Chinese Central Bank Governor Defines STOs as ‘Illegal Financial Activity in China’

Chinese Central Bank Governor Defines STOs as ‘Illegal Financial Activity in China’

The People’s Bank of China (PBoC), the country’s central bank, highlighted the illegality of Security Token Offerings (STOs) in the country, English-language local news outlet South China Morning Post (SCMP) reports Dec. 9. A deputy governor of China’s central bank, Pan Gongsheng, reportedly told a summit in Beijing “that ‘illegal’ financing activities through STOs and ICOs [Initial Coin Offerings]  were still rampant in the mainland despite a nationwide clean-up of the cryptocurrency market last year.” Gongsheng also said that if the government had not stepped in, the chaotic crypto market could have hurt the overall financial stability in China. The central bank official pointed out that “the STO business that has surfaced recently is still essentially an illegal financial activity in China.” Gongsheng also reiterated the stance that cryptocurrencies are associated with crime: “Virtual money has become an accomplice to all kinds of illegal and criminal activities.” According to the article, Gongsheng noted that “most of the financing operations conducted through ICOs in China were suspected of being illegal fundraising, pyramid sales schemes and other financial fraud.” The article also mentions that the chief of the Bureau of Financial Work, Huo Xuewen, warned against STOs about a week ago. He said: “I want to warn those who are promoting STO fundraising in Beijing. Don’t do it in Beijing. You will be kicked out if you do it.” On the other hand, blockchain adoption — the tech behind most cryptocurrencies — has been relatively embraced in China. As Cointelegraph recently reported, a Chinese Internet Court has started using blockchain to protect the intellectual property of online writers. The legal basis of this development can be assumed to be the Chinese Supreme Court’s ruling from September, which established that blockchain can legally authenticate evidence.

South Korean Startup Presto to File Constitutional Appeal Against Local ICO Ban

South Korean Startup Presto to File Constitutional Appeal Against Local ICO Ban

A South Korean blockchain startup, Presto, will reportedly file a constitutional appeal over the county’s ban on Initial Coin Offerings (ICOs), South Korean economic media outlet Sedaily reports Dec. 6. Presto claims on its website that it provides a “total solution to development teams from website building to token issuing.” The startup was reportedly trying to run a Decentralized Autonomous Organization-based Initial Coin Offering (DAICO) in South Korea for the first time. As Cointelegraph explained in a dedicated guide, DAICOs aim to improve the ICO fundraising method by integrating some features of Decentralized Autonomous Organizations (DAOs). This fundraising method enables users to use smart contracts to vote for a refund of the funds if they stop trusting the developers or lose faith in the project, Sedaily notes. As Cointelegraph reported, South Korea banned all ICOs in September last year. Sedaily reports that Presto’s CEO and founder, Kang Kyung-Won declared that the startup has “been hitting a snag as the government and the National Assembly have done nothing over the last one year since the government’s blanket ban on ICOs.” He then announced their intention to file a constitutional appeal: “We will ask the court to rule on the ICO ban and the legislature’s nonfeasance.” Sedaily explains that according to Presto, the ban infringes on “people’s freedom of occupation and property and equal rights and scientist’s basic rights.” Kyung-Won said that given the fast pace of technological development that came with the fourth industrial revolution, “such unconstitutional and pre-modern measures as the ICO ban should not exist any longer.” South Korea’s stance to crypto regulation stands in clear contrast with other countries like Malta. As Cointelegraph reported in July, Malta has been acclaimed as “the blockchain island” after the local parliament approved three bills that gave the crypto industry unprecedented legal clarity. The Maltese government is also reportedly working on an artificial intelligence (AI) strategy of which the ultimate objective is to “explore a citizenship test for robots in the process of drafting new regulation for AI.” That being said, South Korea recently overtook the Maltese crypto exchanges daily trading volume in November according to a CryptoCompare report. In the document, analysts suggest that the reason behind this shift are “competitions, trans-fee mining and rebate programs.”

