CoinDesk Crypto

The Commodity and Futures Trading Commission (CFTC) said Wednesday it approved LedgerX LLC’s amended registration order, allowing the firm to go beyond offering digital currency-based products. 

• According to the press release posted on the CFTC website, LedgerX is now authorized to offer fully collateralized futures and options products, in addition to the digital asset swaps it already offers.
  
• While the amended order will allow LedgerX to provide clearing services for futures and options beyond digital assets, it is already registered with the CFTC as a designated contract market and swap execution facility.

Related Stories

• Open Positions in Deribit’s Ether Options Hit Record High Above $500M
• TeraExchange Reinstated as Swap Execution Facility by CFTC Order
• Huobi Futures to Launch Options Trading This Week, Joining Throng Challenging Deribit
• More Than 95% of Crypto Futures Volume Is in Asia: Report

Three retail-orientated trading platforms have participated in the latest $4.75 million funding round for crypto trading infrastructure provider Zero Hash.

• Zero Hash announced Wednesday it had completed its Series C funding round, which was led by tastyworks, the owner of app-based brokerage, tastytrade.
• Other participants included another app-based broker-dealer Dough as well as Small Exchange, a futures market aimed at retail customers.
• Existing investors including Bain Capital, brokerage firm TradeStation, CMT Digital and Monday Capital also participated in the round.
• Zero Hash provides a settlement infrastructure for platforms, such as app-based brokerages, to offer cryptocurrency trading for their users.
• A Form D filed by Zero Hash’s parent, Seed CX, to the Securities and Exchange Commission (SEC) Tuesday shows $3.75 million had been raised – $1 million off the $4.75 million funding target.
• But co-founder Edward Woodford told CoinDesk Wednesday that Zero Hash had, in fact, hit the $4.75 million raise amount.
• In response to a question about how many retail-oriented trading platforms that invested in the latest round could wind up using Zero Hash’s technology, Woodford said, “Watch this space in particular for Dough and tastyworks announcements in the next two weeks.”
• Indeed, Zero Hash already counts TradeStation, as well as several unnamed over-the-counter (OTC) groups as clients.
• Seed CX launched in 2015 as a derivatives trading platform for exotic commodities, including cannabis, but pivoted into crypto in late 2017.
• Initially a subsidiary, Seed CX, closed its exchange in June in order to focus on Zero Hash, as it brought in roughly 95% of total revenue.
• Woodford said the company now trades exclusively under the name Zero Hash.

See also: Crypto Trading Platform CrossTower Raises $6M in Seed Round

Related Stories

• Self-Help Firm That Mostly Took Bitcoin as Payment Mostly Just Helped Itself, SEC Charges
• Open Positions in Deribit’s Ether Options Hit Record High Above $500M
• Newly Discovered Malware Has Arsenal of Tricks to Help It Steal Crypto
• Pornhub Adds Bitcoin and Litecoin Payments for Premium Content

Mindset 24 Global LLC was, according to federal prosecutors, a “textbook” pyramid scheme with a million-dollar crypto twist.

• The Securities and Exchange Commission (SEC) on Monday charged Kentuckian John Brian McLane, Jr. and Floridian Paul Anthony Nash with defrauding victims of their personal development multilevel marketing company, Mindset 24.
• Prosecutors say McLane and Nash sold Mindset 24’s 735 investors on a promise of 70% returns powered by self-help kit sales, taking in over $1 million – mostly in bitcoin – during their 11-month run.
• Mindset 24 helped victims set up their bitcoin wallets during the investor on-boarding process, prosecutors allege. Mindset 24’s website listed “bitcoin as currency” as one of its selling points when viewed by CoinDesk Wednesday afternoon.
• The alleged Ponzi scheme highlights how bitcoin’s buzzword appeal and permissionless backbone can be co-opted by scammers. With no central authority to reverse transactions, bitcoin remains a compelling choice, even if a transparent blockchain makes value movements easy to track.
• Five percent of Mindset 24’s million allegedly lined McLane and Nash’s pockets. Two percent allegedly flowed to early backers. Sixty-nine percent was allegedly paid out in commissions. In the end, though, 92% of investors allegedly lost some of their funds, on average $1,168.
• SEC prosecutors claim the pair either knew they were running a “classic Ponzi scheme” or were reckless in not knowing it.
• They charged the pair with unregistered securities sales and multiple counts of securities fraud in U.S. District Court for the Eastern District of Kentucky.

Related Stories

• Retail Trading Platforms Pile Into $5M Funding Round for Zero Hash Crypto Settlements Firm
• Open Positions in Deribit’s Ether Options Hit Record High Above $500M
• Newly Discovered Malware Has Arsenal of Tricks to Help It Steal Crypto
• Pornhub Adds Bitcoin and Litecoin Payments for Premium Content

A South Korean crypto exchange has been raided by police, Bitcoin’s Lightning Network hit a new high and mining revenues are climbing.

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

Full stack

Sushi/Uni
There is a battle for dominance to become the top decentralized exchange in the DeFi space. Uniswap, a venture capital backed project, meant to create a more open and customizable crypto exchange, is being challenged by an upstart unaudited adaption called SushiSwap.

Related: First Mover: Bitcoin Tumbles, Bithumb Reportedly Raided, Uniswap Challenges Coinbase

Part of a trend of “Weird DeFi” projects – frequently food-themed – SushiSwap’s emergence last week is doing bizarre things to the market.

Uniswap was already on a tare. The automated money market (AMM) platform saw its trading volume climb to $953.59 million on Tuesday – a more than ten-fold gain over the past month. Further, its 24-hour trading volume is now 50% higher than on Coinbase Pro, the largest U.S.-based centralized cryptocurrency exchange. 

Uniswap’s usage has grown so rapidly that it’s taken over the top spot among fee payers on the Ethereum network. Traders on Uniswap have paid $5 million (10,805 ETH) in transaction fees in the past 24 hours.

Meanwhile, SushiSwap has already moved into the No. 3 spot of payers of Ethereum “gas,” the unit used to calculate fees on the Ethereum blockchain. It launched Aug. 28.

