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Banks in US Can Now Offer Crypto Custody Services, Regulator Says

CoinDesk Crypto
6 years 2 months ago

The Office of the Comptroller of the Currency (OCC) is letting all nationally chartered banks in the U.S. provide custody services for cryptocurrencies.

In a public letter dated July 22, Senior Deputy Comptroller and Senior Counsel Jonathan Gould wrote that any national bank can hold onto the unique cryptographic keys for a cryptocurrency wallet, clearing the way for national banks to hold digital assets for their clients.

The letter marks a major development for the crypto industry. Previously, custody was the province of specialist firms, such as Coinbase, which typically needed a state license, such as a trust charter, to offer the service to large investors. Now, large, regulated financial companies that already provide similar safekeeping services for stock certificates and the like could enter the fray.

Related: Standard Chartered to Launch Institutional Crypto Custody Solution

The letter, which appears to be addressed to an unidentified bank or similar entity, notes that banks “may offer more secure storage services compared to existing options,” and that both consumers and investment advisors may wish to use regulated custodians to ensure they don’t lose their private keys, and therefore, access to their funds.

“Providing custody for cryptocurrencies would differ in several respects from other custody activities,” the letter said.

It pointed to the need for digital wallets, adding that because they exist on a blockchain, there is no physical possession for cryptos.

“The OCC recognizes that, as the financial markets become increasingly technological, there will likely be increasing need for banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers,” the letter said.

Related: Crypto Custodian Curv Is Helping Institutions Dabble in DeFi With Compound Integration

Banks can provide both fiduciary and non-fiduciary custodian services, the letter said.

It also specified that banks entering the space “should develop and implement those activities consistent with sound risk management practices and align them with the bank’s overall business plans and strategies.”

The OCC is currently headed up by Brian Brooks, a former Coinbase exec who joined the regulator earlier this year. He’s filled in as Acting Comptroller since the beginning of the summer, and has already proposed a number of reforms that would benefit crypto companies, including a national payments charter which would let crypto startups bypass the state-by-state approach in terms of acquiring money transmission licenses if they provide payment services.

Wednesday’s letter also “reaffirms the OCC’s position that national banks may provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, so long as they effectively manage the risks and comply with applicable law.”

JPMorgan Chase is one such national bank that provides banking services to crypto companies, having provided support to Gemini and Coinbase earlier this year. Like their counterparts abroad, however, banks in the U.S. have generally been skittish about serving the industry, perceiving exchanges and other startups as a reputational and compliance risk.

UPDATE (July 22, 17:45 UTC): Added context to third paragraph and at the end.

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CoinDesk

Blockchain Bites: Coinsquare Conclusion, Ethereum Fees and a GPT-3 Poet

CoinDesk Crypto
6 years 2 months ago

Australian blockchain startups are taking tech giants to court for banning crypto advertisements during the ICO boom, Coinsquare executives have settled over accusations of wash trading and South Korea is mulling increased taxes on crypto profits.

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

Top shelf

‘Be Thankful I Don’t Take It All‘
The South Korean government has proposed a 22% tax – including the 2% local income tax – on crypto trading profits. The Ministry of Economy and Finance tabled a proposal Wednesday to introduce the measure for gains above 2.5 million KRW (~$2,000). If approved by Korea’s National Assembly, the tax rule will come into force in October 2021, and will also apply to non-residents and foreign companies who trade on Korean exchanges. Separately, Russian officials have updated a draft bill that would redefine crypto as a taxable property, though not as a means of payment. Previously, the country’s lawmakers introduced a version of the law that would make any business issuing or trading crypto using Russia-based infrastructure illegal.  

Related: Crypto Needn’t Fear GPT-3. It Should Embrace It

Crypto Class Action
Australian crypto startups have banded together in a class action against Google, Twitter and Facebook related to the banning of crypto advertising in 2018. The business owners claim they were harmed by the bans – meant to minimize harm to potential investors in initial coin offering (ICO) scams, but which may have overreached into legitimate businesses – and seek damages amounting to A$872 million (US$600 million). That amount could rise to A$300 billion in total as more litigants join the class action, according to the Daily Mail Australia.

Strengthening Rights
The Supreme People’s Court of China has said the country’s legal system should strengthen protections around digital currency ownership rights. Published Wednesday, a new guideline from the court, under the section “Strengthening judicial protection for property and equity rights,” specifies that the legal system should enhance protections over new types of ownership rights such as digital currencies, online virtual assets and data. Previously there have been legal decisions made by provincial and municipal courts in China in which digital currencies like bitcoin were treated as virtual properties.

Wash Trade Settlement
Coinsquare will settle with the Ontario Securities Commission (OSC) over allegations executives had employees fake trades to inflate the platform’s volumes. As part of the settlement agreement reached Tuesday, Coinsquare admitted that around 840,000 illicit wash trades were conducted on the platform, amounting to a total value of around 590,000 bitcoin (BTC) (worth almost $5.5 billion at press time). Senior executives have also agreed to resign, with CEO Cole Diamond to pay a $1 million penalty and founder Virgile Rostand $900,000.

Watching the Watchdog
SEC Commissioner Hester Peirce on Tuesday criticized the watchdog’s decision to penalize Telegram’s $1.2 billion ICO. Speaking to the Blockchain Association Singapore, “Crypto Mom” Pierce said the SEC fundamentally erred in prosecuting and punishing Telegram’s Gram token sale, saying the decision to sell Grams under a “Simple Agreement for Future Tokens” offering structure should have protected the project from securities violations. Peirce again called for a “safe harbor” that would give certain token projects three years to experiment while regulators retooled their frameworks for what is and is not an investment contract.

