Investment Funds Network to Migrate Entire System to Blockchain in 2019

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Investment funds transaction network Calastone, a founding member of the Linux Foundation-led Hyperledger Project, is shifting its entire system to the blockchain.

The firm, which assists its client sell their funds all over the world via banks and financial advisors, expects to complete the switch to what it is calling the Distributed Market Infrastructure (DMI) next year in May.

The move is expected to radically transform how funds are traded especially in an era of rising costs by creating a global funds marketplace that will allow both buyers and sellers to connect and transact.

Per a press release, Calastone’s client list consists of over 1,700 organizations for which it offers back office and even middle office services in 40 global markets. The likes of JP Morgan Asset Management, Invesco and Shroders are some of its clients.

Enhancing Efficiency

The move by Calastone to adopt distributed ledger technology will see over 9 million messages involving transactions that are passed between various counterparties completed on blockchain. At the moment, the process involves sending three separate messages – one message to place orders, a second one to confirm receipt of the order and another to confirm the price.

The process is also laborious and inefficient as the firms ranging from asset managers to transfer agents have to enter the same data and this is time-consuming, expensive and error-prone.

According to Calastone, the adoption of blockchain technology could save the global fund industry approximately US$4.3 billion in annual costs outside of the U.S. market – there is already a centralized system for trades settlement in the United States known as the Depository Trust and Clearing Corporation.

Investor Pressure

The cost-savings, coming at a time when the industry is under pressure from investors to reduce fees and tame rising expenses, will be achieved by pooling both trading and settlement processes. The pressure from the investors is not unwarranted as the funds industry is falling behind other sectors in the financial services category with regards to the adoption of new technologies. Per the CEO of Calastone, Julien Hammerson, the existing system is not sustainable:

“Funds remain a vital investment vehicle, though remain hampered by continually rising costs and threat of competition, ultimately rendering the current system economically and operationally unsustainable. Through leveraging blockchain technology, the DMI transforms the way in which funds are traded, enabling an investment management community that can meet the changing needs of investors.”

Additionally, investors are seeking faster transaction speeds and transparency and the DMI is expected to improve the investor experience in the wider value chain.

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EOS Node Offers Users Financial Rewards for Votes, Reignites Decentralization Debate

Yet another aspect of blockchain protocol EOS has sparked controversy this week after one of its 21 block producers appeared to offer its token holders financial rewards for voting it as a proxy.

Starteos, one of the official sanctioned nodes which can approve EOS transactions, said in a Medium post Nov. 27 that “after delegating Starteos.io as proxy, you could get continuous and stable EOS revenue.”

The Chinese outfit, which has yet to comment on allegations it runs against decentralized and democratic blockchain procedures advocated by EOS itself, framed the revenue scheme as a reward for token holders.

“The ‘winter’ of cryptocurrencies has come. How much faith do you left to (sic) have?” the post reads, continuing:

“Now, Starteos is still gonna stay with YOU, our most important and best friends! And we gonna share the proceeds with you and make through the difficulties together.”

After selecting Starteos as a proxy, users can pick “stable income” “mining” revenue mode or the “random revenue” mode, where they play “Lucky Fruit Slots Machine” with game tokens to get “EOS revenue.”

The post added information on how users can vote for it as part of EOS’ Block Producer voting rubric.

As Finance Magnates noted Dec. 3, effectively paying off users to strengthen a particular node would constitute heavy centralization on the part of EOS, one of the world’s biggest-value blockchain networks.

Cointelegraph has often reported on the controversies linked to various participants in the ecosystem, the most recent involving moderators, one of whom in November reversed transactions from a reportedly phished account, which nodes had already confirmed.

Creator Daniel Larimer, who in October said decentralization was not in fact the goal of EOS, last week revealed was considering plans to start a new currency-focused token.

“Crypto people will hate it,” he wrote about the concept on social media.

