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BTC-e Operator Vinnik Sentenced to 5 Years in Prison on Money Laundering Charges

5 years 10 months ago

Alexander Vinnik, an alleged operator of the now-defunct cryptocurrency exchange BTC-e, was sentenced to a five-year prison term for money laundering on Monday.

A court in Paris found the Russian national Vinnik guilty of money laundering, though French prosecutors also charged Vinnik with “extortion, conspiracy and harming automatic data-processing systems.” They alleged that, in particular, he helped to develop the Locky malware. These other charges were dropped by the court today.

Vinnik was extradited to France from Greece at the beginning of 2020, where he’d been since his 2017 arrest. Vinnink was arrested at a resort near the city of Thessaloniki at the request of the U.S. Department of Justice (DOJ).

Related: French Judge Orders Trial of Alleged BTC-e Operator Alexander Vinnik

The DOJ named him as a mastermind behind one of the first cryptocurrency exchanges, BTC-e, and indicted him on allegations of “computer intrusions and hacking incidents, ransomware scams, identity theft schemes, corrupt public officials and narcotics distribution rings.” The exchange was shut down at the time, with its domain seized by the FBI. The exchange soon reemerged under the name WEX, but went down just one year later.

After Vinnik’s arrest, the U.S., Russia and France fought for his extradition, with France ultimately winning. The U.S. is still seeking to get Vinnik, said attorney Frederic Belot, who represents Vinnik. He declined to explain how this could be achieved.

Strategy disputes

Belot believes Vinnik had a chance for total acquittal if he participated in the court investigation during this year. He chose not to do so on the advice of his other two lawyers, Zoe Konstantopoulou and Ariane Zimra, who had been working with the defendant before Belot joined the case, Belot said.

Belot said all the proof of Vinnik’s criminal behavior was provided to the French prosecutor by the FBI. The authenticity of those documents could have been contested if Vinnik took a more active role in the investigative process.

Related: French Officials Move to Start Trial of Alleged BTC-e Operator Alexander Vinnik

“Alexander decided to keep silent and not to ask anything or reply to any questions of the judge. And the consequence we can see is that Alexander is sentenced guilty,” Belot said.

Zimra told CoinDesk that Vinnik, on the contrary, “wanted to cooperate very much and said so,” but he didn’t have access to his file in Russian, his native language, so he “couldn’t defend himself nor know what was held against him.” Zimra did not clarify if Vinnik actually responded to questions from the court or not.

According to Zimra, Vinnik has two kids in Russia and his wife died of cancer on Nov. 11. The kids, aged six and nine, now live with their grandmother, Vinnik’s mother, Belot said.

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Crypto Exchange Bittrex Global Lists Tokenized Apple, Amazon, Tesla Stocks for Trading

5 years 10 months ago

Bittrex Global has launched trading in tokenized stocks such as Apple, Tesla and Amazon on its digital asset exchange.

  • The platform said traders and investors will have direct access to listed companies – also including Google, Facebook, Netflix, Pfizer and others – without having to use an external broker or pay additional fees.
  • Launched in a collaboration with DigitalAssets.AG, the tokenized shares can be purchased in fractions using either U.S. dollars, tether and bitcoin. The listings also open up access in countries without access to U.S. stock markets, Bittrex said.
  • Traditional clearing systems “are inefficient and complex and trading small volumes can be expensive and take days, all of which is totally unnecessary given the technological advances that have been made in the last decade,” said Bittrex CEO Tom Albright.
  • Tokenized stocks looks to be growing trend among cryptocurrency firms. In October, crypto derivatives exchange FTX announced it would allow users of the exchange to register to trade on over 12 equity and cryptocurrency pairs.
  • And stablecoin platform Terra announced last week the launch of the Mirror Protocol, a way to mint crypto assets that mimic the value of shares in publicly traded companies.
  • To be clear, Bittrex is not listing actual company shares, but digital assets “backed 1:1 to traditional stocks, entitling holders to the same economic benefits of owning the underlying stock.”
  • Bittrex said its stock tokenization initiative is the first step towards creating more accessible markets where securitized token offerings can harness more mature and varied investors.
  • In future, the company plans to bring exposure to exchange-traded funds, indices and other asset classes.

See also: FTX Launches Bitcoin Pairs for Top Stocks Like Amazon, Apple and Tesla

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First Mover: Why Mohamed El-Erian Might Have Held Bitcoin at $19K

5 years 10 months ago

Bitcoin was lower, staying in the past week’s range of roughly $18,500 to $19,700. Prices are up 167% year to date, having started off 2020 at around $7,160. 

“There is no doubt that $20,000 remains a barrier, both from a technical perspective and on an ideological level,” Simon Peters, an analyst for the trading platform eToro, wrote Monday in an email. 

In traditional markets, European shares fell, led by banks and retailers. U.S. stock futures pointed to a lower open as investors worried a coronavirus resurgence might weigh on the economic recovery. The British pound slid 1.5% against the dollar on concern Brexit talks might collapse. Gold weakened 0.4% to $1,831 an ounce. 

Market moves

Related: Crypto Long & Short: Why Some Investors Get Bitcoin So Wrong, and What That Says About Its Strengths

It’s the question everyone’s asking: With bitcoin prices nearly tripling this year and reaching a new all-time high of $19,920, is it too late for investors to jump in, or is the rally just beginning? 

