CFTC’s Swaps Division Releases Advisory Note To Futures Merchants On Holding Virtual Currencies

Quick Read:

  • The CFTC’s swaps division released its advisory note on digital asset trading and custody among Futures Commission Merchants (FCMs).

The short announcement published on October 21, 2020, from the swaps division of the Commodity Futures Trading Commission (CFTC), the Division of Swap Dealer and Intermediary Oversight (DSIO), provides advice and guidance on how FCMs across the U.S. should handle cryptocurrencies and virtual assets. The post further digs in on how ‘to hold and report certain deposited virtual currency from customers in connection with physically-delivered futures contracts or swaps.’

The U.S. government is gradually regulating the field, learning how to govern the blockchain and cryptocurrency innovations. The advisory note aims to regulate FCMs holding virtual assets and the risk management processes when accepting cryptocurrency deposits from customers.

Joshua B. Sterling, Director of the DSIO, stated the commission’s core value is to offer clarity and protection to market participants hence the latest advisory note. He further stated,

“The CFTC is committed to fostering responsible fintech innovation and improving the regulatory experience of registered firms where doing so is consistent with our rules.

This advisory furthers these critical goals and will provide additional certainty on these issues as the Commission works to establish a holistic framework for digital asset derivatives.”

Futures Commission Merchants refer to institutions, trusts, corporations, associations, and partnerships that accept orders “for the purchase or sale of any commodity for future delivery.” They also accept payments and give credit to any party that has their orders accepted on the futures markets.

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Author: Lujan Odera

SEC Hits eSports Platform With $6.1M Penalty For An Unregistered ICO; Hester Peirce Dissents

Quick Read:

  • SEC charges the e-sports gaming platform, Unikrn, for “conducting an unregistered initial coin offering (ICO)” in 2017.
  • The e-sports firm agreed to pay a $6.1 million fine without admitting or denying the charges.
  • Notable investors include Shark Tank & Dallas Mavericks Owner Mark Cuban, Ashton Kutcher, and Ethereum Co-Founder Anthony Di Lorio.
  • SEC Commissioner, Heister Pierce, filed a statement of dissent stating the company was not charged for any fraud.

On September 15, the U.S. Securities Exchange Commission (SEC) charged Seattle-based eSports gaming firm, Unikrn, for conducting an unregulated ICO between June and October 2017. The statement from SEC claims Unikrn made an ICO raise of $31 million from selling its native UnikoinGold (UKG) token, promising to add more features to the gaming platform and providing more utilities to the UKG token.

However, three years ago, the authorities find the sale of UKG as a violation of registration laws. SEC finds Unikrn guilty of not registering the token through it as UKG represents an investment contract. The statement reads,

“The order finds that Unikrn offered and sold UKG as investment contracts, which constituted securities, yet failed to register the offering or qualify for an exemption.”

According to Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, failure to follow the registration laws impedes the market rules hence “harming investors and [the] markets.”

Unikrn has since accepted to pay the $6.1 million penalty imposed by the SEC – a substantial amount of all company funds – without admitting or denying any wrongdoings. The fine will then be distributed to all UKG investors through a Fair Fund. Unikn also agreed to disable any buying, selling, and use of the UKG token by Sept. 25th. Littman said,

“This resolution allows us to return all of Unikrn’s assets substantially to already-harmed investors and includes measures to prevent future sales to retail investors, including the disabling of the tokens.”

Speaking to Coindesk, Rahul Sood, CEO of Unikrn, said they had been working with the SEC to find a resolution on moving the business forward. He further stated the discontinuation of UKG services would help the company focus on building better products in the future. He said,

“The common ground we found requires Unikrn to completely stop supporting UKG and help provide a fund for purchasers of UnikoinGold. This gives us clearance to focus on continuing to build our industry-leading business.”

Crypto mom files statement of dissent

SEC Commissioner and crypto enthusiast, Hester Peirce, also known in the crypto space as Crypto Mom, filed a statement for dissent on the charges SEC found in Unikrn. Pierce states the company did not commit any fraud during its ICO – only a registration offense was committed. Despite condemning registration offenses, Crypto Mom claims such enforcement actions could lead to stifling of innovation in the crypto arena.

