies in Japan ended trading in the red 2.8% as companies were dragged down on the U.S. Federal Reserve’s outlook. 

Read More: Bitcoin Pops Past $10K as Fed Says Rates May Stay Near 0% Until 2022

In the U.S. the S&P 500 index fell 5.8%, with major selling in the final hour of trading as coronavirus-induced economic numbers put a damper on the market. U.S. Treasury bonds were mixed Thursday. Yields, which move in the opposite direction as price, were up most on the two-year bond, in the green 18%.

• Bitcoin Stuck Below $10K as Stocks Drop
• First Mover: Fed Sees No Inflation Through 2021, but Bitcoiners Are Betting on It Anyway

Coinbase announced Wednesday it is considering listing Bancor’s BNT token, as well as 18 others, which already gave the asset’s global trading price a slight bump.

“Coinbase’s goal is to offer support for all assets that meet our technical standards and which comply with applicable laws,” the announcement said. “As part of the exploratory process customers may see public-facing APIs and other signs that we are conducting engineering work to potentially support these assets.”

Although Coinbase declined to comment further, it’s not hard to imagine why BNT made the list. The token project itself saw a resurgence in May, facilitating nearly $10 million worth of trading volume and rising from roughly $0.20 a token at the start of the month to $0.85 by the end. 

Related: Cryptos on Coinbase’s New Exploratory List See Prices Jump 17% on Average

Bancor’s growth, despite the broader economic crisis in 2020, may be due to a systems upgrade in April. But market analyst Andrew Kang said some of the transactions associated with the surge were related to a wallet affiliated with Bancor CTO Yudi Levi. According to the Bancor analytics site Blockchair, BNT in particular was used in more than 10,457 transactions on Friday, May 29, out of 2.67 million transactions total since 2017.

When asked about the surge, Bancor spokesperson Nate Hindman said the Bancor team practically invented automated market makers (AMMs), which he said are now organically popular.

“After introducing AMMs in 2017 and having seen their meteoric rise in the last two years, we are thrilled to solve some of the key obstacles to their widespread adoption and continue to drive innovation in this key area of decentralized finance [DeFi],” Hindman said of the upgrade in April. “AMMs are now used in a wide range of DeFi products and protocols.” 

The network analytics site Dune Analytics estimates the decentralized exchange (DEX) software and token have been used to process more than $1.4 billion worth of transactions to date.

Related: Sequoia-Backed Band Protocol Creeps Onto Chainlink’s Turf With Oracle Product

BNT’s growth comes as other DEX tokens have surged in recent months. Kyber Network (KNC) surged promptly after being listed by Coinbase in February 2020 and became one of this year’s hottest crypto assets. Ethereum-friendly DEX tokens like KNC and BNT appear to be increasingly lucrative in 2020. 

Yet, even after the jump, BNT tokens are now selling for far less than they were during the initial sale in 2017. The overall DEX system, however, is only growing in value as the Bancor team garners political clout in addition to their considerable token holdings. As such, some blogs continue to promote the idea that BNT is “undervalued.”

It’s proving to be an eventful year for the Bancor team even beyond the token activity.

On March 2, 2020, Israeli Prime Minister Benjamin Netanyahu thanked Bancor co-founders Eyal Hertzog and Guy Benartzi, along with their business partner, LiquidApps CEO Beni Hakak, for their “help” using “data” to win the March election. Hertzog and Benartzi were among roughly two dozen campaign leaders mentioned in both the victory speech and featured in the official photo of the celebration in Netanyahu’s office.

Stepping back, the token founders – who declined to comment on the election – raised more than $153 million in 2017 for the DEX project now serving hundreds of people a day. Still, it’s unclear if the crypto companies, Bancor and LiquidApps, had anything to do with this software system during the Israeli election.

Most likely, the token founders were acting as private citizens rather than corporate donors or contractors. Either way, Israeli professor Anat Ben Dov said the Netanyahu campaign’s data strategy “was turning citizens into informants” by using both Facebook and a mobile app called Elector. This strategy encouraged voters to enter sensitive information about all Israeli citizens, Ben Dov said. 

“The more people you added to the app, the higher your rank was. You could get stars, like military ranks,” Ben Dov said of the app’s gamified leaderboard. “The campaign was said to transport data from Facebook to Elector … it’s also a social supervision system.”

Tehilla Shwartz Altshuler, a senior fellow at the Israel Democracy Institute, said that“data was the game changer in March 2020” because Netanyahu used Facebook data to push “proactive” notifications to influence voters.

“Using personal data to win an election is not unique to Israel, it’s also happening all around the world,” Altshuler said. “This is similar to what was done in America in 2016.”

Ben Dov agreed, adding this “wouldn’t be possible because of the GDPR,” but it “might be possible in the United States.”