Why You Shouldn’t Fear the Blockchain Regulators

Why You Shouldn’t Fear the Blockchain Regulators

Kevin Werbach is a Professor of Legal Studies & Business Ethics at the Wharton School at the University of Pennsylvania, and the author of “The Blockchain and the New Architecture of Trust,” from which this article is adapted. _______ In 2015, New York became one of the first jurisdictions in the world to adopt a regulatory regime for cryptocurrencies. The Department of Financial Services began requiring virtual currency businesses to obtain a “BitLicense” in order to operate or serve customers in the state. “We want to promote and support companies that use new, emerging technologies to build better financial companies,” said then-New York Superintendent of Financial Services Ben Lawsky, when announcing the rules. He continued: “Regulators are not always going to get the balance precisely right…. But we need to begin somewhere.” Perhaps. Yet Lawsky picked the wrong somewhere. And he moved fast to formalize rules governing what was still, in 2015, a small-scale and fluid cryptocurrency community. Bitcoin entrepreneurs and technologists argued that the threat of overbroad regulation, and the costs of compliance, would chill startup activity. More than 4,000 comments were filed on the draft rule, most of them critical. And when the regulations went into effect, a substantial number of Bitcoin-related startups left New York, including the exchanges Kraken, Shapeshift, Bitfinex, and Poloniex. “The ‘Great Bitcoin Exodus’ has totally changed New York’s Bitcoin ecosystem,” declared the New York Business Journal. Three years after the Great Bitcoin Exodus, the crypto-native exchanges have not rejoined the New York startup scene. But other firms have. R3, the financial industry distributed ledger consortium with over $100 million in funding, is headquartered in New York. As one might expect, so are a number of finance-focused blockchain startups such as Digital Asset Holdings, Symbiont, and Axoni. Pillars of Wall Street such as Goldman Sachs, JPMorgan, and the parent company of the New York Stock Exchange are getting into the action. And the activity is not limited to financial services. Consensys, a venture development studio building around Ethereum technology, grew from 100 to over 400 employees during 2017 alone in its Brooklyn headquarters, and is working on dozens of innovative projects around the world (though it recently announced significant layoffs). Blockstack, a high-profile startup hoping to build “a new internet…

The Era of Central Bank Digital Currencies Is Within Reach

The Era of Central Bank Digital Currencies Is Within Reach

Kevin Rutter is the research lead at R3. _________ “CBDC, not bitcoin” is the new “blockchain, not bitcoin.” Since 2014, discussions of a publicly accessible digital payment vehicle issued by a central bank have matured significantly. Central bank digital currencies (CBDCs) have been the center of many high-level discussions, notably at the Bank for International Settlements (BIS) and the International Monetary Fund (IMF). The breadth of reports from experienced central bankers validates blockchain technology in a way that crypto-anarchists, armchair blockchain economists, and even millennials that got smoked by buying cryptocurrencies last Thanksgiving (2017), can collectively be proud of. However, the cruel reality is that consumer adoption of new retail payment innovations is often difficult – whether that innovation is magic internet money or new Sacagawea U.S. dollar coins. Further, just as payment habits with physical cash, credit card, or cell phone use varies from country to country, different regional consumer preferences regarding anonymity, fees or interest payments would persist with a digital manifestation of “physical cash.” New technologies are cool, but the road to adoption is treacherous – history is littered with the decomposed debris of failed payment innovations that did not provide what consumers wanted. Approaches in Brazil Successful and wide-scale CBDC implementation would require architects to consider consumer demand, payment habits, and preferences within a particular country – possibly resulting in idiosyncratic design decisions. Adding to the growing discourse on the topic, in a recent research report for R3, JP Koning evaluates what a CBDC might look like if it were to be issued by the central bank of Brazil, the world’s eighth largest economy. While this paper anchors the analysis through specific treatment of the Brazilian market, many of the design decisions that central banks (or private sector companies on behalf of central banks) would have to make can be generalized to other economies as well. Building on his earlier work, JP questions whether CBDCs should be in bearer form or account-based, whether they should be private like physical cash or have identities tied to transactions (and to what extent), and whether CBDCs should pay interest or not. He presents three potential high-level archetypes for a CBDC: a cash-like digital bearer instrument; an account at the central bank; or a hybrid…

