CoinDesk Crypto

Gary Gensler, a Washington and Wall Street veteran who has closely studied the budding cryptocurrency field, will lead the financial policy transition team for projected U.S. President-elect Joe Biden.

A former chairman of the Commodity Futures Trading Commission (CFTC), Gensler was tapped to lead the agency review team for the Federal Reserve, banking and securities regulators, the Biden campaign formally announced Tuesday, following reports last week he was a contender. 

As CFTC chairman, Gensler served as a key financial regulator for former President Barack Obama, spearheading new derivatives rules after the 2008 financial crisis. He also served in the Treasury Department during the Clinton administration. 

Related: Crypto Impact Unclear After Joe Biden Unseats Donald Trump as Next US President

More recently, he has also testified before Congress about cryptocurrency and blockchain on multiple occasions, pushing back against comparisons between cryptocurrencies and Ponzi schemes and declaring that the still-unlaunched Libra token met the requirements of being a security under U.S. law. At an MIT conference two years ago, he opined that there was a “strong case” XRP, the cryptocurrency closely associated with startup Ripple, is a security. Gensler called blockchain technology a “change catalyst” in a 2019 op-ed for CoinDesk. 

Gensler did not return a request for comment.

He was one of 500 individuals named Tuesday when the Biden-Harris transition team announced the names of members of the agency review teams who will evaluate the function of federal agencies and help ensure a smooth transition. 

To be sure, incumbent President Donald Trump has contested the election results and has filed lawsuits in a handful of states seeking to have votes discounted due to alleged irregularities, though with little evidence so far.

Brain trust

Related: Cryptocurrency CEO Donated Second-Largest Amount to Joe Biden’s Campaign

Also on the list for the Biden review team for financial regulators are several other policy experts who have paid careful attention to cryptocurrency, blockchains and related matters: 

• Simon Johnson, an economist and professor at the MIT Sloan School of Management, where he led digital currency research. He was part of the Congressional Budget Office’s Panel of Economic Advisers from April 2009 to April 2015. Johnson has also co-authored a paper about the extensive impact blockchain technology can have on the financial world, and served on CoinDesk’s advisory board.
• Chris Brummer, a law professor and the faculty director of Georgetown University’s Institute of International Economic Law, is a familiar figure in the fintech sector who also testified in front of the U.S. Congress regarding Facebook’s Libra project. Brummer was also nominated to serve as a commissioner on the CFTC under President Obama, but the nomination was reversed after the 2016 election. 
• Mehrsa Baradaran, a University of California at Irvine School of Law professor, specializes in banking law and also testified as an expert witness at a Senate Banking Committee hearing on regulatory frameworks for blockchain and cryptocurrencies. Baradaran has written extensively about inequalities in banking and is a critic of the idea that projects like Facebook’s Libra could by default help expand financial inclusion.
• Lev Menand, one of the original creators of the digital dollar concept, is an academic fellow and law professor at Columbia University. He served as a senior advisor to the Deputy Secretary of the Treasury in 2015-16 and has also worked as an economist at the Federal Reserve Bank of New York’s bank supervision group. 

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Bitcoin is sideways Tuesday, with little price action. However, traders seem to be jumping into decentralized finance to maximize their crypto yield.

• Bitcoin (BTC) trading around $15,345 as of 21:00 UTC (4 p.m. ET). Slipping 0.30% over the previous 24 hours.
• Bitcoin’s 24-hour range: $15,092-$15,471.
• BTC close to its 10-day and 50-day moving averages, a flat or sideways signal for market technicians.

Bitcoin’s price was flat Tuesday, sticking to a $15,000-$15,400 range and at $15,345 as of press time. It was a bit of a respite after Monday’s $1,000 price move in a span of hours. 

Read More: 3 Reasons Bitcoin Has Rallied Over 60% in Just Two Months

Related: Legendary Investor Stan Druckenmiller Turns Bitcoin Bull

Funding rates have ticked up on major derivatives venues, a sign more traders are looking for long leverage.

“It is likely that the sharp bounces in BTC price yesterday and on Saturday were retail led – with the perpetual swap funding spiking for the first time since September,” quantitative trading firm QCP Capital wrote in its Tuesday investor note. “One reason for the overall strength and stickiness of the rally in the last two months has been the absence of retail over-leverage, as evidenced by the flat funding up till now.”

Mostafa Al-Mashita, executive vice president of trading for Global Digital Assets, is keeping an eye on bitcoin’s correlation with the S&P 500 index as a way to gauge fundamental market news affecting the crypto market. 

“We saw positive momentum from the Pfizer announcement, with a loss of S&P 500 correlation to bitcoin price action,” Al-Mashita said. “Support will be established over the next couple of days before rebounding to continue the bullish trend.” 

Related: Volume Surge Brings 25% Turnover to ‘CoinDesk 20’

After a slight dip last week, bitcoin’s correlation to the key U.S. index cropped back up on Monday.

“The last month has been extremely bullish for digital assets,” said Brian Mosoff, chief executive officer of investment firm Ether Capital. “Various institutions are committing to new products and R&D and giving a new set of investors more comfort that the space is maturing.” 

Read More: Billionaire Investor Druckenmiller Says He Owns Bitcoin in CNBC Interview

Year-to-date, bitcoin has more than doubled and over the past month, the world’s oldest cryptocurrency is up over 35%.

With the sideways price performance Tuesday, a number of traders appear to be moving crypto into decentralized finance, or DeFi, for yield-generating opportunities. According to DeFi Pulse, 168,111 BTC, worth $2.5 billion as of press time, is generating yield in various Ethereum-based protocols.

“BTC is digesting the recent confusing macro and political events and consolidating before its next move,” said Jean-Marc Bonnefous, managing partner of investment firm Tellurian Capital. “We are seeing the rotation from BTC to DeFi in full swing now, which is typical of traders redeploying capital to higher yielding assets.”

DeFi value locked at a high

Ether (ETH), the second-largest cryptocurrency by market capitalization, was up Tuesday trading around $450 and climbing 0.70% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

The amount of cryptocurrency “locked” or held in Ethereum-based DeFi protocols is at a record Tuesday. Over $12.8 billion is currently being held in DeFi, the highest it has ever been according to data aggregator DeFi Pulse.

Ether Capital’s Mosoff says many investors have profited from rising crypto prices and are looking to find additional gains in the DeFi market. 

“Total value locked in DeFi is hitting all-time highs likely due to the price increase across all crypto assets and the continued positive sentiment in the space alongside more certainty in the political arena,” Mosoff told CoinDesk.

