Cryptocurrency Needs More Regulation than other Commodities: Fmr. CFTC Chair

Gary Gensler CFTC blockchain cryptocurrency
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Former Commodity Futures Commission Chairman Gary Gensler, who helmed the organization from mid-2009 to early 2014, recently shared his opinions on cryptocurrency regulation in a Bloomberg interview.

Need For Regulation

Gensler was asked about the validity of blockchain technology, and the regulator-turned-blockchain-lecturer stated outright that it “has a real chance to be a catalyst for change in the world of finance.” He pointed out the fact that the decentralized nature of blockchain is significant, and noted that when he teaches blockchain technology at MIT, that “the class is crowded.”

When asked about how it should be regulated, he continued to state that if cryptocurrency truly is to be a part of the future, it must “come inside of the public policy envelope.” He stated the importance of protecting investors and guarding against illegal activity. He pointed out the fact that the large cryptocurrency exchanges have to comply with either the SEC or the CFTC, the organization that he was “once honored to chair.” He even stated that “pure cash cryptocurrencies, like bitcoin, need more protection than frankly, even the oil markets, or corn and wheat.” He then declined to comment on which organization should be regulating the market in general, declaring himself “regulator-neutral.”

Interestingly, he emphasized the importance of remaining “technology neutral” to promote innovation, while still calling for regulation — meaning that blockchain technology as a whole should not be regulated, but that there should be as much effort as possible to reduce fraud and manipulation within DLT applications.

Additional Conclusions

cryptocurrency derivatives CFTCSource: Shutterstock

When asked whether it was realistic for organizations to understand the true nature of whether fraud is prevalent, and whether the federal government even had the manpower to regulate the industry, given the new nature of the technology, Gensler dismissed the idea that it cannot be understood, stating that, “It’s always a challenge…that was true when the internet came along in the 1990s…but I don’t think that means we give up.” He then elaborated that more confidence in markets meant that more investors could participate.

He elaborated that the more that asset managers can invest, the more widespread adoption we will see. His statements come off the heels of Fidelity, a $7.2 trillion asset manager, and a major player in global finance, announcing the creation of a new company to help its customers invest in bitcoin.

He was also clear about his belief that blockchain technology is at present still more “hype than reality.” He stated that the technology is years away from “being scaled,” comparing the transactions per second between Visa and bitcoin, and pointing out the massive difference. He does believe that the scaling issues will eventually be addressed.

Featured Image from Bloomberg/YouTube

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Brazilian Presidential Candidate Uses Blockchain to Publish Government Plan

Fernando Haddad, the presidential candidate for the Brazil Workers’ Party, has published his government plan via blockchain, per an announcement published on his website Oct. 14.

According to the release, Haddad decided to use blockchain technology for disseminating information about his presidential campaign after a long-term struggle with fake news reports. As information stored on a blockchain cannot be altered or compromised, he decided to store the data on a decentralized platform.

The release also notes that Haddad used “free software” in Sao Paulo where he served as mayor from 2013–2017. The software solutions monitored various city projects, including the municipal Master Plan “with the support of users through the internet.”

Haddad is not the only presidential candidate to apply the technology. According to crypto news outlet Criptomoedas Facil, other politicians that participated in the general election; Joao Amoedo and Marina Silva, also mentioned blockchain during their campaigns.

Silva proposed to create a “digital government,” storing all public data on a decentralized platform, while Marina used decentralized ledger technology (DLT) to register donations for her campaign.

In the first round of the 2018 elections, Haddad and his vice-presidential running mate Manuela d’Avila won almost 30 percent of the overall vote, but eventually lost out to far-right candidate Jair Bolsonaro.

Bolsonaro, who has previously expressed fond sentiments for Brazil’s former military regime, exceeded expectations at the polls, having ran a right-wing populist platform that promised a return to “traditional” Brazilian values.  

While he won the general election with almost 47 percent of the overall vote, Bolsonaro fell short of the 50 percent needed to avoid a runoff election against Haddad on Oct. 28.

As Cointelegraph reported in January, the Brazilian government was considering to move popular petitions — an instrument that allows citizens to vote on different social matters — to a blockchain based on the Ethereum network. Officials wanted to create a mobile app that would allow people to submit their votes via a decentralized platform.

Huobi Joins OKEx in Adding Four New Stablecoins

Huobi Global has announced its decision to list four USD-pegged stablecoins by the end of the week.

In a support notice published on its platform, the company noted that users will be able to make deposits for Paxos Standard Token (PAX), True USD (TUSD), Circle’s (USDC), and Gemini exchange’s (GUSD) on its exchange starting from Friday, October 19, 2018 (GMT +8).

