Nov. 22nd: EIF Invests €100 Million In Blockchain Fund

This Week in Crypto

This is your daily roundup for Friday, November 22, 2019. The European Investment Fund invests €100 million in a blockchain fund, Coinbase Custody expands Tezos staking internationally, and China cracks down on crypto related activities in Shenzhen.

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EU Invests €100 Million In Blockchain Fund

The European Investment Fund (EIF) has partnered with the European Commission, to launch a dedicated investment scheme that will provide €100 million to venture capital funds or other investors that support AI and blockchain-based products and services. The EIF also expects a total of €300 million to be invested for AI and blockchain from other private investors.

According to the International Data Corporation, Western Europe is expected to remain the second-largest region in the world for blockchain spending in 2019 at $674m. Currently, the United States is the largest spender in blockchain at $1.1 billion. The EIF fears that Eurpean developers and entrepreneurs wanting to grow their businesses ultimately end up recipients of US financing or working for US companies, bringing talent elsewhere.

South Korea Invests In Blockchain R&D

South Korea’s ministry of science and technology also has plans to invest 450 billion won in blockchain research and development over the next six years. The goal of the initiative is to create a data economy foundation powered by blockchain. South Korea has announced several blockchain initiatives in the past. Most recently, the Korea Internet Security Agency said it will support blockchain-related projects in 2020 with 10.5 billion won in funding.

China Further Monitors Crypto Related Activities

China’s central bank has released an announcement outlining its plans to monitor crypto-related activities continuously and shut down early-stage operations to protect investors. The notice encourages investors to report any individual or organization that uses domestic or foreign services related to virtual currencies.

According to The Block, the government in Shenzhen is also investigating cryptocurrency exchanges and has already identified 39 undisclosed exchanges for inspection. Last week, regulators in Shanghai were required to search and inspect crypto exchange related services before Nov. 22. The notice further clarifies that promotional and brokerage services inside China for ICO projects that are registered outside of the country also fall under the inspection scope of the local financial regulators.

Algorand Releases 2.0 Update

The Algorand Foundation has released the Algorand 2.0 update, adding DeFi and smart contract features to the protocol. Algorand’s in-house programming language TEAL is non-Turing-complete, limiting some functionality for ASC smart contracts. Algorand says that being non-Turing-complete is a feature that makes smart contracts safer to write and execute.

According to Hackernoon writter Kirill Shilov, simpler functionality could mean better security – or, at least, a more straightforward path to ensuring ASC contract coders do not inadvertently lose assets. Turing completeness is a measure of a programming language’s ability to simulate another programming language and possibly manipulate its own programming instructions, a popular attribute among most modern programming languages such as Solidity.

JPMorgan Patens Floorplan Lending DLT

JPMorgan has filed a patent for tracking auto dealer inventory on the blockchain. The bank believes that VIN numbers can be anchored to a blockchain for auditing dealership inventory in real time. The patent describes a DLT version of floorplan lending, a revolving line of credit that allows car dealers to borrow against inventory.

The DLT system is also designed to prevent a practice known as double flooring, which occurs when a dealership pledges one vehicle as collateral for one floorplan contract to one bank, but also pledge the same collateral for another floorplan contract with another bank.

According to Kevin Point, head of research and development at Chase Auto, “The floorplan lending process involves periodically doing a physical audit of all the inventory on the dealership’s lot” and reconciling any discrepancies. Point believes tracking floorplan lines of credit on a distributed ledger will achieve cost savings over time.

Coinbase Opens Staking To International Users

Coinbase has announced the expansion of its staking service for international users. The service was initially only available to institutional clients and recently extended to all U.S. customers. Coinbase users can currently stake Tezos (XTZ) and earn a reward of of roughly 5%.

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Nov. 21st: Chainalysis Lays Off 39 Employees

This Week in Crypto

This is your daily roundup for Thursday, November 21, 2019. Chainalysis lays off 39 employees, Shanghai police allegedly raid Binance offices, and Silvergate Bank announces plans to launch crypto lending and custody services.