Other markets

Digital assets on the CoinDesk 20 are mixed Tuesday. Notable losers as of 21:00 UTC (4:00 p.m. ET):

• algorand (ALGO) + 8.2%
• 0x (ZRX) + 7.7%
• chainlink (LINK) + 4%

Notable losers:

• bitcoin cash (BCH) – 3.1%
• litecoin (LTC) – 1.7%
• cosmos (ATOM) – 1.2%

Read More: Volume Surge Brings 25% Turnover to ‘CoinDesk 20’

Equities:

• The Nikkei 225 ended the day in the green 0.26%, boosted by gains in Yamaha Motor Co Ltd., which jumped 21% on better-than-expected earnings.
• Europe’s FTSE 100 closed up 1.8% as investors plowed money into cheap stocks amid optimism a coronavirus vaccine is closing in on regulatory approval.
• In the United States the S&P 500 was flat, in the red 0.10%, weighed down by a sell-off in major tech stocks such as Amazon, Zoom and Netflix.

Commodities:

• Oil was up 3.8%. Price per barrel of West Texas Intermediate crude: $41.34.
• Gold was in the green 0.58% and at $1,872 as of press time.

Treasurys:

• U.S. Treasury bond yields all climbed Tuesday. Yields, which move in the opposite direction as price, were up most on the 2-year, jumping to 0.183 and in the green 3.4%.

Related Stories

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In traditional business, “key person risk” refers to when a company relies too much on one individual to succeed. Cryptocurrency businesses are prone to a very literal version of this risk when handling funds. The most infamous example may be QuadrigaCX, whose customers have been waiting nearly 3 years to recoup $115 million worth of deposits since the death of founder Gerald Cotten, the sole possessor of the cryptographic keys to the exchange’s wallet.

Fortunately, multisignature cryptocurrency wallets offer a built-in way to manage this sort of risk.

Multisignature wallets (or multisig, for short), are cryptocurrency wallets which require two or more private keys to sign and send a transaction. The storage method requires multiple cryptographic signatures (a private key’s unique fingerprint) to access the wallet.

Related: How the World Stopped Producing Enough Money, Feat. Emil Kalinowski

Of course, multisig is not a panacea, as customers of OKEx learned last month, when the exchange suspended withdrawals, explaining (somewhat cryptically) that one of its key holders was cooperating with an investigation and had fallen “out of touch.” Without that key holder’s authorization, OKEx was unable to give customers their money back.

But properly used, multisig can mitigate the hazards of dealing with digital bearer assets where transactions are irreversible. What follows is an explainer of how mutisig works, why someone might want to use it, how it can go awry, and more.

How does a multisignature crypto wallet work?

Imagine a bank vault that requires more than one key to open: That’s a little how multisignature cryptocurrency wallets work (and why multisignature wallets are typically called vaults).

You can choose how many keys are allowed to open the vault as well as the minimum number of keys needed to unlock it (e.g., you could have a 2-of-3 multisig where two out of three assigned private keys are needed, 3-of-5, 5-of-7, etc).

Related: A (Not Quite) Complete History of Money, Feat. Planet Money’s Jacob Goldstein

It works like this: Justin, Vittie and Craig set up a multisignature crypto wallet where each holds one key and two of the three keys must be present to send a transaction. To make a payment, Justin would create a transaction and sign it with his key; he would then send this transaction to Vittie, who would sign it with her key. From here, Vittie can either send it back to Justin to finalize the transaction or send it to Craig for him to sign too (though this last step is not necessary, considering only two of the three keys are needed to unlock the wallet).

Typically, hardware wallets (namely, Trezor, Coldcard, and Ledger) are the go-to option for using a multisig setup since they are the safest way to store a private key. Once these wallets are combined into a multisig setup, they create an entirely new multisignature address that is independent of each individual hardware wallet.

When would someone use a multisignature crypto wallet?

For retail investors, multisignature wallets are commonly used to secure bitcoin, but you can also use them for ether and other cryptocurrencies.

Most notably, crypto exchanges, brokers/OTCs, investment funds and other crypto companies use multisignature storage to secure their cold storage funds. Exchanges, brokers, and the like distribute admin keys for their funds in order to distribute the risk; if a hacker wants access to their reserves, they’re going to need several keys to do so. Similarly, multisig ensures that no one person in the firm is able to unilaterally withdraw funds from the account. The more signatures you need to execute a transaction, the more distributed the decision-making process can be.

Other specific use-cases may involve setting up a shared account among family members (for, e.g., a trust or estate) or an escrow account (for, e.g., a bet or a sale of property). Relatively speaking, multisig is still a niche custody practice among cryptocurrency holders. Still, that doesn’t mean your typical crypto user doesn’t use it to custody their coins.

When multisig goes wrong

Multisig provides an extra layer of protection for cryptocurrencies holdings, but it’s not without risks. 

For Bitcoin, multisignature wallet software has come a long way since the early days of Electrum (one of the earliest Bitcoin software wallets which was also one of the first to support multisig), but it’s still a complex process for less technically savvy users. The forthcoming Taproot upgrade, which will enrich Bitcoin’s scripting language to make coding smart contracts easier, will likely improve consumer-grade multisig software.

Each single-signature wallet has an associated seed phrase that allows a user to back up and recover their wallet. A multisig wallet, however, does not have this back-up mechanism; this is part of its design.  So if you lose the majority of wallets in a multisig and the seed phrases for these wallets, then you lose access to the whole vault (of course, the same could be said for losing the device and seed phrase for a single-signature wallet).

Should I use multisig?

Multisignature proponents argue that multisignature is the most secure and fail-proof way to store cryptocurrency. Even if a thief gets their hands on one of your wallets, for example, they still won’t be able to access your account without the keys to the other wallets in the setup. 

Still, there are others who argue that the multisignature user experience is not simplified enough for average users, so only those who really know what they’re doing should bother with it.

How do I set up a multisignature wallet?

Historically, multisignature wallets have been the domain of developers or hardcore Bitcoiners as they are difficult to set up from scratch. Luckily, today’s tenderfoot multisignature users have it easier than the trailblazers of yesteryear. Nowadays, there are wallet softwares that streamline the multisig setup process, as well as services that provide customer support and key management services (for instance, if an unwitting client loses a hardware wallet to the ether, the service has a key as backup).

For Bitcoin custody specifically, some popular multisig service providers with key management services include Blockstream, Casa and Unchained Capital. Other open-source, do-it-yourself multisig software includes Caravan, Electrum, Lily, Nunchuck and Specter, among others.

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ShapeShift, the Colorado-based cryptocurrency exchange that allows users to self-custody their assets, has delisted another privacy coin.

Zcash has been removed from the trading platform in addition to monero and dash. Decrypt reported last Friday that XMR and DASH had been quietly removed; the delisting of ZEC was not noted.

“We’ve taken down the privacy coins because of their regulatory concerns,” Veronica McGregor, ShapeShift’s chief legal officer, told CoinDesk in an interview. “At least for the moment, we’re not working with those coins.” 

Related: Volume Surge Brings 25% Turnover to ‘CoinDesk 20’

XMR, DASH and ZEC “were delisted at the same time for the same reason – to further derisk the company from a regulatory standpoint,” McGregor wrote in a follow-up email.

ZEC’s removal is somewhat notable because the company invested in the Electric Coin Company, one of the creators of zcash, in 2016, and listed ZEC that October. 

