New Cryptocurrencies Announced, Difficulties Integrating Crypto With Banks Persist
By: Simone O. Otenaike
According to recent reports, a leading social media network and a global messaging firm will each launch their own cryptocurrency over the next year, allowing users to send cryptocurrency across international borders through their respective messaging systems. The social media network’s cryptocurrency reportedly will be pegged to the value of a basket of different foreign currencies, rather than just the U.S. dollar. The global messaging firm’s cryptocurrency will operate like a traditional cryptocurrency, with fluctuating values and a decentralized design. Meanwhile, Tether has announced plans to launch a new cryptocurrency backed one-to-one by U.S. dollars in partnership with the Tron Foundation. Tether currently offers a cryptocurrency for the bitcoin and ether blockchains that is tied to the U.S. dollar.
TrustToken recently announced a new feature available to traders of the firm’s TrueUSD cryptocurrency. TrustToken will partner with an accounting firm to offer traders real-time confirmation that TrueUSD is backed by real-world value. The new service aims to make this information for collateralized cryptocurrencies available quicker and may set a new standard for tokenized assets in the future. Medici Ventures recently announced that its portfolio company Bitt will use blockchain technology to pilot a digital version of the Eastern Caribbean Central Bank’s (ECCB) dollar across the Eastern Caribbean Currency Union. The ECCB is the third-largest monetary union in the world. Bitt’s pilot will offer the digital EC dollars to the public in phases. The company’s ultimate goal is to use blockchain technology to provide banking options to countries in the Eastern Caribbean region and ultimately stimulate economic growth and financial access.
The difficulties faced by cryptocurrency companies in gaining access to banking services was the subject of two news reports this week. One report noted that many large financial institutions refuse to work with cryptocurrency companies due to the banking industry’s rigid know-your-customer and anti-money laundering policies. The report noted that a compliance and monitoring system that meets these standards but also accommodates the distributed network structure will be expensive – and most banks conclude that the risk isn’t worth the reward. Another report noted that despite Malta’s bid to bring more blockchain firms to the country, Maltese financial institutions are reluctant to service these firms and are willing to open accounts only for firms that are able to secure a Malta Financial Services Authority (MFSA) license. The MFSA aims to issue its first licenses for registration as VFA Agents under Malta’s Virtual Financial Assets Act within the first quarter of the year. Access to banking was also at issue in a recently introduced bill in California. The new law would allow cannabis companies to make tax payments in cryptocurrency to facilitate electronic payments without traditional banking services and reduce the vast amounts of cash that end up in state tax offices.
Finally, a major online payments processor and Blockstream’s co-founder and CEO made news this week by supporting the Bitcoin Lightning Network through participation in a transaction on what has become known as the Lightning Torch. Separately, despite U.S. sanction concerns, the Lightning Torch also made it to Iran early this week. The capacity of the Bitcoin Lightning Network reportedly surpassed $2 million in December of last year.
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International Market Developments, New Blockchain Reporting Tools Announced
By: Diana J. Stern
Following our previous reporting on SIX Group, the Swiss stock exchange operator continues to expand its cryptocurrency-related listings. On Tuesday, trading commenced for its third cryptocurrency-based exchange-traded product (ETP) listing, Amun Ethereum ETP. Coindesk reports that the firm backing the ETP issued a prospectus for its cryptocurrency-based ETPs late last year, stating that the products are not subject to the Swiss Federal Act on Collective Investment Schemes or to the Swiss Financial Market Supervisory Authority FINMA. Separately, SIX selected R3’s Corda Enterprise platform to provide the infrastructure for its new digital trading platform, which is set to launch in the second half of the year. Also in Switzerland, blockimmo, Elea Labs and Swiss Crypto Tokens claim to have completed the first set of blockchain-based transactions for a tokenized Swiss property in Zug, also known as “Crypto Valley.” A recent report by the Lucerne University of Applied Sciences found that the Swiss fintech market grew 62 percent in 2018. The number of “distributed ledger companies” increased threefold and accounted for 34 percent of that growth. At the same time, the data revealed a cooling off in the ICO market.
The Thai Securities and Exchange Commission issued a press release regarding its updated list of cryptocurrencies eligible for ICO investment of base pair trades: BTC, ETH, XRP and XLM. The Commission emphasized that the announcement does not certify the cryptocurrencies’ legal status in any way. In other news, SWIFT, the Singapore Exchange, four major banks and a securities software provider have partnered up to trial a blockchain proof-of-concept for proxy voting. Additionally, this week a Big Four accounting firm unveiled its Crypto-Asset Accounting and Tax (CAAT) tool. The software helps institutional and individual clients alike consolidate data and generate reports for tax returns related to crypto-asset transactions. Finally, according to a recent study, worldwide blockchain solution spend is forecast to be almost $2.9 billion in 2019, compared with $1.5 billion in 2018.
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Updates on QuadrigaCX, New Reports on Crypto Crimes From Public and Private Sectors
By: Marc D. Powers
The court-appointed monitor of defunct Canadian cryptocurrency exchange QuadrigaCX has reported that six cold wallets supposedly holding $100 million of customer cryptocurrencies for 115,000 accounts at the exchange held only $400,000 in digital assets. At the time of the sudden death of QuadrigaCX’s founder, the exchange was supposedly holding over almost $200 million in customer funds and cryptocurrencies. There are various theories as to what happened to the customers’ coins. Cryptocurrency exchange Kraken recently offered a $100,000 reward for assisting in the recovery.
The Department of Justice in its February 2019 Journal of Federal Law and Practice focused on cybercrime and cyber threats. Of note was an article on “Attribution in Cryptocurrency Cases” and how best to prove criminal charges, despite the fact that these transactions are generally considered anonymous. Among its many findings, the report noted the challenges in proving attribution because of the way cryptocurrencies function, and stated it was key for prosecutors to understand blockchain and explain it clearly to juries. A Big Four accounting firm recently issued a report linking Iranian nationals behind the bitcoin ransomware scheme SamSam to the crypto exchange WEX. SamSam is ransomware demanding bitcoin that reportedly damaged multiple U.S. companies, government agencies, universities and hospitals. According to the report, within 34 months the hackers managed to extort over $6 million in bitcoin and caused over $30 million in losses. By analyzing the wallet addresses and emails used by the perpetrators, the accounting firm was able to link the Iranians to the WEX exchange and the SamSam scheme. In addition, another recent report from a cybersecurity firm provided details on yet another cryptocurrency mining malware scheme, detected in a program commonly used to run operating systems.
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