Quick bites The big idea

Related: First Mover: This DeFi-Ready Token Is Teaching Crypto Traders to Cherish Inflation

CoinDesk spoke with Gwern, the pseudonymous tech researcher, about his ongoing experiments with the most powerful AI language model to date. 

OpenAI’s GPT-3 has “read” nearly every word published online, and now has the ability to complete human prompts. The tool can write media articles, business prospectuses and – as Gwern has discovered – poetry. 

Human: Please write me a sonnet on the subject of the Forth Bridge.

AI: Countless their wheat-stacks tall and trains which roar across it by night, All these must fall like Gabriel’s hair, Which was all gold before it withered.

As others have noted, the model can’t think on its own and has clear limitations in always writing what its users want it to. To this end, Gwern found that the biggest hurdle is in coming up with the right prompt. 

“I think it is partially a matter of intelligence and the technology, yes. I should be able to write out clear descriptions and provide a few examples, which would be enough for a human to infer my intent, but right now it’s still quite chancy for GPT-3 to pick good completions,” he said over a direct message. 

Considering this, CoinDesk asked whether the final result of running a situation feels like his own work of art. 

“[W]hen I nail a prompt, what I tend to feel is more that I’ve created a new genre,” he said. “[I]n the way that JRR Tolkien might feel that he was the author of ‘fantasy’ even if he didn’t feel otherwise like the author of any specific fantasy book, if you follow me. [O]ther people take the idea and run with it. [Y]ou feel proud of how your idea goes on without you.”

Still, after a month of experimentation, Gwern has found the novelty has worn off. “[I]f I’m going to spend half an hour on something, it’d better be testing something interesting on GPT-3.”

That’s a fine position to take while the program is still in a private beta. It might be a different story when it’s released to the world.

Market intel

Users Up, Transactions Down?
Despite recent price doldrums, the Bitcoin network has as many users since the cryptocurrency topped $20,000 in 2017, according to an on-chain metric. The seven-day moving average of Bitcoin’s “active entities” rose to 305,355 on Tuesday to hit the highest level since Dec. 23, 2017, according to Glassnode, which defines active entities as a “cluster of addresses controlled by the same network entity.” This would include both businesses like exchanges and custodians and individuals. However, the seven-day moving average of bitcoin’s transaction count has increased 23% over the past four months, but is still well below the 2020 high registered on March 5.

Open Interest
Open interest for bitcoin futures on BitMEX – the largest derivatives exchange by open interest – passed $1 billion Tuesday morning for the first time since the cryptocurrency market crash in March, a sign of life in a very quiet market. Before the March crash, open interest for bitcoin futures on BitMEX was about $1.2 billion. Further, open interest for bitcoin futures across all cryptocurrency exchanges broke above $4 billion for the first time since March, according to data from Skew.

Broken Record
Decentralized exchange volumes have already topped $1.6 billion, as of Tuesday, breaking the previous all-time high set in June, according to Dune Analytics data. Four platforms – Uniswap, Curve, Balancer and Bancor Network – have already surpassed their June volumes. “For investors racing to get exposure to the newest decentralized finance (DeFi) projects, decentralized exchanges are the earliest and often only place to make those initial investments,” said Joseph Todaro, managing partner at Blocktown Capital. 

Tech pod

Hype & High Fees
Ethereum fees are at a two-year high as the hype around DeFi yield farming leads to a surge in network activity, according to research firm Coin Metrics. Coin Metrics’ data shows median transaction fees, which increase in step with network activity, were around $0.50 yesterday – the highest since August 2018. The total value locked (TVL) in DeFi projects recently passed the $3 billion mark, according to DeFi Pulse, having only crossed the billion-dollar milestone in February. Digital Assets Data analyst Connor Abendschein attributes “massive increase” in ERC-20-standard stablecoins as a contributing factor. 

Ethereum at Five

The World Computer at a Crossroads
Five years ago, an unlikely project went live. It called itself “the world computer” and it promised to transform not just cryptocurrencies as we knew it, but the very idea of what could be done with cryptography and consensus. Ethereum had arrived.

From its technical aspirations to unicorns and memes, Ethereum is a culture on its own. It has spawned blockchain uses — from digital cats to yield farming — previously unimagined. 

Ethereum is at a crossroads. But it must complete an ambitious and fraught retooling of its foundations — the long awaited move to Ethereum 2.0 — to keep up with the market’s demands.

CoinDesk is marking the milestone with Ethereum at Five: a cross-platform series comprising a series of special coverage, a pop-up newsletter and live-streamed discussions. New issues and sessions launch daily from July 27-31. Register for CoinDesk Live and our pop-up newsletter.

Opinion

Scaling Blockchain Businesses
Lex Sokolin, a CoinDesk columnist and Global Fintech co-head at ConsenSys, is joined by Figure CEO Mike Cagney and Rebank’s Will Beeson to discuss how to successfully run a business in blockchain, why working from home is better and lessons learned from scaling multi-billion dollar corporations. 

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CoinDesk

Newly Discovered Botnet Infected Up to 5,000 Computers with a Monero Miner

CoinDesk Crypto
6 years 2 months ago

A highly sophisticated hacker has infiltrated thousands of computers and hijacked them to covertly mine the privacy coin monero.