ShapeShift has become increasingly cognizant of regulators, despite its founder once having a reputation as a rebel and libertarian.

Formerly, the platform allowed crypto trading without any kind of account or login, but in September 2018 ShapeShift began requiring customers to reveal their identities to the exchange. Later that month, it faced scrutiny after a Wall Street Journal report alleged that ShapeShift had been widely used for money laundering (ShapeShift strongly refuted the claims).

Privacy coins and bank cops

Related: Market Wrap: Bitcoin Jumps to $14.2K; Ethereum Gas Usage Grows 113% YTD

A September report from the law firm Perkins Coie about privacy-enabling cryptocurrencies noted that XMR is a cryptocurrency which is private by default, in that all transactions are made so that only the sender and receiver should know who participated.

ZEC and DASH both make privacy optional.

Read more: Monero and Zcash Conferences Showcase Their Differences (And Links)

Peter Van Valkenburgh is director of research at Coin Center and a member of the Zcash Foundation board. He explained to CoinDesk in a phone call that guidance from the U.S. Financial Crimes Enforcement Network, or FinCEN, “basically says, you have to make sure you are taking reasonable steps from a cost-benefit analysis to stop the proceeds from crime from flowing through your institution.”

Because many cryptocurrencies, such as bitcoin, make all transactions and balances public, he explained, working with blockchain surveillance firms like Chainalysis or Elliptic can be enough to be seen as taking reasonable steps. 

That said, privacy-preserving cryptocurrencies will be treated, Van Valkenburgh said, like someone who shows up at a bank with a large bag of cash. They may be subject to greater scrutiny or more thorough background checks (as possible examples). 

“To my knowledge, FinCEN has fairly clearly articulated to regulated crypto companies that there is a way to comply, just as banks deal with cash,” Van Valkenburgh said.

Read more: SEC, CFTC, FinCEN Warn Crypto Industry to Follow US Banking Laws

Though he also offered the caveat that a particular agency or a particular regulator’s zeal can be enough to discourage a company from engaging in a line of business, even if no action is taken against them.

“The Bank Secrecy Act is extremely broad. It affords prosecutors and regulators with a whole lot of powers,” he said. “That vagueness about our financial surveillance laws to me is problematic.” 

CoinDesk reached out to other U.S. crypto exchanges that list privacy coins but did not receive responses by press time.

Ian Allison contributed reporting.

Correction (Nov. 10, 19:39 UTC): Corrects the date of when ShapeShift was featured in a Wall Street Journal report on alleged money laundering. Also adds links to ShapeShift’s refutations of the WSJ report.

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Goodbye, dai and bitcoin sv. Hello, kyber and cosmos.

A swelling in volume in the crypto markets over the third quarter has changed the list of noteworthy digital assets beyond bitcoin and ether that matter most to traders and investors. That change is reflected in the CoinDesk 20. 

In the latest revision, based on data from the second and third quarters of this year, five assets were replaced by crypto assets that saw volume surges outpacing even the double-digit gains posted in market volume as a whole. 

Related: ShapeShift Delists Privacy Coin Zcash Over Regulatory Concerns

The CoinDesk 20 list is designed to represent the assets that matter most to the market. While other rankings use market capitalization, the CoinDesk 20 lists crypto assets ranked by market volume over two consecutive quarters, as reported by eight trusted crypto exchanges. The CoinDesk 20 represents the 20 assets with the largest amount of consistent, trusted trading volume in crypto. These assets represent about 99% of total volumes on trusted exchanges, and about 90% of the entire sector’s market capitalization. 

The new assets are algorand, cosmos, cardano, kyber network and omg network. On average, incumbent CoinDesk 20 asset volume increased by 22% from Q2 to Q3. However, these crypto assets’ trusted market volume increased by much more.

These five new crypto assets replaced incumbent assets that are well-known to crypto investors. Bitcoin SV, a 2018 fork of bitcoin and dai, the decentralized-finance (DeFi) stablecoin issued by MakerDAO, are both off the CoinDesk 20. So are all three privacy currencies formerly listed: zcash, monero and dash. Of the five, just one, bitcoin sv, showed a decline in dollar volume on trusted exchanges, between Q2 and Q3.

New CoinDesk 20 Assets, Q4 2020, Quarterly Volume Change

Three of the new assets, ALGO, ATOM and ADA, represent “Web 3” infrastructure developers, projects that are potential competitors to Ethereum.

Related: Flaw in Bitcoin SV Multisig Wallet Puts Funds at Risk

Kyber, in particular, grew by an eye-popping percentage, due to its listing on three new exchanges that are included on our trusted list. Coinbase, in particular, handled impressive volume in the KNC token, which is connected to Kyber Network, a decentralized exchange application. 

Kyber 2020 Quarterly Volume by Trusted Exchange

Former CoinDesk 20 Assets, Volume Change, 2020 Q3 Over Q2

All three of the privacy coins removed from the CoinDesk 20 grew in volume in Q3, but not by the multiples of the average volume growth their replacements recorded. That doesn’t mean DeFi stablecoins and privacy currencies are no longer important or interesting. It means that, at least for now, the verifiable portion of volume in the crypto asset markets has shifted its activity into other assets.

We launched the CoinDesk 20 in July; a September revision saw a small amount of turnover, with one Ethereum-based application token, orchid moving in to replace another, basic attention token.

Orchid, which offers a decentralized virtual private network (VPN) service, remains on the list, with volume growing 562%, quarter over quarter from Q2 to Q3. 

The CoinDesk 20 methodology will be reviewed and revised periodically. If you have questions or comments on the method, please email them to research at coindesk dot com. 

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MicroStrategy’s headline-grabbing bitcoin bet was a rational response to a macroeconomy in chaos, said Chief Executive Michael Saylor.

Appearing Tuesday at CoinDesk’s Bitcoin for Advisors virtual conference, Saylor shed new light on one of this year’s biggest cryptocurrency stories: his software company’s recent purchases of $425 million in bitcoin. 

That surprise September move by Nasdaq-listed MicroStrategy marked one of the first – and largest – embraces of bitcoin by a mainstream corporation.

Related: First Mover: Bitcoin Needs No Vaccine as Druckenmiller Lays Down ‘Better Bet’

In a prerecorded fireside chat with CoinDesk Chief Content Officer Michael Casey, Saylor unpacked MicroStrategy’s bitcoin thought process, why it decided to eschew cash as a treasury reserve and whether gold can reclaim its spot as the marquee store of value in an increasingly digital world.

Saylor’s short answer: Gold can’t. He thinks bitcoin has seized the lead.

Hoarding gold is “an antiquated approach to storing value,” he said. Bitcoin is “a million times better.”

Printer go brr

In Saylor’s telling, MicroStrategy’s bitcoin journey began with the realization its $500 million cash pile was being eaten alive by government money printers. With recent emergency stimulus inflating the U.S. money supply faster than a Thanksgiving parade balloon, company executives felt compelled to move the treasury reserves away from the dollar. 

