FinCEN Takes First Enforcement Action Against P2P Cryptocurrency Exchanger

FinCEN Takes First Enforcement Action Against P2P Cryptocurrency Exchanger

The United States Financial Crimes Enforcement Network (FinCEN) has assessed a civil money penalty for a California resident accused of wilfully violating money transmission laws in his work as a peer-to-peer exchanger of virtual currencies. The news was announced in an official FinCEN news release on April 18. FinCEN — the U.S. Treasury Department’s financial crimes unit — says the move represents its first enforcement action against a peer-to-peer cryptocurrency exchanger. Eric Powers of Kern County, Calififornia, has been served a $35,000 fine and debarred from any future activities that would qualify his work as a money services business, the agency states. This was determined on the basis that Powers violated his statutory reporting and registration obligations under the U.S. Bank Secrecy Act, as the news release outlines: “As ‘money transmitters,’ peer-to-peer exchangers are required to comply with the BSA [Bank Secrecy Act] obligations that apply to MSBs [Money Services Businesses], including registering with FinCEN […] maintaining an effective AML [anti-money-laundering] program; filing Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs).” According to FinCEN’s assessment filing, Powers conducted over 1,700 transactions as a money transmitter between December 2012 and September 2014, buying and selling bitcoins (BTC) on behalf of customers. He is reported to have publicized his services on peer-to-peer sites such as bitcointalk.org, and to have coordinated crypto transactions for users of the now-defunct bitcoin exchange Mt. Gox. The news release states that Powers also processed numerous suspicious transactions — over 100 related to the illicit marketplace Silk Road — without filing an SAR. He is also reported to have conducted business via the dark web client TOR without verifying clients’ identities or the source of their funds. Over 200 of Powers’ transactions reportedly involved the physical exchange of currency worth $10,000, without filing a CTR. A further 160 BTC purchases — worth approximately $5 million — were reportedly conducted via in-person cash transactions with individuals identified through an online bitcoin forum. The vast majority of these (150) involved the transfer of over $10,000 within a business day — often in coffee shops or other public places. “We will take enforcement action based on what we have publicly stated since our March 2013 Guidance—that exchangers of convertible virtual currency […] are money transmitters…

Coinbase’s 2018 Revenue Is 60% Less Than Projected by the Firm: Report

Coinbase’s 2018 Revenue Is 60% Less Than Projected by the Firm: Report

Major global crypto exchange Coinbase reportedly saw around $520 million in revenue last year, Reuters reported on April 18. The publication calculated the sum by looking at a filing to Britain’s corporate registry last week showing Coinbase’s non-U.S. revenue equaled around 154 million euros ($173 million), noting that a Coinbase executive once stated that the non-U.S. revenue is equal to almost one third of the overall revenue Based on Reuters’ calculations of Coinbase’s 2018 revenue, the crypto exchange has generated 60% less than its stated plans. In late October 2018, Bloomberg published an article claiming that Coinbase had projected that it would see $1.3 billion in revenue in 2018. Based on unspecified documents, Bloomberg wrote that the San Francisco-based crypto exchange foresaw significant revenue from commissions on trades, as well as from gains and losses in its crypto holdings, despite the bear market. In January 2018, industry sources reported that Coinbase made about $1 billion in revenue in 2017, overshooting its forecast for that year by 66 percent. The Cointelegraph team has not found any official data from Coinbase about its revenue for either 2017 or 2018. Founded in 2012, Coinbase is a major crypto trading and wallet service based in the United States. Recently, the exchange was featured in LinkedIn’s list of the most popular companies for 2019, with Coinbase placed at 35 out of a total of 50 companies. Coinbase Pro is currently ranked 43rd among global crypto trading markets by adjusted daily trading volume. On April 17, Coinbase expanded its crypto-to-crypto trading offering to 11 countries in Latin America and Southeast Asia, including Argentina, Mexico, Peru, as well as South Korea, Indonesia, the Philippines and others. Meanwhile, Binance, currently the third largest crypto exchange, was recently reported to have made $78 million in profits in Q1 2019, up 66% from the previous quarter. In a previous version of the Reuters article, the publication reported that venture capital investments in crypto and blockchain startup have the potential to set an all-time high in 2019, as investors also appear to be contributing larger amounts per deal.