  • Security intelligence firm Cisco Talos, part of U.S. tech giant Cisco Systems, said it discovered a botnet – a network of internet-connected devices – that had been active for months, in its report Wednesday.
  • Dubbed “Prometei,” the botnet can disable security controls, copy across important files, and masquerade as other programs to set up covert mining operations in computer systems.
  • It also constantly reinvents its tools in order to avoid detection.
  • Since starting operation in early March, researchers estimate it has infected anywhere between 1,000 and 5,000 systems.
  • Prometei may have earned its owner approximately $5,000 worth of monero – around $1,250 per month, the report reads.
  • Cisco Talos doesn’t know the identity of the hacker, but it is likely to be a single professional developer based somewhere in Eastern Europe.
  • They also found that the botnet had also stolen credentials, such as administrator passwords, possibly to sell on the black market.
  • Monero is the cryptocurrency of choice for these attack vectors as it can be mined easily with general-purpose CPUs and can be traded with little risk of detection.

See also: Hackers Plant Crypto Miners by Exploiting Flaw in Popular Server Framework Salt

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CoinDesk

Lithuanian Central Bank’s Commemorative Digital Token Goes Live Thursday

CoinDesk Crypto
6 years 2 months ago

Lithuania’s central bank, Lietuvos Bankas, announced on Wednesday that consumers would be able to buy and use the bank’s commemorative digital tokens, LBcoins, beginning Thursday. 

  • In an announcement on its website, the bank said it would release 24,000 digital tokens that commemorate the signing of the nation’s Act of Reinstating Independence in 1918.
  • The launch of LBcoin comes after about two years of blockchain experiments by the Lithuanian central bank. LBcoins, while exchangeable for legal tender, currently seem too advanced for people to actually use. 
  • According to the bank, the tokens will be divided into six categories, with 4,000 digital tokens issued in each. 
  • In its announcement, the central bank said the tokens could be purchased and stored on the Bank of Lithuania’s e-shop. Consumers would also be able to transfer their tokens to a public NEM wallet, exchange them, gift them or even trade them for a silver coin if they can get their hands on one of each category.

Read more: Lithuania Is Trialing a CBDC No One Can Use – And That’s by Design

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CoinDesk

Cryptopia Creditor Issues Legal Notice to Liquidator Over Alleged Failures, Fees

CoinDesk Crypto
6 years 2 months ago

A creditor of hacked New Zealand exchange Cryptopia has sent a legal notice to the firm’s liquidators over alleged failures to address its claim.

  • Blockchain machine learning startup GNY claims in a press release Tuesday that accounting firm Grant Thornton New Zealand has failed to accept or reject its creditor claim, has failed to fully make its claim clear in court or reports, and has also failed to investigate the cause of the Cryptopia hack in January 2019.
  • Also at issue are the fees that Grant Thornton is taking from the remaining exchange reserves.
  • GNY says the liquidator has not adequately explained what work it’s carried out to warrant NZ$955,618 (US$636,945) in fees.
  • The startup saidy it complied with the liquidator’s requests for documentation and further information throughout 2019.
  • GNY claims to have lost 15 million LML tokens in the hack. It also said the exchange breach caused the value of the token on the market to plummet 95%.
  • As such, GNY says is owed more than NZ$27 million (US$17.9 million).
  • In May 2020, GNY sought confirmation of its creditor claim, hoping to recover some of the stolen tokens.
  • Yet, nine months after the liquidators had sought additional documentation and information, a response was received from Grant Thornton the firm claimed was brief and didn’t “adequately address” its concerns and queries.
  • GNY’s legal representative has now issued a “failure to comply” notice on July 21 to the liquidators under sections 285 and 286 of the New Zealand Companies Act 1993.
  • Citing the extreme complexity of the liquidation, Grant Thornton New Zealand told CoinDesk: “We understand that this is a difficult time for creditors. However, the allegations made by this creditor have no merit and we fully deny them.”
  • In April, Cryptopia creditors won a small victory when it was ruled that users of the exchange were entitled to assets, which are classed as property, that they held in Cryptopia accounts at the time of the hack.
  • The alternative ruling would have seen the assets classed as normal debt to be distributed among both users and creditors.
  • The funds were valued at over $100 million.

Also read: Last Week’s Big Twitter Hack Was Years in the Making

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CoinDesk

Crypto Custodian Anchorage Adds Litecoin Support

CoinDesk Crypto
6 years 2 months ago

U.S.-based crypto custodian Anchorage has added support for litecoin (LTC), the eighth-largest cryptocurrency by market capitalization.

  • Institutional investors can now store and trade litecoin from Anchorage’s platform.
  • The Visa-backed company now supports 27 cryptocurrencies, including bitcoin (BTC), ether (ETH), bitcoin cash (BCH) and XRP, as well as dollar-backed stablecoins like TrueUSD, PAX and USDC.
  • Litecoin, forked from Bitcoin in 2011 by founder Charlie Lee, is one of the oldest cryptocurrencies.
  • As reasons for adding the asset, Anchorage cited LTC’s liquid market and a sizeable group of institutional investors interested in both trading and investing.
  • Just yesterday, Grayscale Investments, a crypto asset management firm, announced its Litecoin Trust fund had cleared a regulatory hurdle and will now be quoted on over-the-counter markets with the ticker LTCN. (Grayscale is owned by CoinDesk’s parent firm, Digital Currency Group.)

