Leading Cryptocurrency and Finance Companies Answer CFTC on Ethereum

Leading Cryptocurrency and Finance Companies Answer CFTC on Ethereum

The U.S. Commodity Futures Trading Commission (CFTC), through its LabCFTC initiative, has published an inquiry towards the end of December 2018 and sought public comments on fintech innovations, and now the results are in from a number of prominent industry figures.

Gain Better Understanding of Ethereum Network

According to an official communication from CFTC, over 30 leading cryptocurrency and financial institutions have so far filed responses to the December 12, 2018, request on crypto-asset mechanics. The watchdog had placed a public appeal for information with the primary objective being seeking an understanding of the Ethereum Network.

The information sought included the similarities and differences between different digital currencies including the “technology, mechanics, and markets for virtual currencies beyond Bitcoin.” As per the request, the public’s response would help the commission advance its mission of maintaining the reliability of the derivative markets besides keeping an eye with the aim of decreasing systemic risks by promoting legal certainty in the field.

The commission stated:     

“The RFI seeks to understand similarities and distinctions between certain virtual currencies, including Ether and Bitcoin, as well as Ether-specific opportunities, challenges, and risks.”

A Bright Future for Asset-Backed Cryptocurrencies

The deadline for submitting responses was set for February 15, 2018, but forms have continued to provide information at least until February 25, 2019, with over 35 institutions responding. Among the leading crypto firms to return were blockchain consortium R3, Coinbase, the Ethereum Foundation, Weiss Ratings, Circle crypto finance company, blockchain tech experts ConsenSys and ErisX to name a few.

Apart from applauding CFTC for their initiative, R3 Director Charlie Cooper gave a bird’s eye view of where he believes cryptocurrencies are headed in 2019. He reiterated his belief that asset-backed cryptocurrencies like the ones pegged to real estate or gold as well as native tokens most likely held the future of the crypto industry.

On his side, Circle Chief Legal Officer Gus P, Coldebella praised the Ethereum network, which supports several cryptocurrencies saying it could contribute to the global tokenization of value. According to Gus, just like the internet has made information transfer easier and accessible, tokenization will make assets more available online and internationally.

Coinbase Chief Legal Officer Brian Brooks addressed the issue of regulations and risks surrounding the Ethereum network. However, he said Coinbase believes that the CFTC’s desire to oversee the Ethereum derivative market could be undermined by the fact that a considerable amount of the trade happens beyond the commission’s jurisdiction.

The initiative by CFTC comes at a time when there are concerns that SEC, by applying archaic rules “to protect investors” is killing innovation since overprotection seems to be doing more harm than good.  However, there is a consensus that while SEC’s approach to cryptocurrencies is legitimate, the U.S can still find a way of regulating the crypto market without killing innovation.

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Indian Authorities Uncover $230,000 Fraudulent Crypto Investment Scheme

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Indian Authorities Uncover $230,000 Fraudulent Crypto Investment Scheme

crime-alert-indian-authorities-uncover-a-200000-fraudulent-crypto-scheme-investigations-underway

Police officials in India have reportedly apprehended Hardik Zadafiya, a local resident who has been accused of being involved in a fraudulent cryptocurrency-related scheme.

According to the Times of India, four other individuals allegedly involved in the crypto-related crime have not yet been arrested. As reported by local news sources, the accused reportedly lured unsuspecting investors into investing Rs 1.64 Crores (appr. $231,000) into a questionable crypto scheme. Although all of the details regarding the financial crime are not yet clear, investigating officers believe the accused may have embezzled a lot more funds from local residents.

Local sources report “an offence of cheating” has been registered by Indian police officials against Ashok Khmabhati, Kalpesh Lakhani, Nikunj Savaliya, Rakesh Mavani, and Zadafiya. In addition to being booked for cheating or financial fraud, the accused have been charged with criminal breach of trust under several sections of the Indian Penal Code.

Promising “High Returns And Commissions”

The five men named in the crypto-related crime report have reportedly been booked under the Prize Chits and Money Circulation Schemes (Banning) Act and the Gujarat Protection of Interest of Depositors (in Financial Establishments) Act of 2003. Police officials investigating the matter discovered that the accused allegedly launched a local crypto exchange called Bitstrades – after registering the company in the UK in January 2017.