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South Korean Exchanges To Register With FSC

South Korean regulators are now requiring virtual asset exchanges to register with the Financial Services Commission (FSC), under a new amendment to the nations Special Financial Transactions Information Act.

The new legislation follows AML guidelines set forward by the Financial Action Task Force (FATF), further requiring exchanges to have real name virtual bank accounts. According to the amendment, exchanges who fail to register with the FSC would face up to five years in prison or a fine of up to 50 million won. Exchanges without real-name virtual accounts would be forced to shut down. Currently, there are only four exchanges in the country with real-name virtual accounts, including Bithumb, Upbit, Corbit, and Coinone.

According to Jae-Jin Kim, secretary general of the Korea Blockchain Association, “It is expected to be the first step in the development of consumer protection and a stable market,” progressing the industry to a regulated system, like that of financial institutions and banks. 

Chainalysis Lays Off 39 Employees 

Chainalysis has let go 39 employees across the entire firm. Maddie Kennedy, director of communications at Chainalysis, says the company is focusing on profitability and shifting resources into product teams and a go-to-market strategy. Kennedy added on to say that the layoff is a preemptive measure to the possibility of an economic downturn, stating that “we think that acting now is best for the long-term health of the business.” 

In April, the company closed a Series B funding round with $36 million, raising a total of $53.6 million to date. Chainalysis provides compliance and regulatory software for tracking illicit activity across different cryptocurrencies. The company says over 140 companies and 20 governments use their products. 

Binance Enters Indian Market

Binance has acquired India-based peer-to-peer bitcoin exchange WazirX for an estimated $10 million. This marks a risky move by the exchange as the Reserve Bank of India (RBI) has banned financial institutions from servicing businesses dealing in cryptocurrency, essentially preventing fiat-to-crypto exchanges from operating in the country.

An Indian committee of regulators even recommended for all cryptocurrencies, except those issued by the state, to be banned in India. However, Binance, has already launched Indian rupees on its Binance Fiat Gateway. As a “workaround” to the ban, Binance says users of WazirX will soon be able to buy Tether with rupees via WazirX and use USDT to trade any cryptocurrency offered by BInance.com.

Binance CEO CZ stated “The acquisition of WazirX shows our commitment and dedication to the Indian people and strengthen the blockchain ecosystem in India as well as another step forward in achieving the freedom of money.” If proven successful, Binance will be one of the first and largest fiat-to-crypto exchanges in India.

Silvergate Introduces Crypto Lending Service 

Silvergate Bank is planning to launch a cryptocurrency lending product this quarter and settlement and custody services for digital assets by June 2020. Silvergate CEO Alan Lane says the IPO is providing fresh capital for new products to meet the rising demand from institutions for full cryptocurrency lending and deposit solutions. 

The new lending product will enable clients to borrow fiat currencies from the bank using bitcoin holdings as collateral. Lane believes that cryptocurrency price volatility will increase trading volumes and bank deposits. Silvergate Bank (SI) concluded its $40 million IPO on Nov. 12th and is currently listed on the New York Stock Exchange.

Shanghai Police Allegedly Raid Binance Office

Chinese authorities have reportedly raided and shut down the Shanghai offices of Binance. According to The Block, Binance executives and at least 50 employees were forced to either work remotely or relocate to Singapore. A Binance spokesperson denied the raid, saying that the exchange doesn’t have a fixed office in Shanghai. Binance CEO CZ responded to the allegation, tweeting “No police, no raid, no office. Hope you didn’t pay to read that FUD block.”

Rumors that Binance is opening an office in China first emerged on CoinDesk earlier this month. The Block also claims to have seen photographs of the office. The alleged raid follows a crackdown on cryptocurrency-related businesses and activities in the country. Bithumb has also denied reports claiming that it’s Shanghai operations have been affected after the city government’s inspection notice.