EOS remains the blockchain which has by far the highest number of daily transactions, despite a decline in token price.

GDPR Uncertainty a Key Concern of 74% of Blockchain Firms in the UK: Report

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Regulatory uncertainty in Britain’s blockchain sector has emerged as one of the biggest concerns for distributed ledger technology firms in the country.

According to research conducted by digital innovation agency Digital Catapult, 74% of blockchain firms in the United Kingdom cited regulatory issues as being one of their key concerns, surpassing other issues such as access to technical, business or legal expertise.

These regulatory challenges include the European Union’s General Data Protection Regulation (GDPR). As the GDPR unifies Europe’s regulatory landscape regarding the use and storage of personal data, the legislation has become a sticking point for firms which use permissionless blockchains since the storage of data is not limited to any one particular geographical location.

“This legislation raised concerns for companies using permissionless, public blockchains, which are open to anyone regardless of location, and where full copies of the database are replicated across all of the nodes participating in the network, making it impossible to selectively limit where the data goes,” Digital Catapult wrote in the report titled ‘Blockchain in Action: State of the UK Market’.

Right to Erasure

Additionally, the GDPR empowers citizens to delete their personal data at any point and this is in conflict with the nature of permissionless public blockchains where data becomes immutable once recorded.

The regulatory uncertainty surrounding the raising of funds via Initial Coin Offerings was also another cause of concern. The report noted that the UK Financial Conduct Authority had indicated in April this year that it would regulate ICOs but has yet to issue formal guidance as at the publication date of the survey. Per the firms that were surveyed, the delay in issuing guidance has further heightened the uncertainty and consequently hampering the ICO plans some projects may have had:

“This uncertainty was raised many times by the companies consulted, as they were unsure whether they should conduct an ICO in the UK or allow UK citizens to participate given the current regulatory landscape.”

The regulatory uncertainty has also affected relationships between blockchain firms and traditional financial institutions. In the survey which polled 264 DLT firms, 54% of the blockchain companies indicated that they faced difficulties opening a bank account with the firms which were particularly hard hit being those dealing with cryptocurrencies.

Still Growing

Additionally, the survey found that firms which had raised funds in crypto-assets found it particularly hard to obtain a traditional bank account despite the necessary Anti-Money Laundering and Know Your Customer checks being undertaken on investors.

Despite the regulatory challenges, the report noted that the DLT sector in the UK is on a growth path with investments in the sector continuing to balloon:

“…investments rose from just over US$50m in Q3 of 2016, to US$150m by Q2 of 2018 (with ICO-related investments topping US$100m in Q4 of 2017 and fiat investments climbing to over US$100m in Q2 of 2018).”

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Islamic Financial Institution Partners With Startup to Develop Interbank Blockchain Tools

Saudi Arabian developmental institution the Islamic Development Bank Group (IsDB) has partnered with a Tunisian startup to develop interbank blockchain tools, a press release confirmed Nov. 29.

IsDB, which will conduct the project through its private sector subsidiary, the Islamic Corporation for the Development of Private Sector (ICD), wants to improve Islamic financial institutions’ liquidity management and increase overall efficiency.

The institution signed an agreement with Tunis-based iFinTech Solutions, a dedicated outfit which describes itself as an “Investment Advisory Firm focused on alternative financial solutions based on Islamic principles.”

The impetus behind using blockchain for the initiative lies in the relative disadvantage Islamic banks have on the worldwide stage, with institutions restricted from funding options provided by international central banks, Reuters noted Dec. 3.

Ayman Sejiny, CEO of ICD, added in the press release:

“IT will always play an important role for the financial system. We will consistently pursue our strategy of service orientation and help our partners with innovative Sharia compliant FinTech solutions.”

Saudi Arabia has traditionally copied many other jurisdictions in maintaining a risk-averse official stance on cryptocurrencies while championing blockchain.

In September, the country saw its first bank join R3’s Corda platform, a month after regulators urged consumers not to trade cryptoassets.