Related: DeFi Flippening Comes to Exchanges as Uniswap Topples Coinbase in Trading Volume

SushiSwap, which provides a near-identical function to Uniswap but rewards liquidity providers with sushi tokens and a share in trading fees, popularity comes from a unique marketing strategy: For roughly two weeks (100,000 blocks) ahead of launch, users who stake liquidity provider tokens from Uniswap to SushiSwap will get 10X the liquidity mining rewards.

Some speculate this incentive may be driving traffic to Uniswap. “DeFi degens can amass LP tokens, which they can dump immediately into Sushi and take advantage of this brief period of extremely generous SUSHI distribution,” CoinDesk’s Brady Dale elegantly said. 

Top shelf

Mining revenues
Bitcoin miners enjoyed a 23% increase in revenue during August, driven by higher network fees from increased on-chain transaction volume. Miners generated an estimated $368 million in revenue in August, up from $300 million in July, and the third consecutive monthly increase in miner revenue, according to Coin Metrics. Network fees brought in $39 million in August, or 10.7% of total revenue, setting the highest percentage of fee-generated revenue in over 18 months. Revenue estimates assume miners sell their bitcoins immediately.

Predictions or bust
With the U.S. presidential election just months away, prediction markets should be booming but they’re not, CoinDesk’s Benjamin Powers and Brady Dale report. Prediction markets harness the wisdom of the crowd and induce experts to put skin in the game to discover what people really predict – and reflect crypto’s natural distrust of so-called authorities, the same ones that misjudged the last election. However, centralized markets like PredictIt are heavily regulated and charge high fees. Nascent decentralized prediction markets, which run on public blockchain networks, are sparsely used. And the ones that run on Ethereum, the second-largest blockchain, now face high “gas” fees for users to run computations. 

OneCoin fallout
The U.S. Department of Justice (DoJ) is seeking to confiscate nearly $400 million from the attorney who helped accused crypto Ponzi scheme OneCoin launder hundreds of millions of dollars. The U.S. Attorney for the Southern District called on the District Court judge responsible for sentencing Mark Scott – convicted last November – to impose a “forfeiture money judgment,” in a submission Monday. Between 2015 and 2018, Scott created a network of fake investment funds for OneCoin that laundered a total of $392,940,000 – the amount the DoJ is now seeking to reclaim. U.S. prosecutors have previously estimated that OneCoin took in more than $4 billion from investors through its cryptocurrency scheme – making it one of the most successful Ponzis ever.

Exchange raided
South Korean authorities have reportedly seized Bithumb, one of the country’s biggest cryptocurrency exchanges by trading volume. The Seoul Newspaper reported Wednesday the police action was linked to a $25 million token sale hosted on Bithumb and a proposed acquisition by a Singapore platform, BTHMB, that never materialized. Some investors said they lost millions participating in the sale. Bithumb’s chairman, Lee Jung-hoon, has been accused of fraud and illicitly sending funds overseas. Last week, police seized Coinbit – the country’s third-largest exchange – on allegations it had faked most of its trading volumes.

Lightning speed?
Bitcoin’s Lightning Network set a record high Monday as total capacity held in the protocol’s payment channels – sometimes referred to as “total value locked” (TVL) – reached $12.4 million. Two weeks ago, Lightning set the prior high of $12.37 million, surpassing the long-standing previous mark of $12.3 million that was reached in early July 2019 and lasted for 405 days. Further, the number of publicly broadcasting nodes has steadily increased to approximately 7,600 nodes, up 55% from January. The total number of bitcoins held on Lightning sits at 1,060, up 24% so far this year, but still remains below the record high of 1,105 BTC set in early May 2019, CoinDesk’s Zack Voell reports.

Quick bites

• The Tapscotts Take Their Blockchain Research Institute Into Europe (Ian Allison/CoinDesk)
• Bitfinex Owner Invests $1M in Dusk’s Security Token Exchange (Paddy Baker/CoinDesk)
• Ethereum Classic Labs Airs New Plan to Stop Future 51% Attacks (Sebastian Sinclair/CoinDesk)
• Yearn.Finance’s New Vault Leverages DeFi ‘Triforce’: ETH, MakerDAO and Curve (Brady Dale/CoinDesk)

At stake

Exchange outages
A problem well-known to crypto traders, exchange outages, is now going mainstream. On Monday, following Apple and Tesla stock-splits, Robinhood, TD Ameritrade and Schwab experienced interruptions. 

CoinDesk’s Muyao Shen looks at a few common causes and solutions hard won in the crypto industry. 

Deribit, a popular derivatives exchange that went dark in late August, has installed redundant load balancers and is setting up a disaster recovery facility in Switzerland. This is to address a hardware issue. 

More frequently, it isn’t an issue with a masternode, but a simple code update that can trigger interruptions. Coinbase and Binance have both recently experienced this issue when a surge in trading volumes tested their limits.

Derivatives exchange FTX’s support team also told Shen that to reduce the risk of outages, their work has been concentrated on making sure enough spare capacity will be available to support the exchange’s operation during busy periods.

Another solution, circuit breakers, are quasi-controversial in crypto. First implemented on stock exchanges after the “Black Monday” crash in 1987, breakers automatically halt trading when prices fall below specified levels. They are designed to save the market from a complete meltdown.

Deribit has an index circuit breaker on its platform which is triggered at +/-1.5% index price move per second to “avoid massive sell-offs, and allow market participants to get up to speed with the market during highly volatile periods,” Luuk Strijers, chief commercial officer at Deribit, said. These were triggered several times in March, during an intense period of market volatility.

Though there is a cost to installing circuit breakers, as evidenced by Binance’s outage that forced traders to competing platforms. 

“These make a lot less sense,” FTX representatives said. “Rather than acting as a sanity check, they restrict users’ ability to trade and enforce artificial pricing.”

Ultimately, there is a tension between security and speed that exchanges need to balance. But the ethos running though Silicon Valley and crypto – move fast and break things – means exchange operators will likely prioritize liquidity and transaction fees rather than reducing outages.

“Is an uptime requirement of 99.999% something that the same type of people who invented Robinhood are going to aspire to?” Dave Weisberger, co-founder and CEO of execution provider CoinRoutes, said. “The answer is no. They say they aspire to it but that’s very expensive. … As a result, there are outages.”

