U.S. policymakers should not attempt to deter Bitcoin’s tech
U.S. congressman McHenry, who represents North Carolina’s 10th District, urged that American authorities should not stifle the new technology in a tweet on Oct. 31.
According to the official, policymakers should facilitate the development of new technologies. McHenry reiterated his previous bullish sentiments about Bitcoin, stating:
“The world that Satoshi Nakamoto envisioned, and others are building, is an unstoppable force. As policymakers, we should not attempt to deter this technology, but instead ask ourselves: what are we doing to meet the challenges & opportunities of this new world of innovation?”
Bitcoin has big potential in protecting privacy
Rep. Davidson outlined Bitcoin’s potential to protect online privacy, retweeting Cointelegraph’s article on Bitcoin’s whitepaper turning 11 years old. The congressman stated:
“Eleven years ago, this anonymous white paper opened up infinite possibilities for technological innovation and #privacy protections. It’s time the US harnesses this potential and establishes a framework for American #blockchain innovators.”
Earlier in October, Davidson suggested that Facebook adding Bitcoin to its native crypto wallet Calibra would be a “way better idea” than launching their own cryptocurrency Libra.
In a blog post on Oct. 31, major U.S. crypto exchange and wallet service Coinbasepointed out that Bitcoin’s adoption has been developing much faster than other transformative technologies such as email and television. The exchange wrote:
“The television set was invented in 1927 but by the end of the 1940s only 2% of American families owned one. Bitcoin, on the other hand, went from an idea in 2008, and a first transaction in 2009, to over 27 million users in the US alone in 2019, or 9% of Americans.”
According to a survey last spring, as much as 11% of the American population owned Bitcoin as of April 2019.
A look at the history of the mysterious firm Crypto Capital and its ties to Bitfinex as court cases brew.
Over the past week, news broke detailing that Oz Yosef, an executive of the mysterious firm Crypto Capital, has been indicted by the United States for conspiracy to commit bank fraud and conspiracy to operate an unlicensed money transfer service.
The news came just days after Crypto Capital’s president, Ivan Manuel Molina Lee, was arrested by Polish authorities on suspicion of laundering roughly $350 million worth of funds from illegal proceeds and having ties to a transnational drug cartel. According to local reports, the arrested was tied to $350 million worth of funds previously seized by the Polish Ministry of Justice from Crypto Capital’s Polish subsidiary, Crypto Sp. z. oo.
Crypto Capital is a Panama-based firm that the U.S. Department of Justice claims provided shadow banking services to several cryptocurrency exchanges, including Bitfinex, Binance, Cex.io, Coinapult and QuadrigaCX.
On Oct. 25, Stuart Hoegner, general counsel to Bitfinex, issued a statement responding to Lee’s arrest asserting that Bitfinex was the victim of fraud perpetrated by Crypto Capital. The statement also rejected accusations that proceeds from narcotics allegedly laundered by Crypto Capital were associated with the exchange.
Relations deteriorate between Bitfinex and Crypto Capital
Crypto Capital’s partnership with Bitfinex has garnered significant scrutiny in recent months, with the exchange claiming that the liquidity issues had been triggered by an inability to access $880 million worth of its funds that were being held by Crypto Capital.
Last week, Bitfinex filed with a California court to subpoena the former vice president of TCA Bancorp, Rondell Clyde Monroe, with the exchange asserting that Monroe held information relating to its funds held by Crypto Capital.
Bitfinex claims that its partnership with Crypto Capital began to deteriorate in April of last year, following reports indicating that Polish authorities had seized roughly $350 million from an account belonging to Crypto Capital subsidiary Crypto Sp. z. oo. with Bank Spółdzielczy w Skierniewicach.
Bitfinex subpoenas Crypto Capital representative
In the subpoena, Bitfinex alleged that TCA Bancorp provided banking services to Crypto Capital, asserting that the firm had “used one or more accounts held at TCA Bancorp to facilitate the transfer of funds.”
Bitfinex holds that in August 2018, Crypto Capital informed the exchange that approximately $500 million of Bitfinex’s funds were being “held up” by authorities in Poland and Portugal. When pressed to provide evidence of the frozen funds, Bitfinex was issued a reference letter signed by Monroe stating that more than $300 million worth of Bitfinex’s funds were being held with TCA Bancorp by Global Trade Solutions AG, operating as Crypto Capital.
The filing requested the court for permission to accept Monroe’s deposition testimony. Bitfinex believes that Monroe possesses key information relating to the funds that were in the custody of Crypto Capital, with the exchange also seeking to obtain communications between Monroe and Crypto Capital.
Additionally, Bitfinex sought documentation of Monroe’s communications with Yosef and his sister Ravid Yosef, as well as Global Trade Solutions shareholder Reginald Fowler and his son Trent Fowler. Both Reginald Fowler and Ravid Yosef have been indicted by the Department of Justice for alleged bank fraud relating to a cryptocurrency exchange intermediary.
Bitfinex is also the subject of an ongoing investigation by the New York State Office of the Attorney General for failing to disclose that it was unable to access the $880 million in funds and that it had used a loan from sister company Tether to both continue operating and conceal the losses.
Crypto Capital’s past
Crypto Capital has been in operation since 2013, with Braveno’s Mathias Grønnebæk claiming that Reddit user u/bitfan2013 was the firm’s founder. In May 2013, u/bitfan2013 posted to the r/Bitcoin subreddit, probing the community sentiment regarding a proposed bank that would comprise a means to convert between BTC and fiat currency, in addition to providing services to companies operating in the crypto sector.
The poster asserted that his family and he sat on the board of directors for four “small – medium sized private banks” in Panama. The following week, u/bitfan2013 announced that they had decided to “offer private international banking to bitcoin customers, merchants and traders.”