SEC Fines Crypto Fund $50K and Issues Cease-and-Desist

SEC Fines Crypto Fund $50K and Issues Cease-and-Desist

The U.S. Securities and Exchange Commission has ordered fund manager CoinAlpha Advisors LLC to pay a $50,000 fine following what it deemed to be an unregistered securities sale. According to the order published Friday, CoinAlpha formed a fund in October 2017 with the goal of investing in digital assets. It reached out to possible investors, raising a bit more than $600,000 during the process. While CoinAlpha did file a “Notice of Exempt Offering of Securities,” the company was not eligible for an exemption and did not otherwise register with the SEC. As such, it effectively solicited securities investors in breach of the law, the order says. Further, the agency said that the company did not run adequate know-your-customer procedures to ensure that all of its investors were accredited, though it did hire a third-party to check accreditation status after the SEC first contacted it. The order notes that CoinAlpha reimbursed all fees to its investors after being contacted by the SEC, saying: “A total of 22 investors invested a total of $608,491 in the Fund. In October 2018, after being contacted by the Commission staff concerning the issues herein, CoinAlpha unwound the Fund, pursuant to the authority granted in the Fund’s Limited Partnership Agreement.” Notably, the order highlights that CoinAlpha cooperated with the SEC, and the regulator in turn is only imposing sanctions that it negotiated with the company. These sanctions include barring CoinAlpha from violating the Securities Act in the future and a $50,000 penalty paid to the SEC, on top of the reimbursements. According to the filing, CoinAlpha didn’t admit to or deny the allegations put forward by the agency. The SEC’s response echoes similarly light repercussions for other entities in the space, including startups Airfox and Paragon and EtherDelta founder Zachary Coburn. While each of those firms or individuals was found to have violated securities laws, the SEC in each case explained that they had cooperated with its investigation, and imposed relatively low penalties for each. CoinAlpha did not respond to a request for comment by press time. SEC image via Kristi Blokhin / Shutterstock

Bitcoin, Ripple, Ethereum, Stellar, Bitcoin Cash, Bitcoin SV, EOS, Litecoin, TRON, Cardano: Price Analysis, Dec. 7

Bitcoin, Ripple, Ethereum, Stellar, Bitcoin Cash, Bitcoin SV, EOS, Litecoin, TRON, Cardano: Price Analysis, Dec. 7

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you should conduct your own research when making a decision. Market data is provided by the HitBTC exchange. The selling in cryptocurrencies dragged the total market capitalization down to about $106 billion on Dec. 7. The crypto market has lost more than 87 percent of its value from the high achieved in late 2017. The latest leg of selling gained traction on the news that the United States Securities and Exchange Commission (SEC) has delayed its decision on Bitcoin (BTC) exchange-traded funds (ETFs) until Feb. 27 of next year. Based on the performance of the Directional Movement Index and the Average Directional Index, Bloomberg Intelligence analyst Mike McGlone expects Bitcoin to drop to $1,500. The fall has scared away most retail investors. Nevertheless, crypto-focused institutional asset manager Morgan Creek Digital believes that its Digital Asset Index Fund — a basket of ten major crypto assets — will offer better returns than the SPX over the next 10 years, starting from Jan. 1, 2019. Morgan Creek Digital is ready to wager a $1 million bet on their forecast. The bear market has been good for the stablecoin Tether, which continues to climb the ladder in terms of market capitalization. It is now sitting at the sixth position, threatening to break into the top five if the selling continues. As Bitcoin SV, which has recently hard forked off from Bitcoin Cash (BCH), has a few days of trading behind it, we shall introduce it in our analysis from today onward. BTC/USD Bitcoin has plunged to a new year-to-date low, but the decline is still not showing any signs of slowing down. The previous low of $3,620.26 did not offer any support, which demonstrates a lack of buying at the current levels. We expect the $3,000—$3,500 zone to act as a stronger support. However, if the BTC/USD pair dips below $3,000, the fall can extend to $2,416.52, which is the pattern target following the break down from the pennant. The current situation is opposite to last year when traders were expecting the price to skyrocket. Now, most believe that digital…

