[co-author: Veronica Reynolds]
Crypto and Blockchain Capital Markets News From UNICEF, Europe and Hong Kong
By: Joanna F. Wasick
On Wednesday, the United Nations Children’s Fund (UNICEF) announced its launch of a newly established cryptocurrency fund, making it the first UN agency that can receive donations and make disbursements in bitcoin and ether without having to convert the cryptocurrencies into fiat currency. The first contributions to the fund will be made by the Ethereum Foundation; the grantees are organizations dedicated to connecting schools around the world to the internet.
Earlier this week, the Swiss-based SIX Digital Exchange announced its collaboration with the central bank of Switzerland (SNB) on a project exploring how digital central bank money can be used in the trading and settlement of cryptocurrencies between market participants. Also this week, trade publication CoinDesk announced a major Swiss-based investment bank’s confirmation that it now accepts transactions on we.trade, a blockchain-based trade finance platform launched in 2018. The bank reportedly stated that the transactions are focused on facilitating services to small and midsized enterprises. And B2C2, a UK-based over-the-counter (OTC) trading platform, has reportedly launched a gold derivatives product that synthetically trades against bitcoin, enabling clients to trade gold priced in bitcoin and settle trades in bitcoin. B2C2 reportedly commented that the product will give clients “access to the underlying metal, since they correspond to ownership of physical gold in vaults.”
On Thursday, the Securities and Futures Commission of Hong Kong (SFC) issued a comprehensive set of regulations focused on funds investing in cryptocurrencies as well as the trading platforms on which the currencies are traded. The new regime essentially closes a regulatory loophole, as neither digital currency funds nor their trading platforms were under the regulatory purview of the Hong Kong Monetary Authority or the SFC. The guidelines also reflect the regulatory differences between Hong Kong and mainland China, where cryptocurrency initial coin offerings and exchanges have been banned since September 2017. Japan also issued guidelines for funds investing in cryptocurrencies in late September.
For more information, please refer to the following links:
Blockchain and Cryptocurrency Payment Applications Introduced Across Jurisdictions
By: Simone O. Otenaike
A U.S. blockchain payments firm and a UK financial technology company made news this week with the announcement of their strategic partnership. The partnership will reportedly enable users to send international payments with end-to-end tracking and visibility into fees, delivery time and status through the U.S. firm’s global blockchain payments network. According to a blog post, the partnership will employ the U.S. firm’s cloud solution and provide access to the UK firm’s network of more than 200 financial institutions. Users will reportedly also have the option to use On-Demand Liquidity, which leverages the digital asset XRP for cross-border payments.
According to recent reports, cryptocurrency exchange Binance now accepts fiat deposits through two popular Chinese mobile payment applications. This move reportedly opens the exchange to peer-to-peer digital asset transactions from China. In other recent international news, a partnership between a leading Spanish bank and blockchain startup Vottun plans to launch a single unified digital payment system powered by blockchain to handle payments for city transportation. The new city transportation application reportedly would leverage a blockchain platform to allow Madrid commuters to centrally access and pay for all different modes of public transportation in the city. In Venezuela, the country’s largest retail chain recently announced the launch of a bitcoin ATM in one of its stores. The retail chain’s bitcoin ATM reportedly only allows customers to buy bitcoin and other digital assets from the machine but does not yet allow customers to trade cryptocurrencies for cash.
For more information, please refer to the following links:
Class-Action Suit Filed Against Bitfinex/Tether, US Enforcement Actions Continue
By: Veronica Reynolds
A class action lawsuit filed on Oct. 6, 2019, against Bitfinex and its sister company, Tether, made waves in cryptocurrency headlines this week. The plaintiffs claim that the defendants manipulated cryptocurrency markets by issuing USDT, a stablecoin that Tether claims is backed 1:1 by US dollars, in amounts that exceeded Tether’s fiat reserves. The lawsuit further alleges that Tether purposefully issued unbacked USDT and the defendants used the USDT to flood the Bitfinex exchange and purchase other cryptocurrencies, thereby artificially inflating demand for cryptocurrencies and creating the “largest bubble in human history.” The suit claims that as much as half of the growth of the cryptocurrency market between 2017 and 2018 was driven by Bitfinex’s and Tether’s “manipulative scheme,” and cites economists and numerous studies. The complaint alleges damages of more than $1.4 trillion related to the crimes of Bank Fraud, Money Laundering, Wire Fraud and more.