As mentioned in the incident report, the five named individuals opened business offices in the Indian cities of Mota Voraccha and Puna. At these office locations, the accused had reportedly been offering “high returns and commissions to investors”, local sources said. These allegedly fraudulent schemes were being offered through various local online crypto trading platforms and other websites related to digital assets.

A police officer assigned to the case remarked: 

Majority of investors who lost money in the racket are yet to come forward. We hope that following the registration of the complaint, they will provide details of cheating about the accused to [local authorities].

“Sudden And Prolonged Crash” Warning Regarding Crypto Investments

Other details related to the investigation revealed that the accused had taken 190 investors on tours to Thailand and Singapore – presumably in an attempt to gain their trust.

In early January, Indian authorities warned local residents not to invest in digital assets like bitcoin (BTC) due to the “heightened risk” associated with such speculative investments. The nation’s government said crypto investments weren’t backed by Indian regulators.

An advisory issued by India’s Inspector General of a local police crime branch cautioned that cryptocurrency investments may result “in a sudden and prolonged crash” in which investors could potentially lose all their invested capital.

Report: Swiss Fintech Market Grew by 62 Percent in 2018

The Swiss fintech market grew by 62 percent in 2018, according to a recent study by the Lucerne University of Applied Sciences published on Feb. 27.

The Lucerne University of Applied Sciences undertook an in-depth review of Switzerland’s fintech market for the fourth time. The report dubbed “IFZ FinTech Study 2019” reveals that on a global scale the cities of Zurich and Geneva remain in second and third place for the best cities for fintech, respectively. The fintech sector inside the country grew 62 percent over the previous year.

Per the analysis, Switzerland had 356 fintech companies in 2018, compared to 220 companies one year earlier. The growth is reportedly contingent on fintech distributed ledger (DLT) companies, representing a triple increase in number. More precisely, “of the total of 356 companies, 122 are in Distributed Ledger Technology, 66 in Investment Management, 56 in Banking Infrastructure, 42 in Deposit & Lending, 36 in Payment and 34 in Analytics.”

The research also cites several initial coin offering (ICO) firms in the fintech sector of Switzerland, specifying:

“Overall, a total of $386 million was raised last year from 15 ICOs, a decrease in both the number and volume of this funding. The largest ICO in 2018 was Envion, which received approximately $100 million, followed by Nexo and SwissBorg with $52.5 and $50 million, respectively.”

Number of Fintech companies in Switzerland. Source: The Lucerne University of Applied Sciences

According to a recent report by ICO rating service ICObench, Switzerland became the second top country in terms of the amount of money raised through ICOs in the fourth quarter of 2018, having reportedly raised $238 million.

As Cointelegraph reported earlier this month, the president of the Swiss Crypto Valley Association (CVA), Daniel Haudenschild, declared that the crypto bear market had damaged Switzerland’s position as a global blockchain hub. Haudenschild also noted that “great ideas are being shelved because they can’t find that funding,” further adding that “we need to bridge that by bringing back investors,” and “make Switzerland open and easy for companies to invest in blockchain projects.”

Kraken Exchange Offers $100K Reward for Missing QuadrigaCX Crypto

Crypto exchange Kraken is offering up to $100,000 to anyone who can help solve this year’s biggest blockchain mystery: what happened to QuadrigaCX’s coins?

Kraken announced Thursday it would pay the reward to users who could help it locate the missing funds. Any tips sent to the platform will, in turn, be shared with law enforcement, the company said in a blog post. The reward is payable in fiat or cryptocurrency.

To participate, Kraken is encouraging users to listen to a pair of podcasts that outline both what is already known about QuadrigaCX, the Canadian crypto exchange that collapsed last month, as well as what Kraken’s operators believe happened.

“Kraken is giving up to $100,000 USD (fiat or crypto) as a reward for the tip(s) that best lead to the discovery of the missing $190 million US dollars,” Kraken’s post said.

