Author: Dan Taylor

Abu Dhabi Global Market achieves KYC breakthrough with blockchain’s help

Abu Dhabi Global Market (ADGM), the financial centre of the UAE’s capital, has successfully completed trials of a new app for improving Know-Your-Customer (KYC) processes, known as e-KYC.

The app is designed to simplify the know-your-customer obligations incumbent on financial institutions and other regulated bodies under anti-money laundering laws, and was developed with blockchain partners, banks and advisors, including KPMG.

Rather than submitting to individual ID checks and verification, the app enables customers to verify their identity on a one-off basis, recording the information immutably on a blockchain. From there, the information can be accessed securely by other institutions, with a full audit trail to ensure compliance with relevant laws.

According to those participating in the trial, the technology has allows for a “radically simplified” KYC process, which will deliver cost and efficiency savings during the onboarding process.

Richard Teng, CEO of the FSRA of ADGM, welcomed the project, and the “tangible benefits” it delivers for financial institutions in improving the KYC process. He said, “By harnessing the power of technologies such as blockchain, the e-KYC project has demonstrated tangible benefits that may be offered by an e-KYC utility for financial institutions in the UAE. In addition to enhancing KYC checks across the industry, the utility can achieve significant cost efficiencies and financial inclusion driven by unified KYC standards.

According to the executive, “The use of digital platforms to share information, transact and test solutions forms a core part of ADGM’s FinTech strategy. We look forward to delivering further meaningful results through the ADGM Digital Sandbox initiative, where we will facilitate FinTech-institutional partnerships and host consortium projects such as the e-KYC project.”

The platform allows individuals to have more control over their personal data, while simultaneously allowing institutional members access to the KYC material they require to discharge their obligations.

At present, KYC checks are conducted on an institution by institution basis, with the app expected to significantly streamline the process.

It comes at a time when several other regulators and banks are investigating blockchain technology for KYC in a bid to improve the efficiency of the process.

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‘Relaxed’ Swiss license allows fintech startups to accept public deposits

The Swiss financial regulator has issued fresh guidelines for fintech startups, giving leeway to licensees to accept up to CHF100 million ($100.1 million) in public deposits, in a radical move designed to boost innovation in the sector.

The move comes as part of the new Banking Act, which has been designed in part to create more favourable conditions for fintech businesses, including expanding the options for crowd-lending models within a regulatory sandbox environment.

The guidelines are part of a wider strategy of supporting the crypto sector by the Federal Council of the Swiss Financial Market Supervisory Authority, which aims to boost Switzerland’s profile as a global destination for crypto and fintech startups.

Crucially, the new guidelines give crypto businesses the ability to accept deposits from the public without the need for the same authorisations as a bank, enabling them to explore innovative models without the full range of compliance expectations.

According to a statement from FINMA, which will oversee firms in the regulatory sandbox and is responsible for issuing the new licenses, the measures will begin to come into effect at the turn of the year. It explained, “With the new measure, companies with special authorisation can accept public funds of up to CHF100 million from 1 January 2019, provided they neither invest nor pay interest on these funds.”

The statement goes on to reference amendments to the Bank Ordinance (BankO), which will come into force in April 2019, noting, “In the BankO, the sandbox will additionally be extended to include crowdlending business models, whereby public funds up to a total amount of CHF1 million can one day be brokered not only for commercial and industrial purposes but also for private consumption.”

The fintech license is aimed at startups looking to explore models of taking deposits, without investing or paying interest on those deposits.

The policy is designed to help cement the reputation of Switzerland and the city of Zug as a haven for cryptocurrency innovation, with an already established and booming crypto sector in the country.  

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US court rejects unregistered securities case against Blockvest

A court in the United States has rejected a claim brought by the Securities and Exchange Commission (SEC) against blockchain assets exchange Blockvest, in a case that could help shape precedent on unregistered securities.

SEC, the regulator tasked with upholding securities law in the U.S., accused Blockvest of promoting an unregistered security, contrary to the law. The firm’s BLV token has come in for scrutiny by the regulator, initially leading to a temporary asset freeze against the company after a preliminary order by the U.S. District Court for the Southern District of California.

However, in the latest twist in the case, a court has found that the SEC failed to demonstrate BLV tokens were unregistered securities, citing the Howey Test model for determining whether an asset falls within the remit of securities law.

According to court documents, a copy of which was secured by CCN, the court is unable to consider the BLV token a security, a material element for any asset being subject to the remit of the SEC.