“Registration violations, even standing alone, are serious, and our enforcement actions can serve to deter such violations and protect harmed investors,” she said.

“We should strive to avoid enforcement actions and sanctions, however, that enervate innovation and stifle the economic growth that innovation brings. I believe that this action and its accompanying sanctions will have such consequences.”

Furthermore, she disagrees that UKG token sale constituted as a security because the SEC has not placed clear guidelines for entrepreneurs and businesses to follow in token sales. The securities regulator is lagging behind in implementing laws that set a dilemma for several innovators – choosing whether to drop the project or continue developing with a dark cloud of enforcement hanging over their heads.

Pierce suggested the implementation of a regulatory safe harbor that allows the SEC to implement and regulate projects on antifraud laws while providing a safe space for innovation to continue. “A regulatory safe harbor could resolve this unhappy dilemma,” she states.

“Affording a company like Unikrn a three-year regulatory window within which to further develop and refine its platform—while still subjecting it to the antifraud laws—would provide benefits to token purchasers, token issuers, and the Commission.”

She ended her statement calling for better regulation policies and experimentation of new approaches to prevent stifling of innovation within the U.S.

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Author: Lujan Odera

BitMEX Exchange Set To Shut Down Operations For Ontario, Canada-Based Customers

Quick Look:

  • BitMEX offers notice to Ontario-based users to close their positions on the platform.
  • The Edge Island-based exchange aims to follow regulations and KYC requirements.

BitMEX, one of the largest Bitcoin futures exchange, will shut down its services to the Canadian province, Ontario, to users starting September 1st, 2020. In a blog post published on the BitMEX website, the exchange will restrict any new users, new orders, or an increase in existing orders from Ontario residents.

Any existing open position by users from the Canadian province, past the 1st of Sept., should be closed by the 4th of January 2021 00:00:00 EST to comply with the exchange’s Terms and Service. According to a spokesperson from the exchange, any open positions by Ontario residents past this date will be forcefully closed by the exchange.

These drastic changes will only apply to Ontario based users with BitMEX exchange still operating in other Canadian provinces.

According to the statement, the latest move is in line with a “mandate” by the state’s financial regulatory commission, Ontario Securities Commission (OSC). The exchange is leaning towards the regulators’ side to formulate products in line with the regulatory standards set in place.

Since the QuadrigaCX scandal, the OSC has taken a more forceful approach to regulating cryptocurrencies and digital asset service providers. In a statement released in January this year, the OSC clarified its position on digital assets as securities claiming some exchanges are bound by securities law. It reads,

“We note that some Platforms are merely providing their users with a contractual right or claim to an underlying crypto asset, rather than immediately delivering the crypto asset to its users.

In such cases, after considering all of the facts and circumstances, we have concluded that these Platforms are generally subject to securities legislation.”

The high leverage derivative exchange has come under criticism in the past for its products and margin trading. Consequentially, the exchange, owned by 100x Group, will now implement mandatory KYC by Feb of 2021 as well as stopping its services across several states in the past few years including, Hong Kong, China, North Korea, Seychelles, Japan, Bermuda, Quebec in Canada, and Iran among others.

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Author: Lujan Odera

Binance On The Spot As Ransomware Attackers Cash Out Over $1 Million On The Exchange

Quick Look:

  • Binance on the spot as authorities trace over $1 million in Bitcoin (BTC)-paid ransomware to the exchange.
  • The exchange maintains it is working to curb all ransomware, money laundering, and illicit cash activities on its platform.

A new report from unnamed researchers points at Bitcoin as one of the contributors to increased hacking by popular ransomware, Ryuk – launched in 2018. According to Interpol, BTC is rising as a favorite option for hackers as the payment is given the privacy associated with the token. Since launch, over $61 million in BTC has been paid out to these Ryuk ransomware attackers, FBI reported.

Ransomware is a hack that sees attacker encrypt files on personal computers and then asking for payment to decrypt the files. These hacks are skyrocketing with the advent of remote working as companies look for ways to deal with the global COVID-19 pandemic.