That was as much detail as the exchange revealed, as it says further information for when trading would start on the exchange will be announced at a later date. Huobi is the fifth largest digital currency exchange and is currently the ninth largest market for Tether, according to data from CoinMarketCap.

Huobi becomes the latest top 10 crytpocurrency exchange to add new stablecoins as uncertainty continues to mar Tether’s market reputation. OKEx took the same step by adding the aforementioned tokens to its listed assets yesterday. Tether, the world’s largest stablecoin, lost its peg in the early hours of October 15, 2018, causing major price discrepancies between bitcoin’s BTC/USDT and BTC/USD trading pairs across the market.

While uncertainty persists regarding Tether’s USD holdings, Leonardo Real, Tether’s chief compliance officer, in an email response to CNBC, believes the current happenings in the market are no cause for alarm.

“We would like to reiterate that although markets have shown temporary fluctuations in price, all USDT in circulation are sufficiently backed by U.S. dollars (USD) and that assets have always exceeded liabilities,” he added.

At press time, Tether is trading at $0.98, tied to bitcoin trading pairs. Against the USD on Kraken and Bittrex, it is trading at $0.95 and $0.96, respectively.

Ethereum Creator, NYU Economist Go to War On Twitter, Mull Public Debate

ethereum creator vitalik buterin
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Ever since Nouriel Roubini appeared before the United States Senate Committee On Banking, Housing, and Urban Affairs, to discuss cryptocurrencies – he has certainly been causing quite the commotion with regards to the cryptocurrency community.  

Roubini vs Buterin

This is not surprising, considering the famed economist shared several controversial statements about bitcoin and cryptocurrency in general, such as stating that “only criminals and terrorists use crypto”, and that “utility tokens take us back to the stone age”.  He has also taken specific aim at Vitalik Buterin on Twitter earlier this month, likening the Ethereum founder to a “dictator for life”.

Buterin responded sarcastically that he “officially predicts a financial crisis between now and 2021”.  This is clearly a reference to the fact that many credit Roubini with predicting the global financial crisis of 2008, for which he received the nickname “Dr. Doom”.  

A Possible Debate

Despite his apparent dislike for the cryptocurrency community, Roubini has indicated that he is open to a live debate with Vitalik Buterin, an idea initially set forth by Laura Shin, who invited both to debate on her podcast, Unchained, one of the most popular cryptocurrency-focused podcasts in the world.  Buterin has indicated that he is open to a debate, but Roubini dismissed Ms. Shin as a pseudo-journalist, suggesting that the moderator have less of a bias.

Buterin responded with the suggestion of Kevin Pham as a moderator.  One of the reasons Mr. Pham might be an obvious choice is that he clearly isn’t a fan of Buterin, and even suggested earlier this year that the Etherem co-founder is colluding with the Russian government.

Arthur Hayes, the co-founder of the cryptocurrency exchange Bitmex, offered to pay for all of the production costs involved with the debate, and offered New York or London as possible locations.  Roubini was less than ecstatic with the offer, calling Bitmex a “criminal scam”.

Roubini also eventually responded to the suggestion of Pham as a moderator, quoting a tweet of his and suggesting that he is “thuggish”.

Many are confused as to whether this debate happening is a serious possibility, but that hasn’t stopped Twitter users from suggesting possible moderators.  Some suggestions appear to be more serious than others, but some names that have been floated include John McAfee, Joe Rogan, and the Dalai Lama.

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Russian Accused of Hacking Public Servers to Mine Bitcoin Faces up to Five Years in Prison

A 21-year-old Russian from the Siberian city of Kurgan is facing criminal charges for illegally mining Bitcoins (BTC) via government-owned servers, local news agency Ura.Ru reports Tuesday, October 16, citing the regional office of Russia’s Federal Security Service (FSB).

The investigation found that the man hacked public administration servers in three Russian regions. The breach was discovered when the Internal Security Division in the city of Yaroslavl noticed the intruder’s attempt to hack their equipment.

The alleged hacker was then charged with deliberate use of software that “neutralizes” a computer’s network defense “out of self-interest.” Under this article he could face up to five years in prison, if found guilty.

As Cointelegraph previously wrote in a review of illicit mining cases, stealing or illicitly receiving electricity then used to mine is often the crime punished by prison terms, rather than the mining itself. For instance, in South Korea this April, police arrested miners who purposely rented out factories and chicken farms to receive electricity for substantially lower rates.