In June 2013, Crypto Capital (then operating under the name Crypto Financial) launched, and then conducted what it called an initial public offering to raise 30,000 BTC through Panama-based Havelock Investments in August 2013. By 2015, Crypto Capital had attracted several notable exchanges as clients, providing services to Bitfinex and Coinapult, among others.
Bitfinex depended on Crypto Capital amid banking difficulties
Bitfinex’s affiliation with Crypto Capital became the subject of scrutiny in 2017, with the exchange directing its customers to deposit funds to accounts held by Crypto Capital subsidiaries following the Wells Fargo termination of banking services to Bitfinex via its Taiwanese partners in March 2017.
Stuart Hoegner, general counsel for Bitfinex and Tether, stated that the exchange expanded the number of accounts held with Crypto Capital throughout 2017 and 2018, as the platform became increasingly reliant on Crypto Capital for the processing of fiat services.
During November 2017, Bitfinex began directing customers to deposit funds into Crypto Sp. z. oo.’s account with Bank Spółdzielczy w Skierniewicach in Poland. The director of both Crypto Capital and Crypto Sp. z. oo. is Ivan Manuel Molina Lee, a Panamanian who appears to have acted as a nominee director for many Panama-based companies.
Crypto Capital accounts seized in April 2018
In April 2018, Polish authorities seized $371 million from an account held by Crypto Sp. z. oo. with Bank Spółdzielczy w Skierniewicach in Poland for alleged ties to Colombian cartel operations.
At the time, an individual posting on the Bitcoin.pl forum claimed to have been questioned by Polish police “regarding the case of Crypto Sp. z. oo.” as a result of having previously received funds from Bitfinex via the intermediary.
Bitfinex denied the alleged ties to the accounts seized and claimed that its operations were “unaffected” by the events. Crypto Capital accounts that had been operated on behalf of the now-defunct website Backpage were also seized in a sex-trafficing bust by authorities in April 2018.
Crypto Capital rebrands to Global Trade Solutions
After partnering with ING, Bitfinex recommenced directing customers to deposit fiat using accounts held by Crypto Capital subsidiaries, including the Swiss-based Global Trade Solutions via Portuguese bank Caixa Geral de Depositos in February 2018.
By the third quarter of 2018, accounts held by Global Trade Solutions were used to facilitate fiat transactions for Bitfinex via multiple U.S. banks, including Citibank, HSBC and Enterprise Bank & Trust.
In June 2018, Crypto Capital dissolved and liquidated itself, and has since been operated by Global Trade Solutions. Amid the restructuring, it became apparent that Crypto Capital had purchased a software engineering firm that was founded in 2001, which is presumed to be the basis for the “2001” branded on Global Trade Solutions’ logo featured on its website.
Tensions rise between Bitfinex and Crypto Capital
In chat logs documenting communications between Bitfinex executive “Merlin” and Crypto Capital’s “Oz” that were provided to the New York State Office of the Attorney General for its investigations, Bitfinex appears to have desperately sought to access its funds held by Crypto Capital from August 2018 onward.
On Aug. 15, 2018, Merlin stated: “Hey Oz, sorry to bother you every day, is there any way to move at least 100M […] ? We are seeing massive withdrawals and we are not able to face them anymore unless we can transfer some money out of Cryptocapital.”
On Oct. 15, 2018, Merlin pleaded with Crypto Capital to provide Bitfinex with funds, warning that “too many withdrawals” were “waiting for a long time,” and that a failure to respond “could be extremely dangerous for […] the entire crypto community,” adding, “BTC could tank to below 1k if we don’t act quickly.”
On Oct. 17, Merlin stated that Bitfinex “urgently” needed $100 million in “either Tethers or USD” within one week. The next day, Merlin told Crypto Capital: “Too much money is trapped with you and we are currently walking on a very thin crust of ice.”
Bitfinex among several parties affected
Crypto Capital’s fallout affected a number of cryptocurrency exchanges. In December 2018, Crypto Capital customer Coinapult announced that it was “experiencing issues” and that “withdrawals may take longer than usual.” The statement was the last made by the company, and it is currently unclear whether or not the exchange is still operational.
The now-defunct QuadrigaCX was also a client of Crypto Capital, with the exchange losing access to $190 million of its customers’ funds. Before the exchange’s collapse, Hanin asserted that the platform’s transactions were not being processed by Crypto Capital due to issues with its Taiwanese banking partner.
In May of this year, Minnesota Vikings’ investor and football entrepreneur Reginald Fowler was charged alongside Global Trade Solutions shareholder Ravid Yosef for operating an unlicensed money transmitting business on behalf of cryptocurrency exchanges.
According to the indictment, Fowler and Yosef have access to $345 million held in various international bank accounts, including accounts owned by Global Trade Solutions. Crypto Capital had also processed transfers on behalf of Bitfinex using Portuguese companies co-owned by Fowler in February 2018.
China’s Xi Jinping is pushing his government to adopt blockchain-enabled technologies as the country gears up to release its own CBDC.
Recently, the National People’s Congress in China cleared a new law that will allow local authorities to start regulating all of the country’s cryptography-related activities starting from Jan. 1, 2020. By creating a new regulatory framework, the Chinese government is looking to establish a uniform standard for mainstream application of cryptographic techniques and the management of passwords and other sensitive data.
The initial proposal for the law was published all the way back in May. At the time, the rough draft focused quite strongly on government-centralized password management and did not mention crypto-related matters in detail, although, it is believed that this very law will be used by Chinese officials to govern their upcoming national CBDC (Central Bank Digital Currency) — even though there is no official timetable for the launch.
