DoJ Challenges Visa’s Proposed $5.3B Acquisition of Plaid in a North California Court

The U.S Department of Justice (DoJ) has challenged Visa’s acquisition of financial data aggregation firm, Plaid. According to the filing on Nov 5, Visa’s move to initiate a transaction process for purchasing Plaid at $5.3 billion is a monopolistic approach. It deprives the American people of cheaper and better debit-focused innovations. The filing reads,

“By acquiring Plaid, Visa would eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers.”

It goes on to term Visa as a ‘monopolist in online business transactions’ given that it enjoys a market share of around 70% in the online debit transactions industry. The DoJ claims that Visa will be violating Section 7 of the Clayton Act and Section 2 of the Sherman Act as per the filing made in a North California based federal court. Both Visa and Plaid are defendants in this case, whereas the DoJ is the complainant.

While Plaid’s focus area is not the distribution of debit cards, this Fintech startup proposes a significant value in today’s world where data is the new gold. In fact, the firm received a strategic investment from both Visa and Master card back in 2019. This platform is designed to harmonize interaction between different databases held by financial service providers, including banks. Apparently, the firm was on its way to disrupt Visa’s fort in the online debit service before the ‘monopoly’ swung in to acquire them.

Per the DoJ filing, Visa’s senior executives, including the firm’s CEO, have previously hinted at the move to acquire Plaid as a strategy to neutralize competition. This strategic decision was particularly triggered by information that Plaid had plans to launch a parallel competition to Visa’s money movement business by the end of 2021.

At the time, Visa’s downside risk estimation for the next four years stood at $300-500 million, should Plaid have been acquired by a rival. This prompted them to act swiftly with the CEO noting that ‘Visa seeks to buy Plaid as an “insurance policy” to neutralize a “threat to our important US debit business.’ A statement that appears to have rattled the DoJ is now a focal point in its filing against Visa and Plaid.

Nonetheless, Visa has indicated through a spokesperson who shared with the Wall Street Journal that they intend to defend the Plaid transaction,

“Visa intends to defend the transaction vigorously … Visa’s business faces intense competition from a variety of players — but Plaid is not one of them.”

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Author: Edwin Munyui

NYDFS Directing Banks & Crypto Companies to Address Risks of Climate Change

The New York Department of Financial Services (NYDFS) sent out a letter to banks, firms, and cryptocurrency businesses to pay attention to the financial risks associated with climate change, incorporate them into their business strategies, and develop ways to disclose and mitigate those risks.

This letter followed the same guidelines issued by the agency for the state’s insurance providers last month.

NYDFS is the only US member of the Network for Greening the Financial System, an international group of central banks and regulatory agencies that is focused on climate-related financial risks.

The letter noted that the US gross domestic product (GDP) sees damage of 1.2% with each rise of one-degree Celsius in global temperatures. As such, those communities that are hit harder by climate change can then lead to an increase in default rates, reduced lending activity, devaluations of assets, and losses.

As for the cryptocurrency businesses, it pointed out how studies suggest the environmental impact of mining digital currencies like Bitcoin can be substantial — annual consumption of energy is equivalent to Venezuela’s electricity usage, and carbon footprint is to that of New Zealand’s.

“The energy cost for mining virtual currencies is sizable compared to the value of the virtual currencies,” said Linda Lacewell, NYDFS Superintendent, in the letter.

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The agency wants digital currency firms to consider being more transparent about the location and equipment they use in Bitcoin mining, which is energy-intensive.

“DFS is developing a strategy for integrating climate-related risks into its supervisory mandate,” the letter concluded.

Ripple CEO Brad Garlinghouse called this step from NYDFS “pivotal” and said instead of exacerbating the problem; Bitcoin needs to use more energy-efficient assets as it gains the attention and support of big and mainstream companies.

“XRP was built specifically to use negligible amts of energy,” chimed in Ripple CTO David Schwartz.

“The less it costs to start and run a node, the less decentralized a system will be if you think people being able to use it trustlessly going forward is important to decentralization,” added Schwartz on XRP being hard to audit “because it’s too expensive and nobody cares.”

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Author: AnTy

Chainalysis And Integra FEC Win $625k Grants From IRS To Track Monero (XMR) Transactions

Announced this last Wednesday, The U.S. Department of Treasury has awarded two grants to blockchain tracking and monitoring firms, Chainalysis and Integra FEC. Both firms received $625,000 in grants in a bid to develop privacy-focused blockchain transactions such as Monero and Layer-2 protocols.

In early September, the Internal Revenue Service (IRS) called out firms and companies building blockchain tracking and monitoring tools to submit proposals on cracking privacy blockchains – especially Monero (XMR). The taxation authority incentivized companies to apply with a $625,000 grant promised to the winning contracts.