Further, in another case in the U.S. state of New York this March, local authorities asked miners to cease their work after residents of one town filed an official complaint to the police for the excessive usage of low-cost electricity by local miners.

More recently, this month a Chinese man was reportedly sentenced 3.5 years in jail for stealing electricity from a train station to fuel his Bitcoin mining facility. In addition to the prison sentence, he was also fined 100,000 yuan (around $14,500).

Ethereum Foundation Issues $3 Million in New Grants

The Ethereum Foundation has awarded a total of $2.86 million to 20 different projects in Wave IV of its Grant Program.

Announced at the beginning of 2018, the foundation began the new year with a resolution to fund promising projects that develop on Ethereum. Since the program’s launch, the foundation has committed over $14 million to 72 projects, the majority of which has gone to startups focused on scaling, with security and user experience receiving the next most in funding.

The latest wave of capital allocation keeps with the familiar theme of scalability, though it also concentrates almost equally on developer experience projects. Securing $500,000, Status’ Nimbus, an Ethereum 2.0 sharding client, is tied alongside Prysmatic Labs’ Eth 2.0 Prysm client for attracting the most funding. These two are followed by the $420,000 accrued by Spankchain, Kyokan and Connext for a collective project, originally unveiled at DevCon 4, focused on a non-custodial payment channel. To the tune of $375,000, the third largest grant was awarded to Prototypal​​ for “[front-end] state channel research and development.”

Honorable mentions include the $250,000 allocated to Finality Labs​​’ work on forward-time locked contracts (FTLC) and with a like amount given to Kyokan to develop cash and debit plugins for Plasma, an Ethereum payment channel solution in the same vein as Lightning.

For developer experience, TrueBlocks secured $120,000 to create an open source block explorer, and Gitcoin​​ received $100,000 to kickstart bounty funding on its platform.

In the original post that unveils the program, Vitalik Buterin stresses that “[these] payments are NOT intended to be sources of substantial profit to recipient organizations; they are rather intended to cover some of the costs involved, with the understanding that anyone who participates in the scheme will have access to a unique opportunity to participate in Ethereum 2.0 development.” Outside of an infusion of capital, this “unique opportunity” includes working closely with Ethereum’s core research and development team.

At the end of each grant update, the foundation provides a wish list for the projects it’s looking to fund in the future. At the top of the Wave IV list, the foundation calls for more payment/state channel solutions, Plasma development, smart contract auditing, intuitive wallet designs, key management software and privacy solutions, among others.

Tether Market Cap Sinks to $2.2 Billion as another 250 Million USDT Exits Circulation

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The loss of its U.S. dollar peg isn’t the only thing driving down the market cap of tether (USDT), the cryptocurrency market’s largest “stablecoin.”

Tether Falls Below Dollar Parity

The USD-backed token, which as recently as late August had a circulating valuation of nearly $2.9 billion, is now worth just $2.2 billion, representing a two-month decline of nearly 25 percent.

A portion of that decline is a direct result of USDT’s price falling below the $1.00 in assets that are supposedly backing each token. As CCN reported, the USDT/USD peg slipped away heading into Monday morning, throwing uncertainty into a market that relies on billions of dollars worth of tether trading on a daily basis on exchanges that do not support physical USD.

According to CoinMarketCap, tether’s global average traded as low as $0.92 on Monday but has since climbed back to $0.98. On Kraken, which offers a thinly-traded USDT/USD market, the tether price dropped as low as $0.85 before recovering to a present value near $0.95.

tether price chartUSDT/USD | Kraken

$560 Million in USDT Yanked from Circulation

However, given the current USDT/USD discount, the loss of dollar parity only accounts for about $50 million in lost market cap. The remaining decline is the result of Tether pulling hundreds of millions of dollars out of circulation during the first half of October.

Early this morning, Tether yanked 250 million USDT out of circulation after Bitfinex sent payments of 50 million USDT and 200 million USDT to the token’s treasury address, and it wasn’t the first time this month that tethers had exited the market.

tetherSource: Omni Explorer

CCN reported yesterday that Tether had pulled $300 million in USDT out of the cryptocurrency market through two transactions executed on Oct. 9 and Oct. 14. Altogether, 560 million tether tokens have been yanked out of circulation in October, and none have been issued since Sept. 21.

As of Tuesday morning, the Tether treasury is holding more than 736 million USDT, funds that the company’s website state have been authorized but not issued.

tetherSource: tether.to

USDT Arbitrage or Waning Consumer Confidence?