The debate around the industry’s compatibility with Islam also continues, Turkey adopting a conservative stance which, as Cointelegraph reported, subsequently proved particularly unpopular with one U.K. mosque.

Last week, an Abu Dhabi-based bank also announced it had completed the “first” suduk (a legal instrument also known as “sharia compliant” bonds) transaction with blockchain.

Bitcoin Price Falls to $3,900 After Poor Weekend, Crypto Market Loses $12 Billion

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The cryptocurrency market has lost more than $12 billion from its valuation in the past 24 hours, as the Bitcoin price fell under the $4,000 mark.

Major cryptocurrencies including Stellar (XLM) and Bitcoin Cash (BCH) lost around 6 percent in value on average, demonstrating a lack of momentum and trading activity.

Bloodbath

On December 2, CCN reported that if the price of the dominant cryptocurrency falls below the $4,000 mark and fails to recover to the $4,200 to $4,400 range, then a further drop to the mid-$3,000 region can become a possibility.

The report read:

“A technical analyst with an alias ‘The Crypto Monk’ stated that if BTC sustains the $4,000 support level in the next 12 to 24 hours, then a rebound to the $4,200 to $4,400 range is possible. But, if it falls below $4,000, and it was close to doing so earlier in the day, another short-term correction could be in play.”

Since Sunday, Bitcoin (BTC) has demonstrated a decline in its daily volume from around $6 billion to $5.2 billion as its price fell. Under normal circumstances, during a downtrend, the volume of BTC tends to spike up as more sell orders hit the market.

The drop in the volume of BTC as its price fell by nearly four percent in the last 12 hours suggests that the asset is showing low momentum without much strength at the $4,000 support level to sustain a positive short-term price movement.

Throughout the past five days, possibly due to the positive meeting between U.S. President Donald Trump and Chinese President Xi Jinping on a potential trade agreement, the Dow Jones and U.S. markets have increased substantially in value.

Since November 27, the Dow Jones Industrial Average has increased by 1,065 points, almost fully recovering from the month’s downtrend during which it saw its yearly gains deleted within a three-week period.

However, while the U.S. market recovered, the cryptocurrency market has continued to show a lack of strength and volume.

Alex Krüger, an economist and a cryptocurrency analyst, said that Bitcoin is demonstrating no correlation to the S&P 500 as well as other U.S. markets. He said:

“As of late bitcoin has been positively correlated to the S&P 500. However, short term correlations are unstable and fluctuate around zero, and the 180 day correlation stands right at 0.”

Potential Catalyst

The recovery of the U.S. stock market, which was expected by the majority of investors given the inevitability of a trade agreement between the U.S. and China, is not having any impact on the price trend of cryptocurrencies.

Last week, several reports claimed that as investors in the U.S. market headed for the exit, high-risk, high-reward assets like cryptocurrencies were liquited first, prior to traditional investment vehicles and assets.

Based on the price trend of Bitcoin throughout the past two weeks, if BTC falls to the low region of $3,000, a new monthly low could be established in the days to come.

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G20 Countries to Regulate Cryptocurrencies in Line with FATF Standards

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The G20 Countries have signed a joint declaration in Buenos Aires, where it promises to regulate cryptocurrencies and combat its use for money laundering and the financing of terrorism in line with the Financial Action Task Force (FATF) standards, per a Saudi Gazette report.

Section 25 of the declaration signed by the forum reads:

“We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards, and we will consider other responses as needed.”

FAFT was created by the Organisation for Economic Co-operation and Development  (OECD), as a policy-making organization to fight money laundering and the financing of terrorists. The FATF began discussing ways to introduce binding rules that would govern cryptocurrency exchanges globally, earlier this year. The organization had also sought out the current rules in a bid to accommodate new market realities.