“At this stage, without full discovery and disputed issues of material facts, the Court cannot make a determination whether the BLV token offered to the 32 test investors was a ‘security,’” the documents noted. “Thus, Plaintiff [the SEC] has not demonstrated that the BLV tokens purchased by the 32 test investors were ‘securities’ as defined under the securities laws.”

Judge Gonzalo P. Curiel went on to decline an application for an injunction against Blockvest, as well as several other related claims against the firm.

The development is a setback for the securities regulator, which has been increasingly active in enforcement action against fraudulent ICOs in recent months. Other cases have been more successful the regulator, with several notable examples of successful enforcement action against ICO promoters.

Just this month, Airfox and Paragon, which both raised millions through their ICOs, were ordered to repay investors, as well as a $250,000 fine each for failing to appropriately register securities, and for selling securities without being a registered dealer or agent.

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US Treasury links crypto addresses to Iranian ransomware scam

The U.S. Department of the Treasury has identified two separate wallet addresses linked to the latest Iranian crypto ransomware plot.

The department’s Office of Foreign Assets Control (OFAC) announced that two Iranian citizens, Ali Khorashadizadeh and Mohammad Ghorbaniyan, are to be added to its sanctions list, along with two crypto addresses linked to these individuals.

Including the crypto addresses within the scope of sanctions on Iran marks the first time a regulator has had to resort to blacklisting crypto wallet addresses on this basis. The wallet addresses will be included alongside other identifying information, such as their personal addresses, email addresses and known aliases.

OFAC had previously confirmed it would be including crypto wallet addresses in the data, in order to prevent Iranian actors from relying on cryptocurrency to evade sanctions.

Treasury Undersecretary for Terrorism and Financial Intelligence Sigal Mandelker said the move would stop illicit actors from relying on cryptocurrency to avoid sanctions.

“We are publishing digital currency addresses to identify illicit actors operating in the digital currency space. Treasury will aggressively pursue Iran and other rogue regimes attempting to exploit digital currencies and weaknesses in cyber and AML/CFT safeguards to further their nefarious objectives,” Mandelker said. “As Iran becomes increasingly isolated and desperate for access to U.S. dollars, it is vital that virtual currency exchanges, peer-to-peer exchangers, and other providers of digital currency services harden their networks against these illicit schemes.”

Khorashadizadeh and Ghorbaniyan are specifically linked to the SamSam ransomware, which has exploited over 200 organisations over a period of several years, including hospitals, government departments and universities.

The ransomware worked by holding data hostage, and demanding a ransom to be paid in BTC to the identified addresses.

The decision will be a blow to criminals and scammers worldwide, who continue to use crypto to avoid the detection of authorities in a number of criminal applications, including funding rogue states and financing terrorism.

It also means exchanges will now be held responsible for ensuring they don’t send funds to these addresses or individuals, with secondary sanctions warned against those who fail to comply.

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Alleged BTC-e operator goes on hunger strike to protest extradition

A former cryptocurrency exchange executive accused of using BTC to launder billions of dollars is preparing to go on hunger strike, according to statements issued by his legal team.

Russian citizen Alexander Vinnik was arrested in Greece at the request of U.S. authorities back in 2017, at the outset of what has become an embittered multi-jurisdictional battle for his extradition. After a ruling in the Greek Supreme Court that Vinnik should be extradited to the U.S., separate petitions from France and Russia have been presented, including a European Arrest Warrant issued by France back in June.

The courts are set to review their decision later this week, considering the multiple vying claims to extradition ahead of deciding how to proceed with Vinnik’s case.

Vinnik’s legal team are agitating for his extradition to his home nation of Russia, having labelled the alternatives as “close to a life sentence,” with the inevitable conclusion of eventual extradition to the United States.

Russian news agency TASS quoted the head of Vinnik’s legal representatives, Timofey Musatov, as saying that the man is now preparing a hunger strike in protest at what he alleges will be an unfair hearing. According to the report, “Alexander Vinnik decided to go on a hunger strike because he realized he was stripped of the right for defense in France and, consequently, in Greece…Moreover, it became clear that the European arrest warrant [issued by France] expired.”

“The Greek Supreme Court’s judge completely ignores the work of lawyers who cannot even file a petition. She does not give them an opportunity to speak or do it. After observing this situation, Alexander realized that he would either get a fair trial or die.” Musatov said. “If there is no fair trial, he will inevitably be deported to the United States through France, where he will get something close to a life sentence, which equals death.”