A compiled report from the researchers further pointed at Binance, the world’s largest crypto exchange, as one of the channels these attackers are using to exchange the crypto ransoms into cash.

Read More: Ransomware Demands Jump 200% In 2019: Crypsis Report

Binance and the Ransomware BTC

The largest crypto exchange in the world is at the forefront of these ransomware attacks, with over $1 million in crypto cashed out at the exchange since Ryuk’s launch. One wallet connected to the Ryuk attacks has received over 2,795 BTC since its creation in January 2018.

“Out of the 63 sampled transactions worth around $5,700,000, it was found that over $1 million was sent from the hacking team wallets to the Binance exchange platform to cash out their ransom payments,” the researchers speaking to Forbes reported.

“Thirteen other bitcoin addresses associated with Ryuk, containing a total of $1,064,865, followed a similar pattern. All were sent from the hackers’ wallets to several other addresses, and eventually to Binance, enabling them to cash out their ransom payments.”

The rest of the amount is being held across several exchanges – yet to be fully identified.

Binance responds: “There’s no easy answer!”

The researchers shared their findings with the exchange, who were quick to respond that they are fixing up security and KYC measures on their platform. Despite the “safety of customers and the integrity of the broader crypto space” at the center of Binance’s goals, the practical tracking of illicit acts on the platform is not easy.

One of the reasons is that the network is intertwined such that stopping bad actors could affect other users. An anonymous source from Binance said,

“If you clamp down with policies and procedures in order to try to slow these bad actors, it negatively affects all the innocent users. [There’s] no easy answer.”

However, Binance is enhancing its efforts through “in-platform analysis,” partnerships with external firms such as Chainalysis, and also follow-ups through social media platforms.

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Author: Lujan Odera

Solana Raises $1.76M in Dutch-style CoinList Auction; Secures Partnership With ChainLink

Quick Read:

  • Blockchain startup Solana raises $1.76 million in CoinList launch auction where 8,000,000 of their coins were acquired at $0.22.
  • Their joint venture with decentralized oracle solution Chainlink would prioritize building a new oracle for Solana amidst scalability concerns.

According to reports blockchain startup, Solana has managed to raise $1.76 million in a recent CoinList launch auction. On Tuesday, a Dutch-style auction that was held on the CoinList platform, 8 million coins issued by the web-scaling blockchain startup were acquired at $0.22 each. They have now raised a total of $25.6 million.

This figure only represents about 1.6% of the project’s war chest of 500,000,000 coins which according to Raj Gokal, the Solana COO, citing the current market uncertainties was treated as a win. Denoted by 1,416 registrations in 445 bids originating from over 90 countries.

The initial bids during the pre-biding varied from $4- $0.04 but the price finally settled at $0.22 where the demand sufficed to clear the 8,000,000 coins in an auction highlighted Raj Gokal as he explained the unique auction.

“We’re really happy with the outcome…Everyone gets the same price at the end.”

He further explained that the majority of the funds were disbursed to a Staker Price Guarantee in escrow. This would guarantee investors up to 90% of the auction price redeemable by the first year.

[Also Read: Solana Seeks A $2-$10M Raise; DISH, KIN Jumping To A New Blockchain?]

Joint Venture with Chainlink

Notably, Solana has made headlines after they unveiled a strategic partnership with Chainlink, a decentralized oracle solution to capacitate them to build a fast speed oracle. An oracle is a third-party information source whose objective is to supply data to blockchains that facilitate smart contracts.

This was deemed a necessity last September when Ethereum’s blockchain was faced by Network congestion, which according to Solana CEO Anatoly Yakovenko led to market failures. This led to Solana prioritizing its scalability solutions to overcome these concerns.

They now boast of transaction speeds of up to 60000 TPS amongst their 50 validators, which dwarfed Ethereum’s 3000 TPS as announced by Ethereum Co-founder, Vitalik Buterin in a statement last year.