Assuming Tether and Bitfinex are operating above-board in their handling of USDT, the massive withdrawals could be connected to stablecoin arbitrage.

For professional traders who are confident in their ability to redeem tethers for USD at a 1:1 ratio on Bitfinex or — for large-scale holders — directly at Tether, the USDT/USD spread should represent an opportunity to generate easy, low-risk profit. Simply acquire USDT, deposit it at Bitfinex — where it is treated as USD — and then withdraw the funds to an external bank account.

Traders can continue to engage in USDT arbitrage as long as the exchange continues to process withdrawals (and though fiat deposits were temporarily paused in recent days the company said that withdrawals continued to process normally). Barring any unforeseen disruptions, arbitrage should eventually restore the tether price to dollar parity.

On the other hand, the withdrawals could be the result of large USDT holder seeking to diversify into other stablecoins, including the highly-touted new offerings from Paxos, Gemini, and Circle. While still much smaller than tether in terms of market cap and liquidity, these tokens — particularly Paxos Standard (PAX) — have been making significant gains in the weeks following their launches.

Notably, Bitfinex announced a new “distributed banking solution” on Tuesday, enabling it to resume fiat deposits following nearly a week of fiat deposit downtime. At the same time, The Block published a report citing anonymous sources who say that Tether has opened an account with Nassau-based financial institution Deltec Bank.

It remains to be seen whether this news will be sufficient to thrust the tether price back to dollar parity.

Featured Image from Shutterstock.

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Australian State of New South Wales Mandates Land Registry Shift to Blockchain by 2019

The government of the Australian state of New South Wales (NSW) is set to complete a proof-of-concept (PoC) for a blockchain-based land registry system by summer 2019, ZDNet reported October 15.

The new PoC is expected to be completed by the NSW Land Registry Services – together with Stockholm-based blockchain startup ChromaWay – by early 2019. The NSW state government is said to have given its official mandate for the Registry to shift to the new blockchain-based eConveyancing system by July.

The NSW Land Registry Services maintains the system that defines the legal ownership of both public and private land across the state, according to the report. As of the start of the new financial year, according to ZDNet, all NSW property transactions will be required, under the government’s directive, to be stored digitally, eliminating the need for paper-based Certificates of Title.

In an interview with ZDNet, Land Registry Services CEO Adam Bennett pointed to “blockchain … systems [that] are being implemented in land jurisdictions overseas,” where, he said, “they are already delivering significant benefits.” He added that NSW would be making a series of “targeted experiments” in order to test “selected use cases” for the technology.

ChromaWay’s AP strategic advisor Nicholas Delaveris told ZDNet that a blockchain system offers “an incontrovertible chain of ownership,” which can not only be more efficient than paper-based methods but provide “a more complete and comprehensive view of land rights, restrictions, and responsibilities” by increasing transparency and preventing data duplication.

According to ZDNet, the NSW government has also implemented a distributed ledger system for digital driver’s licenses, which launched this September.

As reported this spring, the Netherlands’ Land Registry is also expecting to integrate a blockchain solution into its system for national real estate data “within one to three years.”  

In March of this year, Sweden’s land-ownership authority, the Lantmäteriet, said it was poised to conduct its first blockchain-based property transaction after two years of testing, having used ChromaWay’s private blockchain to register land and properties since July 2017.

BlockFi Now Offers Litecoin and Gemini Stablecoin-Backed Loan Options

Crypto-to-USD lender BlockFi has announced that it will support loans backed by both Litecoin and Gemini’s recent stablecoin token GUSD. This is the first time the company is expanding to accept collateral in one of the crypto industry’s top-10 assets besides bitcoin and ether. In addition, BlockFi is also the first crypto-backed lender to support loans backed by GUSD.

Founded in 2017, BlockFi offers both debt and credit products and seeks to bring liquidity to the cryptocurrency space. Based in New York, the company operates in over 40 states and is backed by some of the country’s leading financial firms including PJC and ConsenSys Ventures, as well as Galaxy Digital Ventures LLC, which provided the company with nearly $53 million in capital during a funding round in July 2018. This marked the first investment into crypto-backed loans from an institutional enterprise.

Zac Prince is the company CEO. Speaking with Bitcoin Magazine, he said that BlockFi’s acceptance of Litecoin was a “logical first step” toward supporting most — if not all — of the world’s top 10 cryptocurrencies.

“Litecoin was recently added to Gemini and has a long history of price appreciation,” he commented. “Having large, imbedded capital gains is one of the motivating factors for considering a loan backed by crypto. Litecoin also has strong liquidity with USD pairs in multiple trading venues.”