Market intel

Bitcoin blues
Bitcoin is facing selling pressure at press time, having failed to move above a long-held resistance level on Tuesday. The leading cryptocurrency is currently trading near $11,390, representing a roughly 4% decline on the day, according to CoinDesk’s Bitcoin Price Index. Bulls failed to establish a foothold above the $12,000 mark on Tuesday, CoinDesk’s Omkar Godbole reports, the fourth time in the past five weeks. Immediate support is located at $11,170; a violation there would confirm a bearish head-and-shoulders breakdown.

Tech pod

CBDC wallet
The roll-out of China’s central bank digital currency may include hardware wallets as well, CoinDesk’s Wolfie Zhou reports. Over the weekend, China Construction Bank (CCB), one of the country’s big-four state-owned commercial banks, opened up a wallet service to public users within its mobile app for testing China’s CBDC, also known as DC/EP. The wallet’s Terms and Services showed that a hardware wallet – akin to an actual wallet for cash – may also be in the works. The DC/EP hardware wallets can be traceable and would strip off the anonymity feature of paper cash as users would need personal information such as IDs and phone numbers to activate the wallet in the first place. 

Wallet malware
A new malware, called Anubis, can target cryptocurrency wallets and other sensitive data, according to a Microsoft Security Intelligence report. On sale on the darkweb since June, experts recommend not visiting sketchy websites or opening strange or suspicious attachments, links or emails, CoinDesk’s Benjamin Powers reports. Importantly, this malware is distinct from a family of Android banking malware also called Anubis. It joins a growing list of malwares that look for vulnerable cryptocurrency stashes.

Op-ed

Crypto shortages?
J.P. Koning, a CoinDesk columnist and author of Moneyness, thinks people who don’t consider crypto to be money need to look at the coin shortage in the U.S., where money is failing to be money. “There can never be shortages of digital versions of the dollar because tokens flow rapidly over the internet, not slowly via hand,” he writes.

Podcast corner

Month defining
In this recap and “best of” episode, NLW looks at the big themes that defined August. Most notable was the discussion of inflation culminating in the Federal Reserve’s newly announced policy of average inflation targeting. 

Who won #CryptoTwitter? Related Stories

• Uniswap Rises to Top of DeFi Charts Thanks to Rival Looking to Unseat It
• Yearn.Finance’s New Vault Leverages DeFi ‘Triforce’: ETH, MakerDAO and Curve

Ether option contracts listed on Deribit, the largest crypto options exchange, are more popular than ever. This is possibly due to yield farming, the act of putting crypto holdings to work on decentralized applications to earn more crypto. 

• Options open interest, or contracts traded but not liquidated by an offsetting trade, rose to a record high of $507 million on Deribit on Tuesday, surpassing the previous record high of $438 million reached on Aug. 20, according to data source Skew.
• “The key driver for the phenomenal growth has been the recent DeFi success,” Luuk Strijers, CTO of Deribit, told CoinDesk in a Telegram chat.
• “Many clients have been farming yield using stablecoins, which are bought by selling ether and buying ether call options (bullish bets) to keep the upside potential in the second-largest cryptocurrency,” Strijers added.

• Open positions in ether options have surged by 45% from $349 million to $507 million over the past five days and nearly doubled since the end of July.
• The total value locked (TVL) in the DeFi applications has surged by over 20% to $8.65 billion in the past five days. Also, TVL has more than doubled in the past four weeks, according to defipulse.com.
• Data suggests that the yield farming frenzy has boosted the ether options open interest.
• That said, it is also possible that some investors might have just bought calls, anticipating a strong price rally. Ether rose to two-year highs near $480 on Tuesday.
• Other exchanges have not seen quite the same level of activity over the past two weeks. Open interest in options listed on the futures giant OKEx remains well below the record high of $43 million reached in mid-August.

Related Stories

• Retail Trading Platforms Pile Into $5M Funding Round for Zero Hash Crypto Settlements Firm
• Self-Help Firm That Mostly Took Bitcoin as Payment Mostly Just Helped Itself, SEC Charges
• Newly Discovered Malware Has Arsenal of Tricks to Help It Steal Crypto
• First Mover: Bitcoin Tumbles, Bithumb Reportedly Raided, Uniswap Challenges Coinbase

An advanced form of cryptocurrency-targeting malware shared through pirated software and games downloaded from torrent sites poses multiple threats to victims.

• In a report Wednesday, researchers at Slovakian cybersecurity firm ESET said they had found malicious code within the installer program for media files that contains a cryptocurrency mining bot.
• Once downloaded, the hidden app starts its mining bot to hijack computer power and mine monero, as well as ether if a GPU card is detected.
• However, the malware has evolved in its two years of existence to possess other tricks that are more concerning to users of cryptocurrency.
• Dubbed “KryptoCibule” – a combination of the Czech and Slovak words for “cryptocurrency” and “onion” – the malware can also change a wallet address to one linked to the hacker when pasted from the clipboard, potentially diverting funds sent to the victim.
• Further, it will hunt for, and steal, cryptocurrency passwords, private keys or key phrases stored on the host machine’s hard drive.
• The malware is spread by users sharing the affected media files on peer-to-peer file-sharing networks.
• It also updates itself using BitTorrent, which was acquired by Tron in mid-2018, the researchers said.
• ESET said KryptoCibule had stolen roughly $1,800 in bitcoin and ether by changing victims’ wallet addresses.
• They were unable to determine how much the hacker stole through the mining bot or from stealing passwords.

• KryptoCibule likely started operation in late 2018 but has remained hidden till now thanks to being designed to evade detection.
• KryptoCibules hides in files that work normally, so victims are less likely to suspect anything amiss. It also actively watches for, and hides from, antivirus tools such as Avast.
• In addition, it contains a command line to the Tor browser that encrypts communications and makes it impossible to trace the mining server behind KryptoCibule.
• KryptoCibule also monitors the computer’s battery so it doesn’t consume too much power and thus get noticed.
• If the battery falls below 30%, KryptoCibule shuts off the GPU miner and runs its monero miner at a much lower capacity. The whole program shuts down should battery go under 10%.
• Despite its sophistication, ESET said the bot had so far only been downloaded by several hundred computers, mostly based in Czechia and Slovakia.