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Nov. 20th: Polymath Migrates Polymesh To Parity Substrate

This Week in Crypto

This is your daily roundup for Wednesday, November 20, 2019. Polymesh migrates from Ethereum to Parity’s Substrate, the U.S. Federal Reserve responds to a letter in regards to a Central Bank Digital Currency (CBDC), and ShapeShift launches its “FOX” exchange token.

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Polymesh Migrates To Parity Substrate

Polymath has migrated its Polymesh blockchain away from Ethereum and onto Parity Substrate, a blockchain development framework with upgradable blockchains, modular architecture, and customizable block execution logic. Polymath had announced plans to find another blockchain platform back in May.

As part of the transition, Parity agreed to build certain business-logic features on Polymesh’s base layer, including smart contract communication and runtime modules. Polymath’s ST20 and POLY Ethereum-based tokens will be migrated over to the substrate-based chain. A bridge for POLY tokens will be maintained for at least one year.

Adam Dossa, Head of Blockchain at Polymath, stated “The [ethereum] mining process is permissionless. If you’re paying transactions on Ethereum, you don’t really know where that transaction is going to end up. For a large institution that could be an issue.” Dossa further explained that one of the reasons for moving to Substrate is the ability to provide custom compliance logic required by some institutions.

Fed Chair On Central Bank Digital Currency

Federal Reserve Chairman Jerome Powell has responded to a September 30th letter from U.S. Reps French Hill and Bill Fosters on whether the Federal Reserve plans to launch its own digital currency. In the letter, Powell says that the central bank is not actively developing a digital currency, but will continue to carefully analyze the costs and benefits of pursuing such an initiative in the U.S.

Powell explains that a digital national currency may not offer advantages to the U.S. that it may do to other nations. A digital currency would also raise important questions regarding legal, monetary policy, payments policy, financial stability, and operations. In addition, digital currency may also raise concerns about privacy and security. Unlike cash, the Fed would maintain a record of all transactions made with the digital dollar. Powell concluded by saying that the Fed has not identified potential material benefits of a general purpose CBDC, but is carefully monitoring the activities of other banks that may be relevant to the U.S.

Gigawatt Mining Farm Under Construction In Texas

German-based miner Northern Bitcoin has acquired Whinstone US Inc., a Louisiana-based developer of high-speed data centers, to launch a 100-acre bitcoin mining farm in Rockdale, Texas. The mine hopes to launch with 300 megawatts of power in Q1 2020, and reach a full 1 gigawatt capacity by the fourth quarter next year. 

According to Whinstone, the data center will cost $150 million to build. Northern Bitcoin said two publicly listed companies have signed on as its first clients and plan to use a significant portion of the capacity for Bitcoin mining. Northern Bitcoin also operates a bitcoin mine in Norway powered by renewable resources.

Currently, around 70% of the crypto mining market is dominated by Chinese miners. Last month, Bitmain launched a 33,000 acre mining farm in Texas, hoping to reach a maximum capacity of 300 megawatts.

ShapeShift Launches “FOX” Token

ShapeShift has launched its own FOX token offering users commission-free trading, similar to tokens seen by other exchanges. According to the announcement, users will receive $10 of commission free trading on a rolling 30 day basis for every FOX token they hold. 

ShapeShift CEO Erik Voorhees stated “This has nothing to do with establishing a new chain. Basically, we’re trying to get people away from custodial exchanges. This is an endemic problem in the crypto world that was a problem in 2011 when I first got involved and it’s still a problem.”

Voorhees claims the exchange has more liquidity than any other self-custody option. FOX is an ethereum-based “utility token” with a limited purpose as a loyalty coin. The exchange minted a finite supply of 1 billion FOX tokens, offering users 100 tokens for signing up.

Singapore Regulators Propose Bitcoin Derivatives

The Monetary Authority of Singapore (MAS) has published a paper, proposing the listing and trading of payment token derivatives on approved exchanges in the country. Currently, payment tokens are not categorized as an underlying asset for a derivative product under the oversight of the country’s Securities and Futures Act (SFA).