Related: 3 Reasons Bitcoin Has Rallied Over 60% in Just Two Months

“What we’re trying to do is preserve our treasury,” he said. “The purchasing power of the cash is debasing rapidly.”

Read more: ‘I Didn’t Buy It to Sell It. Ever.’ MicroStrategy’s Michael Saylor on His $425M Bitcoin Bet

For the last decade or so, the M2 money supply – the sum of physical cash, checking and savings accounts, certificates of deposit and money market funds – grew a modest 5.5%, Saylor noted. “A rational view of business treasury strategy would be, you had to get more than five and a half percent as your cost of capital in order to hold your purchasing power from 2011 to 2020,” he said. 

But when COVID-19 hit this year, tanking the economy, the measures taken to contain the damage swelled M2 by 20%, raising the hurdles for corporate treasurers to preserve that purchasing power. “The cost of capital of every cash treasury or every treasury in the world is now 20%,” Saylor said.

To be sure, U.S. inflation, as measured by the core Consumer Price Index (which excludes food and energy) declined briefly in 2020. But to Saylor, that measure is “irrelevant.”

“If inflation only means a market basket of things with no food and energy in them, then almost by definition I’ve defined a metric which will never go up,” he said.   

He pointed to cash holders in inflation-prone countries like Argentina, Brazil and Venezuela. They know all too well their purchasing power takes a hit when money supply expands.

“What if you live in Europe and the United States? It wasn’t obvious. But it needs to become obvious,” Saylor said. “I think people will figure it out.”

Bitcoin pivot

Convinced the dollar was no place for MicroStrategy’s excess capital, Saylor said he and his executives began trawling around for a “tangible” asset alternative. “We had to cycle through real estate, bonds, equity, precious metal, derivatives or crypto,” Saylor said.

Of that group, precious metals, particularly gold, has long stood as an enticing store of value, a scarce, safe-haven asset recognized around the world. Not to Saylor. For starters, he balked at the notion that gold is scarce. “Gold is the least abundant of the commodities, but you can still produce gold,” he said.

But he’s also acutely concerned with what he describes as the clashing interests of gold miners and gold bugs. One is trying to capitalize on the market by mining replenishable supply while the other is hoping that access remains scarce, pushing prices up.

Read more: Square Puts 1% of Total Assets in Bitcoin in Surprise $50M Investment

“The gold miners are the enemies of the gold holders,” said Saylor. “The gold miners are trying to destroy your value, right? They’re not trying to help you.” 

He predicts an even bigger problem with the gold market: Investors fleeing to bitcoin. Even if they don’t know it yet, Saylor thinks gold investors will eagerly dump the commodity for what he calls a superior store of value. It’s not an if. It’s a when. 

“Not a good bet to bet against ingenuity and assume that people will be lazy and ignorant for the next decade, because it’s not likely,” Saylor said.

Debasing fiat

Citing one analyst’s prediction that Federal Reserve action will keep equities moving upward regardless of the recent election’s outcome, Saylor said the “most aggressive monetary expansion” is probably ahead.

Investors will therefore likely continue treating blue-chip juggernauts from Apple to Amazon as a new kind of safe haven. “They’re desperately grasping at straws,” Saylor said. All those assets are reliant on the fiat currency he sees as crumbling away. 

Read more: Billionaire Hedge Fund Investor Druckenmiller Says He Owns Bitcoin in CNBC Interview

“Equities don’t make a good store of value over the long term, unless the company can raise its prices faster than the rate of monetary expansion, or raise its gross margins faster than the rate of monetary expansion,” he said. 

Saylor predicts monopolistic corporations will be the only ones positioned to achieve that kind of price pump. But the politicians won’t let those corporations exercise such power indefinitely, he said. So, back to square one. 

“Ultimately you have to find something which you can’t print more of that doesn’t have its fundamental underpinnings tied to a fiat currency, and the only thing that I can find right now is bitcoin,” he said.

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Blockchain has made major strides as of late, making headway into more traditional financial and payment circles. But there’s another, less-mentioned sector that is currently testing the waters with blockchain. That’s the $160-billion gaming industry.

Another billionaire investor disclosed his bitcoin bags. The Silvergate Exchange Network added another exchange member. Riot Blockchain, a publicly traded bitcoin mining firm, recorded bumper revenues with plans to expand.

Top shelf

Billionaire’s bitcoin
Billionaire U.S. investor Stanley Druckenmiller, who just weeks ago was said to be shorting the dollar, is long on bitcoin. In a Monday CNBC appearance, Druckenmiller disclosed a bitcoin position significantly smaller than his gold horde. However, he predicts bitcoin will outperform gold in the long run – largely due to millennial and Silicon Valley attraction to the crypto scene. “Frankly, if the gold bet works the bitcoin bet will probably work better because it’s thinner, more illiquid and has a lot more beta to it,” he said. Drunkenmiller made headlines last week for his bearish views on the U.S. dollar, which he suspects will decline for the next three to four years.

Botched BSV
A protocol change in at least one Bitcoin SV (BSV) multisig wallet has crippled security and led to lost customer funds. Bitcoin Core developer Gregory Maxwell found that after BSV developers removed a proven transaction script and replaced it with an outdated version, one wallet manufacturer’s home-brewed hash function has serious security flaws. The ElectrumSV wallet’s so-called “accumulator multi-sig” function cancels transfers if more than the minimum number of keys sign a transaction and, perhaps more dangerously, enables anyone to access multi-sig funds “with too few signatures (such as none at all).” One BSV user, Aaron Zhou, lost 600 BSV to an attack exploiting this weakness.

Related: First Mover: Bitcoin Needs No Vaccine as Druckenmiller Lays Down ‘Better Bet’

Legal maneuvers
Lawyers are looking to ditch Reginald Fowler – accused of running a “shadow banking” service for cryptocurrency exchanges – as a client, according to court documents. Fowler and partner Ravid Yosef, who remains at large, stand accused of opening bank accounts with various financial institutions to illegally store funds. The partners’ bank, Crypto Capital, is further tied up in a $850 million black hole of crypto funds that went missing from the Bitfinex exchange in 2019. In October, Fowler considered reopening plea bargain talks. Fowler’s lawyers gave no explicit reason for wanting to withdraw from the case.

SEN zen
Binance.US is the latest U.S. exchange to join the Silvergate Exchange Network (SEN). The 24/7 instant settlement network allows crypto exchanges to move cash between themselves, replacing slower wire transfers, at any time of day. Gemini, Kraken and ErisX are all participants in the service, which saw $17.4 billion in first quarter volume. “We’ve launched SEN for our corporate clients so now they’re able to move dollars through Silvergate around the clock, instantaneously,” Binance.US CEO Catherine Coley said. “It’s a huge advantage for clients that are trying to get funds into Binance.US to be able to buy and sell cryptocurrencies, and we’re excited to see the impact on the rest of our liquidity.”