“Attention is starting to shift towards analyzing where we are in the market cycle,” the cryptocurrency research firm Coin Metrics wrote last week in a report. 

None other than Mohamed El-Erian, chief economic adviser for the German financial firm Allianz, which has €2.3 trillion (US$2.8 billion) of assets under management, tweeted last week that he had sold bitcoin after buying some two years ago at $4,728. The original purchase was made “not on a deep analysis but rather on the basis of technicals” as well as to get “a feel for what’s becoming a more popular holding,” according to the tweet. The decision to sell was “again not based on any deep analysis,” he wrote. Based on a rough analysis by First Mover, El-Erian quadrupled his money on the round trip. 

But one traditional finance guy using admittedly cursory analysis does not a market make. A lot of cryptocurrency analysts and investors are convinced that now’s not the time to take profits on bitcoin, even after its market capitalization surged this year to more than $350 billion. 

Related: Grayscale Sees a New Group of Ethereum-First Investors

Last week, Kraken Intelligence, a research unit of the digital-asset exchange Kraken, published results of a survey noting that clients expect an average bitcoin price of $36,602 in 2021, nearly double the current level. 

As discussed previously in First Mover, one of the problems with valuing bitcoin is that the cryptocurrency was just invented 11 years ago, so there’s no deep history of reliable analytical factors to key off, such as the stock market’s price-to-earnings ratios, bond-market yield comparisons or even the supply-and-demand forecasts used in commodities. 

So it’s impossible to say whether the latest price levels represent nosebleed levels or are more akin to an oxygen-rich hyberbaric chamber. 

Greg Cipoaro, global head of research for NYDIG, an investment firm that recently raised $150 million for two new cryptocurrency funds, has authored a report arguing that growth in the Bitcoin network could justify a price range of $51,611 to $118,544 in five years. 

The forecast relies on Metcalfe’s Law, which according to Wikipedia, is attributed to Robert Metcalfe, an Internet pioneer who now serves as a University of Texas professor of innovation and entrepreneurship. 

As summarized by Cipolaro, Metcalfe’s Law “states that a network’s value is proportional to the square of the number of its users.” 

“Given our view that, as an emergent successful money, bitcoin’s fundamental value derives from its network effects, bitcoin’s value should roughly adhere to Metcalfe’s Law,” according to the NYDIG report. “This may be an important insight for investment professionals who, understandably, require anchoring around a fundamental valuation framework as a necessary component of their allocation diligence and analysis.” 

So far, according to the report, the valuation metric appears uncannily accurate:

Of course, nobody knows the future, now matter how confident they sound. 

And Cipolaro’s price projection does require assumptions about how fast bitcoin’s network grows during the first half of the 2020s. Over the past 12 months, the number of Bitcoin addresses has grown by 18%. So he assumes growth rates of 5% to 25% over the coming years. 

“The reality is that there are many potential future growth rates, and we truly have no idea where growth rates will land,” Cipolaro wrote. He added a “reminder that all models are wrong. Some are useful.” 

With many investors now simply asking whether bitcoin’s failure last week to surpass $20,000 might be due to psychological factors, it can’t hurt to be aware of an analytical method that so far has worked pretty well. 

– Bradley Keoun

Bitcoin watch

Bitcoin’s price set a new all-time high at $19,920.53 last week. Since then, however, the oldest cryptocurrency has struggled to break above the $20,000 level.

The bull momentum has stalled with large sell orders capping the upside near $20,000, according to some analysts. 

“People are trying to sell at this level based on what happened during the 2017 bull market,” Simon Chen, executive director of investment and trading at Hong Kong-based crypto lender Babel Finance told CoinDesk. Bitcoin peaked near $20,000 three years ago and fell as low as $6,000 by early February 2016. The bear market ended near $3,200 in December 2018.

Data extracted from the Bitcoin blockchain network backs Chen’s analysis. The number of accumulation addresses – a proxy for those who are buying and holding – has dropped to 495,000 from 514,000 over past four weeks, according to data source Glassnode. The decline suggests that some longer-term investors might be taking profits at these price levels.  

Accumulation addresses are those that have at least two incoming “non-dust” transfers (representing minuscule amounts of bitcoin) and have never spent funds. The metric does not include addresses belonging to miners and exchanges and excludes addresses active more than seven years ago to adjust for lost coins.

The total balance held in these accumulation addresses has dropped to 2.72 million BTC, from more than 2.8 million BTC, in the past two weeks.

According to some analysts, the cryptocurrency needs to make a quick move above $20,000 to avoid a drawdown. “I think the longer bitcoin continues to reject $19,500 and $20,000 with whale-induced sell-offs, the probability of some more consolidation/correction increases in the near term,” market analyst Joseph Young tweeted.

– Omkar Godbole

Token Watch

XRP (XRP): Coinbase to support Spark token airdrop to XRP holders (CoinDesk) 

Ether (ETH): Grayscale’s Sonnenshein sees “growing conviction around Ethereum as an asset class.” (Editor’s note: Grayscale is a unit of Digital Currency Group, the owner of CoinDesk.)

Cardano (ADA): Blockchain project set for hard-fork upgrade to introduce token-locking mechanism, in preparation for “Goguen” development phase integrating smart contracts.  

Solana (SOL): Proof-of-stake network’s block production halted due to bug, though later restarted successfully.  