See also: New Malware Spotted in the Wild That Puts Cryptocurrency Wallets at Risk

Related Stories

• Open Positions in Deribit’s Ether Options Hit Record High Above $500M
• Pornhub Adds Bitcoin and Litecoin Payments for Premium Content
• Police Reportedly Raid Headquarters of Bithumb, South Korea’s Largest Exchange
• Crypto Banking Firm Cashaa Eyes India Expansion After $5M Raise

Authorities have identified another teenager who may have played a role in July’s Twitter hack, according to the New York Times. While three individuals have been arrested so far for their alleged involvement with the attack, authorities are now looking at a 16-year-old Massachusetts resident who is thought to have ties with Graham Clark, the 17-year-old Florida man state prosecutors allege to be the ringleader of the group, people involved in the ongoing investigation told the Times. The teen has not been charged.

• The new suspect was served with a search warrant at his Massachusetts home on Tuesday, according to the report. Court documents remain under seal. The Times didn’t identify the suspect because of his age. 
  
• Citing the people involved with the probe, the report said the 16-year-old came into investigators’ focus because he allegedly continued to be involved with voice phishing attacks even after the attack on Twitter.
  
• According to the report, the teenager met Clark online and in May, it’s alleged, they both started tricking Twitter employees into revealing their login details, which helped them carry out July’s breach. 
  
• In a court proceeding earlier this month, Clark pleaded not guilty to all charges. The coordinated attack on 30 high-profile accounts, including CoinDesk’s, promised to double the money of users who sent cryptocurrency.

Related Stories

• 17-Year-Old Pleads Not Guilty to Twitter Hack as Defense Tries to Lower Bail From $725K
• Social Engineering: A Plague on Crypto and Twitter, Unlikely to Stop
• Twitter Hacker Owns $3.4M in Bitcoin, Court Sets Bail at $725K
• Officials Arrest 3 Allegedly Behind Twitter Hack

Following last year’s QuadrigaCX collapse and loss of client funds, Canada’s crypto exchanges are going the extra mile to rebuild the trust of consumers.

Announced Wednesday, Toronto-based Coinberry has acquired a financial institution bond, a requirement for registration with its provincial securities regulator, the Ontario Securities Commission.

The move is a concrete example of a general tightening of regulation in Canada, particularly in the wake of the Quadriga debacle.

Related: A New Attempt to Tokenize Real Estate Projects in Mexico and Canada

“Every Canadian crypto user remembers Quadriga and the impact of that is still fresh in the back of their minds,” said Coinberry CEO Andrei Poliakov. “People still have to trust exchanges and platforms to use crypto and the investment on Coinberry’s part protects against the corrupt human element that has struck the personal finances of many Canadians.”

Read more: Gerald Cotten: Mystery Man

In the U.S., surety bonds of this type, which provide insurance in case of dishonest or fraudulent acts by employees, have been a requirement for crypto firms to be registered with FinCEN for some time.

However, to qualify as a money service business in Canada with its version of FinCEN, the  Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) – with which Coinberry is already registered – does not require a financial institution bond. 

Related: Canadian Exchange Shakepay Gets Cold Wallet Insurance to Protect Customer Funds

In this respect, Poliakov believes “wholeheartedly” that Coinberry is the first crypto firm to go the extra mile. 

“We applied for registration with the OSC and we’ve been going through that process for quite some time,” said Poliakov. “One of the requirements was to have our financial statements publicly audited, by MNP in this case, and another requirement was to have a financial institution bond in place.”

Read more: Canadian Municipality Set to Accept Bitcoin for Property Tax Payments

Coinberry’s surety bond is underwritten by the Lloyd’s of London insurance market and the coverage limit is CAD$1,000,000 ($764,000) per claim/incident, said Poliakov.

Neither Lloyd’s nor the OSC returned requests for comment by press time.

There may well be other crypto firms in the process of going through the registration process with the OSC, Poliakov said, adding that a general clampdown when it comes to crypto compliance has seen Ontario regulators blocking firms that don’t play ball. Last week, BitMEX was blocked from serving Ontario-based customers.

“I cannot speak to whether the others in Canada are in the process of getting this,” Poliakov said in a follow-up email. “I do know some platforms are not applying at all, while others (like BitMEX) have already received instructions from the OSC to cease operation in Ontario because they are not going the registration route.”

Related Stories

• Crypto Derivatives Exchange BitMEX to Block Ontario Traders
• Mining Firm Hut 8 Reports 28% Drop in Q2 Revenue Following Bitcoin Halving

Following last year’s QuadrigaCX collapse and loss of client funds, Canada’s crypto exchanges are going the extra mile to rebuild the trust of consumers.

Announced Wednesday, Toronto-based Coinberry has acquired a financial institution bond, a requirement for registration with its provincial securities regulator, the Ontario Securities Commission.

The move is a concrete example of a general tightening of regulation in Canada, particularly in the wake of the Quadriga debacle.

Related: A New Attempt to Tokenize Real Estate Projects in Mexico and Canada

“Every Canadian crypto user remembers Quadriga and the impact of that is still fresh in the back of their minds,” said Coinberry CEO Andrei Poliakov. “People still have to trust exchanges and platforms to use crypto and the investment on Coinberry’s part protects against the corrupt human element that has struck the personal finances of many Canadians.”

Read more: Gerald Cotten: Mystery Man

In the U.S., surety bonds of this type, which provide insurance in case of dishonest or fraudulent acts by employees, have been a requirement for crypto firms to be registered with FinCEN for some time.

However, to qualify as a money service business in Canada with its version of FinCEN, the  Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) – with which Coinberry is already registered – does not require a financial institution bond. 

Related: Canadian Exchange Shakepay Gets Cold Wallet Insurance to Protect Customer Funds

In this respect, Poliakov believes “wholeheartedly” that Coinberry is the first crypto firm to go the extra mile. 

“We applied for registration with the OSC and we’ve been going through that process for quite some time,” said Poliakov. “One of the requirements was to have our financial statements publicly audited, by MNP in this case, and another requirement was to have a financial institution bond in place.”

Read more: Canadian Municipality Set to Accept Bitcoin for Property Tax Payments

Coinberry’s surety bond is underwritten by the Lloyd’s of London insurance market and the coverage limit is CAD$1,000,000 ($764,000) per claim/incident, said Poliakov.

Neither Lloyd’s nor the OSC returned requests for comment by press time.