Market Mayhem: Bitcoin Sinks Below $3.4K, Ethereum Plummets to Double Digits

Market Mayhem: Bitcoin Sinks Below $3.4K, Ethereum Plummets to Double Digits

Friday, Dec. 7 — Crypto markets have today again taken a major downturn, with virtually all of the major coins by market cap seeing double digit losses. Some coins are down by over 20 percent, as data from Coin360 shows. Market visualization by Coin360 Bitcoin (BTC) has taken a steep hit of over 11 percent on its 24-hour chart, and is trading at $3,400 as of press time. Having attempted to reclaim ground above the $4,000 price point in early December — to briefly trade close to $4,300 — the top coin’s recovery has failed to hold, and the asset has seen stepped losses in the days before today’s dizzying tumble. On the week, Bitcoin is now down by around 20.5 percent; monthly losses are at a severe 47.3 percent. Bitcoin 7-day price chart. Source: Cointelegraph’s Bitcoin Price Index. Second-largest crypto by market cap Ripple (XRP) is down by around 12 percent on the day, trading at almost $0.30 as of press time, according to Cointelegraph’s Ripple Price Index. Ripple’s weekly and monthly charts are also blisteringly red, with losses of around 23.5 and 40 percent respectively. Ripple 7-day price chart. Source: Cointelegraph’s Ripple Price Index. Third-ranked crypto by market cap Ethereum (ETH) has fared even worse, with 24-hour losses pushing 16 percent as of press time. The top altcoin is down to double-digit value, currently trading at $84. On the week, Ethereum down by 31.4 percent; monthly losses are close to 60 percent. Ethereum 7-day price chart. Source: CoinMarketCap Virtually all of the remaining top ten coins on CoinMarketCap are seeing deep red; Stellar (XLM) and Bitcoin Cash (BCH) are both down almost 18 percent, at $0.11 and $102.3 respectively; eighth largest ranked crypto Litecoin (LTC) is down close to 15 percent, trading at $25.3, and EOS (EOS) is the hardest hit, down almost 23 percent on the day at $1.68. Newly-forked “Bitcoin SV” (BSV) is the only exception among the top ten, soaring 20 percent on the day to trade at around $109, sealing the ranking of 5th largest crypto. With a market cap of around $1.94 billion as of press time, BSV is holding a slim margin ahead of BCH; the latter, ranked 7th, currently has a market cap of about $1.77…

Bitcoin, Ripple, Ethereum, Stellar, Bitcoin Cash, EOS, Litecoin, Cardano, TRON, Monero: Price Analysis, Dec. 5

Bitcoin, Ripple, Ethereum, Stellar, Bitcoin Cash, EOS, Litecoin, Cardano, TRON, Monero: Price Analysis, Dec. 5

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you should conduct your own research when making a decision. Market data is provided by the HitBTC exchange. Experts are divided over the future behavior of the crypto markets. Mike Kayamori, CEO of Quoine, expects Bitcoin to make new lifetime highs by the end of next year, and believes that the bottom is close to current levels. On the other hand, Malachi Salcido, head of Wenatchee, Washington-based Salcido Enterprises, expects the situation to “possibly get a little worse before it gets better,” reports Bloomberg. He anticipates markets to bottom out in February of next year. Though the markets are way below their lifetime highs, it has not deterred investments from large players. The ability of new ventures to raise funding shows that interest in the space is alive and the markets have a bright future.   In a recently published report, American global management consulting firm A.T. Kearney suggests that Bitcoin will reclaim two-thirds of crypto market capitalization by end of next year. Currently, Bitcoin dominance is about 54 percent. This means that Bitcoin will move up at the expense of altcoins. Investors should avoid buying shady cryptocurrencies and stick to ones with visibility. BTC/USD The main trend in Bitcoin is down. For the past two days, the bulls have been trying to defend the trendline of the pennant but have not been able to push prices higher. This shows a lack of buying at higher levels and selling pressure. The moving averages are sloping down and the RSI is close to oversold territory. A breakdown of the pennant will resume the downtrend and has a pattern target of $2,416.52. We believe that the BTC/USD pair will witness strong buying in the $3,500–$3,000 zone. Contrary to our opinion, if bears sink prices below $3,000, then the next stop will be $2,416.52. If the bulls succeed in holding the trendline of the pennant on a closing (UTC time frame) basis and reverse direction, it will indicate strength. The first indication of a trend change will be when the price sustains above the resistance line of the pennant. A…