With the addition of GUSD, BlockFi can offer loan options to customers outside the standard business hours of 9-6 through an option that isn’t cash related. Speaking with Bitcoin Magazine, BlockFi’s director of customer operations, Abbey Young, explained, “Most banks have an outgoing wire cutoff time of 5:30 p.m. EST, so we can only send funds between the hours of 9 a.m.-5:30 p.m. EST during the week. However, if a client would like to be funded in GUSD, we can deposit those funds at any time, like weekends or after 5:30 p.m. EST.”

Gemini announced the coin back in September 2018 as an ERC-20, asset-backed token on the Ethereum network. It is supported by USD in a formal bank account where the GUSD deposit balance is examined monthly by public accounting firm BPM, LLP.

“Customers can apply [for funds] in less than two minutes,” Prince said. “The team will then evaluate the application and respond within one business day. Once accepted, the customer sends their crypto to a unique wallet address we generate for them. Then, we send them their funds. With USD, we wire the money directly into their bank account. For our GUSD customers, we can send it to any wallet address they like. This entire process often happens in as few as 90 minutes.”

The company is now designing plans that would enable more lending products supported by an assortment of differing cryptocurrencies to provide further, timely liquidity across the global crypto scene.

“We believe that the crypto asset market will continue to grow, and we are attracted to the promise of being able to deliver financial services on a more equitable and global scale rather than traditional systems,” Prince said.

What Led the World’s Largest Brokerage to Fully Integrate Crypto After 1 Year of Testing?

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In late 2017, Fidelity, one of the largest brokerages and asset managers with 7.2 trillion in assets under management as of October 2018, launched its first crypto initiative.

By partnering with Coinbase, the biggest crypto-to-fiat exchange in the global market, Fidelity enabled its clients to track investments in major cryptocurrencies like Bitcoin and Ethereum through the Fidelity Portfolio Summary View.

At the time, Fidelity did not directly integrate cryptocurrencies into its infrastructure and only allowed investors that are registered with Coinbase to invest in the emerging asset class, most likely to test the market and the demand from investors for crypto.

Within 1 year, Fidelity has gone from studying and evaluating the crypto market to fully integrating digital assets into its platform.

Why is Fidelity Committed?

Since last year, Fidelity has maintained an open-minded stance towards cryptocurrencies and blockchain technology.

Hadley Stern, senior vice president and managing director at Fidelity Labs, told The Street in August 2017 that the investment firm does not underestimate the disruptive nature of the blockchain, even though consensus currencies still require significant work in infrastructure development and adoption to grow.

“Bitcoin and other blockchain technologies are emerging from their infancy but mass adoption is still many years away. Additionally, don’t underestimate their disruptive nature. Just as many other technologies have done in the past, Bitcoin and blockchain will transform how we manage our finances,” said Stern.

Around the same time, CCN reported that Fidelity mined cryptocurrencies for a brief period of time, to better understand and analyze the structure of digital assets. Stern explained the initiative was driven by Fidelity Labs as an experiment to learn how consensus, difficulty levels, and the network of Bitcoin operate.

Axel Pierron, managing director of bank consultant Opimas, stated that the ambitious decision of Fidelity to mine digital currencies was a response to increasing inquiries from its clients. Pierron explained:

“They’re clearly receiving interest from their clients, both from retail investors and on the institutional side. It’s highly volatile, it’s highly illiquid when you need to trade large volumes, so they see the opportunity for a new asset class which would require the capability of a broker-dealer.”

Since its partnership with Coinbase and the implementation of crypto onto the Fidelity Portfolio Summary View, it is highly likely Fidelity observed a significant increase in interest and demand for cryptocurrencies from its clients.

Similar to Goldman Sachs, Citigroup, NYSE, Bakkt, and TD Ameritrade, Fidelity has disclosed its intent to commit to serving investors that are interested in investing in the cryptocurrency market through a strictly regulated and transparent channel.

Founding head of Fidelity Digital Assets Tom Jessop said in an interview:

“This is a recognition that there is institutional demand for these assets as a class. Family offices, hedge funds, other sophisticated investors are starting to think seriously about this space.”

Not Merely Retail Investors

The 2017 rally of Bitcoin which saw the dominant cryptocurrency achieve a price of $20,000, was purely driven by retail traders and individual investors.

As hedge funds and institutional investors begin to invest in the asset class through Fidelity and other brokerages that are faciliating crypto trades, an influx of capital into the crypto market can be expected in the months to come.

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