There may well be other crypto firms in the process of going through the registration process with the OSC, Poliakov said, adding that a general clampdown when it comes to crypto compliance has seen Ontario regulators blocking firms that don’t play ball. Last week, BitMEX was blocked from serving Ontario-based customers.

“I cannot speak to whether the others in Canada are in the process of getting this,” Poliakov said in a follow-up email. “I do know some platforms are not applying at all, while others (like BitMEX) have already received instructions from the OSC to cease operation in Ontario because they are not going the registration route.”

Related Stories

• Crypto Derivatives Exchange BitMEX to Block Ontario Traders
• Mining Firm Hut 8 Reports 28% Drop in Q2 Revenue Following Bitcoin Halving

U.S. Sen. Mike Crapo (R-Idaho), who heads the powerful Senate Banking Committee, has asked the Office of the Comptroller of the Currency (OCC) to fill his committee in on its Advanced Notice of Proposed Rulemaking for cryptocurrency services.

• The OCC, a federal banking regulator, asked the general public to weigh in on how cryptocurrencies were used or treated in the financial sector this past June.
• Around 90 banks, crypto startups, academics and industry organizations provided responses, with some major banks in particular suggesting they would be open to providing cryptocurrency services with some clearer regulation.
• Crapo's letter, dated Sept. 1, asks the OCC to “provide the committee with an update on its findings and the next steps the OCC intends to take with this technology.”
• The U.S. needs to create clear rules around cryptocurrency services “without stifling innovation,” the letter said.
• With the crypto space offering products and services as “diverse” as elsewhere in finance, Carpo wrote, “These and similar innovations are inevitable, beneficial and the U.S. should lead in their development.”
• The Senate Banking Committee has held a number of hearings around the crypto space, as Crapo’s letter points out, including on the Facebook-led Libra project.

Also read: US Regulator to Shake Up Banking With Federal Charters for Payment Firms

Related Stories

• US Regulator to Shake Up Banking With Federal Charters for Payment Firms
• The OCC’s Crypto Custody Letter Was Years in the Making
• Following OCC Letter, Some US Banks Appear Open to Providing Crypto Services
• Banks Won’t Rush to Hold Crypto – But OCC’s Regulatory Approval Makes It Harder to Ignore

Shyft Network is adding Huobi, Bitfinex and Tether to its crypto-focused anti-money laundering (AML) platform, and launching a “governance task force” including a host of new and existing members.

Announced Wednesday, Shyft’s Veriscope Governance Task Force includes recent joiners Binance and Bitfury, as well as a globally distributed collection of crypto firms such as BCW, HashKey Pro, Tokocrypto, Unocoin, Paycase Financial and CoinHako.

Shyft, a well-known participant in the race to bring crypto in line with Financial Action Task Force (FATF) AML regulations, last year hired heavyweight advisers Rick McDonell (former FATF executive secretary) and Josee Nadeau (former head of the Canadian delegation to the FATF). The two will co-chair the governance task force.

Related: Ethereum Transaction Fees Set a Record Once Again as DeFi Becomes Even Pricier

“Veriscope intends to provide a governance and rules framework whereby virtual asset service providers [VASPs] can trust each other,” McDonell said in an interview. “It keeps them in a democratic environment in terms of making rules and, because of the transparency between them, allows firms to take the risk of sharing information that could at times be commercially competitive.”  

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

In June 2019, the FATF issued guidance requiring VASPs to share know-your-customer (KYC) data between a transacting originator (sender of funds) and a beneficiary (receiver). This personally identifiable information (PII) must “travel” concurrently with digital asset transfers of over $1,000.  

In order not to simply rebuild SWIFT, a 50-year-old interbank messaging system, the industry has to think about onboarding and governance frameworks, said Shyft co-founder Joseph Weinberg. 

Related: Huobi Futures to Launch Options Trading This Week, Joining Throng Challenging Deribit

“The one thing that you can’t get away from is you still need to onboard the VASP to the network,” Weinberg said. “It’s really about defining the onboarding governance framework, an open mandate for the best practices for any VASP that has to join into the network. What are the rules?”

Despite the fact crypto was specifically designed to be pseudonymous, the industry has responded energetically with an array of technical solutions and a universally agreed-upon messaging standard.

Read more: Crypto Firms Establish Messaging Standard to Deal With FATF Travel Rule

Coordination among so many approaches to the Travel Rule problem is needed, as are responses to any changes or updates in crypto’s protean regulation from one jurisdiction to the next as well as incoming FATF guidance. 

Another key area here is interoperability, Weinberg said; “Everyone’s talking about it,” he added, but it should be governed by the exchanges rather than protocol teams. 

No firm should be precluded from accessibility but VASPs globally should be given the tools and provided with a baseline to determine how counterparties are expected to share information with counterparties, said Weinberg.

“It’s an inclusive working team that’s open to any other VASPs to join,” Weinberg said of the Veriscope effort. “It’s for the users of the system. Shyft developers are handing over the most important decisions to the stakeholders.”

Related Stories

• First Mover: Huobi Takes On OKEx in Futures, Opening New Front in ‘Chinese’ Rivalry
• Huobi and OKEx Battle for Supremacy in China

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

Price Point

Bitcoin slid 4.1% Wednesday to about $11,430, wiping out the prior day’s gains and then some, as the U.S. dollar strengthened against the euro and other major currencies and reports surfaced that a major South Korean crypto exchange had been raided.

The move lower pushed the largest cryptocurrency back toward the middle of its range over the past month, between roughly $10,500 and $12,400.  

Related: Blockchain Bites: How SushiSwap Drove Uniswap to DeFi’s Top Spot

Mati Greenspan, founder of the digital-asset and foreign-exchange analysis firm Quantum Economics, put a positive spin on bitcoin’s recent performance in a note to clients on Tuesday. 

“One can’t help but wonder whether the underperformance of bitcoin in this market is actually a further sign of it moving toward being considered a safe-haven asset,” Greenspan wrote. “If all the risk assets are outperforming, then surely the property of stability should count for something.”

Market Moves

Trading volumes are surging on Uniswap and other so-called decentralized cryptocurrency exchanges, challenging established venues like Coinbase while driving up fees and congestion on the Ethereum blockchain.    