What’s hot

Binance expects to earn $800M to $1B this year, CEO Changpeng “CZ” Zhao tells Bloomberg (CoinDesk) 

Standard Chartered, Philippines Bank issue $187M blockchain bond (CoinDesk)  

U.S. House Financial Services Committee Chair Maxine Waters wants President-elect Joe Biden to rescind or monitor all cryptocurrency-related guidance issued by Office of the Comptroller of the Currency (CoinDesk)

India-based investors may soon have to pay taxes on returns earned from bitcoin investments (CoinDesk)   

Apple co-founder Steve Wozniak’s new venture lists token WOZX to facilitate investments in energy efficiency projects via cryptocurrency and blockchain technology (CoinDesk) 

Bitcoin miners saw 48% revenue increase in November, to an estimated $522M, according to Coin Metrics data (CoinDesk) 

“We haven’t before had a technology with element-like properties, that emerged in a technology-rich era ripe for catalysts, at a time buffeted by so many other society-transforming trends and events,” CoinDesk Research Director Noelle Acheson writes in weekly column, arguing that another bitcoin can’t just be easily spun up (CoinDesk)  

Analogs The latest on the economy and traditional finance

Biden says $1,200 stimulus checks “may be still in play” in coronavirus relief talks (CNBC)

JPMorgan analysts warn of crowded trades including shorting the U.S. dollar versus cyclical developed-market currencies, long copper and long bitcoin (Bloomberg)  

“When it resumes, the market economy will decide which firms prosper and which fail,” former Bank of England Governor Mervyn King writes in op-ed (Bloomberg Opinion) 

Burger King India’s initial public offering attracted over $9B in bids, according to exchange data (Reuters)

Climate change could cost Asia $8.5T in damage from natural disasters per year, studies show (Nikkei Asia Review)

U.S. economy adds 245K jobs in November, slowest month of growth since recovery began (Washington Post):

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Boerse Stuttgart Group Says Its Crypto Trading App Has Hit €1B Volume in 2020

5 years 10 months ago

Germany’s second-largest stock exchange, Borse Stuttgart, announced on Monday that its Bison crypto trading app has achieved trading volume of €1 billion (US$1.21 billion) so far this year.

  • The stock exchange reported that in November there were several days where the app saw record daily trading volumes exceeding €35 million ($42.3 million). Over the year so far, active users also hit new highs, increasing by 180% to 206,000, the group said.
  • “The increase in user numbers and the trading volume on Bison in the current year have far exceeded our expectations,” said Ulli Spankowski, CEO of Sowa Labs GmbH, the subsidiary of Boerse Stuttgart, which developed the app.
  • Launched in 2018, the app allows users to trade bitcoin, ether, XRP, litecoin and bitcoin cash.
  • Rather than charging fees, Bison makes a profit from the spreads between the buying and selling prices.
  • Boerse Stuttgart also has a crypto exchange launched earlier this year, providing regulated access for institutional and retail investors initially via a bitcoin-euro pair. It later added ether, litecoin and XRP.

See also: Germany’s No. 2 Stock Exchange Unveils Crypto Trading App

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Singapore’s National Research Foundation Invests $9M in Blockchain Innovation

5 years 10 months ago

A Singapore government research department has launched a new program intended to advance commercial applications of blockchain within the city-state.

According to a report by The Strait Times on Monday, the S$12 million (US$8.99 million) program from the National Research Foundation (NRF) will support research and development of real-world use cases for the technology.

The Singapore Blockchain Innovation Programme is expected to interact with up to 75 companies ranging from multinational corporations, large enterprises and IT firms to come up with 17 blockchain-based projects.

Related: Jack Ma’s Ant Group, 3 Other Digital Banks Get OK to Operate in Singapore

The initiative will see those projects established over a three-year period across sectors including trade, logistics and supply chains, The Times said.

The NFR, established in 2006, operates as a department within the Prime Minister’s Office to guide Singapore’s direction on research and development.

While the program is funded by the NFR, the Infocomm Media Development Authority and Enterprise Singapore (ESG), a government agency supporting businesses, also participated in the launch.

The coronavirus pandemic has underscored the importance of “trusted and reliable business systems,” said ESG chairman Peter Ong. “Blockchain technology helps to embed trust in applications spanning logistics and supply chains, trade financing to digital identities and credentials.”

Related: Australia and Singapore to Trial ‘Paperless’ Trade Using Blockchain Technology

The business solutions developed under the program are expected to help Singapore’s enterprises to be “more globally connected and competitive,” he added.

See also: Pandemic Will Speed Bitcoin Adoption, Says DBS Bank Economist

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Standard Chartered, Philippines Bank Issue $187M Blockchain Bond

5 years 10 months ago

Standard Chartered Bank and UnionBank of the Philippines said Monday they have completed a proof-of-concept issuance of a 9 billion Philippines peso ($187 million) tokenized retail bond on a blockchain-backed platform.