Proof of history

The startup, based in San Francisco, offers a unique layer-one blockchain solution that helps them circumvent security concerns brought about by Sharding. By employing Proof of History protocol; which verifies timestamps between two transactions. They are able to trim off time spent trying to thwart attempts by actors to processing Identical blocks.

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Author: Lujan Odera

Tether (USDT) Stablecoin Rolls Out on the Bitcoin Cash Blockchain Network via SLP

Quick Read:

  • Tether (USDT), the leading stablecoin within crypto markets, is now available on the Bitcoin Cash Network.
  • This USD backed digital currency scaled to BCH as the more crypto users opt for stability amid uncertainty in oil markets and Coronavirus (COVID-19).

The demand for stablecoins has been on an uptrend in the past week surging Tether’s market cap to over $5.7 billion. As it stands, more than $480 million have been minted within the past weeks. These figures may continue rising especially with the move to leverage BCH’s Simple Ledger Protocol (SLP). The SLP is basically Bitcoin Cash generic token and fuels this network just like ERC-20 tokens do within Ethereum’s ecosystem.

Prior to the BCH launch, Tether (USDT) was already available on Tron, Omni, Liquid Network, EOS, Algorand, and Ethereum. This stablecoin began its journey on the Omni layer protocol but later shifted most operations to Ethereum’s network. However, some shortcomings like scaling options forced Tether to leverage more platforms as the market grows.

The BCH network is known for its lower fees and larger blocks compared to Bitcoin. Therefore, Tether is optimistic that leveraging this capacity will improve the stablecoin’s efficiency and value. The company’s CTO, Paolo Ardoino, highlighted that;

“A key strength of Tether is that it is underpinned by a rich diversity of different blockchains. Our latest collaboration with Bitcoin Cash will provide Tether with a variety of benefits.

We expect the adoption after launch to be pretty easy for any integrator. The launch will also support more applications on the Bitcoin Cash chain, with Tether facilitating payment for these applications.”

Given this development, Bitcoin Cash users will be more exposed to USDT via the network’s app. This platform was upgraded recently to allow participants access to the SLP native token. Bitcoin Cash Chair, Roger Ver, noted that it is exciting that the world’s largest stablecoin will start using BCH blockchain including Bitcoin.com wallets.

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Author: Edwin Munyui

New Zealand Aims To Abolish Cryptocurrency Sales Tax While Income Tax Would Remain

Quick Read:

  • The New Zealand Inland Revenue Department is calling for a revision of current Goods and Services Tax laws that are unfavorable to the crypto sector.
  • Issues of whether to treat different crypto assets differently have arisen as they all have different features.

The New Zealand government has held discussions in a bid to revise the Goods and Service Taxes applied to cryptocurrency. This would mean that cryptocurrencies exchanging ownership would be liable to a 15% GST and end up double taxing as they would still be keen on applying the income tax.

The revenue authority Inland Revenue Department (IRD) has come to acknowledge that the tax rules in place cannot be applied to cryptocurrencies. This is because they don’t fall into the same framework that was designed for currency, shares, debt and equity securities.

“Because of their innovative nature, they will often also have different features to these other investment products.”

Should different tokens have different GST terms?

They are, however, in a bit of a crunch, as they have yet to decide on whether or not they will have different GST treatment for the different types of crypto-assets. With current laws being a bit unfavorable to the sector. This is because of the nature of various tokens, it makes it even harder to classify. The list includes payment tokens, utility token, security token, asset token, and hybrid token are all very different in nature.

They are however confident that simplifying the laws could make it attractive to crypto investors who would open job opportunities and further technological developments in New Zealand.

There is also the question of how to treat situations where the exchange of ownership in crypto assets has occurred with an individual that is not living in New Zealand.

“The supply of a crypto-asset could be an exempt financial service, subject to 15% GST, or a zero-rated supply to a non-resident.”

The authority reckons that there’s a need for change, as the current GST framework in regards to crypto assets is vague, making the sector less attractive for the investors. There’s an April 9thdeadline for anyone with varying opinions.

Notably, New Zealand is following the footsteps of their neighbor Australia who revised their GST laws in October 2017.