Vinnik is accused of laundering as much as $9 billion through the now defunct crypto exchange, BTC-e, in what has become one of the most high profile of the outstanding BTC fraud cases.

With authorities in France, Greece, the U.S. and laterally Russia apparently interested in bringing criminal convictions, it remains to be seen whether his planned hunger strike will assist Vinnik in getting his desired outcome.

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Zaif crypto exchange completes transfer to buyer Fisco

Japanese cryptocurrency exchange Zaif has completed the handover of its business to Fisco Cryptocurrency Exchange, just a matter of weeks after the company was hacked resulting in losses in excess of $60 million.

The development means those still waiting to get money from the failed exchange will now be entitled to do so from the new owners Fisco Cryptocurrency Exchange, following their high profile bailout of the firm, according to a CoinTelegraph Japan report.

The handover was arranged in a bid to save Zaif after the firm was unable to compensate clients affected by the hack. As a result, many have been left out of pocket with little hope of recovering any of their lost funds until now.

Compensation proceedings are expected to begin this November, as the buyers look to address the losses suffered by those trading through the exchange at the time of the hack.

The completion of the sale and transfer of the Zaif business from parent company Tech Bureau concludes an embarrassing episode for the exchange, which was financially crippled in the wake of the hack.

For the time being, both deposits and withdrawals from the Zaif exchange remain in lockdown, with investors unable to get their hands on their money.

Following the transfer, Tech Bureau said it plans to dissolve the company and move away from its interests in the cryptocurrency sector. It declared, “We will abolish the registration of our virtual currency exchange and plan to dissolve.”

The hack was blamed on inadequate security at Zaif, as well as a lack of effective regulatory structures in Japan at the time. At the time of the hack, Zaif was the 37th largest cryptocurrency exchange in the world by volume.

Following the hack of the Zaif exchange, and the high profile hack of exchange Coincheck which saw some $534 million lost to hackers, Japanese regulators have taken significant steps to tighten the compliance burden on new and existing market players.

Nevertheless, these cases show the risks faced by cryptocurrency exchanges who fail to take adequate security measures to deter crypto scammers and hackers.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Major Korean energy supplier to deliver eco-friendly power via blockchain

South Korea’s leading energy provider KEPCO has turned to blockchain to help it deliver eco-friendly power through its next generation micro grid (MG), becoming the latest firm in the energy sector to utilize the technology.

The company is majority owned by the South Korean government and the state-controlled bank, with what has been described as a “virtual monopoly” over the generation and distribution of power within the South Korean market.

The decision will represent a significant deployment of blockchain, with the technology working alongside other innovations to shape the new Open MG infrastructure.

In a statement, the South Korean energy provider said the platform will focus on what it termed the “three key trends” for the future of energy management—decentralization, decarbonization and digitalization.

Decentralization ensures energy stability and security, while decarbonization comes from more efficient management of energy sourcing and production. Digitalization will enable next generation systems to interact effectively, to more effectively manage output.

Previous MGs have experienced difficulties in producing stable power supply, with wind turbines, photovoltaic and energy storage systems being implemented by KEPCO prior to the new system.

Building on those experiences, Open MG will incorporate an “additional fuel cell” to underwrite fluctuations in output, which was explained by the firm as a way of increasing energy independence without additional greenhouse gas emissions.

The company press release describes Open MG is interoperable and based on international standard technology, which will help prevent demand squeeze and reduce bottlenecks in the system.

KEPCO said it intends to develop Open MG into South Korea’s first megawatt-scale micro grid, which will see the system distributing power more efficiently to end users nationwide.

In the last few weeks, KEPCO announced it had partnered with the University of Tokyo, Mitsubishi UFJ Bank and Nihon Unisys to research using blockchain for managing electricity supply.

The plans follow a decision this month from the South Korean government to increase the budget for domestic blockchain research to $35 million, a 300% increase on the previous allocation.

It comes amidst proactive efforts at government level worldwide to integrate blockchain technology in next generation systems, with a view to delivering more efficient public services and administration.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Was Tether used to prop up BTC? US wants to know

With Bitcoin Core (BTC) continuing its descent into irrelevance, the highs of near $20,000 from the end of last year feel more distant than ever. But the U.S. Department of Justice (DOJ) has cast fresh doubt on whether BTC was ever worth as much as its market price, after identifying irregularities that suggest market manipulation.