  • Singapore-based SC Ventures – Standard Chartered’s fintech investment unit – was responsible for building the bond tokenization platform in collaboration with UnionBank.
  • In total there were 3 and 5.25-year dual-tranche issuances totaling $187 million by UnionBank which were mirrored in tokenized form on the platform, according to the announcement.
  • The project aims to provide retail investors with a platform to gain direct access to bonds.
  • “The bond infrastructure around the world has been designed primarily for institutional investors and involves a number of intermediaries to buy and subsequently trade bonds, making it less accessible to retail investors,” said Aaron Gwak, Standard Chartered Bank’s head of capital markets, ASEAN.
  • This is not the first time the two banks have partnered on a bond issuance. Earlier this year, Standard Chartered and UnionBank teamed up to launch Bonds.PH, a platform for retail treasury bonds, in collaboration with the Philippine’s Bureau of the Treasury and PDAX, a digital assets exchange.
  • UnionBank has also issued its own stablecoin, PHX, according to a 2019 report from Filipino media outlet PhilStar Global. With the issuance, the bank also reportedly conducted the first blockchain-based transaction by a Filipino bank. 

See also: Standard Chartered to Launch Institutional Crypto Custody Solution

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Thai Excise Department Will Deploy Blockchain Tech to Boost Tax Collection

5 years 10 months ago

Thailand’s Excise Department is hoping the integration of a blockchain system can help it boost revenues and assist the nation’s economic recovery.

According to a report by the Bangkok Post on Monday, the department will implement a system to make tax receipt collection more efficient, rather than raising taxes.

The Excise Department, which falls under the purview of the country’s Ministry of Finance, is responsible for taxes on sales of certain goods and commodities manufactured or sold in the country.

Related: India Plans to Tax Income From Bitcoin Investments: Report

Lavaron Sangsnit, the department’s director-general, said raising existing taxes would risk hindering Thailand’s economic recovery, so instead the department looked for different ways to meet the finance ministry’s tax targets.

Blockchain technology will be employed for the purpose of tax revenue collection for the 2021 fiscal year, he said.

The nation’s two other tax agencies, the Revenue Department and Customs Department, will also start rolling out blockchain systems in their operations, according to the report.

Lavaron said tax evasion would be a lot harder with the blockchain integrations, because the three departments will be able to coordinate when conducting tax audits.

Related: Russian Prime Minister Pledges to ‘Civilize’ Crypto Market and Prevent Scams

Last year, the Excise Department began developing a blockchain-based system for assessing the tax returns of oil exports because of the large revenue generated by the industry. That system is expected to roll out in the first quarter of next year, according to the department chief.

See also: Thai Central Bank’s New Blockchain-Enabled Bond Infrastructure Passes Test With $1.6B Bond Sale

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Japanese City to Trial Blockchain Voting System

5 years 10 months ago

A Japanese city is turning to blockchain technology to allow residents to vote online in local elections.

According to an announcement on Thursday, Tokyo-based blockchain firm LayerX and digital ID solutions provider xID have teamed up to build a “safe and convenient” voting platform for the city of Kaga in Ishikawa Prefecture.

The city hopes the initiative will address some concerns with voting online and make it more convenient for elderly people living in more remote parts of the jurisdiction to vote on city policies.

Related: Digital Yen Would Make Crypto Markets ‘More Lively,’ Says CEO of Monex Group

LayerX has developed an e-voting protocol that “that balances the transparency of the voting process and the confidentiality of voting content.” Meanwhile, xID specializes in digital identity systems.

LayerX said “it is possible to build a highly convenient electronic voting technology” by combining the two solutions.

While voting via electronic means is already available and legal in Japan, the stability and cost associated with certain voting devices are an issue, according to the companies.

“Voting over the internet presents more challenges, such as preventing double voting, high technical hurdles to keep voting secrets, and the cost of voting devices.” The companies said blockchain was selected by Kaga city because it is “tamper resistant” and “transparent.”

Related: Leading Japanese Financial Firm SBI Holdings Rolls Out Crypto Lending Services

Blockchain voting is a commonly cited use case for the technology and there have been various projects launched for the purpose. Most notably perhaps, voting platform Voatz has been involved in several U.S. city and state elections but has also been criticized over security issues with its app.

In Kaga, if the voting effort proves a success, other options for blockchain tech will be considered as a means to solve other problems in the city.

See also: Ohio Lawmakers Propose Blockchain Voting in Elections Overhaul Bill

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Bequant, Global Digital Finance Look to Create Best Practices for DeFi

5 years 10 months ago

A working group created as a partnership between crypto prime broker Bequant and Global Digital Finance wants to create some best practices for decentralized finance (DeFi) in an effort to improve adoption while warding off burdensome regulations.

The companies announced last month they would form an industry group with law firm Hogan Lovells, aiming to bring industry participants together “with the goal of bringing credibility and integrity to DeFi projects around the globe,” according to a press release. 

Denis Vinokourov, Bequant’s head of research and one of the working group’s chairs, told CoinDesk the group has its roots in how the broader crypto industry has grown over the years. Creating some best practices might help ensure that regulators don’t feel the need to impose overly strict rules on the space by cleaning up malicious actors or reducing the amount of buggy code.

Related: Terra Brings 24-Hour Trading to Synthetic Versions of Stocks Like TSLA and AAPL

“Over the years, [the crypto market has] gradually matured and I think DeFi just wants to go through the same evolution,” he said. 

The process likely won’t be straightforward. Vinokourov noted the DeFi space has a number of different services – such as lending or custodian services – that would need unique practices and standards. 

In his view, DeFi projects have the potential to “upend the traditional financial system” but this potential suffers from the sheer number of projects that lose funds due to vulnerabilities or malicious actors.

Uniform standards can help solve this problem.