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Author: Lujan Odera

Cryptokitties Developer Dapper Labs Brings UFC Collectibles To Ethereum Blockchain

Quick Read:

  • CryptoKitties founder, Dapper Labs, partners with UFC to register fighters on the blockchain.
  • The partnership allows users to buy, sell and trade collectibles on UFC fighters.

Blockchain is taking its place in the octagon after a partnership announcement between highly rated Ethereum based game, CryptoKitties’ creator, Dapper Labs and Ultimate Fighting Championship (UFC). The partnership will see the blockchain-based firm create tradable collectibles of UFC fighters such as Conor McGregor and Khabib.

Dapper Labs is widely known for its CryptoKitties game, a dApp on Ethereum blockchain that was so prominent in 2018 that it crashed the blockchain for a number of hours.

The agreement states the two firms will develop a new digital experience that will offer the fans across the globe a platform to trade, buy, sell and own their own UFC-branded collectible cards on the blockchain. Dapper Labs platform, The Flow, which launched at the end of 2019 will host the users’ collectibles.

Speaking on the partnership with UFC, CEO of Dapper Labs, Roham Gharegozlou, said,

“Working with the UFC, we are showing what’s possible when you give an engaged fan base a real ownership stake in the game they love and the communities they’re a part of.”

UFC is widely known for embracing digital solutions for the future having previously advertised Litecoin (LTC), a cryptocurrency, in the Octagon. Notwithstanding, Ben Askren, a prominent UFC fighter has also shown his love of cryptocurrency promoting the industry in the past few months.

Tracey Bleczinski, UFC Senior Vice President, Global Consumer Products, hopes the latest partnership with Dapper Labs will promote digital solutions in the field even further. Bleczinski further said,

“UFC is thrilled to partner with Dapper Labs to offer a new form of digital collectibles to our global fan base. UFC prides itself on being innovators in sports technology, and Flow is another way to provide our fans with the best entertainment experience.”

[Also Read: CryptoKitties’ Dapper Labs also partnered with the NBA last year]

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Author: Lujan Odera

Here’s Why Big Fund Managers Won’t Be Buying Bitcoin Until it Passes Trillions

Quick Look:

  • Institutions don’t come until it gets big enough
  • Just keep on HODling and you get to rake in huge gains

The best way to weather the crypto market and earn serious gains on Bitcoin is HODLling.

All that an individual Bitcoin investor can do is HODL and they know it well and they do it well. As we reported, 11,580,000 Bitcoin hasn’t been moved in more than a year. This has been despite an 85% increase in BTC price during that time.

As Bitcoin enthusiast Rhythm Trader said, “Hodlers of last resort are insane.”

But this insanity can pay off extremely well because “Professional fund managers literally can’t hodl,” points out analyst Ceteris Paribus.

This deduction was highlighted in the Wall Street article “How You Can Get Big Gains That Wall Street Can’t.”

It reveals the “dirty secret” of the investment business that fund managers just don’t hold stocks and not because they don’t want to but because they simply can’t.

It has been found that small investors actually ave a “big edge” over the giants of Wall Street when it comes to capturing the gains. The reason is,

“to earn such superior long-term results, you have to withstand bone-cracking short-term downdrafts along the way—something most fund managers can’t do.”

It’s all about HODLing

The insight emerged from the analysis between a little known Jack Henry & Associates company and Warren Buffett’s Berkshire Hathaway.

If you’d invested $1,000 in Jack Henry stock at its closing price on Sept. 1989, you would have had a whopping $2,763,000 on Sept. 30, 2019.

Now, the same $1,000 invested in Berkshire Hathaway would have only grown to $36,000 and $16,000 in the S&P 500.

However, this would have only been the result of the determination, in other words, HODLing.

Because HODLing means weathering through the brutal winter of price drops and crashes. In the case of Jack Henry, it was in June 2001 through Oct. 2002 when the company’s shares fell 67% and then the stock underperformed the S&P by 72% points between Oct. 1996 and August 1999.

Also Read: Bank of America Merrill Lynch Calls Bitcoin (BTC) The Best Asset Class In The Last 10 Years

But why can’t professional investors withstand this kind of pain?

