[co-author: Jordan Silversmith]
Paying with Crypto: Where to Use Your Crypto and the Recent Surge in its Value
By: Panida A. Pollawit
You may be able to use cryptocurrency to pay for your next vacation. Bitrefill, a Sweden-based company, recently began offering gift cards that can be purchased with bitcoin, ether, dash, litecoin and even dogecoin. These gift cards can be exchanged for more than 750 products, including booking a place to stay in the U.S. on a popular alternative-to-hotel website. Once at your destination, you can also buy or renew your favorite streaming subscription using cryptocurrency through Bitrefill. Other businesses that have recently begun to accept bitcoin as payment include a five-star hotel in Switzerland and a state-run transportation system in Argentina. Starting in April, Innisfil, Ontario, will allow its residents to pay property taxes using bitcoin.
A recent report by DataLight highlighted an advantage that the Bitcoin network may have over other electronic payment systems. According to the report, the average bitcoin transaction volume was $41,615 during the period studied. In comparison, major credit card and other online payment providers averaged less than $100 per transaction. The report concludes that the Bitcoin network may be more suitable for larger international payments due to its smaller fees.
This competition has not discouraged payment systems from investing in blockchain technology. A prominent Internet payment company recently announced an investment in Cambridge Blockchain, a company working on digital identity solutions. The purpose of the investment will be to support research into verifying a customer’s identity during a financial transaction while limiting the company’s access to their personal information.
On Tuesday, April 2, 2019, there was a large jump in the value of 1 BTC by more than $1,000. According to Bloomberg, one culprit for this sudden price increase may have been algorithmic cryptocurrency trading software used by one or more hedge funds to automatically execute a $100 million trade in bitcoin across three cryptocurrency exchanges. In other cryptocurrency exchange news, on March 26, 2019, Zero Hash, a subsidiary of Seed CX, launched its over-the-counter trade settlement services, providing for spot settlement of digital assets. Zero Hash’s new service will increase the number of counterparties firms can trade with and promises to streamline the reconciliation, reporting and settlement of trades.
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SEC Issues Digital Assets Guidance, Blockchain Regulations Evolve in U.S. and Abroad
By: Jordan R. Silversmith
Earlier this week, the SEC’s FinHub, a branch that helps facilitate the SEC’s engagement with new and evolving forms of securities, released a much-anticipated framework for analyzing whether a digital asset is a security. FinHub’s stated purpose for releasing the framework is to help individuals and corporations in the digital currencies realm that are looking to comply with federal securities laws. The framework came too late to help the executives of cryptocurrency startup ATBCoin LLC, who were recently ordered by a New York federal judge to face a proposed shareholder class action accusing them of selling unregistered securities at the company’s initial coin offering, or ICO. Judge Vernon Broderick of the Southern District of New York rejected the company’s attempt to dodge the suit, finding that the putative class adequately demonstrated that ATBCoin and its two executives plausibly violated federal securities laws. The evolution of the cryptocurrency world from the Wild West to a highly regulated industry has affected crypto companies in other ways, with the Wall Street Journal reporting that only about $118 million has been raised through ICOs in the first quarter of 2019, more than 58 times less than the $6.9 billion that was raised over the same period in 2018. And with Congress having already proposed 12 virtual currency bills in 2019, the increasing regulation of the cryptocurrency industry looks set to continue.
Regulation also continues to evolve overseas. The Malta Financial Services Authority announced earlier this week that it had issued in-principle approvals for 14 virtual financial assets (VFA) agents that applied for registration in November 2018. The VFA agents will work to protect the integrity of Malta’s markets pursuant to the country’s Virtual Financial Assets Act. According to a new framework from the State Bank of Pakistan, Electronic Money Institutions will have to meet certain requirements to be licensed by the government. The new requirements will reportedly apply to cryptocurrencies. Pakistan decided to introduce these rules to encourage innovations in payments to promote “financial inclusion” the State Bank of Pakistan said in a statement.