Riot’s returns
Riot Blockchain recorded over $2.4 million in mining revenue in Q3, a 42% increase year over year, according to the publicly traded firm’s latest corporate filing, though it is operating with a quarterly $1.7 million net loss. Having mined 222 BTC (a 41% bump from the same period last year), Riot’s corporate cryptocurrency liquidity grew from $7.2 million in Q2 to $9 million in Q3. And with $30.1 million in cash reserves, Riot is looking to expand its fleet of Bitmain S19-Pro mining machines. Riot shares traded hands at $3.50 at Monday’s close, up 32% from the start of Q4. They’ve risen more than 200% year to date.

Quick bites

• Obsessively checking prices. Rabbit holes of crypto content. All-night trading sessions. Jeff Wilser presents the face of crypto addiction. (CoinDesk)
• Telos and open-source weather tech company Telokanda Weather Group will collect and share West African weather data on a blockchain. (CoinDesk)
• Bitcoin needs philosophy, write three academic philosophers. (CoinDesk)
• A CipherTrace report has found that crypto platforms and users have lost $100 million so far this year to “DeFi hacks.” (Decrypt)
• Lebanon’s central bank plans to launch a digital currency in 2021. (Bloomberg)

Market intel

Trend lines
CoinDesk’s Omkar Godbole examines three major trends contributing to bitcoin’s two-month-long rally. Having peaked at 33-month highs near $16,000, experts are citing increased institutional participation (high-net-worth individuals such as investor Stanley Druckenmiller and publicly traded firms Square and MicroStrategy), a supply crunch (huge spot market buys from retail investors and funds like Grayscale’s GBTC trust have significantly reduced bitcoin supply, driving up the price); and technical analysis to explain bitcoin’s rise. (Grayscale, like CoinDesk, is a unit of DCG.)

At stake

Related: Blockchain Bites: Figure Files for Banking Charter, Cred for Bankruptcy

Regulatory matters
“Regulators are slow and there’s a reason we’re slow,” Securities and Exchange Commission (SEC) member Hester Peirce said yesterday at CoinDesk’s Bitcoin for Advisors virtual event. 

“We need to have [a] process in place so that we make sure when we’re changing rules people have notice that we’re thinking about changing a rule and they can comment,” she said. 

When confronted with the quickly evolving crypto landscape, however, Peirce said the agency could do more to be proactive. Noting it is less top-heavy than it appears, Pierce said the SEC’s five commissioners usually defer to the agency’s staff to approve or disapprove novel products like exchange-traded funds (ETF).

In one such example of this arrangement, yesterday the SEC’s Division of Investment Management issued a letter seeking comment on an expanded definition of a “qualified custodian.”

In response to the Wyoming Division of Banking’s recent decision to affirm the wealth management firm Two Ocean Trust as a qualified custodian eligible to custody digital assets for its clients, the SEC is now asking questions. Traditionally, qualified custodians were limited to banks, registered broker-dealers and certain derivatives merchants, all subject to stringent regulation.

Now, with at least one state granting a public trust company qualified custodian status under state law, the federal watchdog is looking to add clarity to the definition.

Industry publication Decrypt writes: “The SEC’s letter asks for public comments on a variety of questions, for example, who’s been left out of the qualified custodian definition that should be in? Who’s in, who should be out? And, importantly, do state-chartered trust companies like Two Ocean have the same characteristics as banks?”

Depending on where the SEC lands, this could open the door for other public trust companies – like pensions, endowments and foundations, Caitlin Long, head of Avanti said – to enter the crypto fold.

As Peirce said yesterday: “There are circumstances where we have a framework at the SEC that was built in the 1930s and 1940s and added on over time,” she said. “Certainly now that we’re seeing what’s happening in the crypto space, for example, there are areas we are going to have to make adjustments and I do think we should move faster … I’m impatient there.”

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Lebanon’s chief central banker said the country is preparing a national digital currency (CBDC) for a 2021 debut.

• Banque Du Liban Governor Riad Salameh told state-run media Tuesday the CBDC project is part of a “regulatory mechanism” to restore confidence in Lebanon’s troubled banking sector.
• Lebanon’s private banks have deep ties to the government, which defaulted on its debts in March. Neither institutions garner much trust from the public. Lebanese citizens currently store over $10 billion in their homes, Salameh said.
• CBDC will also help Lebanon move to a “cashless system” that enables more seamless cash movement locally and abroad, he said.
• Salameh has advocated for a Lebanese CBDC since at least November 2017.

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Hybrid blockchain platform Kadena is teaming up with stablecoin maker Terra with the aim of expanding its decentralized finance (DeFi) platform. 

Announced on Tuesday, Kadena said it will add Terra’s luna stablecoin to its decentralized exchange (DEX) Kadenaswap, which was announced earlier in September and is expected to roll out at the end of the year. Using its hybrid blockchain as the selling point for its DeFi offering, Kadena hopes to draw businesses and users looking to get away from the congestion on Ethereum-based platforms. 

• Noting how congestion on the Ethereum blockchain can prevent DeFi applications from successfully scaling, Kadena’s co-founder and President Stuart Popejoy said combining Kadena’s “low-gas and high-speed transactions” can not only aid adoption but will also add interoperability between coins like Terra’s and blockchains like Ethereum and Polkadot.

• According to Terra’s co-founder and CEO Do Kwon, the collaboration will mean that “Terra could process wrapped Luna transactions on Kadena’s DEX and then bridge to Ethereum,” he said in an emailed statement, adding this also expands use cases for Terra-based payments. 
• Terra currently offers stablecoins backed by fiat currencies such as the U.S. dollar, South Korean won and the Phillippine peso. 
• Kadena’s emailed announcement also said the first stage of moving Terra and other coins in and out from one network to another via Kadenaswap will be carried out in 2021. 

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Texture Capital is preparing to launch a digital securities trading hub for private capital markets after getting the green light from a U.S. financial regulator.

With its Financial Industry Regulatory Authority (FINRA) broker-dealer registration and alternative trading system go-ahead, revealed to CoinDesk Tuesday, Texture moves closer to taking its issuance marketplace live.

The one-year-old blockchain company is the latest tokenization outfit hoping to capture even a sliver of the hulking marketplace for private securities. The U.S. Securities and Exchange Commission told Congress in an August report that companies and funds raised $1.5 trillion through so-called “Regulation D” exempt offerings in 2019.

Related: Russian Metal Giant’s Tokenization Firm Expands to America

Although mountains of capital stream into Reg D offerings, the securities themselves seldom flow around. “Most [private] securities do not trade in a secondary market” the SEC report said. Lockup periods and other restrictions account for some of the illiquidity.

According to Texture CEO Richard Johnson, the right tech stack can fix that.

“Other participants have tried and had some success – e.g., Nasdaq Private Market, Forge and the newly announced ClearList,” Johnson said. “This demonstrates the demand for institutional access to private companies.”

However, Texture believes it gains an edge by using “the latest technology” (blockchain), and by” tackling the underlying problems with private securities market structure,” he said.