Related: Valuing Open Source: Principles for Acquiring DeFi Projects

Vinokourov said his biggest goal is supporting stablecoin stability, referring to those cryptocurrencies’ whose prices are theoretically pegged to a fiat currency. 

Products like flash loans, which could use stablecoins to conduct some transactions, “have exposed the instability” of some DeFi projects, he said. While most of these coins’ prices usually revert back to a mean price of $1, these tokens should be able to handle the stresses of capital entering or exiting a project without volatility. 

Just last month, two DeFi projects saw flash loan attacks, leading to users losing some $13 million. Multiple stablecoins were involved – the Origin Dollar was used in a “rebase” attack, while Value DeFi saw attackers arbitraging dai and USDC.

Combating this type of price fluctuation is difficult, and Vinokourov said he didn’t know what the best way to address it may be, though he has some ideas.

“More audits, stricter audits, you know, just like in the traditional space you don’t really want to invest in a company that’s not been audited,” he said. “Same with crypto protocols. Again, [have] a code of conduct, make sure that everything is in order. It doesn’t mean that things can’t go wrong but there’s probably less chance of it going wrong.”

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Hong Kong in Talks With PBOC on Digital Yuan Trial for Cross-Border Payments

5 years 10 months ago

Hong Kong Monetary Authority (HKMA), the city’s central banking institution, said it is working with the People’s Bank of China (PBOC) to test digital yuan use cases. 

PBOC’s Digital Currency Institute and the HKMA are discussing the technical pilot testing of using e-CNY for making cross-border payments while making the corresponding technical preparations, Eddie Yue, the chief executive at HKMA, said in a statement on Friday. 

“As the renminbi is already in use in Hong Kong and the status of e-CNY is the same as cash in circulation,” Yue said. “it will certainly offer an additional payment option to those in Hong Kong and the Mainland who need to make cross-border consumption.”  

Related: Niall Ferguson on Why Bitcoin and China Are Winning the Monetary Revolution

There is not yet a clear timeline for the official launch of the digital yuan in the city, according to the statement. 

China has been mostly focused on domestic use cases for its national virtual currency Digital Currency, Electronic Payment (DC/EP) facilitating consumers’ retail payments. The adoption of DC/EP in Hong Kong, one of the major financial hubs in Asia, could be part of its efforts to enhance renminbi as a payments currency in the global financial system.  

During a legislative council meeting in October, Hong Kong Treasury Secretary Christopher Hui said the city is most interested in wholesale and cross-border digital currency use cases, a contrast to DC/EP’s initial retail-facing use cases that are being developed by the PBOC. 

The Bank of China, one of the four major state-owned commercial banks, launched a lottery in October. It gave away $1.5 million worth of PBOC-issued digital yuan to encourage consumers to download the digital wallet and use e-CNY to make payments. The trial was only for the citizens in Shenzhen, one of the closest mainland cities to Hong Kong.   

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Bitcoin Miners Saw 48% Revenue Increase in November

5 years 10 months ago

Bitcoin miners generated an estimated $522 million in revenue in November, up 48% from October, according to on-chain data from Coin Metrics analyzed by CoinDesk.

The sharp revenue increase came as bitcoin soared through November, setting a new all-time high by month’s end after gaining over 40 percent. Monthly aggregate revenue in November hit the highest level since September 2019. 

Revenue estimates assume miners sell their BTC immediately.

Related: Hive Reports $7.4M Q2 Profit as Lower Costs More Than Offset ‘Big Spend’ on Expansion

Measured by revenue per terahash (TH), the unit measurement for the speed of cryptocurrency mining hardware, miner revenue hit six-month highs as it climbed above $0.15 multiple times in November, the highest level since early May, according to data aggregated by mining software company Luxor Technologies. 

Despite significant intra-year volatility, mining revenue measured by terahash per second (TH/s) is roughly flat year to date from roughly $0.138 per TH/s on Jan 1 to $0.135 per TH/s at last check.

Network fees brought in $54.9 million in November, or nearly 11% total revenue, a slight percentage decrease from the 12.2% of revenue represented by fees in October. 

Fees steadily declined through November, coming down from the roughly two-year highs in late October, dropping from a $13 average transaction fee at the start of November to below $3 near month’s end, per Coin Metrics.

Related: Riot, Marathon, Canaan See Record Monthly Share Gains as Bitcoin Clears All-Time High

Notably, fees as a percentage of total revenue continues a strong upward trend since April, prior to the network’s third-ever block subsidy halving in May. Increases in fee revenue are important to sustain the network’s security as the subsidy decreases every four years.

Taking advantage of the revenue increase, miners are bringing more and more machines online after early November’s record difficulty drop, with the past two adjustments resulting in difficulty increases and a third consecutive increase projected for mid December, meaning an increase in resources required to mine than at a lower difficulty level.

As analysts predict bitcoin’s current rally is sustainable with the strong possibility of continued upward price movement, miners eye continued revenue growth through the end of 2020.

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Grayscale Sees a New Group of Ethereum-First Investors

5 years 10 months ago

While bitcoin was the first stop for most investors before this year, a growing number of people are paying attention to Ethereum in its own right in 2020, Michael Sonnenshein, managing director at Grayscale Investments LLC, said. 

“Over the course of 2020 we are seeing a new group of investors who are Ethereum-first and in some cases Ethereum-only,” Sonnenshein said in an interview with Bloomberg. “There’s a growing conviction around Ethereum as an asset class.” Grayscale is owned by CoinDesk’s parent company, Digital Currency Group.