Additionally, on Oct. 24, President Xi Jinping called on his country’s tech community to accelerate their efforts in blockchain adoption as a core for digital innovation. These comments were made during a Politburo Committee session that was focused solely on blockchain technology and its utility across various industrial domains. A translation of Xi’s remarks during the session reads:
“We must take blockchain as an important breakthrough for independent innovation of core technologies, clarify the main directions, increase investment, focus on a number of key technologies, and accelerate the development of blockchain and industrial innovation.”
However, Xi’s apparent willingness to adopt blockchain comes against the backdrop of China’s long-standing aversion to cryptocurrencies — with the nation having banned initial coin offerings (ICOs) as well as all activities relating to digital currency trading a couple of years back.
What does this mean for the global crypto community?
To get a better understanding of the fallout from these developments, Cointelegraph reached out to Daniel Popa, the founder and CEO of Anchor — a crypto-based platform that aims to solve transparency and liquidity issues. He told Cointelegraph:
“President Xi Jinping recognizes the inevitability of blockchain technology integration across industry verticals and wisely seeks to place China in a leadership position when it comes to the development, application, and regulation of cryptocurrencies and blockchain-based products.”
Similarly, Alexey Ermakov, the CEO of crypto-centric banking service Aximetria, believes that while the United States and Europe are actively resisting crypto-backed innovations, other countries have begun to realize the potential behind the technology. Ermakov told Cointelegraph:
“We reach a completely different geopolitical level when competition arises not between companies and state regulators, but between global leaders, as we see with the latest announcement by China’s President Xi Jinping who wants to take a leading position in the blockchain industry. The competition between political leaders in the fintech industry will sparkle with completely new colors, benefiting all those states that contribute to development, and not resist it.”
Further expounding his views on the subject, Ermakov believes that Switzerland, a country that has created the most hospitable framework for fintech startups and actively leads matters related to crypto regulation, will most likely be one of the first states to benefit as adoption continues to increase.
What exactly does the new law entail?
As mentioned previously, China’s newly passed law does not deal exclusively with cryptocurrencies but rather discusses a host of specialized concepts related to cryptography. Simply put, the law deals with three core tenets:
— Core and Common Cryptography: This relates to matters associated with cryptographic tools and systems that are designed to protect state secrets and other state-significant objects of informational interaction.
— Commercial Cryptography: This aspect covers matters related to cryptographic systems that are meant to be used for protecting commercial information.
— Legal Liability: This aspect of the new legislation seeks to determine and define the responsibility that arises in cases where an intentional or unintentional use of a commercial cryptographic product or service (that has not been verified) is discovered.
In regards to the matter, Ermakov pointed out to Cointelegraph that the Chinese government’s approach is basically that each crypto token or coin will have to rely on a cryptographic system that is certified by a sanctioned regulatory body.
He suggested that in the worst-case scenario, the setup might be a hierarchical one, where the highest certification authority will consist of preselected Chinese officials — which basically means that at any time, any token could be confiscated by the government.
Does China’s upcoming CBDC pose a threat to the U.S. dollar?
Over the past month, Facebook Founder and CEO Mark Zuckerberg has been reiterating that the launch of China’s much-talked-about CBDC will spur the country’s superiority across the digital currency landscape and put the United States dollar at risk. On the subject, Zuckerberg was quoted as saying:
“China is moving quickly to launch a similar idea in the coming months. We can’t sit here and assume that because America is today the leader that it will always get to be the leader if we don’t innovate.”
However, the Facebook CEO’s comments have largely been viewed by the global crypto community as being a ploy to push his company’s very own stable coin offering — Libra. Andrew Rossow, attorney and cybersecurity professor told Cointelegraph that Facebook already has a full plate of issues when it comes to security measures and data collection methods, and therefore assessing whether the allegations are supported by documented fact is extremely difficult.
“By not allowing one group to control or arbitrarily change the rules, decentralized cryptocurrencies and applications provide a powerful tool for checks and balances, to protect the system from malicious actions.”
Additionally, according to Ermakov, there are many groups currently vying to consolidate their control over blockchain — something that goes against the very essence of what the technology stands for.
Popa also feels that a Chinese cryptocurrency (or even Libra) would not have enough power to greatly affect the U.S. dollar or any other sovereign currency for the simple reason that neither are likely to offer any superior advantages in terms of stability, preservation of purchasing power, or as a hedge against volatility.
That said, Popa believes that China fully realizes that many of the world’s top economies are currently engaged in a “currency race” akin to the U.S. vs. Russia space race during the 1960s. In this regard, he added:
“The world power that succeeds in adopting a stable digital currency that is easy to exchange across borders and can be used as a value peg for other currencies will lead the 21st-century global economy.”
However, Brian Young, CEO of Cuvia Labs blockchain platform, is of the mindset that a Chinese cryptocurrency issued by its central bank could pose a credible threat to the reserve currency status currently enjoyed by the U.S. dollar.
He told Cointelegraph that this is a Sputnik moment for the Federal Reserve, since China seems to have a substantial lead and has the necessary governmental control to ensure widespread adoption. Edwards then added that the U.S. needs to fast-track the launch of Libra or the consequences will be catastrophic:
“This should be followed by the creation and issuance of sensible regulations and compliance requirements to allow US entrepreneurs and investors to engage with regulatory certainty. Finally, the Fed should layout a clear roadmap to the crypto-USD. A roadmap would create FUD in the market and slow down the competition.”
President Xi is a blockchain advocate now
After Xi made his pro-blockchain comments, the crypto market lit up as the price of Bitcoin soared by just over 25%, reaching close to the $10,000 mark.