According to the G20 declaration, “other responses” would be considered as needed, adding that the countries would also continue to monitor the global economy, which is rapidly being digitalized, adding that it “would seek a consensus-based solution to address the impacts of the digitization of the economy on the international tax system with an update in 2019 and a final report in 2020.”

The G20 forum first issued a communique in July, where it sought to apply anti-money-laundering standards for the cryptocurrency sector by October. At the time it had stated that its member states would continue to monitor the industry, while claiming that the sector does not pose a financial.

The forum had commissioned its regulator, the Financial Stability Board (FSB), headed by Mark Carney, Governor of the Bank of England, who is a fan of strict monitoring of the crypto markets to develop a framework for monitoring the crypto sector. The watchdog had published a set of metrics that it would use to monitor and bring sanity to the markets. The FSB framework was developed in partnership with the Committee on Payments and Market Infrastructures.

“The objective of the framework is to identify any emerging financial stability concerns in a timely manner. To this end, it includes risk metrics that are most likely to highlight suck risks, using data from public sources where available,” the FSB framework reads.

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Op-Ed: Is Tether Trying to Price Itself out of the Stablecoin Wars?

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Bitfinex recently moved toward “Tether neutrality,” breaking its special bond with Tether (wherein it was the most reliable way to redeem USDT for USD) and in turn, Tether, with nearly $2 billion it outstanding units, had to re-establish direct redemption for USDT holders to USD. Those still wanting to use the Bitfinex method will have to trade at normal rates, which are frequently not-quite-pegged to the dollar.

tether priceSource: CoinMarketCap

Well, fine. But here’s the problem: Tether’s fees and limits are sort of outrageous, especially compared to its much more recent competitors. Paxos Standard (PAX) has no redemption fee but a minimum of $100. The same with Circle’s USD Coin (USDC). But Tether? Well, to even consider redeeming your USDT for USD with Tether proper, you’ll need to be doing it $100,000 at a time. You’ll pay a minimum fee of 0.1% to make a deposit and acquire USDT, and there are three tiers of withdrawal fees: 0.4% at $100,000 or more, 1% at $1 million or more, and 3% at $10 million or more.

These fees are not inconsequential, and the size limits mean that primarily large operations like crypto exchanges will be using them. After all, $100,000 only goes into $1.8 billion 1800 times. $1.8 billion is roughly the size of the USDT market at the time of writing. Additionally, clients are only allowed to make conversions and transactions once per week, while Paxos at least has a daily schedule of when transactions are processed.

The move is non-competitive. It puts both Paxos and USD Coin in a stronger position, and each has been steadily growing. Gemini Dollar (GUSD) is mainly used on its issuing exchange, Gemini, so I leave it out of this article. However, it’s notable that GUSD has much friendlier fees and rates as well.

At the time of writing, both PAX and USDC were trading 1% above their peg – meaning that you could effectively, at scale at least, earn a profit just exchanging either of them to dollars. Erstwhile, USDT was at $0.996, meaning you would take a loss converting them outside of the Tether one-for-one program, such as going to Bitfinex.

The situation raises an important question: is Tether intentionally trying to weaken its position and effectively price itself out of business? Shifting tides have shown that exchanges will lend their loyalty to whichever stablecoin clients most want. Binance and Bitfinex have both diversified their stablecoin offerings, and if market movement is any indicator, the positions of USDC and PAX will improve there while USDT will stagnate or decrease.

Is this all part of an exit strategy on the part of Tether, or will they find a way to compete with the low-and-no fee situation that PAX and USDC have going on? Time will tell, but in the meantime, this author can’t recommend the purchase of USDT unless absolutely necessary. It seems without large volumes you’ll have to take severe losses just to realize any gains or advantages that might have been had through holding it.

Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.

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Top Coins Are Shaky, But Bitcoin Still Holds $4,000 Mark

Sunday, Dec. 2: the top 20 cryptocurrencies are mostly in the red, according to data from Coin360, after a modest recovery yesterday, Dec. 1. Despite the mild losses, Bitcoin (BTC) is still holding just above the $4,000 mark.