In First, FinCEN Penalizes Bitcoin Trader for Violating AML Laws

In First, FinCEN Penalizes Bitcoin Trader for Violating AML Laws

The Financial Crimes Enforcement Network (FinCEN) has for the first time penalized what it dubs a “peer-to-peer cryptocurrency exchanger” for breaking anti-money laundering (AML) rules. The U.S. regulator announced Thursday that California resident and cryptocurrency trader Eric Powers failed to comply with the Bank Secrecy Act’s (BSA) registration and reporting requirements during 2012–2014. While conducting the business of buying and selling bitcoins on the internet, Powers did not register himself as a money transmitter or as a money services business, FinCEN said. He also failed to report suspicious transactions in cryptocurrency and fiat currency. For instance, the regulator said, Powers conducted around 160 transactions of bitcoins worth about $5 million and also conducted over 200 transactions involving the physical transfer of more than $10,000 in currency, but did not file a single currency transaction report. Powers also processed several suspicious transactions without ever filing a suspicious activity report, including doing business related to the darknet marketplace Silk Road. Powers has admitted to the violations, according to the agency. FinCEN director, Kenneth A. Blanco, said that “Obligations under the BSA apply to money transmitters regardless of their size.” Blanco further said that there were indications that Powers “specifically was aware of these obligations, but willfully failed to honor them,” adding: “Such failures put our financial system and national security at risk and jeopardize the safety and well-being of our people, as well as undercut responsible innovation in the financial services space.” As a result, Powers has been fined $35,000 and is barred from providing money transmission services. Back in 2014, FinCEN ruled that bitcoin payment processors and exchanges are money services businesses under U.S. law. Last year, the regulator said that money transmitter rules apply even to those who conduct initial coin offerings or ICOs. FinCEN image via Shutterstock 

South Korean Crypto Exchange Coinnest Announces Closure

South Korean Crypto Exchange Coinnest Announces Closure

Cryptocurrency exchange Coinnest, once South Korea’s third largest, is closing down. The exchange posted a notice on its website saying that as of Tuesday it is no longer operating, adding that users will need to withdraw any funds held on its platform by April 30. The fees for withdrawals and the minimum threshold have been lowered to assist the process, it said. While the notice was vague as to the reasons for the closure, a Coinnest official told CoinDesk Korea: “It is a natural result of a decrease in trading volume. Both regulatory issues and business decisions have served as a background for this decision.” The decision comes after a bad year for the exchange. A year ago an executive of the firm was arrested on suspicion of fraud and was later convicted, receiving a jail sentence and a 3 billion Korean won ($2.5 million) fine. However, another official at Coinnest played down the connection with the company’s closure when speaking to CoinDesk Korea. Coinnest also lost $5 million in a mistaken airdrop this January. The firm revealed at the time that bitcoin and other cryptocurrencies were sent to customers due to a computer error. The exchange had been trying to distribute We Game Tokens (WGT) when the incident occurred. Closed sign image via Shutterstock

RBI Excludes Cryptocurrency From Indian Regulatory Sandbox

RBI Excludes Cryptocurrency From Indian Regulatory Sandbox

India’s central bank, the Reserve Bank of India (RBI), has unveiled its framework for a fintech regulatory sandbox. While blockchain and smart contracts are welcomed, the bank stated that cryptocurrency and related services “may not be accepted for testing.” Also read: Indian Supreme Court Postpones Crypto Case at Government’s Request RBI Welcomes Blockchain Tech The RBI published its draft framework for a fintech regulatory sandbox Thursday. The central bank explained that one of the recommendations the inter-regulatory fintech working group, which it set up in July 2016, came up with is to introduce a framework for a regulatory sandbox (RS). The RBI clarified that this framework includes “a well-defined space and duration where the financial sector regulator will provide the requisite regulatory guidance, so as to increase efficiency, manage risks and create new opportunities for consumers.” The central bank proceeded to provide a list of innovative products, services, and technology which could be considered for testing. In addition to money transfer services, digital KYC, digital identification services, AI and machine learning applications, the list includes smart contracts and “applications under blockchain technologies.” The working group included representatives from the RBI, the Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority, the Pension Fund Regulatory and Development Authority, the National Payments Corporation of India, the Institute for Development and Research in Banking Technology, select banks and rating agencies. Crypto Excluded From Sandbox While noting that some entities may not be suitable for the sandbox “if the proposed financial service is similar to those that are already being offered in India,” the RBI noted an exception. Applicants that “can show that either a different technology is being gainfully applied or the same technology is being applied in a more efficient and effective manner” may be considered for the sandbox, the bank described. Nonetheless, it continued with “An indicative negative list” of products, services, and technology “which may not be accepted for testing.” This list includes cryptocurrency, crypto assets services, crypto trading, crypto investing, as well as settling in crypto assets. It also includes initial coin offerings and “any product/services which have been banned by the regulators/Government of India,” the central bank wrote. RBI’s Unchanging Stance Toward Crypto India’s central bank has never been…