Felix Shipkevich, an attorney and principal of Shipkevich PLLC, told Cointelegraph that Xi’s sudden support for blockchain technology is logical, given the imminent launch of the digital yuan:
“This statement is a positive one, as blockchain has the power to change how currency and even society functions, providing an anonymous, peer-to-peer, highly accountable transaction, while it is decidedly counterintuitive coming from China.”
However, the fact still stands that the crux of cryptocurrencies is the idea that they are free from government control. By creating a digital yuan and passing the new law, it seems as though China’s current goal involves further modernization and getting ahead of the blockchain/cryptocurrency curve while laying the groundwork for future economic success.
China-based mining titan Bitmain Technologies has discreetly filed an application for an Initial Public Offering with the United States Securities and Exchange Commission.
China-based mining titan Bitmain Technologies has discreetly filed an application for an Initial Public Offering (IPO) with the United States Securities and Exchange Commission (SEC).
According to an Oct. 29 report from Tencent News citing anonymous “informed sources,” German multinational Deutsche Bank is sponsoring the application. The amount sought to be raised by the offering has not been specified.
Deutsche Bank reportedly sponsoring the application
Tencent News further reports that the IPO plans have been dominated by Bitmain co-founder Jihan Wu and Chief Financial Officer Liu Luyao.
To bolster chances of success, the firm has purportedly hired Zheng Hua, former Nasdaq representative for China, as a consultant to the firm.
The SEC’s review process will reportedly entail three rounds of inquiries and last an estimated minimum of 1-2 months.
A further unnamed industry source, reportedly familiar with the SEC’s listing procedures, told Tencent:
“The SEC has no biased position toward the blockchain business, but is rather concerned about professional and technical issues.”
The source claimed that the company’s connection to the Bitcoin (BTC) fork Bitcoin Cash (BCH) is likely to be the largest obstacle facing the application.
Industry onlookers will remember Bitmain’s earlier, ill-fated attempt to file a major $3 billion IPO on the Hong Kong Stock Exchange in September 2018, which lapsed after multiple controversies this March.
This week has been another eventful week for Bitmain with Jihan Wu revealing that fellow co-founder Micree Ketuan Zhan had left the company amid signs of internal company drama.
On Oct. 28, rival Chinese mining firm Canaan Creative filed for an IPO with the U.S. SEC to raise $400 million, eyeing a listing on Nasdaq under the ticker CAN.
Earlier this month, Bitmain opened what it claims is the “world’s largest” facility for Bitcoin mining in Rockdale, Texas.
Chinese cryptocurrency mining giant Canaan Creative has filed for an initial public offering with the U.S SEC to raise $400 million.
Chinese cryptocurrency mining giant Canaan Creative has filed to be a publicly-traded company in the United States.
On Oct. 28, Canaan Creative filed for an initial public offering (IPO) with the U.S. Securities and Exchange Commission (SEC) to raise $400 million, while planning to be listed on the Nasdaq under the ticker CAN.
Canaan reportedly filed a $200 million IPO draft request with the U.S. regulators in July, but the formal F-1 form was not made public until today.
If successful, Canaan, which is one of the three major Chinese crypto mining companies alongside Bitmain and Yibang International, could become the first China-based mining firm to be publicly traded in the U.S.
Bitmain already filed to list an IPO with the U.S. SEC in June 2019, following the expiration of its IPO listing application with the Hong Kong Stock Exchange in March.
According to the SEC filing, Canaan generated $394 million in revenue in 2018, with a net income of $8.3 million. However, the designer and manufacturer of Bitcoin mining machines has experienced a total comprehensive income loss of $45.8 million in 2019.
Canaan competitor opens the “world’s largest” mining farm
Canaan’s biggest competitor Bitmain opened what it claimed to be the world’s largest facility for Bitcoin (BTC) mining in Rockdale, Texas, which was completed thanks to a collaboration with the Rockdale Municipal Development District and Canadian technology firm DMG Blockchain Solutions.
Clinton Brown, Rockdale lead project manager for Bitmain, said that the facility’s launch is “significant to Bitmain’s global expansion plans” and that the state’s stable and efficient energy resources will be fundamental to supporting what he believes is set to be the inevitable scale of growth of the mining industry.
Stablecoin operator Paxos is launching its settlement platform for U.S.-listed equity securities after receiving a no-action relief from SEC.
Paxos Trust Company announced today that it is set to introduce its Paxos Settlement Service for a number of United States-listed equity securities.
In an Oct. 28 press release, digital asset trust company Paxos stated that it is moving forward with the launch of its blockchain-based settlement platform, having received no-action relief from the U.S. Securities and Exchange Commission (SEC).
The SEC letter indicated that the agency will not take any action against Paxos, which means the company can now proceed with the roll-out of its settlement platform.
Two European banks, Credit Suisse and Société Générale, will be among the first to utilize the live application of the blockchain-enabled product for U.S. equities, where the two parties will be able to bilaterally settle securities trades directly with each other. Charles Cascarilla, CEO and co-founder of Paxos, stated:
“We’re starting with U.S. listed equities, but this technology can be scaled to many asset classes across geographies and for all types of clients.”
At the beginning of September, Paxos launched PAX Gold (PAXG), a gold-backed Ethereum token, claiming that it is “the first crypto-asset redeemable for physical gold.” A few days later, the stablecoin received a regulatory nod of approval from the New York State Department of Financial Services, with the government body referring to PAXG as the first gold-backed digital currency to become eligible for trading in the state of New York.
Kraken adds support for PAX Gold
Just today, the San Francisco-based cryptocurrency exchange Kraken announced that it is listing PAXG. The users of the exchange will be able to deposit, withdraw and trade the asset starting Oct. 29. Kraken will roll out trading pairs between PAXG and Bitcoin (BTC) and Ether (ETH), as well as with fiat currencies such as the euro and the U.S. dollar.