DeFi has given Ethereum a significant boost since this summer and the blockchain kicked off its journey to Eth 2.0 after launching its beacon chain earlier this month.

Related: $50K BTC in 2021? Bloomberg Analysts Join the ‘Traditional Onslaught’ Driving Bitcoin’s Rally

“The development of the asset class has continued to solidify itself,” Sonnenshein said. “Ethereum has along the same lines of the staying power bitcoin has.”

There have been a wide range of opinions on whether Ethereum’s native currency, ether (ETH), would become an even more contentious competitor to bitcoin as an asset class. 

“For institutional investors, they are buying bitcoin for the digital gold narrative,” Ryan Watkins, senior research analyst at Messari, previously told CoinDesk. “Ether just isn’t in that conversation yet.”

Ether “benefits from spillover and likely has more conversation around it from crypto-natives,” Vishal Shah, founder of derivatives exchange Alpha5, said in an earlier interview with CoinDesk. “For the uninitiated, [it is] hard to see how bitcoin is not the sole on-ramp.”

Related: Market Wrap: Bitcoin Dips Below $19,000 as Ether Options Volume Drops

Read more: Why Ethereum and Bitcoin Are Very Different Investments

If Ethereum gets more investors’ attention as an asset class, it would be for very different reasons. The blockchain strives to be the “world computer” that provides an inclusive ecosystem for decentralized applications whereas bitcoin has been treated as an emerging asset class. 

“I’ve always thought this digital asset space is huge – and it’s not just bitcoin – because there are going to be different applications for different things,” Raoul Pal, CEO and co-founder of financial media group Real Vision, said in his recent documentary. “I think of the two [bitcoin and ether] as having a very nice combined asset allocation.”

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Coinbase to Support Spark Token Airdrop to XRP Holders

5 years 10 months ago

Coinbase announced Saturday it plans to support an upcoming airdrop that has been seen as a factor in boosting XRP’s price in recent weeks.

The San Francisco-based exchange said in a blog post that Coinbase customers with XRP balances as of midnight UTC on Dec. 12, 2020 will receive Spark tokens from Coinbase at a later date.

“The amount of Spark you’ll receive depends on how much XRP you had in your account at the snapshot time,” Coinbase wrote. Details about the airdrop will be posted this week, a company spokesperson told CoinDesk.

Related: Market Wrap: Bitcoin Dips Below $19,000 as Ether Options Volume Drops

Spark is the native token of the Flare Network, a system meant to bring Ethereum-like functionality to the XRP Ledger.

“Flare’s token, Spark is created through what may be the first ever utility fork whereby the origin network, in this case the XRP Ledger, benefits through increased utility,” the team behind the smart-contract project wrote in August.

XRP is up nearly 10% over the last 24 hours as of press time, according to CoinDesk data.

“Supporting new networks and their projects is important for not only meeting customer interest, but also the continued growth of the crypto ecosystem,” said Coinbase spokesperson Crystal Yang.

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Cardano to Launch Hard Fork Before Next Major Development Phase

5 years 10 months ago

IOHK, the development team behind public blockchain project Cardano, said it is set to launch a hard fork in December as part of the transition to the third development phase of the protocol. 

Dubbed “Goguen,” the third phase will be focused on the protocol’s integration of smart contracts after building Cardano’s foundation and decentralizing its system in the first two phases. 

The hard fork will introduce the token-locking mechanism, one of its most significant new functions, to the mainnet. It will enable the network’s smart contracts to support certain conditions such as making users hold tokens for a fixed period of time in order to complete a contract.

Related: Market Wrap: Bitcoin Dips Below $19,000 as Ether Options Volume Drops

While only having a slight impact on the actual ledger, the token-locking function will prepare the platform for smart contracts and the creation of assets that run on Cardano, Kevin Hammond, the company’s software engineer, said in a statement.

In addition, the upgrade will bring custom tokens into the network besides its native ADA token, Hammond said. 

Founded in 2015, Cardano has experienced multiple hard forks to evolve through its five development phases, according to its roadmap. After the Goguen era, the protocol will go through the last two phases, Basho and Voltaire, to improve its scaling and governance functions.  

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Hong Kong Crypto Exchange Founder Taken Amid China’s Crackdown on Fraudulent Bank Accounts

5 years 10 months ago

Hong Kong-based crypto exchange CEO Global said Saturday one of its founders has been taken away by authority to assist with an investigation for 15 days and it has no idea when he may return.

“Affected by the ongoing national crackdown on fraudulent sim cards and bank accounts, the bank account of one of our core founders has received illicit money from international fraudsters and scammers,” the company said in a statement. “The founder has been taken away for 15 days for the investigation.” 

The founder holds the private keys to most of the platform’s cold wallets. Since the exchange currently can not process all the withdrawals through its hot wallets, it said it has decided to suspend all the withdrawals.

Related: JD.Com Says It’s Accepting China’s Digital Yuan for Latest Lottery

In the meantime, the platform will close all its over-the-counter (OTC) trading services because of the risks related to uncertainties from China’s regulatory policies including the national crackdown. 

The State Council, China’s cabinet, announced a national crackdown on fraudulent bank accounts and sim cards in October.  “Fraudulent sim cards and bank accounts are among the root causes that have enabled many phone and cyber scams,” according to the announcement. 