In fact, according to court filings QuadrigaCX owes roughly 115,000 customers about $137 million in cryptocurrencies and another $53 million in fiat, or $190 million overall (though later filings indicate that there may be additional funds owed, bringing the total as high as $196 million).

The story so far

QuadrigaCX sought protection from creditors following the death of its founder, Gerald Cotten. In court filings, Cotten’s widow, Jennifer Robertsen, said that he was the only individual at the exchange who knew the private keys to its crypto reserves, which were held in cold storage.

Further, while the exchange indicated that the majority of its crypto funds were held in cold storage, it has so far not released any wallet addresses to confirm this.

A cluster of five bitcoin addresses may be associated with Quadriga, according to blockchain analysis, but those addresses only contain roughly 104 bitcoin “inadvertently” sent to cold storage earlier this month.

So far, Quadriga and its court-appointed monitor, Ernst & Young (EY), have unlocked a large chunk of the fiat funds, which were held by various third-party payment processors, after a hearing before the Nova Scotia Supreme Court, which is overseeing the exchange’s case.

Kraken CEO Jesse Powell image via CoinDesk archives

P2P Exchange Hodl Hodl Announces New Prediction Market

P2P Exchange Hodl Hodl Announces New Prediction Market

On Feb. 27, KYC-free cryptocurrency exchange Hodl Hodl announced a new service called Predictions, which will soon be added to the peer-to-peer trading platform. Hodl Hodl believes prediction markets are useful financial instruments within the crypto ecosystem that offer an incentive for those forecasting the specific outcome of an event.

Also read: What Does the Future Hold for Augur’s Prediction Market?

Hodl Hodl Is Adding ‘Predictions’ to Its P2P Multi-Signature Exchange

Peer-to-peer multi-signature trading platform Hodl Hodl will be adding a prediction markets feature this spring. Hodl Hodl is an exchange that doesn’t require KYC verification and utilizes a multi-signature escrow scheme that curbs the possibility of theft and fraud. At the moment, the exchange allows users to trade BTC and LTC, but the founders are considering adding other coins as well. The multi-signature escrow system protects funds during trades by using a P2SH contract, which gives traders the ability to hold keys to funds held in escrow. The latest prediction markets feature will use a similar approach by locking prediction contracts in a 2-out-of-3 multi-signature escrow.

P2P Exchange Hodl Hodl Announces New Prediction Market

Prediction markets are nothing new to the crypto ecosystem. They are used as financial tools that allow participants to create a contract with others and the system rewards the correct prediction after the event has unfolded. For instance, a contract could be created on the outcome of the next U.S. presidential election or someone could attempt to forecast the price of a certain cryptocurrency in 2020. The Augur platform is the leading crypto prediction market which relies on the wisdom of the crowd and its native currency REP. The Hodl Hodl concept utilizes BTC, and its developers claim their implementation “can be called a ‘peer-to-peer’ prediction market.”

“Because each party would lock funds in multi-signature 2-out-of-3 escrow, the oracle, in this case, is going to be sort of distributed: in a perfect case, both parties agree on the outcome, because neither party is able to return the coins locked in escrow unilaterally and, thus, they have nothing to win whatsoever by denying the outcome in favor of the other party,” the developers explained. “In fact, they risk losing their reputation on Hodl Hodl and future prospects for creating contracts.”

The blog post adds:

But even in case of a dispute, Hodl Hodl leaves a chance of interference with its third key, which can be used to sign the transaction in favor of the party, who guessed the outcome — Best part of it is that Hodl Hodl, as always, doesn’t have direct access to the funds and is not actually in possession of bitcoins at any moment.

‘Prediction Markets Do Not Equate to Gambling’

Hodl Hodl further explained that participants will be able to create contracts on things like election outcomes, the price of oil or other assets, and the weather. However, the team will make sure contract conditions are “not illegal or ambiguous.” Offers are pre-moderated, which means the contract creator will have to execute the prediction contract after it’s approved. The founders have detailed that Hodl Hodl’s prediction markets will offer a unique approach to contracts as well, such as offering different odds and a minimum contract volume and offer balance method. For example, the contract’s creator can up the odds by making them 1 to 10 which means the creator locks 1 BTC and the counterparty must lock 10 BTC.