Also read: The Litecoin Foundation Helped Produce a Horror Movie – Here’s the Trailer

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BitMEX Owner Awards $50K Grant to Bitcoin Smart Contract Developer

CoinDesk Crypto
6 years 2 months ago

The parent of crypto derivatives exchange BitMEX has given $50,000 to the Bitcoin Core contributor who revealed last week he was working on a smart contract language for bitcoin.

  • 100x Group announced Wednesday it had awarded a one-year grant to Jeremy Rubin, as part of its Open Source Developer Grant program.
  • The Seychelles-based company, which recently changed its name from HDR Trading, has already given similar grants to fellow Bitcoin Core contributors Michael Ford, Amiti Uttarwar and Gleb Naumenko.
  • A Bitcoin developer since 2011, Rubin said last week he was developing a new programming language, Sapio, for a full smart contract capability on the Bitcoin protocol.
  • He has also established a new research organization, Judica, that plans to develop and release new software tools for Bitcoin.
  • Per the announcement, 100x said the grant would make Judica financially sustainable and further fund research into Sapio.
  • Established in 2014, BitMEX’s primary product is its bitcoin perpetual contract – trading volume stood at $800 million at press time, according to CoinGecko.

See also: Bitcoin Futures Pass $1B in Open Interest on BitMEX for First Time Since March Crash

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CoinDesk

First Mover: This DeFi-Ready Token Is Teaching Crypto Traders to Cherish Inflation

CoinDesk Crypto
6 years 2 months ago

One of the things crypto traders like about bitcoin is that it’s resistant to inflation, potentially serving as a hedge against the trillions of dollars of money that central banks have printed this year to address the coronavirus-inflicted economic collapse. 

But what if a cryptocurrency were designed to produce its own inflation – as a good thing?

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

Related: Bitcoin ‘Active Entities’ at Highest Since 2017 Bull Run

That’s the principle behind the cryptocurrency project Ampleforth’s AMPL tokens, which are suddenly getting a fresh look from traders after a tenfold increase in their total supply over the past three weeks to 340 million.

Though the project’s market capitalization of $398 million is still tiny in relative terms, at just 0.23% of bitcoin’s $170 billion, some analysts say AMPL could see further uptake as a new form of liquidity in the fast-growing arena of decentralized finance, or DeFi. 

In fact, demand for the token has been so hot that its current price of about $2.77 is nearly three times the project’s own target of $1.009. The impetus appears to have been Ampleforth’s launch last month of Geyser, a new rewards program that encourages the token’s use on Uniswap, a decentralized exchange. 

The token “has been on an absolute tear,” Paul Burlage, an analyst with the cryptocurrency research firm Delphi Digital, wrote in a July 9 report. 

Related: Blockchain Bites: China’s BSN Integrations and Satoshi’s Newfound Wealth

Two years ago, a San Francisco-based engineer and robotics researcher named Evan Kuo, alongside co-founder Brandon Iles and their team, decided to tackle a problem in digital-asset markets: tight correlations between bitcoin and alternative cryptocurrencies that make the market vulnerable to widespread sell-offs – as traders scramble for cash or cash-like instruments such as dollar-backed stablecoins. 

The dynamic poses risks for DeFi, where the cryptocurrencies are often pledged as collateral on semi-autonomous lending and borrowing platforms. 

“The high correlations prevalent in today’s cryptocurrencies create systemic risk,” Kuo told First Mover in a Telegram chat. 

So in December 2018, the team launched Ampleforth protocol with $3 million in funding from the likes of Brian Armstrong, CEO of the big U.S. cryptocurrency exchange Coinbase; Pantera Capital, a cryptocurrency investment fund; and True Ventures, a Silicon Valley-based venture capital firm.

The project aims to address the systemic risk by designing a token to be mostly uncorrelated with other cryptocurrencies, and also isolated from swings in traditional financial markets.

The secret to the design is a combination of intentional inflation and anti-dilution: When prices for the AMPL token rise above a target, more units are issued directly to holders’ wallets in proportion to their holdings. Theoretically, the extra supply creates inflation that should help to push prices back down, but traders are made whole because they suddenly have more of the tokens.   

The mechanism is supposed to limit price volatility, potentially making AMPL tokens more desirable as a stable form of collateral for DeFi systems. 

“AMPL’s differentiated movement pattern reduces the risk of autoliquidation in the DeFi space,” Kuo said. 

According to the project’s website, traders can use the tokens to diversify investment portfolios, park as collateral in DeFi or even hold as a “better bitcoin.” 

How AMPL works

Ampleforth has set a target price for AMPL based on the value of the U.S. dollar in 2019. And that target price is adjusted continuously based on the consumer price index, which offers a rough way of gauging monthly decreases in the dollar’s purchasing power. 

But during times of heavy demand for the tokens, the market price can diverge from the target price. And that appears to be happening now, as traders deploy the AMPL tokens in fast-growing DeFi platforms. 

On June 23, AMPL “traded above its price threshold of $1.06 and never looked back,” according to Delphi Digital’s Burlage. 

For example, on July 19, the token was trading at $2.95, nearly three times the target price. Under the rules of the protocol, the supply automatically increased by 16% at the end of the 24-hour period, according to Ampleforth’s dashboard. 

The extra supply represents inflation that should theoretically reduce the value of each AMPL token. But since the extra supply goes into holders’ wallets, the overall value of their holdings should theoretically stay the same. Inflation, coupled with anti-dilution, as designed. 