People who want to avoid revealing their dentity when opening a bank account or sim card, most of whom are scammers, would buy existing sim cards and bank accounts registered under others’ names. 

Due to high demand for these fraudulent accounts, an industry has developed to create and sell these accounts, some of which are obtained via identity theft. Within two weeks of the State Council’s announcement, the Chinese police have arrested more than 4,600 people and confiscated about 65,000 bank cards that are linked to fraudulent banking accounts, according to a report by the state media CCTV. 

Related: Crypto.com Secures Australian Financial Service License

More than 15,000 people involved in the crimes are barred from opening a new bank account in five years, according to the report. 

Colin Wu, a Chinese crypto reporter, recently said some of Chinese crypto miners might have had difficulties in exchanging their mined bitcoin or ETH for the Chinese fiat currency to pay their electricity bills using a bank card due to the crackdown. 

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Apple Co-Founder Wozniak’s New Venture Lists Token to Help Fund Energy Efficiency Projects

5 years 10 months ago

Apple co-founder Steve Wozniak has launched Efforce, a company that facilitates investments in energy efficiency projects via cryptocurrency and blockchain technology. 

The company aims to be a marketplace to streamline the process of financing and undertaking energy efficiency projects by enabling them to receive crowd contribution from investors via its token WOZX, which was listed on Thursday through hbtc.com. 

Efforce claimed the listing has increased Efforce’s market value tenfold to $950 million. The token will also be listed next week on South Korea-based crypto exchange Bithumb Global. 

Related: 5 Reasons Why Bitcoin Just Hit an All-Time High Price

According to the company, energy services companies (ESCOs) tend to have limited access to capital since they often are unable to turn to traditional banking channels as banks lack the technical expertise to properly assess the return on investment.

ESCOs can register energy efficiency projects with Efforce and it will validate the projects, and evaluate their investment needs, calculate returns and create an Energy Perforce Contract.  

There will be a smart meter on the company’s blockchain to measure each project’s energy savings and turn them into energy credits that are saved in investors’ profile for use or sale. 

“We created Efforce to be the first decentralized platform that allows everyone to participate and benefit financially from worldwide energy efficiency projects, and create meaningful environmental change,” Wozniak said in a statement.    

Related: China’s State-Sanctioned Blockchain Project BSN Adds Polkadot, Oasis, Bityuan to Network

The company was co-founded by Wozniak, Jacopo Vanetti, Andrea Castiglione and Jacopo Visetti, who also founded AitherCO2. 

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CME Leveraged Funds Double Down on Shorts as Bitcoin Maintains $19,000

5 years 10 months ago

Fresh off of bitcoin’s record high in late November, leverage funds trading bitcoin futures on the Chicago Mercantile Exchange continue adding to their short positions as the leading cryptocurrency trades above $19,000.

  • Net short open interest (OI) for CME leveraged funds, or the total amount of outstanding contracts, hit record levels for the past two weeks, according to CME Commitment of Traders reports published every Friday.
  • The market’s total OI hit record highs of $1.3 billion at the end of last month.
  • Despite a slight decrease in short positions in early November, this demographic of traders has continued increasing its short positions since September. Over the same time period, bitcoin has gained 60%.
  • Leveraged funds represent 62% of the total OI on CME’s bitcoin futures market.
  • CME traders likely opened some of these shorts are part of a carry trade in conjunction with long exposure in other bitcoin markets.
  • Also, the trades could be taken as hedges to reduce risk incurred by other open positions in the event of adverse price movements, explained Josh Olszewicz, bitcoin trader at Techemy Capital. Of course it’s hard to know for sure, but using CME bitcoin futures market to open hedging trades as well as exploiting the yield between CME markets and bitcoin spot price is a common strategy for many cryptocurrency trading firms. 
  • Notably, OI for the other categories of CME traders is not nearly as bearish. For example, net OI for the catch-all category of “Other Reportable” traders, claiming 17% of total OI, is heavily long and near all-time highs.

Update (Dec. 5, 17:38 UTC): This article has been updated to reflect the carry trade possibility for short OI increase in addition to hedging strategies.

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India Plans to Tax Income From Bitcoin Investments: Report

5 years 10 months ago

India-based investors may soon have to pay taxes on returns earned from bitcoin investments.

The country’s income tax authority is tracking investors making money amid the ongoing bitcoin price rally and is all set to demand taxes, two sources familiar with the matter said, according to The Economic Times (ET), a business-focused daily newspaper. 

The tax department collected information about bitcoin trades executed through banking channels before the Reserve Bank of India’s (the country’s central bank) crypto ban took effect in April 2018. The Supreme Court overturned the ban in early March, bringing cheer to both investors and local cryptocurrency exchanges. 

Related: Russian Prime Minister Pledges to ‘Civilize’ Crypto Market and Prevent Scams

“The tax authority can also monitor earnings of cryptocurrency investors registered through KYC/AML compliant exchanges like CoinDCX and through national identity documents such as the PAN card,” Sumit Gupta, CEO of Mumbai-based cryptocurrency exchange CoinDCX, told CoinDesk. 

Some experts are anticipating a 30% tax on cryptocurrency gains, and many are advising their clients to file bitcoin returns as capital gains, which are associated with stocks, according to the article. 