Crypto Exchange ErisX Raises $27.5 Million From Fidelity, Nasdaq Ventures and Others

Crypto Exchange ErisX Raises $27.5 Million From Fidelity, Nasdaq Ventures and Others

Crypto exchange ErisX has raised $27.5 million from Fidelity Investments and Nasdaq Ventures, among other investors, Reuters reports Tuesday, Dec. 4. Nasdaq is the world’s second-largest stock exchange, while United States investment firm Fidelity administers over $7.2 trillion in client assets. According to Reuters, ErisX will offer both spot trading in Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC), as well as futures markets in the following year, pending regulatory approval. Nasdaq confirmed their participation to Reuters without specifying the amount of their contribution, while Fidelity has not responded to Reuters’ requests for comments by press time. According to Thomas Chippas, ErisX CEO, the investment’s purpose is to hire staff and “build out our infrastructure and secure the appropriate steps are taken to develop a regulated market for digital assets.” In October of this year, retail brokerage firm TD Ameritrade had also invested in ErisX, with participation from investing company DRW Holdings and high-speed trader Virtu Financial. Reuters writes that private equity firm Valor Equity Partners and CBOE Global Markets Inc. also participated in the fall investment. Bloomberg had noted this fall that ErisX would also offer Bitcoin Cash (BCH) support, but the altcoin was not mentioned by Reuters in today’s article.

Stablecoin Issuer Promises Full Audits of Euro-Backed Crypto Token

Stablecoin Issuer Promises Full Audits of Euro-Backed Crypto Token

Stasis, a Malta-based issuer of stablecoins, has hired accounting firm BDO Malta to conduct quarterly and annual audits of its financials, including the euro reserves backing the startup’s EURS token. The engagement aims to dispel any doubts that EURS stablecoins are backed one-to-one by euros. Many cryptocurrency investors and traders will be wary of any such claim by a stablecoin issuer, due to nagging questions around the dominant issuer, Tether. Tether’s USDT tokens lost their parity with the U.S. dollar in a dramatic fashion in October, due to widespread doubts that the company held one U.S. dollar in bank deposits for every token in circulation. More than a year ago, Tether reiterated its promise of regular audits to prove it held sufficient fiat collateral, but so far it has still not delivered. Rather it severed ties with the auditing firm Friedman LLP in January and instead produced documents prepared by a law firm in June and its bank in November, which vouch for the existence of sufficient deposits. Apparently alluding to the controversy surrounding Tether, Stasis CFO Vyacheslav Kim said in a statement last week: “The recent conversation around stablecoins has hinged on two things: compliance and transparency. By providing verification by a top accounting firm, in addition to EURS’ existing regulatory compliance under Maltese law, we’ve established EURS as a standout option for European investors.” In addition to the audits, BDO Malta – a member of the BDO International network of accounting firms, which operates out of more than 160 countries according to its website – will “provide weekly cash reserve verification” of the fiat collateral behind EURS, Stasis said. The first such report was published Thursday. It makes clear that the document does not constitute an audit. Stablecoin issuance is an increasingly crowded and competitive corner of the cryptocurrency sector, and a number of providers are aiming to reassure a skeptical market by publicizing their relationships with prominent accounting firms. Within the past month Circle, which provides the dollar-linked USDC, has published an attestation of its dollar collateral prepared by Grant Thornton LLP; Gemini, which issues the USD-pegged Gemini Dollar, has done the same with an attestation from BPM; and Paxos, issuer of the dollar-linked Paxos Standard, has published an attestation from Withum. Audits > attestations Yet Stasis stands…