Burlage wrote that there are strong incentives built into the system encouraging traders to hold onto their AMPL tokens. But the market could turn, since it’s prone to a “cyclical boom and bust cycle.” 

“With the price running up, it is now a game of chicken between large holders to see who sells first and time the top,” Burlage wrote.  

It might be the future of money, but as is often the case in cryptocurrency markets, speculation and experimentation are the right-now. 

Tweet of the day Bitcoin watch

BTC: Price: $9,361 (BPI) | 24-Hr High: $9,445 | 24-Hr Low: $9,304

Trend: Bitcoin is struggling to extend Tuesday’s 2.5% price gain. 

The leading cryptocurrency by market value is currently trading near $9,360, representing a 0.4% decline on the day. 

The immediate bias remains neutral as the cryptocurrency remains trapped in tight range, as represented by Bollinger volatility bands, currently located at $9,424 and $9,037.

A move above the upper band would imply range breakout and could power the cryptocurrency higher to resistance at $9,800 (June 22 high) and possibly to the psychological hurdle of $10,000. Alternatively, a range breakdown would expose the 200-day moving average at $8,560. 

A range breakdown may be seen if the global equities suffer sharp losses on the escalating China-U.S. tensions and the U.S. Congress’ inability to reach consensus on an additional coronavirus relief package. The cryptocurrency has recently developed a relatively strong correlation with the equity markets. 

At press time, futures tied to the S&P 500 and major European indices are reporting moderate losses. Risk sentiment weakened early Wednesday after Washington ordered China to close its consulate in Houston, marking an unprecedented escalation of tensions with the Asian nation.

Note: This article has been edited to show that AMPL’s market cap is 0.23% of bitcoin’s market cap.

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CoinDesk

Bitcoin ‘Active Entities’ at Highest Since 2017 Bull Run

CoinDesk Crypto
6 years 2 months ago

An on-chain metric suggests the Bitcoin network is garnering users despite the cryptocurrency’s extended period of comatose price action.

  • The seven-day moving average of Bitcoin’s “active entities” rose to 305,355 on Tuesday to hit the highest level since Dec. 23, 2017, according to blockchain analytics firm Glassnode.
  • The previous 1.5-year high of 301,870 was reached on May 12.
  • The average has risen by 14% this month. 
  • Glassnode defines active entities as a “cluster of addresses controlled by the same network entity.” This would include both businesses like exchanges and custodians and individuals.
  • The rise suggests that the number of users of the network is the highest since the cryptocurrency topped out at $20,000 in December 2017.
  • Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds, told CoinDesk the climbing metric is the result of the DeFi frenzy spilling over onto bitcoin. 
  • The surge in active entities also suggests users are anticipating a pick up in bitcoin’s price volatility, he added.
  • While user numbers may be up, bitcoin’s network activity is not at similar highs.
  • The seven-day moving average of bitcoin’s transaction count has increased by 23% over the past four months, but is well below the 2020 high registered on March 5.
  • Bitcoin is stuck in the narrow range of $9,400 to $9,000 for the fourth straight week, according to CoinDesk’s Bitcoin Price Index.

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

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CoinDesk

Korean Government Proposes Tough New 22% Tax on Crypto Trading

CoinDesk Crypto
6 years 2 months ago

The South Korean government has proposed obliging crypto investors to pay more than a fifth of their profits to the state.

  • The Ministry of Economy and Finance tabled a proposal Wednesday to introduce a 22% tax –including the 2% local income tax – on crypto trading profits above 2.5 million KRW (~$2,000).
  • If approved by Korea’s National Assembly, the tax rule will come into force in October 2021.
  • The new tax rule will also apply to non-residents and foreign companies who trade on Korean exchanges.
  • The news was originally reported by CoinDesk Korea.
  • Traders will be obliged to keep accurate records of their crypto activity and file with the National Tax Service at the end of the tax year on May 31.
  • Profits will be based on the difference in the asset’s won price at the time of acquisition and time of sale – if the trader doesn’t know the acquisition price, it will be assumed to be 0 won.
  • The government says the new tax rule is needed as many other countries have also introduced their own regimes for cryptocurrencies.
  • Cryptocurrency trading profits in the U.S. count as capital gains, where individuals can pay up to 25% in tax.

See also: South Korean Government Turns to Blockchain Tech to More Securely Store Clinical Diabetes Data

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CoinDesk

Google, Twitter and Facebook Face $600M Lawsuit Over Crypto Ad Bans

CoinDesk Crypto
6 years 2 months ago

Corporate giants Google, Twitter and Facebook could soon face the wrath of cryptocurrency business owners in a class-action lawsuit relating to the banning of cryptocurrency-related advertising in 2018.