Indeed, Netanyahu leaned heavily on American advisers for this data strategy, including President Donald Trump’s campaign strategist John McLaughlin. Netanyahu also relied on another American consultant, former Breitbart journalist Aaron Klein. Former White House chief strategist Steve Bannon credited Klein with the idea of interviewing former U.S. President Bill Clinton’s sexual assault accusers ahead of an October 2016 presidential debate. Altshuler said Netanyahu and Trump have similar, and complementary, digital media strategies. 

“On the surface, you have leaders trying to be as extreme as they can,” Altshuler said. “The deeper layer is using personal data to target these messages and spread them through specific social groups.” 

On the other hand, both Netanyahu and Trump fans see such strategies as effective leadership in an age of voter apathy and high-tech tools. 

Regardless of the Bancor founders’ political activism, their proximity to such data strategies may offer a competitive advantage. Understanding how to compliantly encourage specific behaviors, whether it’s voting or trading, is part of the digital casino game. Plus, Coinbase appears to be ramping up DeFi governance features in 2020.

• ConsenSys Muscles Into Compliance With New Regulatory Product for DeFi
• Bitfinex Spin-Out Says Funds Are Lining Up for Its New Decentralized Exchange

QuadrigaCX operated like a Ponzi scheme.

That’s the key finding of an Ontario Securities Commission (OSC) report made public Thursday.

OSC, one of Canada’s provincial securities regulators, said the now-defunct cryptocurrency exchange, which went into bankruptcy a few months after founder and CEO Gerald Cotten was reported to have died in India, “was an old-fashioned fraud wrapped in modern technology.”

Related: 17,000 People Have Filed Claims for Refunds From QuadrigaCX, Auditor EY Says

The report, dated April 2020 but released publicly on Thursday, took aim at Cotten’s practices, including allegations that he traded against his own customers, set up fake accounts on other exchanges to trade using his customers’ funds and failed to maintain records. These allegations have been made in the past by Ernst and Young (EY), a court-appointed auditor tasked with recovering customer funds following the exchange’s February 2019 collapse.

The company has recovered about C$46 million to date.

“In 2016 he became the only person in control of these assets,” the report said, adding:

“The evidence shows that Cotten regularly moved clients’ crypto assets off the Quadriga platform and into accounts he had opened on other crypto asset trading platforms. At one point, Cotten told a Quadriga contractor that a certain wallet address was a Quadriga cold storage address, when it was really a deposit address for Cotten’s account at another crypto asset trading platform.”

Related: CoinDesk Live: 2019’s Most Catastrophic Crypto Caper

While it has been speculated that the missing customer funds – close to $200 million – were lost because Cotten was the only individual to control his exchange’s crypto wallets, OSC said in its report that in reality, Cotten lost the funds through “fraudulent conduct.” The regulator totaled this at about C$169 million.

“The bulk of the asset shortfall – approximately $115 million – arose from Cotten’s fraudulent trading on the Quadriga platform. Cotten opened Quadriga accounts under aliases and credited himself with fictitious currency and crypto asset balances which he traded with unsuspecting Quadriga clients. He sustained real losses when the price of crypto assets changed, thereby creating a shortfall in assets to satisfy client withdrawals,” the report said.

The OSC put the report together by interviewing former Quadriga contractors, advisers, clients and his widow, Jennifer Robertson. Quadriga co-founder Michael Patryn did not respond to a request for comment, though OSC said a majority of the lost funds were deposited after Patryn’s departure from the exchange in 2016.

Robertson declined to comment on the report.

“What happened with Quadriga was an extreme example, and not necessarily representative of the broader crypto asset trading platform industry. However, these events serve to highlight for investors the risks that can arise in relation to crypto asset trading platforms, particularly those that are not registered,” the report said in its conclusion.

• Bankruptcy Trustee to Hand Quadriga Users’ Information to Canadian Taxman
• CFTC Sues Alleged Crypto Ponzi Scammer for $500K Theft

CBDCs
The House Financial Services Committee (FSC) Task Force on Financial Technology will convene Thursday to discuss digital currencies and other novel technologies. This includes a discussion on how FedAccounts and other digital tools might help the federal government distribute stimulus payments to help Americans suffering the economic fallout of COVID-19. The virtual hearing kicks off at noon Eastern (16:00 UTC), which you can watch here. Separately, ING Group, crypto custodian Copper, smart contract platform Cypherium and Giesecke+Devrient Currency Technology GmbH have joined the Digital Monetary Institute (DMI), which seeks to research the adoption of digital currencies by central banks. 

Decentralized Storage
Arweave, a blockchain network meant for the permanent storage of data, has released a completely new approach to smart contracts to run on users’ computers rather than the blockchain itself. The SmartWeave update will dispense with gas fees and only requires a smart contract’s code to be run as often as it’s needed and not by every node on the network. Meanwhile, Unstoppable Domains released an uncensorable  decentralized blog (dBlog) service hosted on Protocol Lab’s InterPlanetary File System. Finally, Filecoin announced the launch of the ‘Incentivized Testnet’, the final phase of testing for its decentralized storage network.