Libra considering the use of fiat-pegged stablecoins for its basket while navigating through a wave of negative criticisms from regulators.
Amid the regulatory storm facing Libra, the project’s hierarchy is looking to change one important detail of the payment system: using fiat-pegged stablecoins rather than a token supported by a basket of national currencies. The Libra Association says such considerations are part of efforts to create a more agile payment platform.
Meanwhile, the furor over the controversial Libra has begun to take a more political undertone, both within and outside the United States. Arguments for and against the project now seem to include issues surrounding the trade war between the U.S. and China.
In Europe, China’s response to Facebook’s crypto project (the creation of yuan-pegged digital currency) and Libra itself, have sparked some commentators calling on the European Central Bank to adopt a digital currency for the EU. In some ways, it appears Libra has ignited a new currency war, one that might take place in the digital realm, with several counties floating their own central bank digital currencies (CBDCs).
For Libra, the regulatory hassle might constitute only part of its trouble, as the project could face stiff competition from payment giants, especially in China and other parts of Asia. Some of these payment companies are already identifying Libra as a potential competitor ahead of its launch.
Single Libra token or individual fiat-pegged stablecoins?
As previously reported by Cointelegraph, David Marcus, the co-creator of Libra and head of the Calibra wallet, said the project is open to using various fiat-pegged stablecoins rather than its original idea of creating a token. In its white paper, Libra proposed that its token would be supported by a basket of various national currencies. In a statement shared with Cointelegraph, Dante Disparte, the Libra Association’s head of policy and communications, remarked:
“The Libra Association is committed to pursuing responsible innovation in open collaboration with applicable regulators and stakeholders, to ensure the public interest is always protected and remains at the heart of this project. We have a long launch runway by design and are actively engaged with regulators and policymakers around the world.”
Such a move could change the nature of the project drastically, as Libra will be presenting itself as a payment gateway that utilizes digital versions of national fiat rather than a new currency supported by a basket of fiat deposits. For one, its original idea would likely have meant the existence of a private exchange rate mechanism that is firmly in the control of the Libra Association.
In a conversation with Cointelegraph, Randolf Zhao, vice president of operations at cryptocurrency derivatives trading platform BaseFEX, remarked that the move signals Libra’s intention to smoothen some of the regulatory wrinkles hampering the project:
“If you tie your stablecoin to USD, such as Tether, you are not undermining the dominance of USD because people still consider it as a virtual version of USD that is backed by USD reserves companies like Tether possess. But if your coin is backed by a basket of fiat currencies, you are introducing something whose percentage of USD dependency is much less than a USD-backed stablecoin, which is, in essence, challenging the dominance of USD.”
For Zhao, governments around the world will be hard-pressed to allow a project like Libra to operate, considering the vast userbase commanded by Facebook that counts more than 2 billion users across the globe.
Regulatory scrutiny and loss of banking relationships
Earlier in October, a couple of U.S. senators sent cautionary letters to Stripe, Mastercard, Visa, and other U.S.-based early backers of Libra. An excerpt from one of these letters reads:
“If you take this on [being a member of the Libra Association], you can expect a high level of scrutiny from regulators not only on Libra-related payment activities but on all payment activities.”
As previously reported by Cointelegraph, PayPal pulled out of the Libra Association at the start of October. Other early backers like Visa, eBay, Mastercard and Stripe have also announced their exit from the project. Meanwhile, none of the current Libra backers have yet made any financial commitment to the association.
Facebook CEO Mark Zuckerberg spent more than six hours on Oct. 23 responding to several questions from members of the U.S. Congress. The grilling was the latest in a series of appearances by Facebook and Libra before U.S. lawmakers concerning regulatory issues surrounding the project.
As reported by Cointelegraph, Facebook’s role within the Libra Association was one of the major talking points of the hearing. Amid the barrage of questions, Zuckerberg declared that Facebook would have to quit the Libra Association if it fails to secure the green light for the project from U.S. regulators.
Reaffirming its commitment to complying with regulatory provisions, Libra’s Disparte told Cointelegraph, “From the beginning, we’ve said we’re committed to taking the time to get this right,” and went on to say that the publication of a white paper was intended to kickstart a dialogue with the regulators and policymakers, adding that:
“As a member of the Libra Association, we will continue to be a part of this dialogue to ensure that this global financial infrastructure is governed in a way that is reflective of the people it serves. Facebook will not offer Libra through its Calibra wallet until the Association has fully addressed regulators’ concerns and received appropriate approvals.”
For Disparte, the Libra Association is working to ensure that the project adheres to global best practices in the payments industry. As part of the statement to Cointelegraph, Disparte said:
“Our goal is a digital payment system that replicates or exceeds current standards for consumer protection, financial stability, and the prevention of money laundering and illicit finance — while preserving national sovereignty over monetary policy.”
To this end, Disparte said the Libra Association will continue to liaise with regulatory agencies from around the world, adding, “We look forward to collaboration with applicable policymakers on a path forward that addresses their questions and concerns.”
Meanwhile, regulatory concerns might not be the only problem for Libra and its partners. According to Ralph Hamers, the head of Dutch global financial behemoth ING, Facebook might lose valuable banking relationships due to its involvement with Libra.
As reported by Cointelegraph, Hamers indicated that banks could consider cutting services to Facebook if it launches the Libra project. The ING chief remarked that banks may choose not to be associated with Facebook once Libra comes online due to money laundering concerns.