Related: Securitize Goes License Shopping With Acquisition of SEC-Registered Broker-Dealer

Also read: Russian Metal Giant’s Tokenization Firm Expands to America

Issuing a security token on-chain can help bring efficiency and transparency to private securities, the CEO continued. Similarly, building the secondary trading hub right into the platform might allow investors to flip their tokens far more seamlessly than they otherwise could.

Johnson is also keen on ensuring non-blockchain companies see the appeal of tokenized securities.

Texture hopes to have 20 issuers on its platform in the next six months. For comparison, tZero, one of the best-known security token marketplaces, only has three. But getting more tokens up and running will be a boon for overall liquidity, Johnson said.

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Bitcoin was higher, though barely, appearing to settle into a new range over the past several days between roughly $14,800 and $15,600. 

“Should bitcoin prices consolidate this week,” wrote Matt Blom, head of sales and trading for the digital-asset firm Diginex, “it would set us up for the next leg up towards $17,000.”

In traditional markets, European and Asian shares inched up while U.S. stock futures pointed to a lower open. Gold rose 0.7% to $1,876 an ounce. 

Market moves

Related: Gemini Exchange Building ‘Wrapped Filecoin’ for the Ethereum Network

Bitcoin’s price slide Monday amid a vaccine-powered surge in U.S. stocks sent cryptocurrency analysts scrambling to explain the investment logic, while highlighting the on-again, off-again synchronicity between digital-asset and traditional markets. 

The progress reported by Pfizer toward developing a vaccine could portend a faster-than-expected recovery in the global economy. A rebound in consumer demand would bring about faster growth in corporate earnings and thus improve prospects for stocks.

An economic acceleration also theoretically could speed up inflation and by extension boost bitcoin, seen by a growing number of investors as an inflation hedge similar to gold. The investing legend Stanley Druckenmiller told CNBC on Monday that he owned “many, many more times gold than I own bitcoin, but frankly if the gold bet works, the bitcoin bet will probably work better.”

But nothing is simple in the art of pinpointing fickle and topsy-turvy market narratives, especially during a year when the hand of governments and central banks has been particularly heavy, in the form of trillions of dollars of fiscal and monetary stimulus they’ve pumped into the financial system.  

Related: 3 Reasons Bitcoin Has Rallied Over 60% in Just Two Months

According to Bloomberg, economists immediately began to speculate that any improvement brought by a vaccine might simply relieve pressure on the U.S. lawmakers to rush out a new coronavirus stimulus bill, or on the Federal Reserve to accelerate its $120 billion-a-month in asset purchases. All things being equal, less stimulus might mean less inflation. 

“Assuming the Pfizer vaccine is as effective as currently indicated, it will take several months to manufacture and inoculate large segments of the population,” wrote Thomas Perfumo, strategy director at Kraken Intelligence, an analysis unit of the similarly named cryptocurrency exchange. “The key question is whether additional fiscal stimulus is on the horizon and how asset values, including bitcoin, continue to digest the swell in unprecedented fiscal and monetary response.”

Of course the 11-year-old bitcoin has defied market prognosticators for most of its history, and some cryptocurrency traders say the daily price movements represent little more than a statistical random walk, or maybe correlation without causation. Bitcoin has blown away every other major asset class in 2020, with a 113% year-to-date gain versus 10% for stocks and 24% for gold. 

Bitcoin’s price correlation over the past 90 days with both stocks and gold stands at a positive but weak level of 0.35, where 1 represents perfect synchronicity, -1 a perfectly inverse relationship, and 0 no connection at all.

It might also be weak to draw too many inferences beyond just that the bitcoin bet appears to be winning. 

Bitcoin watch

Bitcoin (BTC) has chalked up a stellar price rally in the past two months, reaching 33-month highs close to $16,000.

The uptrend began in early September after buyers bought a dip below $10,000, and gathered pace in the second half of October. Last week, prices reached a high of $15,971, a level last seen in January 2018. That’s a 63% price gain in eight weeks, according to CoinDesk’s Bitcoin Price Index.

Over 2018 and 2019, bitcoin often languished below $10,000, struggling to recover from a crash that followed the late 2017 surge to record highs near $20,000.

So what’s behind the rapid gains in recent weeks? Here are three of the primary factors driving the bull market:

• Increased institutional participation: “Over the past eight weeks, we have seen various notable public companies and hedge funds enter the cryptocurrency market with sizable deployment of capital,” Matthew Dibb, co-founder, and COO of Singapore-based Stack Funds said.
• Supply crunch: “Between Grayscale’s GBTC trust, MicroStrategy and the influx of other large spot buyers, the supply of bitcoin is beginning to look more scarce,” Dibb said. Grayscale is owned by CoinDesk’s parent firm, Digital Currency Group.
• Technical breakout: Bitcoin’s bullish bias strengthened following the cryptocurrency’s convincing break above $12,500 in the third week of October. 

– Omkar Godbole

Read More: 3 Reasons Bitcoin Has Rallied Over 60% in Just Two Months

Token watch

Bitcoin SV (BSV): Flaw in Bitcoin SV multisig wallet puts funds at risk. 

Ether (ETH): Options open interest climbs to record $570M, according to Skew, a provider of crypto-derivatives data:

What’s hot

Beijing municipal government conference notes plans to pilot central-bank digital currency in China’s capital (CoinDesk) 

U.S. government’s tendency to move at slower pace than private sector when it comes to innovation isn’t a bad thing, says SEC Commission Hester “Crypto Mom” Peirce (CoinDesk)

Binance.US joins Gemini, Kraken and ErisX on Silvergate Bank’s SEN Network, which allows companies to move U.S. dollars instantly between cryptocurrency exchanges (CoinDesk)  

Analogs The latest on the economy and traditional finance

The U.S. continues to stare at a mountain of potential debt defaults and decline in asset prices due to coronavirus, Fed says in semiannual report (Reuters)

New Zealand central bank proves “kiwi whale” as ownership of country’s government bonds shoots to 37% from 6% in seven months (Bloomberg) 

U.S. banks tighten loan standards to households even as demand increases for mortgages and auto loans (Federal Reserve):

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Crypto services provider Anchorage said it received third-party certification that the controls supporting its financial reporting and operations are adequately secure.

The SOC 1 Type 1 report is granted after an independent third-party audit of a company’s internal systems and controls supporting client financial reporting, in addition to exclusive control of private keys.

Achieving SOC 1 Type 1 certification is a milestone for San Francisco-based Anchorage, which has spent much of the past two years building out its services. In October 2019 it added a governance platform for on-chain voting, months after introducing stellar inflation and tezos staking to clients holding either crypto asset.

Related: Casa Rolls Out ‘Bank-to-Wallet’ Bitcoin-Buying Services for US Customers

This past January Anchorage launched a crypto platform for its institutional investors and acquired data analysis firm Merkle Data.

Read more: Crypto Custodian Anchorage Teases Growth Plan With 2 Executive Hires

“What sets the Anchorage report apart is a heavy emphasis on our ability to prove exclusive control, confidentiality and availability of private keys,” said Jennifer Lee, head of compliance.

Anchorage said it will be working with EY, which conducted the SOC 1 Type 1 certification process, to complete Type 2 evaluations on a regular basis. Type 2 certifications are considered more rigorous as they’re an examination of a company’s controls over a period of time whereas Type 1 evaluations are of a particular point in time.

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Cryptocurrency exchange Gemini is developing a “Wrapped Filecoin” (wFIL) service enabling the decentralized storage platform’s native token (FIL) to be used on the Ethereum network.

• In a company blog post on Monday, U.S.-based Gemini said it was on the hunt to work with Ethereum developers wishing to add wFIL to their own products and platforms.
• Once complete, users will be able to convert FIL stored in their exchange accounts to wFIL at a 1:1 ratio, which can then be withdrawn to any Ethereum address. The wrapped token can also be exchanged back to FIL.
• Gemini said FIL tokens will be held in Gemini’s storage solution with “full transparency,” meaning users can verify the amount of FIL the exchange holds is equal to the total wFIL in current circulation.
• The Filecoin network is a decentralized alternative to platforms like Amazon Web Services on which users can use FIL to purchase storage space via an open market.
• In 2017, the open-source project raised $257 million in a two-stage token offering of 200 million FIL.
• The “decentralized model offers a compelling alternative to existing centralized cloud storage offerings,” Gemini’s post reads.

See also: Gemini Exchange Launches Crypto Trading Against the Euro

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Bitcoin (BTC) has chalked up a stellar price rally in the past two months, reaching 33-month highs close to $16,000.

The uptrend began in early September after buyers bought a dip below $10,000, and gathered pace in the second half of October.

Last week, prices reached a high of $15,971, a level last seen in January 2018. That’s a 63% price gain in eight weeks, according to CoinDesk’s Bitcoin Price Index.

Related: First Mover: Bitcoin Needs No Vaccine as Druckenmiller Lays Down ‘Better Bet’

Over 2018 and 2019, bitcoin often languished below $10,000, struggling to recover from a crash that followed the late 2017 surge to record highs near $20,000.

So, what’s behind the rapid gains in recent weeks? Here are three of the primary factors driving the bull market:

1. Increased institutional participation

“Over the past eight weeks, we have seen various notable public companies and hedge funds enter the cryptocurrency market with sizable deployment of capital,” Matthew Dibb, co-founder, and COO of Singapore-based Stack Funds said.

On Sept. 15, listed business intelligence firm MicroStrategy (NASDAQ: MSTR) announced the purchase of $250 million worth of bitcoins, and three weeks later payments company Square (NYSE: SQ) also disclosed its investment in the bitcoin market.

Related: Ex-Microsoft Dev Gets 9 Years in Prison Over $10M Theft Involving Bitcoin Mixing

In October, leverage in the derivatives market was also skewed bullish, with institutions holding record long positions in bitcoin futures listed on the Chicago Mercantile Exchange.

Also read: Institutions Take Record Bullish Bets in Bitcoin Futures, Shrugging Off Exchange Missteps

The increased institutional participation likely created upward pressure on prices. Further, it buoyed broader market sentiment and likely prompted more buyers to join the market.

The number of bitcoin whale entities – clusters of addresses held by a single network participant holding at least 1,000 BTC – rose to four-year highs at the end of October. Retail participation increased, too, as suggested by the “accumulation addresses” metric rising to record highs.

Since the coronavirus pandemic hit, expectations for additional U.S. fiscal stimulus alongside the Federal Reserve’s ongoing inflation-boosting bond purchase programs have triggered fears of a dollar sell-off, and motivated both institutions and retailers to put at least some money into bitcoin.

“The talks of further stimulus efforts has put bitcoin on the map as a quasi-safe haven, possessing many of the store-of-value qualities of gold, despite its relatively [brief] existence,” Dibb said.

Also read: World’s Growing Stockpile of Negative-Yielding Debt a Positive for Bitcoin, Say Analysts

2. Supply crunch

Large spot buyers, mostly institutions, have created a shortfall in bitcoin liquidity, pressuring prices to the higher side.

“Between Grayscale’s GBTC trust, MicroStrategy and the influx of other large spot buyers, the supply of bitcoin is beginning to look more scarce,” Dibb said. Grayscale is owned by CoinDesk’s parent firm, Digital Currency Group.

Further, retail investors took direct custody of their coins by moving them from exchanges to their own wallets, adding to the drying up of sell-side liquidity. The total number of bitcoins held on cryptocurrency exchanges has fallen 9% to 2,404,788 BTC in the past two months, according to Glassnode data.

The decline in exchange balances is indicative of strong holding sentiment in the market.

3. Technical breakout

Bitcoin’s bullish bias strengthened following the cryptocurrency’s convincing break above $12,500 in the third week of October.

Back then, many analysts had pointed to $12,500 as the level to beat for the bulls. That’s because the cryptocurrency had declined sharply following a rejection near $12,500 in August.

“The real resistance level is around $12,500-ish, so, until a meaningful breakout above that level, nothing is done,”  David Lifchitz, chief investment officer at ExoAlpha, told CoinDesk on Oct. 20.

Indeed, the eventual breakout above $12,500 looks to have invited stronger chart-driven buying pressure.

Bitcoin ended the third week of October above the key hurdle and remained bid in the following two weeks. Now support, at $12,500, hasn’t been tested since.

Also read: Billionaire Hedge Fund Investor Druckenmiller Says He Owns Bitcoin in CNBC Interview

At press time, bitcoin is changing hands near $15,390, representing a 113% year-to-date gain.

Disclosure: The author holds small positions in bitcoin and litecoin.

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Telos has partnered with open-source weather technology company Telokanda Weather Group to launch an initiative to collect and share weather data in West Africa on the Telos public blockchain. 

Telokanda will use the Telos blockchain to help university students and farming communities record and share weather data with the goal of improving climate research, hurricane tracking and local weather forecasting, the companies said in a statement Tuesday.

According to the announcement, the project was developed by a team in West Africa that includes former Boeing and NASA engineer Nicolas Lopez. 

Related: Australian Senator Touts Blockchain Tech for ‘One-Touch’ Government

High-altitude weather balloons, launched by citizens in West African countries, will carry lightweight devices called radiosondes into the air while beaming atmospheric data, including pressure, temperature and wind speed, back to Earth.

The project hopes to motivate citizens to participate in weather data collection by developing a method of sending digital currency instantly to people who launch their weather balloons, incentivizing timely and consistent launches, the announcement said.

The announcement said that once a weather balloon transmits data to the blockchain, a smart contract will trigger payments in telos tokens (TLOS) to the operators’ digital wallets. Each reward of about $15 can be converted to local fiat currencies such as the Nigerian Naira or Ghanaian Cedis via the Sesacash app. 

A spokesperson for the project told CoinDesk via email that at first rewards will come from the Telos Worker Proposal System but in the future, the funds will come from NGOs that want to use the data for weather forecasting and research. 

Related: Decentralized VPN Sees Increased Use in Nigeria Amid #EndSars Protests

So far Telokanda has partnered with the University of Uyo and Rivers State University in Nigeria, as well as Academic City where students will launch the balloons and track the data. 