According to MAS, the proposal comes in response to demand from international institutional investors for regulated products to be able to hedge their exposure to bitcoin. There are currently four approved exchanges, including ICE Futures Singapore, whom recently opened trading for its physically settled bitcoin futures.

Nov. 19th: Fidelity Granted Trust License By NYDFS

This Week in Crypto

This is your daily roundup for Tuesday, November 19, 2019. The IRS investigates Bitcoin ATMs, Fidelity Digital Asset Services has been granted a trust license, and Grayscale Investments seeks SEC reporting company status.

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IRS Investigates Bitcoin ATMs

According to Bloomberg, the IRS is investigating bitcoin ATMS and crypto kiosks for potential illicit activity including tax evasion and money laundering. IRS criminal investigation chief John Fort says operators are required by law to provide user KYC and AML verification. He believes some operators have varying levels of adherence to those regulations.

The IRS is working alongside other law enforcement agencies to identify users and the source of their funds, as well as making sure operators are in compliance. Fort says that the IRS is also looking into international exchange, as regulations in the U.S. might be pushing people to foreign exchanges.

Fidelity Granted Trust License By NYDFS

Fidelity Digital Asset Services has been granted a trust license from the New York Department of Financial Services (NYDFS). The trust license is broader than a BitLicense, enabling Fidelity to custody bitcoin for institutional investors and provide additional trade execution services. 

Fidelity joins 22 other companies that have been approved for a license by the NYDFS to engage in virtual currency business activities. Galaxy Digital will be among the first to use Fidelity to store bitcoin for its two new funds, Galaxy Bitcoin Fund and Galaxy Institutional Bitcoin Fun. Both funds are designed for accredited institutional investors with standard tax documentation, requiring a $25,000 minimum investment. Galaxy Digital will also use Bakkt to store assets, which also holds an NYDFS trust license.

Mike Novogratz, CEO of Galaxy Digital, stated “Galaxy continues to have high conviction in bitcoin and has made significant strides in helping to bring a more institutionalized footprint to the digital asset ecosystem. We believe this effort is an important step forward in fulfilling this mission.” 

Stablecoin Issuers Are Money Transmitters

According to FinCEN director Kenneth Blanco, the agency views stablecoin issuers as money transmitters, insisting that stablecoin administrators must register as a Money Services Business (MSB) with FinCEN. This means that any firm that works with stablecoin issuers must follow federal KYC and AML laws under the Bank Secrecy Act. 

Emphasizing that there’s no excuse for non-compliance, Blanco stated “You can’t build a car that only goes 150 miles per hour and ask us to change the speed limit. That’s not happening. Build your car to meet the requirements.” FinCEN has also considered placing money transmission service considerations on ICO issuers and most recently on some decentralized applications.

Bison Trails Raises $25 Million

Blockchain protocol provider Bison Trails has secured a $25.5 million Series A funding round led by Blockchain Capital. Last month, the company joined the Libra Association as one of the 21 founding members. CEO Joe Lallouz stated “As the only blockchain infrastructure firm in the Libra project, we’ll contribute to building the new system with Facebook.”

Bison Trails’ investors are betting on the increasing utility of the company’s infrastructure services. Founded in 2018, Bison Trails is a protocol infrastructure service provider that helps customers deploy participation nodes on any blockchain. Lallouz says Bison Trails now serves more than 20 protocol projects. 

Grayscale Seeks SEC Reporting Company Status

Grayscale Investments has filed to register its Bitcoin Trust as an SEC reporting company. Obtaining reporting company status would require public filings of its quarterly and annual reports, improving transparency and liquidity for shareholders. In addition, shareholders with more than 5 percent of the trust’s shares would be required to file beneficial owner reports.