Uniswap, a semi-automated platform for matching buyers and sellers of cryptocurrencies and other digital assets, saw its trading volume climb to $953.59 million on Tuesday, a more than ten-fold gain over the past month, according to the website uniswap.info. The 24-hour trading volume has crossed above $1 billion – at least 50% higher than daily trading volumes observed  on Coinbase Pro, the largest U.S.-based centralized cryptocurrency exchange. 

Related: Open Positions in Deribit’s Ether Options Hit Record High Above $500M

The rise of decentralized exchanges, or DEXs, represents a new chapter of this year’s boom in decentralized finance. The fast-growing ecosystem, known as DeFi, consists of automatic lending and trading platforms, built atop distributed computing networks like Ethereum and constructed from open-source software and programmable cryptocurrencies. They aim to provide more efficient and less costly ways of conducting transactions currently handled by banks and traditional exchanges.   

“It indicates that the DeFi flippening is real and already here,” Denis Vinokourov, head of research at the London-based prime brokerage Bequant, told CoinDesk in a Telegram chat. “Flippening” is crypto jargon, used loosely to indicate the hypothetical moment when one blockchain or digital-asset trend overtakes another. 

Read More: DeFi Flippening Comes to Exchanges as Uniswap Topples Coinbase in Trading Volume

-Omkar Godbole

Meanwhile, traditional market exchanges are struggling with outages long familiar to their crypto counterparts.

Both crypto exchanges and popular online trading platforms including Schwab, TD Ameritrade and Robinhood have a rising number of young investors who, working from home during the coronavirus pandemic, spend some of their work hours trading for their own personal accounts. 

These platforms have another thing in common: outages in the midst of high volume.

On Monday, login issues were reported from customers on Robinhood, along with a few other similar trading platforms including giants TD Ameritrade and Schwab. The outage was allegedly caused by the stock splits of Apple and Tesla. Silicon Valley-based Robinhood was the subject of  more than 400 complaints reported to U.S. regulators during the first half of 2020.

Like traditional platforms, crypto exchanges have been troubled by outages for a long time, even after they pledge to take more steps to improve stability and reduce outages. These mainstream companies may be able to learn something from the experience of crypto exchanges.

One main cause of outages at crypto exchanges is hardware failure, and the solution is to build in redundancy, Dave Weisberger, co-founder and CEO of execution provider CoinRoutes, told CoinDesk in a phone interview. By now, most exchanges have built fully redundant systems, he said, and as a result any outages caused by hardware failures are usually short-lived.

The other cause, more common, is a change in a new piece of code that was not thoroughly tested. Bugs in the new code can be triggered at a later time by an unplanned situation such as a surge in trading volumes, resulting in an outage.

“Building software which scales to serve so many users is really hard, and the operational work to make sure servers stay up and running is quite difficult,” Tushar Jain, managing partner at Multicoin Capital, told CoinDesk in a Twitter direct message.

Read More: Exchange Outages Are Going Mainstream: What Robinhood Can Learn From Crypto

-Muyao Shen

Bitcoin Watch

Bitcoin prices slid 4.4% on Wednesday as the U.S. dollar strengthened, reinforcing the cryptocurrency’s negative correlation with the greenback. 

• The U.S. Dollar Index (DXY) was trading near 92.50 at press time, having clocked a 29-month low of 91.75 on Tuesday.
• “Corrective pressures are giving the greenback a reprieve,” according to Marc Chandler, a former chief currency strategist for the giant British bank HSBC.
• The dollar is most oversold in 40 years and could continue to gain altitude in the short-term, keeping bitcoin under pressure.
• The cryptocurrency’s technical charts are also signaling scope for temporary pullback. 
• Bitcoin’s repeated rejection above $12,000 observed over the past four weeks is suggestive of bull fatigue. 
• On the downside, major support is located at $11,000.

– Omkar Godbole

Token Watch

Ether (ETH): Ethereum network transaction fees set a record once again as DeFi becomes even pricier.  

Ethereum Classic (ETC): Ethereum Classic Labs airs new plan to stop future 51% attacks after getting hit three times in the past month  and losing millions of dollars of cryptocurrency to double-spends. 

Binance coin (BNB): World’s biggest cryptocurrency exchange launches its own smart-contract-enabled blockchain, with staking for the native BNB token.  

Yearn.Finance (YFI): MakerDAO departed chief Mariano Conti says phenom token represents “most interesting thing that has happened to DeFi.” 

What’s Hot

Police reportedly raid headquarters of Bithumb, South Korea’s largest crypto exchange (CoinDesk)

Coffee-bean supplier sells $300M of 5.5-year crypto bonds via HSBC, Singapore exchange (CoinDesk)

Bitcoin miners saw 23% revenue increase in August (CoinDesk)

Bermuda pilots “digital stimulus token” with Stablehouse to help rejuvenate economy (CoinDesk)

Minting dozens of coins a day, speculators tap into crypto craze (Bloomberg)

Is buy-and-hold really the best strategy in crypto? (Hacker Noon)

Total value on Bitcoin’s Lightning Network sets another record amid market rally (CoinDesk)

Coinbase building platform to help crypto startups launch tokens, raise cash (CoinDesk)

Analogs The latest on the economy and traditional finance

Argentina’s creditors to get back just over half of the $2.75B 100-year bonds sold three years ago (WSJ)

Top exec at $138B hedge fund Bridgewater says U.S. economy needs $1.3T-$1.7T of fresh stimulus to sustain recovery (CNBC)

Trump pledges to “help the airlines” as industry loses $5B a month (Reuters)

Federal Reserve buying $100B of mortgage bonds a month, pushing down rates (Bloomberg)

U.S. job growth to slow over next decade even as Fed prioritizes employment over inflation (CNBC)

Indonesia to digitalize state-owned enterprises for competitiveness (Nikkei Asian Review)

Deutsche Bank says “immediate deflationary pressures look to have been averted.”

Tweet of the Day Related Stories

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Pornhub, the popular adult entertainment site, has added two popular cryptocurrencies as payment options.