  • According to a Sunday report from Daily Mail Australia, Australian crypto business owners, represented by Sydney-based law firm JPB Liberty, allege they were harmed by the banning of their advertisements and are seeking damages amounting to A$872 million (US$600 million).
  • That amount could rise to A$300 billion in total as more litigants join the class action, according to the report.
  • The ad bans were aimed to minimize harm to potential investors in initial coin offering (ICO) scams, but allegedly also had a sweeping effect on legitimate crypto businesses also.
  • Facebook, Twitter and Google all took action throughout 2018, including their bans in their terms and conditions of service.
  • A “no-win no-fee” case has been put before a senior barrister who will review the circumstances surrounding the case before it will move forward.
  • JPB Liberty is seeking to raise funding for the case from venture capitalists, litigation funders and investors, with claimants to receive 70% of any settlement and funders a 30% cut.
  • In May 2019, Facebook softened its crypto ban by allowing ads involving blockchain, industry news, educational content or events related to cryptocurrency to no longer require prior written approval.
  • Google came around a little sooner where it reversed parts of its ban in October 2018, allowing regulated exchanges to purchase advertising from the tech giant in the U.S. and Japan.
  • Twitter has yet to lift its ban relating to the advertising of ICOs, token sales, exchanges and wallet services.
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CoinDesk

Coinsquare Exchange Execs to Resign Over Wash Trading Scandal

CoinDesk Crypto
6 years 2 months ago

Canada-based crypto trading platform Coinsquare has agreed to settle with the Ontario Securities Commission (OSC) after it was found senior executives told employees to make fake trades on the platform.

  • Between Q4 2018 and Q1 2019, 90% of Coinsquare’s reported volume was faked in an illegal practice known as wash trading, the OSC said.
  • As part of the settlement agreement reached Tuesday, Coinsquare admitted that around 840,000 illicit wash trades were conducted on the platform, amounting to a total value of around 590,000 bitcoin (worth almost $5.5 billion at press time).
  • The agreement also states that CEO Cole Diamond, founder Virgile Rostand and executive Felix Mazer knowingly “authorized, permitted or acquiesced” Coinsquare staff to carry out the wash trading, made misleading statements and sought retribution against a whistleblower seeking to expose the misconduct.
  • The senior executives have now agreed to resign, with Diamond to pay a $1 million penalty and Rostand $900,000.
  • The agreement acknowledged that Mazer had already voluntarily paid $50,000 to the commission, having acted as the company’s CCO contrary to the public interest.
  • Jeff Kehoe, director of the enforcement branch of the OSC, said the case was the first time the commission has taken action against the reprisal of a whistleblower since protections were added to the Ontario securities legislation in 2016.
  • Diamond and Rostand have also been banned from being registrants, officers or directors of companies or “market participants” for two to three years. Mazer received a one-year ban.
  • Coinsquare’s investment dealer subsidiary, Coinsquare Capital markets Ltd., which was seeking registry approval with the OSC prior to the investigation, has been ordered to put in place major governance improvements, including an internal whistleblower program.
  • Coinsquare, Diamond and Rostand must further pay a total of $300,000 for costs associated with the OSC’s investigation.
  • The OSC first accused the firm of illegal activities on Monday.

See also: Quadriga Was a Ponzi Scheme, Ontario Securities Regulator Says

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CoinDesk

DeFi Hype Has Sent Ethereum Fees Soaring to 2-Year High: Coin Metrics

CoinDesk Crypto
6 years 2 months ago

Ethereum fees are at a two-year high as the hype around decentralized finance (DeFi) leads to a surge in network activity, according to Coin Metrics.

  • Coin Metrics' data shows median transaction fees were just under $0.50 at press time – the highest since early August 2018.
  • Transaction fees increase alongside activity to avoid congestion in busy times.
  • Ethereum’s median gas price – a component of the transaction fees – has also reached levels not seen since early July 2018, according to Glassnode.
  • Connor Abendschien, a research analyst from Digital Assets Data, said a “massive increase” in ERC-20 standard stablecoins had also contributed to a rise in gas prices.
  • In a newsletter Tuesday, Coin Metrics analysts argued the spike in transaction fees came from increased network usage related to the DeFi hype.
  • Total value locked in DeFi projects recently passed the $3 billion mark, according to DeFi Pulse, having only crossed the billion-dollar milestone in February.
  • Ether transferred via smart contracts – a telltale sign of a DeFi transaction – was up to a near all-time high of one million ETH ($242.5 million) a day, Coin Metrics said.
  • The number of active ether addresses hit a two-year high a few weeks ago, but fell again as high fees pushed users off Ethereum, Coin Metrics said.
  • Richard Rosenblum, a co-founder of digital assets firm GSR, told CoinDesk the gas price spike was part of a wider scalability problem for Ethereum.

See also: Nearly $60M in Bitcoin Moved to Ethereum in June

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China’s Supreme Court Calls for Better Protection of Digital Currency Rights

CoinDesk Crypto
6 years 2 months ago

The Supreme People’s Court of China has said the country’s legal system should strengthen protections around digital currency ownership rights.

  • Published Wednesday, a new guideline from the supreme court, under the section “Strengthening judicial protection for property and equity rights,” specifies that the legal system should enhance protections over new types of ownership rights such as digital currencies, online virtual assets and data.
  • While the court did not elaborate on details or provide a definition of “digital currencies,” the guideline comes at a time when there are rising numbers of legal disputes in China over the ownership of digital assets, including major cryptocurrencies like bitcoin and ether.
  • Previously there have been legal decisions made by provincial and municipal courts in China in which digital currencies like bitcoin were treated as virtual properties.
  • Until now, the country’s top judicial body has apparently not addressed the issue, however.
  • The guideline was published by the Supreme People’s Court, together with the National Development and Reform Commission (NDRC).
  • The NDRC is China’s top economy planning agency and is one of the 26 cabinet-level ministries that make up the central government, namely, the State Council.
  • The opinion was issued in response to earlier guideline put out by the State Council in May calling for an acceleration of improvements to China’s socialist market economy.
  • The supreme court’s guidance represents the legal system’s highest-level opinion regarding judicial services and protections.