Grayscale managing director Michael Sonnenshein says obtaining SEC reporting company status would give institutions greater comfort and participants in the bitcoin trust the ability to liquidate their holdings in six months. Currently, investors must hold their shares for at least one year. The SEC is expected to provide a response to the filing in 60 days. Grayscale currently manages $2.5 billion in assets.

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Nov. 18th: Introducing Multi-collateral DAI

This Week in Crypto

This is your daily roundup for Monday, November 18, 2019. Visa introduces the LucidiTEE blockchain, the SEC reviews Bitwise bitcoin ETF rejection, and Cashaa plans to offer banking for US crypto firms.

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Visa Introduces “LucidiTEE” Blockchain

Visa has published a research paper describing the development of LucidiTEE, a blockchain system for managing the transfer of financial data among banks and third parties.

LucidiTEE processes data within a trusted execution environment (TEE). Only certain computations can be performed within the environment, preventing any company from tampering with data. The ledger then stores all hashes of encrypted operations for history-based protocols to review when the next computation is complete.

The ideal use case for LucidiTEE is to replace financial data aggregators such as Mint and Credit Karma. With the idea of open banking, data would be shared directly between consumers and financial apps, reducing the data touch points across multiple companies. 

ICO Promoter Sentenced to 18 Months

ICO promoter Maksim Zaslavskiy was sentenced today to 18 months for defrauding investors and conspiring to commit securities fraud. In 2017, Zaslavskiy was responsible for the Diamond Reserve Club World and REcoin Group Foundation token sales and raised at least $300,000 for investments in real estate and diamonds that never materialized. 

He pleaded guilty last November, after his lawyers failed to get the case dismissed over “vague” securities law governing his case. U.S. Attorney Richard P. Donoghue stated “Zaslavskiy committed an old-fashioned fraud camouflaged as cutting-edge technology. The Eastern District of New York will continue to investigate and prosecute those who defraud investors, whether involving traditional securities or virtual currency.”

Expanding Banking Access For Crypto Firms

A U.K.-based banking service platform called Cashaa is planning to launch bank accounts for crypto firms denominated in U.S. dollars. The new accounts will be available starting Nov. 25, with Cashaa saying they offer full banking features with global access.

The accounts will be based in the U.S. with access to ACH and SWIFT networks. Firms will have to pay an account set up fee of roughly $1,500. Archit Aggarwal, Cashaa’s chief product officer, says partnering with a US bank will help Cashaa expand services to the U.S. as well as provide existing customers more opportunities. Cashaa will become the latest addition to a small but growing list of crypto-friendly banks, including Silvergate Bank, Metropolitan Commercial Bank, and the soon to be launched Founders Bank.

SEC Reviews Bitwise Bitcoin ETF Rejection

According to a notice published in the Federal Register over the weekend, the SEC’s five commissioners will review the rejected bitcoin ETF put forth by Bitwise Asset Management. The bitcoin ETF was originally rejected on Oct. 9th.

Matt Hougan, global head of research at Bitwise, says Bitwise did not request the review, but welcomes the opportunity to continue the dialogue with the SEC. The commissioners will have to either uphold the rejection or overturn it. The general public can comment on the rejection through Dec. 18, 2019. However, unlike the SEC’s formal approval or disapproval process, there are no set deadlines for a review decision.

Introducing Multi-collateral DAI

MakerDAO has officially launched Multi-collateral DAI. DAI can now be backed by BAT and ether. The ticker for Single Collateral Dai has been changed from DAI to SAI and CDPs are now referred to as Vaults. The upgrade includes the addition of Dai Savings Rate (DSR), a feature that pays users variable interest rate for DAI locked into Maker’s DAI Savings Rate contract. The stability fee for borrowing DAI or “opening a Vault position” will also now be owed in DAI instead of Maker (MKR).

Users can currently convert their SAI into DAI on Oasis Trade. Uniswap, Bamboo Relay, and Kyber Network have said they will support trading as soon as possible. Coinbase announced they plan to automatically convert any SAI on a users account to multi-collateral DAI on December 2nd at 9 AM PST.

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