Custody Battles
Crypto custodians are in a race to build the next State Street or BNY Mellon. Recent acquisitions in the crypto space have seen a bundling together of services such as custody, settlement, lending and trade execution – including examples by BitGo, Genesis Trading and a recent partnership between Galaxy Digital and Bakkt. This pace of consolidation is likely to continue, and firms specializing in standalone custody or trade execution may need to pivot to offer additional services or risk being swallowed up, think BitGo CEO Mike Belshe. 

Related: Blockchain Bites: Libra’s Future, Elrond’s ‘Trial by Fire’ and LocalBitcoins’ Volume

Politics
Patrick Nelson (D-NY) is running for New York State Senate, with a background in local politics, progressive activism and vocal support for cryptographic monies. CoinDesk spoke with Nelson about his previous attempts to fundraise using bitcoin, reforming the state’s burdensome BitLicense and his attempts to convince party leadership to use blockchain voting to elect the state’s delegates.

Privacy
The Human Rights Foundation (HRF) will support bitcoin privacy tech with its Bitcoin Developer Fund. The first $50,000 grant has been awarded to a CoinSwap developer, and HRF will continue to support those “working on strengthening Bitcoin pseudonymity at the network level,” Chief Strategy Officer Alex Gladstein said. Elsewhere, Catallaxy, a blockchain consultancy affiliated with accounting giant Grant Thornton, is teaming up with CipherTrace to better track cybercrimes.

Financial Products
Crypto exchange BTSE will price its new tether gold futures contracts in bitcoin. The perpetual contract tracks the value of one tether gold (XAUT) token, which itself tracks the value of gold, allowing traders to speculate on whether bitcoin or gold will turn out to have the most demand. Elsewhere, crypto retirement savings firm Bitcoin IRA will take on smaller accounts with the launch and redesign of its IRA products. The firm has dropped the standard account minimum to $3,000, and launched Saver IRA. Separately, crypto hedge fund Three Arrows Capital now holds 6.26% of GBTC shares, worth nearly $259 million. (The Block) Lastly, Coinbase is looking to possibly add 19 new digital assets, including Aragon, Aave, Bancor, Siacoin, Origin Protocol, Ren and VeChain. The news is drive prices up between 8-25%.

Funding
Hut 8 Mining is looking to raise at least C$7.5 million to upgrade its fleet of BlockBox bitcoin miners. The firm, the biggest cryptocurrency miner in Canada and one of the largest publicly traded miners in the world, seeks to raise the funds through an overnight marketed public offering on the Toronto Stock Exchange. Elsewhere, Celsius Network is running a $5 million fundraising round on BnkToTheFuture, a crowd investment platform. (Decrypt)

Related: Blockchain Bites: ‘Bitcoin Billionaires’ and Buying a Coke With Crypto

Cybercrime
Hackers have moved approximately $4 million of stolen bitcoin from the 2016 Bitfinex hack into unknown wallets. (Decrypt) Additionally, Europol has shuttered a $17 million video stream service, accused of pirating content from Netflix and Amazon, which was partly funded through cryptocurrency. (Decrypt) 

Human Interest
Smart drugs, a class of performance-enhancing supplements are seeing widespread use in the tech and crypto sectors, and prompting much skepticism everywhere else. “Being in frontier tech means you’re (a) more exposed to new ideas and tools, (b) in a community where experimentation is normalized and widely and openly discussed and often encouraged, and (c) more willing to try new things,” Meltem Demirors, CEO of CoinShares, said. 

Inflationary Boost?
There’s no end in sight to loose monetary policy at the Federal Reserve, and that’s just fine with bitcoin bulls. Fed officials said Wednesday they expect to keep interest rates close to zero through 2022, while pumping at least $120 billion a month of freshly created money into the financial system for the foreseeable future. While the monetary guardians are not expecting runaway inflation, cryptocurrency analysts said that the longer the central bank sticks to its loose-money stance, the higher the chances of inflation down the road. Prices for bitcoin, seen by many investors as a hedge against inflation, rose on the news. 

Stuck for Now
Bitcoin remains stuck below $10,000 amid jitters in traditional markets over the pace of economic recovery. While bitcoin’s price is down 1% on the day, the major equity market indices in Europe are reporting over a 2% drop. The futures tied to the Dow Jones Industrial Average, Wall Street’s equity index, are down over 600 points and reporting a 1.8% decline on the day. Asian equities also suffered losses early Wednesday, according to data source Investing.

A Vision for Digital Property Rights, Feat. Nic Carter
Most people today look at social platforms like any other private company, but what if we saw them as alternative jurisdictions with a new set of property rights? That’s the vision Nic Carter, a partner at Castle Island Ventures, lays out in conversation with NLW. You can read more about it here. 

• First Mover: Crypto Broker Voyager’s Stock Has Doubled This Year, Beating Bitcoin
• Blockchain Bites: Coinbase Surveillance, Bitcoin Wargames, CoinMarketCap Drama