P2P Exchange Hodl Hodl Announces New Prediction Market
A lot of people associate prediction markets with gambling but Hodl Hodl asserts that if contracts and conditions are done in a responsible manner they are a great financial tool.

Hodl Hodl added that they will be informing the public as soon as the prediction markets launch and emphasized that the new feature should not be considered gambling. The developers of Hodl Hodl said that gambling traditionally involves an “instant gratification expectation, fast execution, and randomness.” Whereas the trading platform’s prediction markets will rely on “low-time preference, financial planning, and responsibility.”

What do you think about Hodl Hodl’s prediction markets announcement? Do you think prediction markets and gambling are different or are they the same? Let us know what you think about this subject in the comments section below.


Image credits: Shutterstock, Pixabay, and Hodl Hodl.


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Jamie Redman

Jamie Redman is a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open source code, and decentralized applications. Redman has written thousands of articles for news.Bitcoin.com about the disruptive protocols emerging today.

Ethereum’s Constantinople, St. Petersburg Upgrades Have Been Activated

The Constantinople and St. Petersburg network upgrades for the world’s second largest cryptocurrency, Ethereum’s (ETH), occurred today Feb. 28, according to ethstats.net.

Specifically, the updates went live on the main network at block 7,280,000, in accordance with previously released schedule. Although the upgrade has two names of two originally separated updates, they have subsequently been combined into one.

Per Ethernodes.org, not all Ethereum users have adopted the updates. Only 22.3 percent of Geth and Parity clients are reportedly already running the Constantinople-compliant version.

Constantinople is set to bring multiple efficiency improvements to the platform, including cheaper transaction fees for some operations on the Ethereum network. As previously reported, the Constantinople hard fork was delayed in January due to a newly discovered vulnerability.

The St. Petersburg upgrade is meant to delete a previous update, Ethereum Improvement Proposal (EIP) 1283, from Ethereum’s test networks, since that EIP had been identified to have security vulnerabilities.

In January, major United States cryptocurrency exchanges Coinbase and Kraken became the latest to confirm support for Ethereum’s upgrade. The two exchanges join Binance, Huobi and OKEx, who had started to monitor the event before its first implementation attempt.

At press time, ETH is up 2.59 percent over the day and is trading at around $137.19. The altcoin started the day around $132, according to CoinMarketCap.

Russia Said it Will Regulate Crypto 3 Times in the Past 2 Years, Could it Work This Time?

Russian President Vladimir Putin has issued a fresh order to Russia’s government demanding that they draft and approve a regulatory framework for the crypto industry.

Although this seems like a positive development for the industry, similar orders have been issued on multiple occasions over the past few years to no avail, which calls into question the clout that these orders truly hold within the Russian government.

A Brief History of Russia’s Rocky Relationship with Crypto Regulation

Russia has taken a confusing position on cryptocurrency in the past, as there have been multiple conflicting statement from different regulatory and government officials regarding the status of crypto as a legal form of currency.

Despite this, it appears that the country’s hesitance to accept crypto in its current state stems from fear regarding the unregulated nature of the nascent industry, as there have been multiple occasions over the past few years where Putin, or other government officials, have put forth bills or orders demanding the drafting and approval of a regulatory framework for digital assets.

It is important to note, however, that these aforementioned demands for regulation have been filled with sound and fury and have – thus far – signified nothing.

Starting in late-2017, news broke that Putin was insisting that the country develop a regulatory framework for cryptocurrencies, despite warnings from his finance minister and central bank chief, who both claimed that digital currencies could pose “serious risks” to investors and could be easily utilized by criminals.

At this point in time, it was illegal to pay for anything in crypto or to convert digital currencies to the country’s fiat currency – the ruble.

Fast forward a few months to January of 2018 and the situation became slightly more complex when the country’s Finance Ministry announced that they were working on legislation that would regulate cryptocurrency transactions without fully banning them.

At the time, the finance ministry explained their decision, noting that it would be impractical to try to ban crypto transactions entirely.

“Trades with cryptocurrencies have become so widespread, a legal ban on such activity would lead to the creation of conditions for the use of cryptocurrencies as an instrument to service illegal businesses, launder criminal incomes, and finance terrorism,” they said.

Despite this, one year later in January of 2019, nothing new had occurred with regards to Russia’s regulatory climate, and the aforementioned legislation never came to fruition.

This led to a new round of news regarding regulation in Russia, as Anatoly Aksakov, the Head of the State Duma’s Committee on the Financial Market, proclaimed that his state government would convene to debate the merits of crypto regulation shortly after he made his initial announcement.

Will the Latest Round of Crypto-Related Regulatory Discussions Be Any Different?

During his announcement, Aksakov said that his state’s proposed regulations – which were mainly focused on governance of crypto exchanges and marketplaces – would be adopted in mid-February, but that deadline has been pushed back in the time since.

Yesterday, however, the deadline for federal regulations was once again pushed back, when the government announced that Putin had issued a deadline for the adoption of regulation by July of 2019.

Russia may be coming close to finally regulating cryptocurrencies.

According to the official announcement, the goal of these new regulations is to encourage the development of a digital economy within Russia, which includes regulating “digital assets,” and to attract a greater amount of financial resources aimed at promoting the development of digital technologies.

If this time is different, and the Russian government does actually pass a tangible regulatory framework that encourages the formation of a digital economy based on cryptocurrencies, it would be very positive for the industry as a whole.

Despite this, it is likely that most crypto investors are not holding their breath.

Featured image from Shutterstock.

Crypto Exchange Coinbase Adds Support for XRP on Retail Platform and Mobile Apps

United States major cryptocurrency exchange Coinbase has added support for Ripple (XRP) to its retail platform and mobile apps. The exchange announced the development in a blog post on Feb. 28.

The announcement states that Coinbase’s users can now purchase, sell, convert, send, receive, and store XRP both on Coinbase.com and the Coinbase Android and iOS apps.

As usual, the service will reportedly be available for most jurisdictions, however it will not initially be available for residents of the United Kingdom and the U.S. state of New York.

On Feb. 25, Coinbase announced support for XRP on its Coinbase Pro platform. In the announcement, Coinbase stated that full trading of XRP will be available to customers in the U.S., Canada, the European Union, the United Kingdom, Singapore and Australia, while also planning to expand its services to other countries at a later date.

Following the news, blockchain research firm Diar released a report stating that XRP is violating one of Coinbase’s listing rules. Per the report, in its “Digital Asset Framework,” Coinbase states that “the ownership stake retained by the team is a minority stake,” while  Ripple purportedly holds around 60 percent of the supply in escrow with a release schedule.

XRP has not yet reacted the news, up by just 0.4 percent on the day and trading at around $$0.313 at press time, according to data from CoinMarketCap. The altcoin has seen a major dip today before recovering, having dropped to as low as $0.309 earlier today.

Bittrex Leads $1.5 Million Seed Round in South African Crypto Exchange VALR

Global crypto exchange Bittrex led a $1.5 million seed round in South African trading platform VALR.

Bittrex CEO Bill Shihara told CoinDesk the South African market has “tremendous untapped potential.” Fellow VALR investor Michael Jordaan of Montegray Capital told CoinDesk that VALR’s support for 50 cryptocurrencies will offer the most diverse range of assets of any African exchange when it opens to the public on March 1.

“The VALR team has the potential to change the cryptocurrency landscape in South Africa and globally,” Jordaan said.

VALR co-founder and CEO Farzam Ehsani told CoinDesk that 1,500 users, predominantly South Africans, have already signed up on the exchange’s waiting list and started activating accounts in a closed beta leading up the to launch.

Ehsani said a backend partnership with Bittrex will offer the new exchange global liquidity and competitive prices for crypto-to-crypto trading, while his team works on activating fiat on-ramps with South African banks by summertime.

Ehsani told CoinDesk:

“Companies are not allowed to go and buy [large amounts of] crypto from offshore markets. This makes it very difficult for crypto exchanges in South Africa to access liquidity from international markets. [South Africans] want their hands on a store of value that doesn’t depreciate the way the rand has.”