Also read: China’s Blockchain Infrastructure to Extend Global Reach With Six Public Chains

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Latvian Police Seize Crypto Worth $126K in Bust of Suspected Cybercrime Ring

CoinDesk Crypto
6 years 2 months ago

Latvian state police said they had dismantled an organized cybercrime ring, seizing over 110,000 euros ($126,926) in cryptocurrencies from the alleged perpetrators.

  • Police said Monday they had confiscated 110,000 euros-worth of bitcoin, ether, XRP and tether from the group.
  • Additionally, over 12 raids they seized 280,000 euros ($323,084) and $37,000 in cash, 11 properties and three cars.
  • The gang is alleged to have engaged in “large-scale” money laundering from 2015 through 2020.
  • Officials arrested and charged three suspects with committing cyber fraud, procuring reams of private account data on the dark web, laundering money through gold and cryptocurrency, and targeting at least 1,000 victims around the world.
  • In a press statement, Latvian authorities declined to elaborate on the crime syndicate’s fraud tactics, saying that information was sensitive to the ongoing investigation.
  • Criminal proceedings began in late February, they said.
  • If convicted the suspects face three to 12 years in prison.

Also read: The DOJ Wants to Hire a Crypto Crime Attorney Adviser

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Grayscale Moves to List Bitcoin Cash and Litecoin Trusts for OTC Traders

CoinDesk Crypto
6 years 2 months ago

Grayscale Investments has announced that its digital asset funds Bitcoin Cash Trust and Litecoin Trust have cleared a regulatory hurdle in their march to begin being quoted on over-the-counter markets.

  • The U.S. Financial Industry Regulatory Authority (FINRA) on Monday verified that the trusts’ broker-dealer OTC Link LLC had completed its required diligence check. It’s one step in the security quoting process, but more lie ahead.
  • Grayscale’s twin trusts still need to be deemed “eligible securities” by the Depository Trust Company (DTC) before they can begin trading. In a press release, Grayscale did not indicate when that ruling may come. (Grayscale is a subsidiary of Digital Currency Group, CoinDesk’s parent firm.)
  • Bitcoin Cash Trust and Litecoin Trust will carry the tickers BCHG and LTCN once they commence OTC trading, the digital asset management firm said.
  • Grayscale has taken to developing and offering crypto trusts as a way for retail investors to gain exposure to cryptocurrencies. It has already rolled out similar investment vehicles for bitcoin, ethereum and ethereum classic.

Nikhilesh De contributed reporting

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Market Wrap: Bitcoin Briefly Pops Above $9,400 as Global Stocks Rally

CoinDesk Crypto
6 years 2 months ago

Bitcoin hit its highest price point in almost two weeks as stocks climbed.

  • Bitcoin (BTC) trading around $9,371 as of 20:00 UTC (4 p.m. EDT). Gaining 2.2% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $9,149-$9,439
  • BTC above 10-day and 50-day moving average, a bullish signal for market technicians.

Bitcoin stakeholders were delighted to see green flashes on their screens next to the world’s oldest cryptocurrency Tuesday. 

Prices on the world’s most valuable cryptocurrency went as high as $9,439 around 7:00 UTC (3 a.m. EDT), a price not seen since July 9. 

Related: Bitcoin Futures Pass $1B in Open Interest on BitMEX for First Time Since March Crash

“Bitcoin might be waking up,” said Rupert Douglas, head of institutional sales at London-based crypto brokerage Koine. “A close above $9,600 would be a strong sign.”  

Some are just happy to see prices go up in the bitcoin market, which has lacked activity for much of July. 

“Nice to finally see a bit of movement,” said Douglas Bilyk, a director at New York-based crypto brokerage Copper. “With lower volumes, it doesn’t take as much to push it, and looks like the initial move was up. Now we just need to see some follow-through.”

Major global equities are also showing positive gains today:

Related: Institutional Trading House ErisX Joins Silvergate Exchange Network

Read More: Bitcoin Futures Pass $1B on BitMEX for First Time Since March Crash

Gains in the equity markets appear to have been the catalyst for bitcoin’s positive trading day. “Bitcoin seems pretty correlated to equities at the moment,” Koine’s Douglas told CoinDesk. “The test will be whether BTC can hold up if equities sell off.”  

Stock indices have been outperforming bitcoin in July. However, Vishal Shah, an options trader and founder of derivatives exchange Alpha5, points out that flat markets for the oldest cryptocurrency sometimes can occur. 

“This lull isn’t uncharacteristic of bitcoin; it spent most of Q1 2019 in a sideways market,” he said. 

“Expectations are always running high for performance. And though it’s a well-run narrative by now, bitcoin has a tendency to exhibit a high volatility; things will move again,” Shah added.  

Read More: Bitcoin Shows Signs of Life But Ether (And Crew) Steal the Limelight

Curve DEX volumes up

The second-largest cryptocurrency by market capitalization, ether (ETH), was up Tuesday, trading around $245 and and climbing 4.4% in 24 hours as of 20:00 UTC (4:00 p.m. EDT). 

Ethereum-powered decentralized exchange (DEX) Curve Finance is seeing huge growth in volumes this past week. Curve, at $70 million in volume over the past 24 hours, has overtaken bellwether DEX Uniswap as decentralized finance (DeFi) heats up. 

“It is probably a bit of interest picking up in non-bitcoin assets that are becoming multifunctional or yield-enhancing,” said Neil Van Huis, director of institutional trading for Chicago-based liquidity provider Blockfills.