Coin360

Market visualization from Coin360

According to data by CoinMarketCap, Bitcoin is in the red, steadily descending below the $4,100 mark, down almost 4 percent on the day to press time. However, the leading cryptocurrency has been relatively stable throughout the weekend in comparison to Friday, Nov. 30, when it dipped below $4,000 at least twice. Bitcoin is trading at $4,087 to press time.

BTC

Bitcoin 7-day price chart. Source: CoinMarketCap Bitcoin Price Index

Ripple (XRP), maintaining its position as the world’s second largest altcoin by market cap, is trading around $0.36, down just over 3 percent of its price and finishing its week of mostly descent.

XRP

Ripple 7-day price chart. Source: CoinMarketCap Ripple Price Index

Ethereum (ETH) is also in the red, hovering mostly around $115 as of press time. After a brief increase in the middle of this week with the peak at the $125 mark, the altcoin has been relatively calm during the weekend, even reaching $120 point earlier today, Dec. 2.

ETH

Ethereum 7-day price chart. Source: CoinMarketCap Ethereum Price Index

Total market capitalization of all cryptocurrencies has slightly decreased in comparison to Dec. 1 performance, going down to $130 billion by press time after reaching $139 billion on Saturday. Daily trading volumes are hovering around $14 billion at press time, also seeing a mild decrease today.

TOTAL

7-day total market capitalization chart. Source: CoinMarketCap

According to CoinMarketCap, all of top 20 cryptocurrencies have been in the red throughout the day, except for Bitcoin SV (BSV) and Ethereum Classic (ETC). Bitcoin SV, which emerged out of the controversial Bitcoin Cash (BCH) hard fork saw a peak of growth today, before falling slight to trade sideways at around $100. As of press time, the coin is at $95.25, down just under half a percent on the day. Its competitor, Bitcoin Cash (BCH), has dropped from $180 to approximately $166 today, down almost 6 percent over the 24-hour period.

The top three gaining and losing altcoins of the week can be seen in Cointelegraph’s recent Hodler’s Digest.

Bitcoin has been holding steady above $4,000 for two days already, despite news on crypto regulation tightening in several countries. As reported Dec. 1, the Thai Securities and Exchanges Commission is considering Security Token Offerings (STOs), announcing it will elaborate legal framework to oversee them. Meanwhile, “informed” sources have revealed that Japanese financial regulator, the FSA, is set to announce new regulations for Initial Coin Offering (ICO) to protect potential investors from fraud.

In Estonia, the Ministry of Finance announced it will add amendments to a recently passed bill on anti-money laundering (AML) and terrorist financing prevention to “tighten” crypto-related regulation.

On Saturday, the G20 member countries called for the taxation of cryptocurrency internationally, as well as its regulation to combat money laundering, during the summit in Buenos Aires, Argentina this weekend.

FBI Arrests ‘Crypto Bank’ CEO Who Embezzled ICO Funds

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Well, that escalated slowly.

The CEO of “AriseBank,” who CCN previously reported as the target of an SEC injunction and civil proceedings in January, was arrested by the FBI this week without incident on charges of fraud to the tune of around $4 million, according to a press release from the Department of Justice. The arrest comes on the heels of a California US District judge giving some resistance to an SEC request for an injunction against another ICO against which it has a civil suit.

The actions of 30-year-old Jared Rice Sr. are particularly egregious in contrast to those of Reginald Buddy Ringgold III, in that he is alleged to have actually gone on a spending spree even while his unregistered and unregulated security offering was in progress. As DOJ tells it:

“Even as he touted AriseBank’s nonexistent benefits in press releases and online, Mr. Rice quietly converted investor funds for his own personal use, spending the money on hotels, food, clothing, a family law attorney, and even a guardian ad litem.”

A History of Scamming and Domestic Violence

According to public records and the Grand Jury indictment, Jared Rice was previously charged with tampering with government records in Texas for forging the Secretary of State’s seal and signature on incorporation documents. In the same case, which dates back to 2015 and was related to another attempted internet venture, Rice was charged with stealing – in that case, investor funds. This would have been something an ICO reviewer might have come across with any degree of research.

To add a bit of TMZ-style flair to his case, Rice decided to use some of the proceeds of the AriseBank scam to fund his family attorney and a guardian ad litem, which are items related to his apparent domestic problems. In the photo to the right, he is under arrest and held on $15,000 bond for assault on a family member. The domestic violence arrest appears to have been after the charge of defrauding the previous investor, who is not named in the Grand Jury indictment document nor is immediately apparent in other methods of inquiry.

It seems that in all his spending, he did not think to pay to scrub his arrest records, not even with the prospect of millions of dollars more.

The case brings to mind the much more successful scamming of crypto mining executive Josh Garza, who was eventually sentenced to federal prison.

Here is the full indictment:

Jared Rice Indictment by on Scribd

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Strategy Shift: North Korean Hackers Take Aim at Individual Crypto Investors

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Faced with depleted reserves and having been hit with sanctions aimed at its illegal nuclear weapons program, North Korean hackers have a new strategy for growing the country’s cash reserves — steal crypto holdings from individual investors.

According to a report from the South China Morning Post (SCMP), the option to target individuals who hold cryptocurrencies is a departure from their usual model of penetrating high-value financial institutions and centralized crypto exchanges.

To steal their victims’ digital assets, hackers send unsuspecting victims an email with infected file attachments. Once the victim downloads the files, a malicious script infects the computer and takes total control of the machine. From then on, they can do serious damage.

The SCMP quoted the founder of the cyber warfare research group IssueMakersLab, Simon Choi, who confirmed the change in the modus operandi of North Korean hackers. He argued that the shift from targeting exchanges and trading platforms to attacking individuals was most likely due to the upgraded security protocols that crypto exchanges platforms have been able to implement in the past few months.

“Direct attacks on exchanges have become harder, so hackers are thinking about alternatively going after individual users with weak security. They targeted staff at the exchanges, but now they are attacking cryptocurrency users directly. With the US, the UN and others imposing sanctions on the North Korean economy, North Korea is in a difficult position economically, and cryptography has come to be seen as a good opportunity.”

Kwon Seo-Chul, the CEO of Cuvepia, told SCMP that his firm had found over 30 instances where North Korean hackers had preyed on innocent cryptocurrency investors.

“They are just simple wallet users investing in cryptocurrency. In fact, when cryptocurrencies are hacked, there is nowhere one can make complaints, so hackers are increasingly hacking into cryptocurrencies,” Kwon explained.

north korea crypto hackSource: Shutterstock

Choi also added that most of the targets of these attacks had been the wealthy South Koreans, as the attackers “believe that if they target CEOs of wealthy firms and heads of organizations,” they can cash out large sums faster. With the advent of retail custody solutions and hardware wallets, it is amazing that these kind of attacks are still prevalent.

Explaining why it seems easy for these hackers to target individual crypto investors and get away with it, Kwon explained:

“When cryptocurrency wallets are hacked, there is nowhere one can make complaints, so hackers are increasingly hacking into digital currency accounts. Some of the attacks are carried out by sending the victims an email with infected file attachments.”

North Korea has been profiting from cryptocurrencies for a while now. In September, a report on Asia Times said Pyongyang was using cryptocurrencies to evade US sanctions. The report quoted former NSA cybersecurity official Priscilla Moriuchi who said the state was earning millions of dollars on a regular basis from its mining and crypto trading activities.

“North Korea has pursued other avenues for obtaining cryptocurrencies as well, including mining of both bitcoin and Monero, ransom paid in bitcoin from the global WannaCry attack in May and even commissioning a cryptocurrency class for North Korean students in November.”

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