David Salem, co-chairman of New Providence Asset Management, who has been behind this analysis says,

“It’s potentially career-ending for a manager to hold such big interim losers.”

As for small managers, they have to sell if the position gets too large and dominate their portfolios.

Small stocks actually earn their highest return when they migrate to large.

Institutions don’t Come Until it gets Big Enough

As we saw in Jack Henry’s case, the company first sold its shares to the public in 1985, 9 years after it was founded. But as of 1996, 41% of the stocks were owned by insiders and it wasn’t until 2006 did about 5% of the shares were owned by institutional investors.

It was in Nov. 2018 that the company grew to a size large enough to join S&P 500, where it currently ranks at 402nd. Now, 94% of its stocks are held by institutions.

This is yet another best-case scenario for buying and HODL.

As such, professional fund managers will “buy Bitcoin once it passes a couple Trillion” says Paribus. This means individual investors are in the best position to rake in gains by just keep on HODLing.

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Author: AnTy

Mayer Multiple Indicates Bitcoin is Currently Cheap, Stack Some Sats While You Can

Quick Look:

  • Bitfinex traders long on not only Bitcoin but also on Ethereum, XRP, and EOS
  • Even if Bitcoin climbs to $9,000, it won’t be out of the woods because “bear markets have rallies too”
  • Mayer Multiple is sitting at 0.75, which is lower than 84% of history

It’s been over two weeks that Bitcoin has been stuck with the world’s leading cryptocurrency still trading at $7,086.

Today, however, has been a big day for BTC. Exactly a year back, on Dec. 15th, Bitcoin found its bottom at around $3,200 after crashing from its all-time high $20,000, losing 84% of its value.

Since hitting that bottom, Bitcoin is up about 122% and in the first half of the year it even went to $13,900.

This is why the majority of the traders on Bitfinex are long. However, not just for Bitcoin but Bitfinex traders are also long on Ethereum (ETH), XRP, and EOS.

However, while BTC is up about 87% in 2019 to date Ethereum is up only about 4.50%. XRP meanwhile is the biggest loser of 2019 among the top 10 cryptos at almost 40% losses followed by EOS which is down by 1.60% YTD.

In the short term, analyst Magic Poop Cannon says even if we see a rally here, Bitcoin remains in a bear market downtrend. “Bear markets have rallies too,” he explains.

Bitcoin, he says is in a technical bear market and until we see higher highs and higher lows, the trend remains bearish. This holds true even if BTC rallies to $9,000.

Though he isn’t sure how low Bitcoin will fall here he warns BTC bottoms might be much deeper than expected.

Mayer Multiple says Stack some Sats

Bitcoin might be boring right now but it is the perfect time to stack some sats, according to Mayer Multiple.

The Mayer Multiple is the ratio of the Bitcoin price to its 200 days moving average which is a measure of the deviation of BTC price to its long term trend.

Currently, Mayer Multiple is sitting at 0.75, which is lower than 84% of history. A historically low value of Mayer multiple indicates that Bitcoin is cheap relative to its long term trend meaning it is a good time to buy the crypto asset.

This time to stack some sats is warranted because when the market is in fear and there’s blood on the street, that is the time for you to get in.

The market is in extreme fear right now with the Crypto Fear and Greed Index giving a reading of 21 on a scale of 1 to 100, where a value of 0 represents “Extreme Fear” while a value of 100 means “Extreme Greed.”

We are going to $100,000

With the predictions of $100k floating around, it makes sense to ensure that you are in before the next bull market starts.

This week another person joined the $100k BTC price prediction list, Ross Ulbricht, the founder of the now-defunct dark web marketplace Silk Road.

In his six-part blog published from letters he wrote in prison, Ulbricht applied Elliott Wave Theory to predict BTC price. The theory forecasts the highs and lows in the market cycles by identifying the changes in investor sentiment and psychology.

Per this theory, “We have a price target… of ~$100,000 some time in or near 2020,” he wrote. “However, there is no rule that market moves have to be proportional. This is just a patter we see unfolding that may or may not continue.”

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Author: AnTy