Also this week, prosecutors in the United States indicted Ho Jun Jia, who stands accused of Wire Fraud, Access Device Fraud, and Identity Theft for allegedly stealing the identities of multiple parties to gain unauthorized access to cloud computing services, which the defendant then used to run a large-scale cryptocurrency mining operation. At one point, one of the fraudulent accounts constituted a cloud provider’s “largest consumer of data usage by volume.” Ho allegedly racked up in total more than $5 million in unpaid cloud computing services. Ho allegedly executed the scheme by creating false emails and web domains and obtaining personally identifiable information, all used to execute a sophisticated social engineering campaign that gave him access to retail cloud provider accounts.
Late last week in San Antonio, Texas, a federal judge sentenced 30-year-old Alaa Mohammed Allawi to 30 years in prison for using cryptocurrencies to sell narcotics, including fentanyl, on the dark web. Allawi was ordered to pay a $14.32 million judgment based on the profits he generated by operating the criminal enterprise, as well as forfeit property worth around $28,000, multiple firearms, over $21,000 in cryptocurrency and his rights to a coffee and tea franchise.
On Oct. 2, 2019, the Securities and Exchange Commission announced a final judgment against PlexCoin proprietors Dominic Lacroix and Sabrina Paradis-Royer, who were ordered to pay nearly $7 million for selling unregistered securities to the public during an unlawful Initial Coin Offering (ICO). The ICO lured investors by disseminating false and misleading information about the size of the company’s operations, how the money raised would be used, and the amount of funds that were raised. The money judgment reflects a disgorgement of monies received by the parties, as well as civil penalties.
And finally, yet another asset-backed token issuance has come under regulatory scrutiny. Karatbars, a German company that previously sold gold products online, raised $100 million in 2018 through an ICO selling KaratGold Coins (KBCs), a cryptocurrency supposedly backed by gold. There has been no independent verification that the tokens are, indeed, backed by gold. The company announced plans to launch a second ICO in December 2019, this time for the launch of a coin connected to a “cryptocurrency bank” in Miami. This put the company on the radar of the Florida Office of Financial Regulation, which is currently investigating Karatbars.
For more information, please refer to the following links:
Incidents of Ransomware, Cryptocurrency Hacks and Malware Continue
By: Robert A. Musiala Jr.
According to reports late last week, another ransomware attack has hit the U.S. The attackers encrypted the file systems at three hospitals and demanded cryptocurrency as payment to provide the decryption keys. Medical staff at the hospitals were reportedly “forced to switch to a manual paper system to track patient data while their systems were down.” According to a report published in early October, “[i]n the first nine months of 2019, at least 621 government entities, healthcare service providers and school districts, colleges and universities were affected by ransomware.” The report estimates the total losses from these attacks at $5 billion.
In another hacking incident reported this week, the cellphone of an executive at a blockchain investment firm was hacked, resulting in the loss of $1 million to $2 million in cryptocurrencies. Separately, a malware attack was reported this week that involves a relatively simple botnet that has reached an estimated 2,000 devices per week since December 2018 in a phishing scam. Victims who open a malicious file attached to a phishing email enable the malware to steal cryptocurrencies stored in hot wallets on the victim’s device.
In a final item of note, last week a “high-severity security vulnerability” was reported in Tendermint Core, the consensus engine of the Cosmos blockchain interoperability platform. According to reports, an update patch has been released, and all validators and service providers on Tendermint-powered networks have been advised to update their software.
For more information, please refer to the following links:
