Monday, February 25, 2019

Indian Supreme Court Gives Government 4 Weeks to Produce Crypto Regulation


The Supreme Court of India has reportedly given the Indian government four weeks to come up with cryptocurrency regulations before making its ruling on pending crypto cases. The court was set to hear the petitions against the crypto banking ban by the central bank this week.

Government Given a Deadline
The Indian supreme court reportedly addressed the matter regarding cryptocurrency today, Feb. 25. According to Twitter account Crypto Kanoon, a platform for blockchain regulatory news and analysis, the court gave the government four weeks to come up with a clear regulatory framework for cryptocurrencies. After that time, the court will make a decision on the crypto banking ban by the country's central bank, the Reserve Bank of India (RBI). Crypto Kanoon tweeted:

Supreme Court has granted 4 weeks to Indian government as the final opportunity to bring about a policy (rules and regulations) on cryptocurrencies.

he last time the supreme court addressed the crypto case was on Jan. 17 when it decided to hear the petitions against the RBI ban in the last week of this month. In its circular dated April 6 last year, the central bank banned financial institutions under its control from providing services to crypto businesses.

One of the petitioners, the Internet and Mobile Association of India (IAMAI), requested for the RBI ban to be lifted. The IAMAI is an industry body whose members include a number of local crypto exchanges. The association argued that the ban is unconstitutional. It also pointed out to the court that some crypto businesses have suffered because of this banking restriction. Zebpay, for example, shut down its Indian crypto exchange operations due to the banking problem.

Crypto Regulation in India
The government of India has been working on the regulatory framework for cryptocurrencies. The finance ministry set up a panel, headed by Subhash Chandra Garg, Secretary of Economic Affairs, to draft the regulation.

The recommendations by this panel are reportedly being finalized. However, there have been conflicting reports about what they entail. In January, the Ministry of Finance invited reputed law firm Nishith Desai Associates to present its proposals for the country's crypto regulation. Furthermore, the ministry told Lok Sabha, India's lower house of parliament, at the end of last year that "It is difficult to state a specific timeline to come up with clear recommendations" as it "is pursuing the matter with due caution."

Bitfinex Recovers $106,000 of Stolen BTC With US Government Help


Bitfinex has recovered 27.7 bitcoin stolen by hackers in August 2016, the company said on Monday. The coins, worth around $106,000 at the time of writing, represent only a small fraction of the total BTC stolen. U.S. federal law enforcement agencies recovered the bitcoin and returned it to the cryptocurrency exchange.

Recovered BTC to Be Distributed in Cash to Customers
In 2016, Bitfinex hackers made off with 120,000 BTC, valued at about $72 million at the time, in one of the biggest ever thefts from a cryptocurrency exchange.

Bitfinex said in statement that it will return the recovered bitcoin to more than 5,000 victims of the heist in cash. The exchange, the world's 17th largest, with trading volume of $443 million in the last 24 hours, said it will convert the returned BTC to dollars before distributing the money to its customers.

The exchange detailed how it had worked with unnamed law enforcement agencies from the U.S. and Europe, according to a Reuters report, "to provide intelligence and assist with investigations." In November, the U.S. government notified the British Virgin Islands-registered Bitfinex of the recovery of the stolen bitcoin.

Giancarlo Devasini, chief financial officer at Bitfinex, stated:
Over two years following the hack of the Bitfinex platform, today we see the results of a clear and robust response strategy and the efforts of the U.S. government. It gives us great pleasure to be able to reimburse our traders that were loyal to us and believed in us at a very difficult time. We would like to thank U.S. federal law enforcement agencies for their ongoing efforts to investigate the security breach and their commitment to seizing and returning stolen assets.

Bitfinex to Continue to Work With Law Enforcement Agencies
According to U.S.-based cyber security firm Cipher Trace, hackers stole a total $950 million from exchanges and cryptocurrency wallets last year. Japan's Coincheck has suffered the biggest theft yet, with $530 million worth of the NEM cryptocurrency stolen in January 2018. Hackers also pilfered hundreds of millions of dollars from Mt. Gox in 2014, another Japanese trading platform.

The U.S. government recovery and return of a fraction of the Bitfinex coins is thus seen as a positive development in an industry where such recoveries are rare. When BTC is stolen from an exchange, it is often lost forever and exchanges have been reluctant or simply unable to compensate those affected.

In response to the hacks, regulators all around the world have sought to tighten regulation around the trade of cryptocurrencies. Know-your-customer rules and anti-money laundering regulations have or are in the process of becoming compulsory at exchanges from Japan to the U.S. and from Spain to South Africa.

After the 2016 hack, Bitfinex spread losses across all its customer accounts, which meant a loss of about a third of each customer's assets held on the exchange. In compensation, the exchange offered users a credit token called BFX, which was equivalent to every dollar lost.

After eight months, customers had redeemed those tokens for cash or shares in iFinex Inc, Bitfinex's parent company. Users who opted for equity received additional tokens, giving them the right to receive any funds recovered from the hack. Speaking to Reuters, a lawyer representing Bitfinex said the exchange "would continue to work with law enforcement agencies to recover the remaining bitcoin."

Wednesday, February 20, 2019

Bank of Spain Report: Bitcoin Is a Solution for a System Without Censorship


A recent report published by the Bank of Spain states that Bitcoin is a solution for the creation of a system without censorship. This is in contrast to public comments made by most central bankers who are prone to attack cryptocurrency with little insight into why it is needed.   

Explaining Peer-to-Peer Electronic Cash to Bankers
Banco de EspaƱa, Spain's central bank and supervisor of the Spanish banking system, recently published a report aiming to explain how Bitcoin works. The document details the functions of the cryptocurrency, as well as analyzing its strengths and weaknesses from the point of view of the established financial order. It also explains that the best way to understand the aims of the new system is by consulting the original Bitcoin whitepaper written by Satoshi Nakamoto.

The report mentions that according to Nakamoto the world needs "an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party." Thus the goal is to create an electronic payment system similar to cash which allows remote payments without the need for the intermediation of institutions such as banks. This is meant to enable truly irreversible payments and reduce intermediation costs.

A System Without Censorship
The report concludes that cryptocurrency was envisioned as a payments system without the possibility of transaction censorship or a central authority with the power to authorize or reject transactions. It states that "bitcoin is an imaginative and elegant solution to this problem" of "the creation of a system without censorship." However the central bank's report also determines that traditional payment systems do not seek to resolve this problem and therefore cryptocurrency is not an alternative to them.

In line with the common position usually expressed by central bankers, the report ends by saying: "Taking into account that for most agents the existence of trusted intermediaries is not a problem, along with the costs and inefficiencies generated when an attempt is made to eliminate these intermediaries, it does not seem that bitcoin, as it currently stands, is going to have a significant impact for the financial sector as an alternative payment system to the traditional channels."

Nearly Half of Millennial Traders Have More Faith in Crypto Than Stock Market


Nearly half of millennial traders have more faith in cryptocurrency exchanges than they do in traditional ones. They are also enthusiastic about the prospect of traditional financial institutions offering crypto assets. That's according to a new survey which shows a "generational shift" where millennials "place their faith in the power of technology and open networks." 

The Beginning of a Generational Shift
The survey by U.S.-based investment platform Etoro interviewed 1,000 online traders. It found that 43 percent of millennial online traders trust crypto exchanges more than they do U.S. stock exchanges. 93 percent of millennials surveyed also said that they would invest more money in crypto if it were offered by traditional financial institutions such as TD Ameritrade, Fidelity, or Charles Schwab. Even among millennials who don't trade crypto, one third said they would trust crypto over the stock market. Guy Hirsch, Managing Director of Etoro U.S. said:

We're seeing the beginning of a generational shift in trust from traditional stock exchanges to crypto exchanges. At the heart of this change are the asset classes themselves. Younger investors' experience with the stock market has seen a great deal of loss of trust, with the fall of Lehman Brothers because of irresponsible practices followed by the worst recession since the Great Depression.

He added: "Trust further eroded when Americans saw how hundreds of billions of dollars of taxpayers' money are funneled to the largest financial institutions while their savings evaporated and how banks get free money through quantitative easing while their cost of living continued to rise."

The survey also showed that two thirds of millennial crypto traders say they have more faith in crypto as a whole than the stock market. Of millennials who don't trade crypto, one third said they would trust crypto over the stock market. In contrast, 77 percent of generation X respondents revealed they trust stock exchanges more.

The Perfect Asset Class
Etoro's survey also showed that among investors across all age groups that don't trade crypto, 59 percent would invest more money in crypto if it were offered by a traditional financial institution. Current crypto traders would be more at ease investing in the asset class if it were offered by a traditional financial institution, with 92 percent admitting they would invest more money if a conventional financial institution provided this investing option. This shows that despite crypto enthusiasts and millennials distrusting traditional institutions, established companies with a global reputation could draw in younger investors were they to offer crypto assets.

The survey looked at savings plans too. Half of online investors surveyed expressed interest in a crypto allocation in their 401k plans. Of those that don't trade crypto, 45 percent expressed interest in having some of their 401k allocated to crypto assets, while 74 percent of crypto traders are interested in seeing the option from their 401k provider. Hirsch added: "While there is clearly a demand for crypto assets in 401k portfolios, there are a number of regulatory and market changes that need to occur before it becomes a mainstream offering."

Mati Greenspan, a senior market analyst at Etoro, told "Millennials tend to place their faith in the power of technology and more specifically the power of open networks. This is why crypto is the perfect asset class for our generation."

Tuesday, February 12, 2019

Indian Supreme Court Moves Crypto Hearing, Community Calls for Positive Regulations


India's supreme court has set a new date to hear the petitions against the cryptocurrency banking ban by the country's central bank. Meanwhile, the crypto community in India is campaigning on social media for "positive regulations" and the rollback of the banking ban.

New Supreme Court Hearing Date
Indian Court Moves Crypto Hearing, Community Calls for Positive RegulationsThe Supreme Court of India has reportedly set a new date to hear the petitions against the crypto banking ban by the Reserve Bank of India (RBI). The central bank issued a circular in April banning all regulated financial institutions from providing services to crypto businesses. Banks complied and closed accounts of crypto exchanges by July.

A court document circulating on Twitter on Thursday indicates that the supreme court has scheduled Jan. 15, 2019, as the date it will revisit the crypto case.

The court originally scheduled to hear the case on Sept. 11 but continually postponed it. Then, on Oct. 25, it directed the government to submit a counter affidavit within two weeks, detailing its crypto regulatory progress.

According to Quartz India, the government has filed a counter affidavit with the supreme court, stating that it expects the regulatory framework to be finalized in December.

On Saturday, Inc42 reported that the finance ministry's counter affidavit defends the RBI banking ban. The news outlet wrote:

Representatives from the finance ministry submitted that the RBI circular as well as warnings issued by finance ministry on December 29, 2017, and by finance minister Arun Jaitley in his budget speech on February 1, 2018, are in line with the first inter-ministerial (interdisciplinary) committee's recommendations on cryptocurrencies.

The finance ministry set up an inter-ministerial committee in November last year, led by its Economic Affairs Secretary Subhash Chandra Garg, to recommend crypto regulatory measures. The publication noted that this committee has "yet to draft its report." Its next meetings are in December and January.

Community Campaigns for 'Positive Regulations'
The CEO of Indian cryptocurrency exchange Wazirx, Nischal Shetty, started an ongoing Twitter campaign on Oct. 31, calling for "positive regulations" for the Indian crypto industry. Shetty, who has over 55,100 followers on Twitter, wrote:

Please bring positive regulations in crypto and over 5 million crypto Indians will be thankful to you. Youth of India have found a new way to make wealth & this is especially important when there are not enough jobs for everyone.

He added, "We need to tweet to our ministers every day till we get [a] reply. The more we tweet the more chances of our voices being heard and crypto getting a positive regulation in India."

Shetty plans to continue the campaign "till the time the government takes a positive stance on regulating cryptocurrency in India," Inc42 quoted him emphasizing. The CEO elaborated:

We are worried about the RBI's banking ban on crypto. It has hampered the entire crypto sector of India and the innovations that come along.

In addition, the news outlet noted that crypto exchange Bitbns started a campaign on, demanding the repeal of the RBI circular. This petition has garnered 44,626 signatories at press time.

BTC Transactions Hit 1-Year High But Volume Remains Sluggish


There's good news and bad news for traders monitoring onchain data for signs of a market revival. The number of daily transactions has been rising for months, suggesting that BTC is being used for more than merely speculative purposes. Daily trade volume remains sluggish, however, suggesting another bull cycle is still some way off.

BTC Passes 350K Transactions per Day
The average number of daily transactions on the Bitcoin Core blockchain has been rising steadily since mid-2018 and recently surpassed 350,000. Save for a wild day in late 2017, when BTC notched a record 490K transactions, and the opening weeks of 2018, which saw major spikes, Bitcoin is seeing more sustained usage than ever. With Lightning Network taking a small but growing number of transactions offchain, along with Liquid, Blockstream's inter-exchange settlement layer, the actual number of onchain transactions would otherwise be higher stll.

Network usage does not necessarily correlate with price, and it is common for a blockchain to see sustained transaction growth while price remains stagnant. For all the usage that the BTC chain is witnessing, it remains trapped in $3,400-$3,700 territory. A look at trading volume shows that there has been no discernible uptick in months. 2019 has begun in muted fashion, with an average of 50,000 BTC being exchanged per day – a far cry from late 2017, when several hundred thousand bitcoins were being traded on a daily basis.

BTC Fees Remain Low for Now
BTC fees haven't been a talking point for months because there hasn't been much to talk about. A BTC transaction can currently be made for around $0.25. While almost 50x higher than the average BCH fee, it's still low enough to keep the majority of network users content. BTC users shouldn't count on fees remaining permanently low however. As 2017-18 data from Coinmetrics shows, average BTC transaction fees tend to lag behind average transaction count. In other words, it is possible that BTC's rising number of daily transactions could lead to fees also rising in due course.

Regardless of which direction BTC's fee market takes, continued usage of the protocol for its original purpose – sending electronic cash P2P – bodes well for future adoption and pricing. Combined with the ongoing development work being done behind the scenes, which makes it easier for users to send and receive bitcoin with confidence, means the next phase of growth may be driven by more sustainable fundamentals than speculative mania alone.

Tuesday, February 5, 2019

Indian Government Concerned Cryptocurrencies Could Undermine the Rupee


The Indian government panel tasked with drafting crypto regulation is reportedly worried that cryptocurrencies could destabilize the rupee if they are accepted as payments. Its concern came to light despite evidence that cryptocurrencies do not currently pose a threat to financial stability.

Impact on the Rupee
The Indian government committee tasked with developing the regulatory framework for cryptocurrencies is reportedly "obsessed" with the impact they may have on the rupee if they are allowed to be used in payments, Quartz India reported. The committee is headed by Subhash Chandra Garg, Secretary of the Department of Economic Affairs.

"If bitcoin and other digital currencies are going to be allowed to be used for payments then whether it will end up destabilising the fiat currency is a major concern" for Garg's panel, the publication quoted an unnamed representative from the crypto ecosystem who recently met with the ministers as saying. "The overall impact on the financial ecosystem that it is likely to have is still unclear and it has been a challenge to convince them on this particular point."

If bitcoin and other digital currencies are going to be allowed to be used for payments then whether it will end up destabilizing the fiat currency is a major concern.

Garg's panel is finalizing its report containing the recommendations for the country's crypto regulation, according to the government's reply to a Right to Information filing.

However, the Ministry of Finance told Parliament that "It is difficult to state a specific timeline to come up with clear recommendations" and that Garg's panel is "pursuing the matter with due caution."

No Threat to Financial Stability
The Financial Stability Board (FSB) published a report in October last year on the financial stability implications of crypto assets. The FSB is an international body that monitors and makes recommendations about the global financial system to the G20, an international forum for governments and central bank governors. Its members are financial regulators and central bankers from 24 countries as well as global organizations such as the International Monetary Fund.

Cryptocurrencies need constant monitoring on overall financial stability considerations, given the rapid expansion in their usage.

The FSB report states that "Based on the available information, crypto assets do not pose a material risk to global financial stability at this time." Nonetheless, it notes that "vigilant monitoring is needed in light of the speed of market developments. Should the use of crypto-assets continue to evolve, it could have implications for financial stability in the future."

Citing the FSB's finding, the Reserve Bank of India (RBI) reiterated in its Trend and Progress of Banking in India 2017-18 report that cryptocurrencies are not a threat currently. "The market continues to evolve rapidly, however, and this initial assessment could change if crypto assets were to become more widely used or interconnected with the core of the regulated financial system," the central bank detailed. "Cryptocurrencies need constant monitoring on overall financial stability considerations, given the rapid expansion in their usage," the RBI concluded.

Report Claims Quadrigacx Never Held More Than 1,000 BTC


The drama surrounding Canadian cryptocurrency exchange Quadrigacx continues to intensify, with a recent report by Zernoncense claiming that the exchange has no identifiable cold storage reserves and that it has never held more than 1,000 BTC in customer funds.

Report Refutes Claims of Quadrigacx Owner's Widow
The report finds numerous assertions made in the affidavit submitted to Canadian courts on Jan. 31 by Jennifer Roberston, the wife of the exchange's allegedly deceased chief executive officer, Gerry Cotten, to be false.

The findings have been informed by analysis of Quadrigacx's BTC and ETH wallets. As the wallet addresses for Quadrigacx "were not widely known," the report relies on deposit information given to customers that was aggregated from Reddit.

The author notes that the findings are not guaranteed to represent "a factual truth," however, comparisons between Quadrigacx and the withdrawal practices of known solvent exchanges shows "highly unorthodox" practices.

The analysis was conducted using Walletexplorer, which as the author states was created and is still being used by Chainalysis.

Report Claims Quadrigacx Uses Multi-Signature Wallets
Based on Zerononcense's findings, the number of BTC held by Quadrigacx is substantially less than that which was reported in Jennifer Robertson's affidavit.

The analysis finds that there are "no identifiable cold wallet reserves" for Quadrigacx, estimating that the exchange is in possession of less than 1,000 BTC.

The report also claims to evidence transfers totaling approximately 3.53 BTC that occurred on Jan. 24 and Jan. 25, apparently contradicting Robertson's claims that the exchange's funds are inaccessible.

The report also asserts that the numerous wallets used by Quadrigacx had multi-signature capability.

Quadrigacx Accused of Rerouting Customer Funds to Process Withdrawals
According to the report's findings, Qaudrigacx was "clearly" re-routing payments from customers to process withdrawals, comprising the operation of a "shell or a ponzi."

The author also asserts that withdrawal delays previously experienced by Quadrigacx customers resulted from the exchange not having the required funds available at the time, adding that in some instances the exchange was "forced to wait for enough customer deposits to be made" before processing withdrawals.