Jake Brukhman, managing partner for New York-based crypto asset manager CoinFund, said Curve’s specialization in swapping stablecoins gives the DEX an edge in execution. 

When DeFi traders seeking opportunities need to arbitrage stable assets, Curve’s volume increases. 

“They are using a mathematical equation which makes slippage very low,” Brukhman said. 

Read More: Troll Token? Why DeFi Yield Farmers Are Now All About YFI

Other markets

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

Read More: China’s Blockchain Infrastructure to Extend Reach With Six Public Chains

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

Read More: Bitcoin Rises With Stocks as EU Agrees €750B in Coronavirus Stimulus

Commodities: 

  • Oil is in the green 2.5%. Price per barrel of West Texas Intermediate crude: $41.80
  • Gold is up 1.2% Tuesday, at $1,840 per ounce

Read More: Whale Alert Identifies 1.125 Million BTC as Satoshi’s Stash

Treasurys:

  • U.S. Treasury bonds all slipped Tuesday. Yields, which move in the opposite direction as price, were down most on the 10-year, in the red 1.8%.

Read More: Crypto Exchange Group Eyes ‘Bulletin Board’ System for FATF Compliance

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ERX Gets License to Launch Exchange in Thailand

CoinDesk Crypto
6 years 2 months ago

Thailand’s Securities Exchange Commission (SEC) has issued a Digital Assets Exchange License to ERX, a trading platform launched by asset digitization firm Elevated Returns (ER), the company announced Tuesday.  

  • ERX is one of six crypto exchanges to receive the license from the Thai SEC since it began regulating the space in 2018.
  • While other licenced crypto exchanges in the country primarily trade cryptocurrencies, ERX only offers tokenized digital assets for exchange. 
  • The ERX platform was built using New York-based crypto exchange technology provider AlphaPoint’s white label software.
  • Elevated Returns specializes in digitizing traditional assets with a focus on real estate asset tokenization, and is best known for having tokenized the St Regis luxury resort in Aspen, Colorado.
  • According to a statement, the group has a primary ICO portal license issued by the Thai SEC, as well as an asset management license and a secondary market license.
  • This means the firm can now issue real estate backed investment tokens, trade them and “manage funds raised from the public to trade the investment tokens on behalf of investors” in Thailand.
  • Through its Thai ecosystem, built on the Tezos Proof-of-Stake blockchain, the ER group said it intends to launch several real estate investment tokens to bring over $1 billion worth of assets to the blockchain.
  • Stephane De Baets, ER’s founder and president, said the exchange license was the “last stepping stone” to completing the infrastructure the group had built over the last 18 months.
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Russia to Treat Crypto as a Taxable Property

CoinDesk Crypto
6 years 2 months ago

Russia changed its draft bill regulating crypto and digital assets. You won’t go to jail for facilitating crypto deals in the country – at least, not just yet.  

Previously, the country’s lawmakers introduced a version of the law that would make any business issuing or trading crypto using Russia-based infrastructure illegal, provoking an outcry from the crypto community and criticism from several government branches.

The new draft is more neutral. It suggests that crypto is a kind of property that cannot be accepted as a means of payment. Any lawsuits related to the ownership of crypto can only be considered by the courts if plaintiffs report their crypto holdings and deals for tax purposes.  

Related: ERX Gets License to Launch Exchange in Thailand

This might change the currently inconsistent practice in the Russian courts, where there is no universal definition of cryptocurrency.

Read more: Russia Considering Draconian Rules for Illegal Crypto Operations

A digital currency, according to the bill, is a digital set of data, which can be used as a payment method or investment tool and has no central party responsible for it, “except for the operator and (or) the nodes of such systems, which are only responsible for maintaining the issuance of the digital data and upending such a system.”

The issuance and flow of crypto in Russia should be regulated by other laws, the bills says. The bill’s sponsor, Anatoly Aksakov, told Russian news agency RIA Novosti that more detailed regulations might be passed during the next parliamentary session in the fall. 

Related: Singapore May Extend Crypto Regulation to Include Overseas Activities

The bill passed the second hearing today, which is the most important one in the Russian lawmaking process. There are three rounds of hearings for any bill to pass, but after the second one, the text of a bill is considered final. The document, which was initially only dedicated to regulating digital securities, ultimately merely included a mention of digital currency and its basic definition.

The main part of the bill, however, outlines the regulations for assets like digital shares of a company, whether on a distributed ledger or in “another kind of system.” The issuers of such assets should register with the Bank of Russia, and have managers with experience in finance. The issuer of such a system should control it in a centralized way and should be able to amend the ledger in case a court rules so. 

Read more: Russian Courts Can’t Agree on Whether Crypto Is Property

The law is supposed to come into force in January 2021. It won’t change much for the cryptocurrency industry in Russia, says lawyer Mikhail Uspensky.

“The only thing outright prohibited is taking crypto as payment for goods and services, which was the Bank of Russia’s principal premise. But buying a cup of coffee for bitcoin is still a kind of exotic thing anyway,” Uspensky said.

He added that the current version of the bill is a compromise between the conservatively inclined Bank of Russia, other government bodies and the crypto community.

“They decided only to mention cryptocurrency in the bill so far and prohibit using it as a payment, but postpone deciding on more important issues, like the criminal cases [related to crypto], crypto OTC businesses, and so on,” he said.

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