Potential for global Libra adoption
Even if Libra obtains regulatory approval, the project still has to contend with achieving widespread adoption in the electronic payment market. For Vikram R. Singh, managing director at enterprise blockchain firm Antier Solutions, Libra could claim a significant market share in the international remittance scene. In an email to Cointelegraph, Singh observed that the world is currently lacking a banking unicorn, adding that:
“All in all, it [Libra] will be a major disruption and the challenge to the status quo of the state’s authority over its money which will force them to redefine themselves by accepting the change. Consumers will win whichever way it goes; this is for sure.”
In major markets like China, Libra may find breaking into the payment market to be a daunting task due to Facebook’s involvement in the project. Zhao of BaseFEX, commenting on Libra’s prospects in China, remarked:
“Alipay and WeChat Pay both achieved wide adoption through their parent company’s massive promotion efforts and the pre-existent penetration of the corporate’s other services — for Alipay that’s Taobao and TMall, for WeChat Pay it is WeChat. So, unless Facebook can launch something in China and make it a killer app here prior to the launch of Libra, I really don’t see similar success coming for Libra.”
Zhao believes that Libra’s problem in China also has a lot to do with its association with Facebook. Commenting on the matter, the BaseFEX executive said: “Facebook has been out of the picture in China for a long while. Only China’s tech and internet industry talk about Facebook and for the 99.9% population, it is irrelevant.”
Several stakeholders within the banking sector have also come out to dismiss the Libra project. JPMorgan Chase CEO Jamie Dimon recently described Libra as a “neat idea that will never happen.”
Prelude to the CBDC wars?
Amid the ongoing talk surrounding the Libra project, the idea of governments creating their own digital currencies continues to be a recurring conversation. At the Oct. 23 hearing before Congress, Zuckerberg declared that China had stolen the lead from the U.S. in digital currency innovation. An excerpt from an official statement issued by Zuckerberg to Congress reads:
“China is moving quickly to launch a similar idea in the coming months. We can’t sit here and assume that because America is today the leader that it will always get to be the leader if we don’t innovate.”
Indeed, there have been reports that Beijing is looking to release its own CBDC — a yuan-pegged digital currency — with some commentators speculating that the move is part of the country’s efforts to block Libra. However, there have been conflicting statements regarding the level of work already completed on the project.
Oct. 24 did see a flurry of news from China, with the country’s president, Xi Jinping, calling for accelerated adoption of blockchain technology. China has also passed its first-ever “crypto law,” which will reportedly go into effect at the start of 2020. Some commentators, including Dovey Wan of Primitive Ventures, say these moves are part of the modalities for the emergence of China’s national digital currency. Zhao of BaseFEX told Cointelegraph that the proposed digital-yuan is still a work in progress:
“The main driving force at this moment is a working group inside the People’s Bank of China (PBoC). It is more like an internal think tank, within the Central Bank. What that group says represents only what they think, not what the entire People’s Bank of China thinks. But allowing this small working group to say things publicly on a regular basis does indicate PBoC’s favorable stance upon this China-crypto.”
However, Zhao maintained that it would take more than the recommendations of a PBoC working group to engineer something like a national digital currency in China. According to Zhao, the introduction of a national cryptocurrency would be a very big deal for the entire nation, and therefore the PBoC will by no means decide on such a move by itself. Zhao also added:
“People who don’t know how Chinese government departments function and work with each other tend to over-react to such news, which is unfortunately very much the case for the English-speaking crypto community.”
CBDCs for all, including Libra
Nevertheless, these reports seem to have been sufficient to spook some stakeholders within the EU. Bruno Le Maire, France’s finance minister, recently called on the European Central Bank to begin working on creating its own digital currency in response to China’s efforts.
Despite identifying the apparent threat of China’s CBDC efforts, Le Maire and other EU policy stakeholders aren’t keen on Libra, tagging the project as having severe implications for the monetary sovereignty of countries in the EU. Both France and Germany have expressed a desire to prevent Libra from operating in Europe.
For some members of the U.S. Congress, however, the fears surrounding China’s reported digital currency project is much ado about nothing. After the Oct. 23 Libra hearing, Rep. Maxine Waters, who is the chair of the House Financial Services Committee, dismissed Zuckerberg’s implication that the U.S. is lagging behind in terms of digital innovation.
Dovey Wan, co-founder of crypto investment holding firm Primitive Ventures, tweeted a screenshot of the stock market boom in the domestic blockchain sector, noting that “as expected, almost ALL (over 100) blockchain-related Chinese A-shares hit the daily upper limit (10% intraday gain)”:
Blockchain firm A-shares on the Chinese stock market. Source: Dovey Wan
A blockchain arms race
Meanwhile, on global markets, Chinese firms such as the Shenzhen Xunlei Networking Technologies Co. soared 107.76% to $4.82 — its highest daily rise since its listing on Nasdaq in 2014, according to the Global Times.
Today, Oct. 28, Wan has also voiced her concern following reported news that:
“China Merchant Bank just announced invested in BitPie, the Bitcoin wallet with longest history and most users back in China … Tho it’s a non-custodial wallet there can be a non-zero chance …. [redacted]”
Blockchain platform Tron (TRX), formerly under intense scrutiny from Beijing, has gained almost 25% on the TRX/USD charts over the 24 hours to press time.
Readers might recall that Mark Zuckerberg had last week attempted to fuel lawmakers’ concerns about a prospective cryptocurrency and fintech arms race between the United States and China, in a bid to seal their approval for the development of Facebook’s Libra stablecoin.
Here is a list of where and how to secure ownership rights for businesses and real estate through a blockchain.
The use of blockchain to cement ownership rights for real estate and business has been ongoing since 2016, when the technology was first used to organize new forms of registries and registration of transactions. The blocks are used to record information onto the blockchain system, which can then certify the process of transfer of ownership of the property or entity.