• In a tweet Wednesday, the company announced that it’s now accepting bitcoin (BTC) and litecoin (LTC) in payment for its Pornhub Premium offering.
• The company has been accepting the verge (XVG) cryptocurrency for user payments since 2018.
• It has since started allowing its entertainers to be paid in tether (USDT), a stablecoin linked to the U.S. dollar.
• Pornhub has previously announced it would accept both tron (TRX) and horizen (ZEN) for content, too, though its web page currently lists only verge.
• Pornhub has had issues with traditional funding methods in the past, when PayPal suddenly blocked payments to the site without explanation.
• Corey Price, vice president of Pornhub, said at the time the site would look at more cryptocurrency options going forward.

LISTEN: Why This Sex Industry Executive Loves Bitcoin

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Blockchain Research Institute (BRI), the education and innovation hub founded by father-and-son tech evangelists Don and Alex Tapscott, has opened a European arm.

Announced Wednesday, Blockchain Research Institute Europe (BRIE) launches in partnership with Blockwall, an independent venture capital firm based in Frankfurt, Germany. The new BRIE think tank will bring together a gaggle of European industry leaders, academics, policymakers, entrepreneurs and researchers, according to a joint press statement.

The goal: Getting large companies through the “trough of disillusionment” currently surrounding “enterprise blockchain.”

Related: Is This the Blockchain Firm That Will Get Enterprise to Finally Embrace Open Networks?

“We were not focused on what is typically called enterprise blockchain,” Alex Tapscott said in an interview. “I think that’s just a misnomer.”

Instead, BRI is focused on “blockchain for enterprise,” which offers a wider canvas on which distributed technologies can play out.

“Saying ‘enterprise blockchain’ is like saying ‘enterprise internet.’ There’s just one internet,” Tapscott said. “From the very beginning, we saw public protocols like Bitcoin and Ethereum as being the foundation technology that would be used by enterprises.”

Read more: Salesforce Among 12 New Members to Join Blockchain Research Institute

Related: ‘Boring Is the New Exciting’: How Baseline Protocol Connected With 600 Corporates

One particular area of growth: stablecoins.

“Stablecoins were never part of the enterprise blockchain toolkit until recently,” he said. “From first-hand experience talking to banks, supply chain, shipping and logistics companies, all of them are trying to understand how the stablecoin boom is going to transform enterprise.”

Tapscott said BRIE’s aim is to recruit large European corporates to join the BRI consortium, which includes mainly U.S. member firms like FedEx, Exxon, Coca-Cola, PepsiCo, IBM and Microsoft.

BRIE will be based in Frankfurt and staffed by four or five Blockwall staffers, with a view to hiring dedicated research staff going forward, Tapscott said. BRI has carried out over 150 research projects to date.

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After poking above $1.20 for the first time in more than two years, the euro reversed lower yesterday and is continuing to succumb to profit-taking pressures today.

Bitcoin is facing selling pressure at press time, having failed to move above a long-held resistance level on Tuesday.

• The leading cryptocurrency is currently trading near $11,390, representing a roughly 4% decline on the day, according to CoinDesk’s Bitcoin Price Index.
• Prices dropped by nearly $400 in just minutes, but have bounced slightly at the time of writing.
• The sell-off has coincided with a report that South Korean authorities have seized Bithumb, one of the country’s biggest cryptocurrency exchanges by trading volume.
• “We are seeing a significant unwinding of leverage positions in bitcoin and major alternative cryptocurrencies on Bithumb news,” Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds, told CoinDesk in a WhatsApp chat.

• The bulls failed to establish a foothold above the $12,000 mark on Tuesday.
• The cryptocurrency has failed at least four times to keep gains above $12,000 in the past five weeks.
• Immediate support is located at $11,170; a violation there would confirm a head-and-shoulders breakdown, a bearish technical pattern, on the four-hour chart.
• That possibly cannot be ruled out as the U.S. dollar is showing signs of life.
• Bitcoin has developed a relatively strong negative correlation with the greenback over the past few weeks.
• The dollar index, which tracks the value of the greenback against other major currencies, is now near 92.50 at press time, having clocked a 29-month low of 91.75 on Tuesday.
• “Corrective pressures are giving the greenback a reprieve,” according to Marc Chandler, a former chief currency strategist for the giant British bank HSBC. 

Also read: Bitcoin Miners Saw 23% Revenue Increase in August

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South Korean authorities have reportedly seized Bithumb, one of the country’s biggest cryptocurrency exchanges by trading volume.

• The Seoul Newspaper reported Wednesday that officers from the Seoul Metropolitan Police Agency’s Intelligent Crime Investigation Unit had raided Bithumb’s headquarters, located in the capital’s central Gangnam District.
• The police action was apparently linked to a $25 million token sale hosted on Bithumb and a proposed acquisition by a Singapore platform, BTHMB, that never materialized.
• Per a report from TheNews, some investors said they lost millions participating in the sale.
• Bithumb’s chairman, Lee Jung-hoon, has been accused of fraud and illicitly sending funds overseas.
• CoinDesk has approached Bithumb for confirmation.
• This is the second raid on a South Korean cryptocurrency exchange in a week.
• Last week, police seized Coinbit – the country’s third-largest exchange – on allegations it had faked most of its trading volumes.
• Bithumb is one of South Korea’s largest cryptocurrency exchanges – 24-hour trading volume stood at over $365 million, according to CoinGecko.
• The exchange appeared to still be active at press time.

See also: Ferrari, McLaren and $15M in Crypto Seized as Chinese Police Bust Arbitrage Scam

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Cashaa, a financial firm describing itself as a “crypto-friendly neo-bank,” has just raised $5 million from Dubai-based blockchain investment and advisory firm 01ex.

• Announced Wednesday, the London, U.K.-based firm said it will soon launch in India and possibly add the rupee to its list of supported currencies alongside the U.S. dollar, the euro and pounds sterling.
• It also offers services for bitcoin, ether, the stablecoin tether and its own Cashaa coin, with more digital assets like XRP and litecoin eyed for addition going forward.
• “India has tremendous potential in its fintech sector. We believe that the next big evolution in the banking and crypto space can actually happen from India,” said Kumar Gaurav, Cashaa CEO and founder.
• Also in the cards is a move into the African and Caribbean markets, the firm said.
• The new investment will, in part, go toward covering the losses from a hack of its Delhi-based over-the-counter (OTC) operation in July of this year.
• The hack saw $3 million stolen, the firm said, adding that users who lost bitcoin in the breach have already been reimbursed from Cashaa’s own funds.
• Cashaa’s general operations were not affected by the attack, which affected only “personal systems,” per the announcement.
• The company previously raised $33 million through a token sale in 2017.
• Cashaa provides banking services to cryptocurrency firms, and says it now has over 100 companies using its beta service.

Also read: Binance Taps DeFi Excitement to ‘Fuel’ Expansion Strategy in India

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Trading volumes are surging on Uniswap and other so-called decentralized cryptocurrency exchanges, challenging established venues like Coinbase while driving up fees and congestion on the Ethereum blockchain.    

Uniswap, a semi-automated platform for matching buyers and sellers of cryptocurrencies and other digital assets, saw its trading volume climb to $953.59 million on Tuesday, a more than ten-fold gain over the past month, according to the website uniswap.info. The 24-hour trading volume has crossed above $1 billion – at least 50% higher than daily trading volumes observed on Coinbase Pro, the largest U.S.-based centralized cryptocurrency exchange. 

The rise of decentralized exchanges, or DEXs, represents a new chapter of this year’s boom in decentralized finance. The fast-growing ecosystem, known as DeFi, consists of automatic lending and trading platforms built atop distributed computing networks like Ethereum and constructed from open-source software and programmable cryptocurrencies. They aim to provide more-efficient and less-costly ways of conducting transactions currently handled by banks and traditional exchanges.   

Related: First Mover: Bitcoin Tumbles, Bithumb Reportedly Raided, Uniswap Challenges Coinbase

“It indicates that the DeFi flippening is real and already here,” Denis Vinokourov, head of research at the London-based prime brokerage Bequant, told CoinDesk in a Telegram chat. “Flippening” is crypto jargon, used loosely to indicate the hypothetical moment when one blockchain or digital-asset trend overtakes another. 

Uniswap’s usage has grown so rapidly that it’s taken over the top spot among fee payers on the Ethereum network, where most of the DeFi development is taking place. The total value locked in the DeFi applications, the most common metric for measuring the activity, has increased 13-fold this year to about $9.2 billion, according to the data-tracking website Defi Pulse.

Uniswap has now moved into the top spot in total value locked, at $1.7 billion, CoinDesk reported Tuesday, while overall decentralized exchange volumes nearly tripled in August to $11.6 billion from July levels. 

“As DeFi assets approach $10 billion, one narrative we may see is that crypto is a completely separate, new sphere of economics and finance,” according to a blog post Tuesday by Fintech Blueprint, curated by Lex Sokolin of the Ethereum-focused developer ConsenSys. “It does not need to connect to the old world. It simply needs to be left alone to perform.”

Related: Uniswap Rises to Top of DeFi Charts Thanks to Rival Looking to Unseat It

Traders on Uniswap have paid $5 million (10,805 ETH) in transaction fees in the past 24 hours, according to data source etherscan.io. That’s more than double the amount paid for transfers of the dollar-linked stablecoin tether (USDT), which had been the top contributor, according to ethgasstation.info. 

Uniswap is designed to be more customizable than centralized exchanges like Coinbase. Instead of listing specific assets available for trading on the platform, traders can choose and list the tokens they want to transact in; currently the platform boasts more than 6,020.   

And SushiSwap, a five-day-old unaudited project that’s an adaptation of Uniswap, has already moved into to the No. 3 spot of payers of Ethereum “gas,” which is the unit used to calculate fees for token transfers on the Ethereum blockchain. 

Sushiswap, which went live on Aug. 28, pays out rewards to liquidity providers in its tokens – ticker SUSHI – in addition to a share of trading fees. 

There’s already $81 million of liquidity for sushi on Uniswap, and the 24-hour trading volume of $151.42 million exceeds that of spot-market cryptocurrency trading volumes on mid-tier exchanges like Binance US, Gemini and Poloniex. 

The “fear of missing out” on SUSHI reveals the “the DeFi craze,” according to a report Tuesday from the Norwegian cryptocurrency-analysis firm Arcane Research. 

Press officials for Coinbase, which is reportedly considering an initial public stock offering, didn’t respond to a request for comment.

DeFi has grown so quickly that centralized exchanges from Binance to FTX have rushed to roll out indexes – and new trading contracts like futures and perpetual swaps linked to those indexes – to give investors a way to bet on the industry segment’s growth.

But, according to Vinokourov, DEXs might represent a more existential threat to the centralized exchanges. 

“Those already trading on DEXs fully realize that growth will only accelerate,” Vinokourov told CoinDesk. 

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The U.S. Department of Justice (DoJ) is seeking to confiscate nearly $400 million from the attorney who helped accused crypto Ponzi scheme OneCoin launder hundreds of millions of dollars.

• The U.S. Attorney for the Southern District of New York asked the U.S. District Court judge responsible for sentencing Mark Scott – convicted last November – to impose a “forfeiture money judgment,” in a submission Monday.
• Between 2015 and 2018, Scott created a network of fake investment funds for OneCoin that laundered a total of $392,940,000 – the amount the DoJ is now seeking to reclaim.
• These entities received funds from a series of shell corporations, ostensibly investors, that were actually linked to OneCoin.
• The money was then transferred out as loans that were not repaid or wired to a series of bank accounts, some linked directly to OneCoin founder, Ruja Ignatova – who disappeared in late 2017.
• As payment, Scott transferred $50 million to himself.
• U.S. prosecutors have previously estimated that OneCoin took in more than $4 billion from investors through its cryptocurrency scheme – making it one of the most successful Ponzis ever.
• Scott was found guilty last year on one count of conspiracy to commit money laundering and one count of conspiracy to commit bank fraud.
• Per Monday’s submission, the DoJ wants to freeze Scott’s assets until he has forfeited the near $400 million sum he laundered for OneCoin.
• If approved by the court, the U.S. government will be able to confiscate funds and assets, as well as any other property Scott owns, until the amount has been satisfied.
• This would include several seaside villas, sports cars, jewelry, watches and a yacht that he purchased with proceeds from OneCoin.
• He would also face losing control of the bank accounts that he used to launder OneCoin’s funds.
• Scott faces a prison term of up to 50 years when he’s sentenced on Oct. 9.

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

Read the DoJ submission below:

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