In less than three weeks, the IRS has made its decision selecting blockchain analysis firm, Chainalysis, and data forensics analysis firm, Integra FEC. Both the companies will receive a total of $1.25 million, shared equally, with authority looking for solutions to trace and monitor the privacy coin.

An IRS spokesperson confirmed a total of 22 companies in the blockchain space applied for the grants, with the two firms winning the bids. The winning teams will receive an initial payment of $500,000 to develop the privacy-based monitoring and tracking tool, and the rest of the amount will be released once the prototype of the tool is released and inspected.

The New York-headquartered blockchain analysis firm is a relatively known company in the crypto space. Chainalysis recently announced a partnership with the Wyoming state financial regulator to monitor public blockchain transactions and cryptocurrency mixers.

Integra FEC is a Texas-based data forensics firm that is relatively unknown in the crypto space despite partnering with the U.S. securities regulator, SEC. The firm built a consultation service, “Other Scientific and Technical Consulting Services,” for the SEC.

Also Read: Gemini Rolls Out Zcash (ZEC) Shielded-Address Withdrawals For Transaction Privacy

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Author: Lujan Odera

Homeland Security Calls On Freelancers to Design A Digital Wallet Interface; $25k to Finalists

  • The Science and Technology Directorate (S&T) division of the US Department of Homeland Security has allocated up to $25,000 in prizes as an incentive for designing a digital wallet user interface.
  • Prospective applicants will be required to create a user interface compatible with DHS projects in the blockchain niche.
  • Notably, the DHS has been quite active in this area and previously supported innovations focusing on the decentralization of identity records.

According to the technical director of S&T’s Silicon Valley Innovation Program (SVIP), Anil John, participants who get to the final stage are expected to demonstrate ‘ease of use and visual consistency, while supporting interoperability, security, and privacy.’ Digital wallets that stand out might ultimately increase the value proposition of the DHS blockchain projects once integrated.

John highlighted that one DHS client is already leveraging blockchain to build a decentralized credential network for the issuance of digital green cards. Despite its active involvement in funding blockchain projects, this is the first time the DHS is taking a design challenge to the public, according to S&T’s program manager, Kathleen Kenyon.

She was keen to highlight that they are trying to get that ‘freelance designer’ given that their foothold in this space is less significant than corporate contacts; this was the main reason for a low budget digital wallet crowdsource. As for the prizes, three finalists will be allocated $5,000 each while the winner gets an extra $10,000. Applications are still open, with the first stage finalists announced on October 27 via an online SVIP event. Overall winners will be announced later in the year.

This incentive by the DHS is not the first of its kind; just recently, the IRS issued a bounty of up to $625,000 to developers who will crack Monero’s anonymity and the lightning network. In similar efforts to boost compliance and oversight, the U.S Financial Crimes Enforcement Network (FinCEN) has floated an Advanced Notice of Proposed Rulemaking (ANPR) targeting the amendment of AML policies.

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Author: Edwin Munyui

OFAC Blacklists Three Russians’ Crypto Addresses Linked to 2016 US Presidential Election

The Treasury Department of Foreign Assets Control, OFAC in short, announced sanctions for three Russian hackers involved in meddling in the 2016 Presidential elections. The statement further added cryptocurrency addresses attached to the Russian Troll group, Internet Research Agency, were also sanctioned.

The sanctions stretch to several crypto addresses, including Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Zcash (ZEC), and Bitcoin SV (BSV). As of the publishing of the sanctions, “all property and interests in property of these targets that are subject to U.S. jurisdictions are blocked,” the statement adds. U.S. citizens are also prohibited from engaging in transactions with the listed persons.

The three sanctioned persons – Artem Lifshits, Anton Andreyev, and Darya Aslanova – are listed for controlling the crypto wallet accounts and dealing with the IRA. The statement reads,

“Russian nationals Artem Lifshits, Anton Andreyev, and Darya Aslanova, as employees of the IRA, supported the IRA’s cryptocurrency accounts. The IRA uses cryptocurrency to fund activities in furtherance of their ongoing malign influence operations around the world.”

OFAC first listed IRA operations using cryptocurrency in 2018, accusing the firm of participating in meddling in the 2016 U.S. Presidential election.

Russia is not the only nation the U.S. agency is focusing on. In November 2019, BEG reported OFAC was accelerating its efforts to sanction cryptocurrency addresses from two Iran nationals in relation to ransomware attacks within the country.

The list of Russian cryptocurrency addresses that have been blacklisted by the U.S. Treasury Department.

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Author: Lujan Odera

The US Seizes $2M in its Largest-Ever Move Against Militant Group’s Crypto Fundraising Effort

The US Justice Department has taken down the efforts by the military wing of al Qaeda, Hamas, and Islamic State to raise funds via cryptos through schemes that sold bogus COVID-19 safety equipment to US hospitals.