This process excludes intermediaries that collect commissions in the process of, for example, conducting real estate transactions while also lowering the risk of fraud. Specialized blockchain platforms can prevent data forgery and simplify the process of checking real estate objects or business debts before deals take place.
That is why, in 2016, the National Agency of Public Registry of Georgia launched a blockchain project on land management with the Bitfury Group. In 2017, the State Land Cadastre of Ukraine switched to the Exonum platform for private blockchains, which is also supported by Bitfury.
The latest move came in early October this year in the United Arab Emirates, as the Department of Economic Development of Dubai announced a transition to a blockchain-based platform for the single enterprise market. The platform is designed to increase the convenience of doing business in Dubai and enable agents to obtain a license for managing trade licenses and corporate clients.
Thus, governments of different states are increasingly participating in, or encourage the creation of registries and are looking to record ownership through the blockchain. So, here is a list of countries where registries are either piloted or already used.
In the U.S., blockchain has been interacting with the real estate sector for some time now, and different companies are trying to occupy this attractive niche. In 2014, major U.S. retailer Overstock.com began to accept BTC payments and founded its subsidiary Medici Ventures to invest in blockchain projects. One of the venture’s projects was Medici Land Governance, which has been developing a global land blockchain registry since 2018.
Medici Land Governance uses blockchain and other technologies to support land management, appropriation and administration through a reliable public registry of land ownership. The project currently operates in the U.S., Zambia, Rwanda, Mexico, and St. Kitts and Nevis, where memorandums of understanding have been established with local governments.
Another Californian blockchain-based real estate company, Propy, aims to connect buyers and sellers through smart contracts in a peer-to-peer system that enables users to acquire properties completely through the blockchain, fully avoiding paperwork and mediation. This is useful for global real estate transactions, where various national laws confuse the process.
In January 2018 in South Burlington, U.S., the project began pilot tests for the purchase and sale of real estate, and in March 2018, the company conducted the first real estate transaction completed on a blockchain in the U.S. without any intermediaries or signing of physical papers. The government of Vermont accredited and registered the deal on a smart contract that exists in the form of an electronic QR code containing all the necessary data on ownership rights.
In Delaware, where over half of all publicly traded U.S. companies are registered, state representatives announced in summer 2018 that they plan to launch conceptual proof for a blockchain-based business filing system that will allow corporations to take advantage of smart contract technology for automatically tracking stocks and securing assets in real time. Previously, Delaware had signed a contract with IBM to develop an electronic distributed ledger based on the Hyperledger Fabric blockchain structure.
The Swedish land-ownership authority Lantmäteriet began testing blockchain technology in 2016 in cooperation with telecommunication company Telia, consulting firm Kairos Future and blockchain company Chromaway. As a result, a pilot project was presented to develop future real estate transactions by using smart contracts that aimed to significantly reduce the time it takes to sign contracts, register a deal and ultimately sell a property.
The project consists of three steps, with the first one being an experiment to demonstrate the technology’s potential. On March 30, 2017, the second stage ended with the release of a report that showed how the preparation of smart contracts automates the processes of cadastral operations.
To conclude a sale and purchase transaction, the buyer and seller do not need to use a notary. It is enough to provide digital signatures that are checked automatically. The third phase was to enable the actual transfer of land rights. On June 2018, developers completed the first successful transaction on the platform.
Swiss blockchain startup Proxeus joined with IBM Switzerland, Canton Zug and Swisscom in April 2018 to create the first register based on blockchain technology.
The project shows how a variety of parties, such as an entrepreneur, lawyer, bank, notary and commercial register can digitize their workflows through the use of IT systems integrated into banks and the commercial registry, which already exist with the Hyperledger blockchain and smart contract.
The project was a part of the Digitalswitzerland Challenge, a joint initiative of several leading Swiss companies aimed at stimulating the digitization efforts across the country and creating an alternative to the cumbersome process of registering a business in Switzerland.
In the fall of 2018, the National Land Registry of Great Britain — Her Majesty’s Land Registry (HMLR) — decided to use blockchain for maintaining land cadastre, announcing plans to digitize its data. The plan was called Digital Street and should take up to five years to complete.
The use of the technology should simplify the record-keeping process for ownership of land and real estate. The blockchain will protect this information, making it possible to avoid unnecessary bureaucracy. In April 2019, HMLR announced that the prototype blockchain was used to sell a house in Kent.
The process, which included the sale of the duplex in Gillingham, Kent, was designed to show how to buy and sell a house as easily and quickly as possible by demonstrating a digital transfer of ownership.
The Russian state program called “Digital Economy” launched in 2017, which included making use of blockchain technology in the public sector. The Ministry of Economic Development and the Government of Moscow plan to jointly implement a pilot project on the use of blockchain technology in the real estate registry.
Transferring an existing real estate registry to the blockchain will mean that all the data on any property will be made available to interested parties, including a full list of past owners as well as the debts and persons registered to the property. The next step should be the transfer of sales contracts in the form of smart contracts, which cannot be changed retroactively.
The Federal Service for State Registration, Cadastre and Cartography (Rosreestr) was one of the first to register an equity agreement in this way in 2018. In the future, blockchain will be used in interactions between the Rosreestr with the Foundation for the Protection of the Rights of Participants in Shared Construction, where property developers pay insurance premiums.
The representative of Rosreestr explained that a larger project for recordinging all Moscow’s real estate transactions on a blockchain was also in the works, but is still being organized past its initial launch date of January 2019.
In March 2019, IBM and the National Council of French Commercial Court Secretaries announced the development of a corporate registry solution based on blockchain technology.