Over the past decade the South African rand has nearly halved in value. Meanwhile, capital controls restrict citizens from transacting across borders with more than roughly $72,000 worth of foreign assets or currencies.

This contributes to why bitcoin is often sold for a high premium on peer-to-peer exchanges like LocalBitcoins. For comparison, on Tuesday a single bitcoin on LocalBitcoins would have cost more than $4,100 in South Africa compared to the global rate of roughly $3,800.

Yet Marius Reitz, South Africa manager at the longstanding African bitcoin exchange and wallet provider Luno, told CoinDesk that Luno’s user base grew to over 2 million user accounts by early 2019.

“Most of the growth is driven by South Africa,” Reitz said. In fact, a Luno survey of 1,000 local residents found that roughly 167 people said they use bitcoin for payments.

“Specifically in South Africa we see a situation were a lot of people move from elsewhere in Africa to look for jobs and they send money back home,” Reitz said.

As for VALR, Jordaan said Ehsani’s history as the former head of the Rand Merchant Bank’s blockchain initiative and inaugural chair of the South African Financial Blockchain Consortium, which included dozens of traditional financial institutions, could help bridge the gap between African banks and the global crypto economy.

Regional hub

Reitz and Jordaan agreed that cryptocurrency exchanges like VALR and Luno are helping establish standards for the regional market. Plus, the South African Reserve Bank published a paper about prioritizing crypto industry regulation in January. While the daily volumes on incumbents like Luno, established in 2013, still fall shy of $2.5 million according to CoinMarketCap, such companies have a broad impact through their educational conversations about bitcoin with regulators and banks across Africa.

“Because several of the countries around us actually peg their currencies to the rand,” Ehsani said, “if we do well, we have the ability to influence other countries in the region, and Africa as a whole.”

Ehsani added that VALR’s scope reaches beyond South African borders, as the platform’s know-your-customer identity checks accommodate traders from most countries. Similarly, Reitz said Luno is looking to expand to 20 new African countries this year as South Africa’s central bank starts “offering more clarity” and establishes trends followed by other jurisdictions.

Much like global markets, many South African exchange users are speculative traders and investors. However, for Ehsani, remittances to and from members of the African diaspora provide a salient use case because local remittance services are very expensive.

Speaking to the impact that venture capital investment in South African exchanges can have on broader adoption, Ehsani said:

“Cryptocurrency will start bringing communities together through their ability to transact and send value back home much more seamlessly and cheaply than their current options.”

Farzam Ehsani image via VALR

Suspected Crypto-Fueled Money-Laundering Goes 10x In Japan

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Suspected Crypto-Fueled Money-Laundering Goes 10x In Japan

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There has been a massive uptick in the reported cases of possible money laundering on Japanese cryptoasset exchanges, according to reporting by the South China Morning Post (SCMP).

Roughly 7,000 cases have been reported to Japanese police since December, 2018, ten times more than during the period between April and December of 2017. In December 2017, it became mandatory for Japanese exchanges to report suspicious activity.

These findings are consonant with what seems to be a general crackdown in Japan. CryptoGlobe reported late last year that the country’s tax agency announced new requirements for Japanese exchanges.

To wit, exchanges became required in December to produce customers’ identification details, and the agency pledged to pursue traders who had failed to report gains of 10 million JPY (about $90,000) and up.

The SCMP also reported that identification photos used on exchanges had been used multiple times for different profiles. Japanese police say they will begin to train specialists to analyze blockchain transactions, in an effort to find illegal activity.

KYC/AML

Increased scrutiny on crypto is a broad and ever-growing theme in the industry. CryptoGlobe recently reported that peer-to-peer exchange LocalBitcoins will begin complying with a new EU-wide regime of financial laws, that for the first time treat of digital assets.

Once a pillar of anonymous Bitcoin trading, Finland-based LocalBitcoins began to ask for identification data last year, leading to increased interest in more private exchanges like Bisq and HodlHodl.

CryptoGlobe has reported in past months on the implementation of that EU-wide financial regime, the Fifth Anti-Money Laundering Directive (5MLD), which has begun to take effect on the continent.