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South Korean Exchange Is Hacked, Canadian Law Enforcement Takes Action, Sanctioned States Continue Cryptocurrency Use
By: Joanna F. Wasick
Bithumb, South Korea’s largest cryptocurrency exchange, recently lost nearly 20.2 million XRP (about $6.2 million at that time) and 3 million EOS (about $12.5 million) in what appears to be a series of illegitimate withdrawals conducted by an insider. The exchange suspended withdrawals and deposits on the platform after the hack was noticed. This would be the exchange’s second major attack in roughly a year. A new report from cybersecurity firm Group-IB described a new generation Trojan horse malware, “Gustuff,” which uses “web fakes” that look like regular apps and phish for sensitive data (usernames, passwords, etc.) through push notifications. Group-IB warned that users of cryptocurrency and banking apps are particularly targeted and that using third-party app stores increases risk of exposure.
Law enforcement in Canada has recently been active in the cryptocurrency space. The Canadian police froze the assets of the founders of Vanbex, a blockchain services company, as part of a fraud investigation into the company’s 2017 ICO, which raised $22 million through the sale of a token called FUEL. According to court papers, Vanbex told investors that FUEL’s value would increase dramatically, but in actuality, the company developed no usable products and conducted the ICO solely for its own financial benefit. No criminal charges have been filed to date. Separately, a Toronto judge ordered the forfeiture of about 280 bitcoin (now worth $1.4 million) from an online drug dealer who allegedly used cryptocurrency to purchase arms and illegal narcotics on the dark web. This may be Canada’s largest-ever forfeiture of bitcoin to date.
Use of bitcoin by Hamas and North Korea was also in the news this week. According to reports, Hamas recently issued a new video that advises how to acquire and send bitcoin to unique, individualized addresses. Previously, donors were told to send all funds to one specific bitcoin address. The new method apparently makes it harder for law enforcement to identify and track donations and their donors. According to another recent report, in addition to cryptocurrency exchange hacks and cryptocurrency ransom malware, North Korea may also be orchestrating fraudulent ICO’s as a means of attempting to steal cryptocurrency to fund military operations.
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Blockchain Developments for Telecoms, Food Supply Chain and Related Standards
By: Simone O. Otenaik
Late last week, a leading research company released a report on blockchain in the global telecommunications industry. The report forecast that the telecommunications market will likely grow at a CAGR of 77.9 percent during the forecast period and reach $1.37 billion in revenue by 2024. According to the report, North America will likely dominate the blockchain in the telecommunications market during the forecast period due to the high presence of key players offering solutions for the industry. Rising security concerns, demand for fraud management and 5G implementation are reportedly key factors driving the growth of blockchain in the telecommunications industry. According to a separate digital enterprise report released this week, 61 percent of high-profile digital companies worldwide are investing in blockchain. The report surveyed 1,050 IT, security and engineering purchasing decision-makers from global companies with at least $1 billion in revenue.
On Monday, a multinational Swiss food technology firm revealed two blockchain-based food safety products. The firm currently processes 70 percent of the world’s chocolate, 65 percent of the world’s grain products, and 30 percent of global rice and pulses. According to reports, storing this food safety data on the blockchain allows stakeholders to monitor and verify decontamination status during an outbreak with a high degree of certainty in seconds. In other supply-chain industry news, a nonprofit organization that develops and maintains global data standards for business communication announced that two of its supply-chain pilots are gearing up for full launch in November 2019. The first initiative is a traceability/recall mandate by a leading global retailer with their suppliers of green leafy vegetables; and the second is an initiative within the pharmaceutical industry to support new government regulations surrounding salable returns.
The International Association of Trusted Blockchain Applications (INATBA), which aims to implement data standards for the blockchain industry, officially launched this week. INATBA brings together blockchain and Distributed Ledger Technology (DLT) industry stakeholders (e.g., startups, policymakers, international organizations and regulators) and aims to develop a framework that promotes public and private sector collaboration, regulatory convergence, and legal predictability, and ensures the system’s integrity and transparency. INATBA’s goal is to facilitate the mainstream adoption and scale-up of blockchain and DLT across multiple sectors.
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