A blockchain network will be used by clerks working in commercial courts throughout France and will provide additional transparency and efficiency through improved management of legal transactions related to the life cycle of companies. The network also allows the sharing of a single version of the truth between court clerks and provides tracking of notifications related to changes in legislation.
The government of Japan began to find ways of implementing real estate transactions into blockchain back in 2017. Different ministries and real estate companies in Japan have their own real estate databases, which the government opted to unify.
Pilot testing of the state blockchain-based real estate registry began in summer 2018 in several cities across the country. If successful, the Japanese government will fully transfer the state registry of real estate to the blockchain over the next few years.
In April 2017, the U.S. company Ubiquity LLC announced that it is collaborating with the land registrar offices of two Brazilian municipalities by recording land ownership information on the Bitcoin blockchain.
The company implemented this pilot project together with the Brazilian real estate registry Cartorio de Registro de Imoveis in the municipalities of Pelotas and Morro Redondo. According to project developers, the ongoing pilot program aims to move away from paper records to a 100% digital solution.
The U.S. remains a challenging environment for centralized cryptocurrency exchanges, with major players significantly scaling back their operations and others heading for the door. The most recent casualty of America’s stringent regulatory climate is one time market-leader Poloniex, which has “spun out” from parent company Circle, spinning out of the U.S. market in the process and leaving a void for other exchanges to fill.
Poloniex Heads for the Door, Other Exchanges Enter
Until fairly recently, American citizens could freely trade hundreds of digital assets across exchanges such as Bittrex, Poloniex, Bitfinex, and Binance. Those options have been rapidly whittled down, however, as centralized exchanges have been forced to either exclude the U.S. altogether or render the majority of their assets off-limits to traders east of the Atlantic.
Following a buyout from an Asian investment group, Poloniex will continue to operate internationally, but U.S. customers will be forced to cease trading from as early as November 1. Binance and Bittrex have also been given pause to reconsider their American strategies, vastly reducing the number of trading pairs available to customers in the USA. As centralized exchanges continue to struggle with regulation and red tape, the market seems primed for alternative solutions such as decentralized exchanges and token swapping protocols that aren’t so easily cowed by regulators. It’s a lucrative space which new players are actively seeking to exploit.
The Decline of Centralized Exchanges
American traders find themselves particularly ill-served by centralized exchanges. Not only do they have fewer platforms to trade on, but the available options are severely crippled and a poor reflection of the true state of the crypto market in 2019. Poloniex has officially hit the iceberg and is abandoning ship, Bittrex is severely wounded and a shadow of itself. Coinbase, Kraken and the relaunched Binance US are all options, but each has limitations due to a need to appease regulators, resulting in a sub-optimal experience. Coinbase is more truthfully a brokerage in any case, Kraken is struggling to innovate in the strict regulatory climate it finds itself in, and Binance US is possibly the least satisfying iteration of the exchanges, providing only a fraction of the trading pairs enjoyed by customers elsewhere.
U.S. traders are effectively operating with one hand tied behind their back while being force-fed the decaf soy milk latte of crypto. For those who want to enjoy full mobility and to drink in the “full fat” experience, two practical options remain: VPN or DEX. In the case of the Binance DEX, U.S. customers would need to use both, firing up a VPN to connect to the DEX, which defeats at least one of the reasons for choosing a decentralized exchange in the first place. Moreover, should an exchange find that U.S. customers are illegally accessing it, it could potentially freeze funds, which presents another headache.
From a legal perspective, a DEX is bound by the same rules and regulations as any centralized exchange, but if it is decentralized enough to have no formal company structure, U.S. regulators are largely powerless to act. Quite simply, if a DEX can be accessed from the U.S. then it can be traded upon. Of the existing options, Uniswap and Bancor are the leading Ethereum-based candidates, in terms of UX certainly, but also with regards to liquidity. Bancor has cracked the liquidity problem through the use of liquidity pools that enable conversion between tokens through the use of multiple smart contracts. Cotrader has built a DEX on the Bancor protocol that promises a “free, open source, unrestricted portal into the Bancor network,” enabling anyone, anywhere to trustlessly trade ERC20s.
Can’t Poloniex the DEX
Decentralized exchanges have been a long-held dream of the crypto community, but until recently, the drawbacks of using one mostly outweighed the benefits. Now the tide is finally turning as decentralized trading matures and key players become more adept at meeting customer expectations. The user experience has been greatly improved, order matching is faster, and slippage has been minimized through plugging into multiple liquidity pools.
Further, the very nature of decentralized exchanges means they cannot be easily censored and stopped. Without a central point of attack, DEXs avoid the vulnerabilities inherent to centralized exchanges, including being at the mercy of U.S. regulators. Now ever greater numbers of Ethereum DEXs are emerging including Nash, which bridges Ethereum and NEO, Loopring’s Dolomite DEX, and Dex.blue. There are also P2P platforms such as local.Bitcoin.com which enable users to swap BCH without the need to deposit funds.
Another decentralized exchange which has opened to the sort of fanfare you would expect from a John McAfee project is McAfeeDex. As one of crypto’s most prominent and colorful characters, McAfee is certainly more than capable of getting the word out on his latest venture, but whether his eponymous DEX will fill the vacuum left by centralized exchanges remains to be seen.
It would be naive to think that decentralized exchanges can replace their centralized counterparts at this point in time; the fact that most DEXs are native to one blockchain only means the tech isn’t even capable of supporting seamless trading of multi-chain assets; wrapped workarounds such as WBTC are the closest substitute, currently. For U.S. traders craving the full trading experience, a combination of top 20 assets on centralized platforms and the long tail of ERC20s on decentralized protocols is about as good as they’re gonna get.
Which centralized and decentralized exchanges do you think will gain market share in the US? Let us know in the comments section below.
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