Aragon Vote Aims to Restrict Ethereum App from Funding Polkadot Blockchain

Aragon Vote Aims to Restrict Ethereum App from Funding Polkadot Blockchain

Two weeks from now, token-holders for the Aragon application will put the efficacy of its on-chain governance model to the test. The Aragon project, launched in 2016, is envisioned as a way to offer users the tools to build decentralized organizations that are secured cryptographically and run natively on top of the ethereum blockchain. But starting as early as February of this year, the core developers behind Aragon have expressed interest in launching a version of the app on the Polkadot blockchain network. At the time it was announced, Luis Cuende, CEO of AragonOne – a for-profit entity building Aragon – said that the idea was “very early research” and did not indicate any specific intention to move away from launching their product on ethereum. Now, token holders of Aragon are deciding between two competing Aragon Governance Proposals (AGPs) that will effectively approve or restrict such plans to build the application outside of ethereum. The vote is set to begin on April 25 and last for 48 hours, and the the final results of the voting cycle will be announced April 27 at 16:00 UTC. AGP 42 was submitted Ameen Soleimani, the CEO of adult entertainment blockchain platform Spankchain Ameen Soleimani. To wit, the proposal is dubbed “Keep Aragon Focused on Ethereum, not Polkadot.” Soleimani’s pitch proposes “to restrict Aragon from spending money on Polkadot development in any way, shape or form” and posits that many Aragon token holders “are significant stakeholders in the ethereum ecosystem” who wish to see Aragon remain strictly focused on ethereum. Conversely, AGP 41, submitted by the Web3Foundation the exact same day as Soleimani’s proposal, would approve the non-profit entity holding all of Aragon’s development funds – known as the Aragon Association – to hedge up to $1.5 million in native Polkadot tokens calls DOTs. The proposal reads: “The Aragon Association is seeking the signalling by the community for the approval of closer engagement in technology collaboration and parachain development, as well as in purchasing DOTs to diversify its crypto assets.” At present, the Aragon Association holds roughly $37 million in both crypto and fiat currencies. Their largest holding, worth roughly $33 million, is all held in ethereum’s native cryptocurrency, ether. Executive director of the Aragon Association Stefano Bernardi explained in…

Speak Out: Unmasking the True Creator of Bitcoin

Speak Out: Unmasking the True Creator of Bitcoin

Within the past week, a few crypto exchanges — including Kraken and Binance — have delisted bitcoin SV. The following decisions were mostly made based on Craig Wright’s repeated public statements that he is Satoshi Nakamoto. Since bitcoin first emerged, there have been numerous theories and controversy about who the true, original creator of the largest cryptocurrency actually is. At various points, internet users from around the world have suggested that Satoshi could be Vitalik Buterin, Nick Szabo, Hal Finney and David Kleiman. Today, we invite you to share your opinion on the subject. Reply in the comments below!

US Presidential Candidate Andrew Yang Calls for Clear Crypto Regulations

US Presidential Candidate Andrew Yang Calls for Clear Crypto Regulations

Andrew Yang, a United States Democratic presidential candidate for the 2020 elections, is advocating for clear regulations on digital assets. Yang put the key operative points in a policy published on his campaign website. Yang — an entrepreneur who contributed $120,000 to establish Venture For America (VFA), an accelerator aimed at building new startups in emerging cities — is running for president in 2020. As part of his presidential campaign, Yang stands for the implementation of cryptocurrency and digital assets regulation in the country. In the release, Yang outlines that the government has failed to develop and launch a national framework for regulating digital assets, while several federal agencies claim conflicting jurisdictions. Yang stresses the need to define how digital assets should be treated and regulated in order to ensure that investors proceed with all the relevant information. Yang said: “We should let investors, companies, and individuals know what the landscape and treatment will be moving forward to support innovation and development. The blockchain has vast potential.” Yang further points out that cryptocurrency and digital asset markets develop faster than regulations can keep up, and that some states have conflicting regulations. “Create clear guidelines in the digital asset world so that businesses and individuals can invest and innovate in the area without fear of a regulatory shift,” Yang continues. In January, Cointelegraph reported that U.S. States Senator and cryptocurrency critic Elizabeth Warren had announced her bid for president in 2020. Speaking at a Senate Banking Committee hearing in October, Warren asserted that “the challenge is how to nurture productive aspects of crypto with protecting consumers.” The Senator also outlined that American consumers are falling victim to cryptocurrency scammers. Earlier this month, Reps. Warren Davidson (R) and Darren Soto (D) reintroduced the Token Taxonomy Act. The bill would exclude cryptocurrency from being classified as a security. The act also pursues the introduction of regulatory certainty for businesses and regulators in the U.S. blockchain industry, as well as clarifying conflicting state initiatives and regulatory rulings.