The agency said they seized about $2 million in the largest ever move by the US against the use of cryptos by militant groups. Authorities confiscated over 300 crypto accounts, four websites, and four Facebook pages.

All 150 cryptocurrency accounts used to launder funds were seized, investigators said. The department said in a statement,

“These actions represent the government’s largest-ever seizure of cryptocurrency in the terrorism context.”

Homeland Security, Federal Bureau of Investigation, Internal Revenue Service, and the U.S. Justice Department were all involved in the investigation to take down the fundraising schemes.

During the probe, the US agents operated an undercover website mirroring a Hamas website for 30 days, said John Demers, head of Justice Department’s national security division.

Using FaceMackCenter.com website, the militant groups peddled the personal protective equipment touted as approved by the US Food and Drug Administration, which in actuality “were not FDA approved,” to first responders, nursing homes, and US hospitals.

Investigators also reported that the payments were collected through US credit cards and PayPal, but the equipment was never delivered.

The Islamic State promoted its scheme via Facebook accounts while AL Qaeda solicited donation for its scheme through the Telegram app.

“Nothing was hidden,” said one U.S. official, “They thought they were protected” by the encryption in the apps they used.

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Author: AnTy

Bank of Japan (BoJ) Appoints its Top Economist as the New Head to Oversee Digital Yen

The top economist of the Bank of Japan (BoJ) has been appointed as head of department overseeing research on central bank digital currencies (CBDC), as the central bank steps its efforts to join the race to embrace financial innovation.

Kazushige Kamiyama will be heading the payments and settlement department of BOJ, which has conducted joint research with other central banks on state-backed digital currencies and looked into how the growing presence of cryptocurrencies affect central banking.

As the central bank’s top economist, Kamiyama has spearheaded efforts to use big data in analyzing the economy, an approach that helped Bank of Japan catch real-time changes affecting the country’s economy amidst the ongoing coronavirus pandemic.

BOJ also shared that Seisaky Kameda will be succeeding Kamiyama as its top economist and head of the statistics department.

This move comes at a time when BOJ is working on testing a digital yen. Earlier this month, the central bank released a report about the technical hurdles for CBDC, where it discussed checking the feasibility of such digital money from a technical perspective and considering whether or not to use blockchain for it.

The bank also set up a task force a couple of weeks back that was said to belong to the BOJ’s payment and settlement systems department. The new team is looking more closely into the CBDC by following up on BOJ’s efforts, including joint research it has been conducting with other major central banks since January.

Japan has been cautious about its digital currencies approach, given that it has the most cash-loving population in the world. But the fact that China is making steady progress towards issuing its digital yuan, having chosen the companies to test the CBDC, it has prompted not just BOJ but other central banks and governments to look into the idea of issuing CBDCs more closely.

BOJ has said although it has no immediate plans to issue its own digital currency, it has been conducting research on the issue with other central banks.

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Author: AnTy

Australia’s NSW Treasury Department Pushes for Advanced Blockchain Regulatory Framework

Australia’s New South Wales Treasury Department has released a research paper looking into the regulation of blockchain and another emerging tech. According to the city’s authorities, catching up with the rapid technological progress could save New South Wales a significant amount of money in compliance costs. The paper reads,

“Even small improvements to our regulatory framework have the potential to drive significant economic benefits. A saving of just 5 percent of compliance costs in New South Wales could result in a net benefit between $0.6 billion and $4 billion.”

The research acknowledges that COVID-19 has indeed changed the outlook of businesses in New South Wales, making it necessary to review the current regulatory frameworks. Notably, one of the propositions towards changing the landscape is outcome-focused legislation. This means that legislation will be informed or follow innovation hence giving more space for ideas to thrive.

“Outcome-based regulation can provide the flexibility for businesses to innovate, adapt, and realize the potential of emerging technologies, without having to seek permission from regulators.”

Another factor that the NSW Treasury Department plans to look into is the overlapping of regulation. Currently, some of the laws in this state create quite an overlap when it comes to processes such as registration, compliance, and reporting. This has since made some businesses stall, especially those that heavily depend on a swift action by the NSW market watchdogs.

It is, therefore, not surprising that the NSW state has decided to play catch up or ‘pace the problem’ by fast-forwarding considerations on emerging tech regulatory frameworks. In doing so, the Australian city is optimistic that it will seamlessly recover from the effects of COVID-19 under proper oversight while adopting the latest tech,

“With new tools providing a roadmap for reform, the way forward for New South Wales is clear … Technology and AI can continue to play a role in assisting regulators to target opportunities for burden reduction and streamline reform moving forward.”