Read more: Chainlink to Provide Data for Farming Insurance Startup Arbol

“This project can quickly grow into one that will save lives and help prevent billions of dollars in weather damage while rewarding local participants for their efforts,” Douglas Horn, chief architect of the Telos blockchain, said in a statement to the press. 

The project has so far completed eight launches.  

Starting out, Telokanda plans to have each university launch one balloon per week, scaling up to daily launches by 2021, the spokesperson said.

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Blockchain-based agriculture trading platform Cerealia has announced its commercial launch, Bloomberg reports Tuesday.

• Aiming to facilitate trading of physical grains, Cerealia is focusing on the international market for Russia, the world’s largest wheat supplier.
• The project has already undergone a series of trial transactions with participating companies from Japan, Dubai, Ukraine, Turkey, Algeria and Brazil, per the report.
• Allowing shipments as big as 20,000 metric tons, Switzerland-based Cerealia aims to provide faster trades and more traceability using blockchain tech.
• “Traders can now be 100% certain they really did the trade, versus traditional over-the-phone brokerage,” CEO Andrei Grigorov said.
• The agri-trading industry has been eyeing the potential benefits of blockchain for some time.
• In 2018, four of the biggest agricultural corporations said they would use blockchain and AI to bring the international grain trade into the digital age.

Also read: Australia’s Biggest Grain Exporter Trials Blockchain Tracking System

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Lawyers of embattled former U.S. Football League player and National Football League investor Reginald Fowler have filed a motion to withdraw as his representative counsel in a case involving alleged illegal cryptocurrency operations.

• In a court document filed Monday, no definitive reason was given for the motion due to attorney-client privilege.
• However, Fowler’s lawyers, James McGovern and Michael Hefter of law firm Hogan Lovells, cited Local Civil Rule 1.4, which states an attorney for a party may be allowed a court order to withdraw for a “satisfactory reason.”
• According to the motion, filed in the U.S. Southern District Court of New York, McGovern and Hefter have informed Fowler multiple times since Feb. 26 of this year that they wished to withdraw.
• They asked the court to delay deadlines in the case to allow Fowler’s new representation to get up to speed.
• Fowler is one of two individuals accused of running a “shadow banking” service for cryptocurrency exchanges. The other individual, Ravid Yosef, remains at large.
• Allegedly acting under the guise of processing real estate transactions, the pair opened bank accounts with various financial institutions to illegally store funds on behalf of cryptocurrency exchanges.
• Crypto Capital, the “shadow bank” Fowler stands accused of operating, is allegedly tied up in an $850 million black hole of crypto funds that went missing from the Bitfinex exchange in 2019.
• In October, Fowler was said to be considering reopening plea bargain talks.

See also: Prosecutors Detail ‘Shadow Bank’ Accounts in Fowler Crypto Case

See the court document in full below:

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Lawyers of embattled former NFL player and investor Reginald Fowler have filed a motion to withdraw as his representative counsel in a case over alleged illegal cryptocurrency operations.

• In a court document filed Monday, no definitive reason was given for the motion due to attorney-client privilege.
• However, Fowler’s lawyers James McGovern and Michael Hefter of law firm Hogan Lovells cited Local Civil Rule 1.4, which states an attorney for a party may be allowed a court order to withdraw for a “satisfactory reason.”
• According to the motion, filed in the U.S. Southern District Court of New York, McGovern and Hefter have informed Fowler multiple times that they wished to withdraw since Feb. 26, 2020.
• They asked the court to delay deadlines in the case to allow Fowler’s new representation to get up to speed with the case.
• Fowler is one of two individuals accused of running a “shadow banking” service for cryptocurrency exchanges. The other individual, Ravid Yosef, remains at large.
• Allegedly acting under the guise of processing real estate transactions, the pair opened bank accounts with various financial institutions to illegally store funds on behalf of cryptocurrency exchanges.
• Crypto Capital the “shadow bank” Fowler stands accused of operating is allegedly tied up in an $850 million black hole of crypto funds that went missing from the Bitfinex exchange in 2019.
• In October, Fowler was said to be considering reopening plea bargain talks.

See also: Prosecutors Detail ‘Shadow Bank’ Accounts in Fowler Crypto Case

See the court document in full below:

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A former software engineer at Microsoft received a nine-year prison sentence Monday for an elaborate multi-million dollar criminal scheme involving bitcoin and digital gift cards.

Ukrainian citizen Volodymyr Kvashuk, 26, was sentenced in the U.S. District Court in Seattle for 18 federal felonies related to his scheme to defraud Microsoft of more than $10 million. This marks the first case of its kind in the U.S., according to a press release by the Department of Justice.

Kvashuk was involved in the testing of an online retail sales platform for Microsoft from August 2016 until he was fired in June 2018. He had used his employee access to steal “currency stored value,” (CSV), namely digital gift cards. He then resold that value online and used the proceeds to fund a lavish lifestyle including a $1.6 million lakefront home and a $160,000 Tesla car.

Related: Market Wrap: Bitcoin Drops as Low as $14.8K; ETH Options Open Interest at Record High

What initially began as a small sum of $12,000 in CSV using his own email account access, Kvashuk eventually moved on to email accounts belonging to other employees in order to mask the growing thefts. Kvashuk then employed a bitcoin mixing service attempting to conceal the source of funds arriving in his bank account.

“Stealing from your employer is bad enough, but stealing and making it appear that your colleagues are to blame widens the damage beyond dollars and cents,” said Brian Moran a U.S. attorney for the Western District of Washington.

Over a period of seven months, Kvashuk’s illegal activity saw a total of $2.8 million in bitcoin transferred to his bank and investment accounts. He then filed fake tax return forms claiming the bitcoin had been a gift from a relative, according to the department’s statement and court records.

Kvashuk must now pay more than $8.3 million in restitution – the value of CSV redeemed by third parties who had purchased stolen Microsoft gift cards. The software giant was able to block a further $1.8 million in CSV redemptions totaling more than $10.1 million, according to a court memorandum filed on Nov. 2 in the Western District of Washington.

Related: Why Bitcoin Needs Philosophy

In February, Kvashuk was convicted of five counts of wire fraud, six counts of money laundering and two counts of aggravated identity theft by a Jury. His sentencing concludes a 16-month trial.

The Ukrainian citizen was also convicted on two counts of filing false tax returns, and one count each of mail fraud, access device fraud and access to a protected computer in furtherance of fraud, a court judgment document shows.

“Kvashuk’s criminal acts of stealing from Microsoft, and subsequent filing false tax returns, is the nation’s first bitcoin case that has a tax component to it,” said Ryan Korner, IRS Special Agent. “Today’s sentencing proves you cannot steal money via the Internet and think that bitcoin is going to hide your criminal behaviors.”

See also: US Charges 6 With Laundering Mexican Drug Cartel Cash Using Crypto and Casinos

See Government’s sentencing memorandum in full below:

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