The Reserve Bank of India’s Regulatory Sandbox Accepts Blockchain, Excludes Crypto

The Reserve Bank of India’s Regulatory Sandbox Accepts Blockchain, Excludes Crypto

The Reserve Bank of India (RBI) has announced the terms of its regulatory sandbox in report on April 18. Per the terms of the sandbox, various applications of blockchain technology can be tested, while cryptocurrency-related projects are clearly excluded. Sandboxes are used by regulators around the world, including the Financial Conduct Authority in the U.K., so fintech companies can put their innovations to the test with a small number of consumers over a set time period. Almost three years after the RBI began reviewing its framework to respond to the dynamics of the “rapidly evolving” fintech market, India’s central bank has concluded “innovative technology” built on blockchain can be sampled by the public — giving the institution a chance to assess whether new regulations are needed to protect consumers. The RBI says fintech companies and consumers also benefit from this arrangement. While blockchain firms can “test a product’s viability without the need for a larger and more expensive roll-out,” the public could benefit from “reduced costs and improved access to financial services.” However, the report does admit that “innovators may lose some flexibility and time” by embarking on the sandbox process, and adds that completing these tests do not guarantee that further regulatory approval will not be needed. Detailing the “innovative technologies” given the green light to apply for sandbox testing, the RBI lists blockchain platforms along with mobile-based payment and digital identity software, data analytics, and artificial intelligence or machine learning applications. Eligible sectors for “innovative products and services” include retail payments, money transfer services, digital Know Your Customer checks, smart contracts and cybersecurity products. As well as cryptocurrencies, platforms which enable crypto assets to be traded and invested — as well as initial coin offerings — have been excluded. Products and services already banned by regulators or India’s government are also ineligible to apply. Cointelegraph reported last April that the RBI said it would no longer provide services to people or businesses who deal with cryptocurrencies. Five months later, one of India’s biggest crypto exchanges, Zebpay, announced that it had ceased all trading due to “extremely difficult” conditions. The Reserve Bank of India had been pursuing the idea of releasing its own digital currency, but these plans were postponed at the start of…

Crypto Exchanges Collaborate With Bithumb to Freeze Stolen Funds After Major Hack

Crypto Exchanges Collaborate With Bithumb to Freeze Stolen Funds After Major Hack

In late March, major South Korean cryptocurrency exchange Bithumb lost around $18 million as a result of a hack. While the details are still sketchy — for instance, it is unclear whether or not it was an inside job, as Bithumb initially claimed — a large portion of the stolen funds have been frozen by various exchanges who received them from hackers attempting to sell the loot. However, despite Bithumb stressing that the hijacked assets belonged to the company and not to its clients, the customers still can’t access their funds, since withdrawals and deposits have been disabled as part of the security measures.   Bithumb reportedly lost 3 million EOS and 20 million XRP, claims it was an inside job On March 29, Bithumb experienced what it described as “abnormal withdrawals” through its monitoring system. Then, as per the company’s manual, the exchange reportedly moved all remaining funds to a cold wallet. Additionally, deposits and withdrawals have been disabled on the platform for security reasons. In the accompanying blog post issued the day after the incident, Bithumb also assumed that the security breach was performed by insiders, citing the results of an internal inspection.    Moreover, Bithumb blamed itself for the security breach. Specifically, the exchange team admitted that it only focused on protection from outside attacks and did not verify its staff, according to an announcement by the company. Bithumb also promised that the incident won’t occur again, because a workforce verification system is allegedly already in the works. “We are working with major exchanges and foundations and expect to recover the loss of the cryptocurrency equivalent,” Bithumb’s statement reads. “Also we promise that we will open our progress clearly with social responsibility as a global leader company.” Interestingly, while Bithumb never directly disclosed how much cryptocurrency was lifted in any updates regarding the hack, it has been established that more than 3 million EOS (about $12.5 million) were transferred from its hot wallet during the security breach. Moreover, according to cryptocurrency news outlet The Block, around 20 million XRP — the cryptocurrency created by Ripple — (equivalent to about $6.2 million) were also stolen. Notably, Bithumb has stressed that the embezzled funds were owned by the company and that all assets belonging…