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Author: Edwin Munyui

Changes to NYDFS BitLicense Have Been ‘Beyond Positive;’ NY Hopes to Become Tech Hub

New York Department of Financial Services (NYDFS) superintendent, Linda Lacewell, has said that crypto-based firms have reacted positively to the recently enacted changes on the Bitlicense.

Speaking during the Global Webinar Series on July 14, Lacewell noted that the new changes seem to have been well-received despite a few still critiquing the regulator. Earlier on, NYDFS suggested modifications to make it easier to acquire the Big Apple crypto license by introducing new provisions such as self-certification and a conditional license attributed to partnerships with operating entities.

Lacewell went on to note that interested licensees are pursuing additional approvals to scale their crypto businesses within New York:

“We’ve even had some licensees tell us that they’re very excited and interested in pursuing additional licensing with other potential parties that are all partners in the space.”

This success has been part of a collaborative effort between the NYDFS and stakeholders, whether licensed or unlicensed. Lacewell was keen to acknowledge this partnership, adding that she was not surprised that it is gradually paying off.

Back when she took office last year, Lacewell and the NYDFS had a considerable backlog of Bitlicense applications, including Bitstamp’s, which was in the queue for almost four years. This has, however, taken a different turn after Lacewell appointed personnel to focus on Bitlicense applications specifically. Since then, six entities have been granted a Bitlicense approval.

New York Gradually Turning to a Crypto Hub

Despite its corporate status in America and globally, New York was a bit hesitant to accept digital currencies. At some point, firms had to relocate shops following multiple crackdowns by the NYDFS.

This is now taking a different turn after the regulator’s latest moves signal the will to forge a definitive path for crypto innovators. According to Lacewell, this process is essential in the prevention of bad actors leveraging the ambiguity to commit financial crimes. That said, Lacewell is optimistic that the new NYDFS outlook towards crypto activity will attract more stakeholders in the long-run:

“We want innovators right here in New York, which has been the birthplace of so much invention and ingenuity, historically, and has always set the standard, not just for the rest of the country but the world. That’s what it means to be the birthplace of immigration because change agents come here and we want you here.”

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Author: Edwin Munyui

NYDFS To Ease Bitlicense Approval Process as the Crypto Regulation Turns Five

The New York Department of Financial Services (NYDFS) has suggested modifications to Bitlicense’s issuance to make the state more crypto-friendly.

This license – introduced in 2015 – is now five years old, and has dramatically impacted crypto operations in New York since its introduction. While most crypto businesses view it as an obstacle, some companies find it to be within an achievable scope for compliance.

Currently, only 25 crypto firms have been approved by the NYDFS to carry out business in the big apple. The approval might, however, change given new proposals that seek to introduce conditional licenses and self-certifications as part of smoothening the approval process.

Going forward, crypto entities such as Bitfinex and Shapeshift, which terminated their New York operations following the Bitlicense roll out could make a gradual return to the lucrative market.

Conditional Bitlicense

This initiative will allow crypto firms looking to enter the New York market to obtain a conditional license by working with entities whose Bitlicense was already approved. According to the NYDFS’ logic, a firm that gets a provisional license will eventually seek the Bitlicense as it scales operations:

“DFS expects that an entity that seeks a Conditional License will endeavor to eventually seek and obtain a full BitLicense.”

Consequently, the new market entrants must document their intention to work with a Bitlicense holder. This will then be reviewed by the NYDFS coupled with a follow-up should an entity be granted the conditional license. In the event where a provisional license holder goes astray, NYDFS can step in to discontinue the approval.

Self-Certification

To further advance its impact, the NYDFS has introduced a guideline on self-certification for crypto assets that are still in the pipeline.

However, this only applies to licensed entities and will need the approval of at least three firms to self-certify that a crypto asset meets NYDFS rules. Linda Lacewell, an NYDFS Superintendent, said that this move is meant to boost crypto businesses while maintaining proper oversight:

“We want to regulate … as much as we have to and not a drop more because businesses need to do business and they need to operate.”

State of Crypto Business in New York

As mentioned earlier, the Bitlicense has significantly shaped New York’s crypto ecosystem. Notable players that currently operate under the ‘strict’ measures include Circle, BitFlyer, and Bitstamp.

According to BitFlyer’s Chief Compliance in the U.S, Dave Zacks, the approval process was, however, not easy and took almost a year:

“We don’t know how many applications NYDFS has under review currently, but the requirements are strict, and a lot of newer smaller entities don’t have the capital or capability to meet those standards.”

Nonetheless, crypto stakeholders eyeing the New York market can now try their luck with better odds. Such a move would not only be beneficial in terms of market share but also in building a trustworthy business having qualified to operate in the world’s financial hub.

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Author: Edwin Munyui