Amit Maheshwari, a partner at tax and consulting firm AMK Global, told the newspaper that bitcoin’s active trading would be treated as a speculative business and attract normal tax rates. In contrast, authorities may treat one-off or infrequent transactions as capital gains, long-term or short-term, depending on the holding period, and levy a concessional rate of capital gains. 

The tax authority has not yet categorized returns from cryptocurrencies under any specific bracket. “Currently, if an investor submits his Income Tax declaration, the amount of earnings generated by investing in cryptocurrencies is highlighted under Income from Other Sources,'” Gupta told CoinDesk. 

Related: In India, a Clash of Digital Innovation and Internet Censorship

The clarity on the tax and regulation front may bring more investor participation. While the Indian government does not consider bitcoin legal tender, holding cryptocurrencies is not necessarily illegal or banned. 
Back in September, the government was reportedly mulling a new law prohibiting cryptocurrency trading. However, according to a think tank, the government would be better off legitimizing bitcoin by regulating it like corporate stock.

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JD.Com Says It’s Accepting China’s Digital Yuan for Latest Lottery

5 years 10 months ago

Chinese e-commerce firm JD.Com says it’s become the first online platform to accept the nation’s central bank digital currency (CBDC).

  • As reported by Reuters on Saturday, JD Digits – the company’s digital technology arm – will accept the digital yuan at its online shopping center during the second mass giveaway of the token in the city of Suzhou.
  • CoinDesk previously reported that the event, a kind of lottery, will allow the city’s residents to apply to win 200 digital yuan as happened with the first such giveaway in Shenzhen in October.
  • According to Reuters, there will be a total of 10,000 winners this time round, who will be able to spend the tokens at stores that are set up with point-of-sales technology that can handle the CBDC.
  • The Suzhou lottery kicks of on Dec. 12 – a shopping festival known as “Double 12” – and is said to be trialing functionality of the token including offline (phone-to-phone) payments.
  • Seemingly preparing the ground for the launch of the CBDC, China’s central bank proposed a banking law in October, recognizing the renminbi in both physical and digital form, and outlawing all third-party rivals. This would likely be a blow to cryptocurrencies like Tether’s yuan stablecoin if passed.
  • See: Proposed Chinese Law Outlaws All Yuan-Pegged Tokens – Except for Its CBDC
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Waters Tells Biden to Rescind OCC Crypto Guidance; May Be Part of Anti-Trump, Anti-Crypto Offensive

5 years 10 months ago

U.S. Representative Maxine Waters, who chairs the powerful House Financial Services Committee, wants President-elect Joe Biden to rescind or monitor all of the cryptocurrency-related guidance issued by the Office of the Comptroller of the Currency (OCC).

Waters’ comments in a letter Friday follows weeks after fellow Democratic members of the House Financial Services Committee criticized the OCC’s crypto-related actions during the COVID-19 pandemic.

It also comes days after those same members introduced a bill that would require stablecoin issuers to seek bank charters and secure regulatory approval to issue tokens.

Related: OCC Chief Hints at Coming ‘Good’ Actions on Crypto by End of Trump’s Term

In this light, Waters’ action is bound to be seen as part of a coordinated effort to impose more severe regulatory oversight on stablecoins, if not all cryptocurrencies, as a way to undo what she termed the harms of President Donald Trump’s administration.

“As you begin to carry out the mandate given to you by the American people to restore trust in the federal government, I would like to highlight several areas where you and your team should immediately reverse the actions of your predecessors,” she wrote.

In her letter, Waters (D-Calif.) called on Biden to rescind guidance by the OCC that national banks may hold stablecoin reserves as a service to bank customers.

Waters also is recommending that similar guidance by the OCC that allowed federally chartered banks and federal savings associations to provide cryptocurrency custody services for customers be rescinded.

Related: US Regulator Seeks End to Bank Deplatforming of ‘Disfavored’ Industries (Like Crypto)

Each of these recommendations would undo work conducted by Brian Brooks, the Acting Comptroller of the Currency. Brooks was recently nominated to serve a full five-year term by Trump.

“Your appointed officials at the Office of the Comptroller of the Currency (OCC) must also not assume, as their predecessors have, that a law Congress passed over 150 years ago somehow gives, them authority to provide a national bank charter to non-bank fintech or payment companies,” she wrote.

Under a section on financial stability, Waters wrote that the Financial Stability Oversight Council and Office of Financial Research should publish their analysis on developments and the existing regulatory framework around digital assets and distributed ledger technology.

If Waters and the three Democratic sponsors of the bill – Rashida Tlaib (D-Mich.), Jesús “Chuy” García (D-Ill.) and Stephen Lynch (D-Mass.) – are indeed intent on rolling back the OCC’s pro-crypto guidance as a way to undo what they perceive as Trump’s legacy, an assertion earlier Friday by Brooks that “we’re very focused on not killing (crypto innovation)” may prove hollow.

The chairman finds himself in an unenviable position. On the one side, the outgoing administration is rumored to be planning to issue self-hosted wallet regulation, a plan that already has the crypto industry up in arms. Now, the moves by Waters and the Democratic representatives may bode poorly for the crypto space in the U.S., particularly should the GOP lose the Georgia Senate runoff and thus control of the Senate.

Read also: OCC Chief Hints at Coming ‘Good’ Actions on Crypto by End of Trump’s Term

(UPDATE Dec. 5, 2020, 01:45 UTC): Rewrites throughout, adds context of prior actions by House members.

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