Federal prosecutors opened their probe into BTC markets several months ago, and continue to investigate the shady goings on behind the market price, Bloomberg reported.

Now, new evidence has emerged of alleged price manipulation, thought to involve stablecoin Tether and crypto exchange Bitfinex, which is suspected of having been involved in outright manipulation of BTC’s price.

Bitfinex and Tether share a management team, and there have been numerous suggestions of investors buying up Tether tokens when the price of BTC dips, as part of an elaborate attempt to illegally shift market prices.

While the claims have previously been rejected by Bitfinex CEO JL van der Velde, the Justice Department probe makes the allegations even harder to ignore.

The probe adds another strand of investigation into the DOJ’s wider exploration of the management of Bitfinex and Tether. Last year, both firms were subpoenaed by the Commodity Futures Trading Commission (CFTC), which is known to be working in collaboration with the Justice Department as part of the investigations.

It is worth noting that neither the CFTC or the Justice Department have formally accused either firm of wrongdoing, though there seems to be mounting evidence that some of their suspicions could be proved correct.

The development comes at a time of disastrous trading for BTC, with prices plummeting as low as $4,225 on Tuesday, in what looks certain to cement the downward slide that has dominated this year.

Alongside market pessimism over the fundamental weaknesses in the token, the increasingly vocal criticisms from regulators have only hastened its decline.

Responding to the criticisms, van der Velde said that coins issued by Tether could not be used to prop up BTC prices, stressing, “Tether issuances cannot be used to prop up the price of [BTC] or any other coin/token on Bitfinex.”

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Crypto businesses in Isle of Man face stricter requirements

Regulators in the Isle of Man have tightened the rules around registering cryptocurrency businesses in the jurisdiction, imposing two new conditions on those seeking to register.

In a revision to the Designated Businesses Act 2015, which established the structure of regulation for registered cryptocurrency businesses in the British Crown Dependency, companies will now be required to have at least two directors resident on the island.

There is also a new requirement for businesses to be managed and controlled from the Isle of Man, in a move that has been seen as shoring up the island’s crypto industries.

According to the Isle of Man Financial Services Authority (Iomfsa), the changes are a necessary step to allow the regulator to undertake effective industry oversight. It noted, “In order for the Iomfsa to be able to successfully undertake its statutory duty of overseeing compliance of designated businesses with the AML/CFT legislation, designated businesses must have sufficient real presence to facilitate oversight.”

The revised rules also impact on initial coin offerings (ICOs), in particular holding that ICOs will only be permitted where they offer a ‘benefit’ beyond the token itself, although the precise legal definition of ‘benefit’ remains unclear.

The update in the law comes at a time of increasing competition between jurisdictions vying to create favourable regulatory regimes for the growing cryptocurrency sector. In particular, the introduction of official legal frameworks is designed to enable large institutional players to become more involved in crypto sectors, which relies on legal certainty and structure.

It follows in the footsteps of jurisdictions like Gibraltar, already a haven for iGaming and financial services, which became the first jurisdiction to introduce a regulatory regime for ICOs.

A number of cryptocurrency companies have set up or moved to Malta on a similar basis, thanks to its structured crypto laws, including Binance and Okex. Similarly, Switzerland and neighbouring Lichtenstein are working with banks and regulators to foster their nascent Crypto Valley in Zug, home to some of Europe’s most fancied crypto startups.

With more companies choosing to set up in the Isle of Man, it remains to be seen whether the tightening of licensing conditions will make the jurisdiction even more appealing to those crypto firms pitching at regulated businesses.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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McAfee Labs spots yet another Monero-mining cryptojacking malware

A new Russian malware designed to mine privacy-centric cryptocurrency Monero from unsuspecting user machines has been discovered by researchers at McAfee Labs, the latest coin mining malware to be uncovered in recent weeks.

The malware, known as WebCobra, steals computing power from affected devices, before silently mining for cryptocurrency in the background. Users are often unaware of the effects of the malware until they notice a loss of performance, or a higher-than-expected energy bill.

WebCobra is similar to other malware, according to experts at McAfee Labs, with attacks of this type dubbed “cryptojacking.” These attacks have become increasingly more common in recent months, particularly popular with scammers mining SegWit and Monero.

This latest discovery reveals a new type of malware, which researchers have linked to hackers based in Russia.

While some have suggested cryptojacking is less invasive than other types of hacks, the financial costs of mining some cryptocurrencies, coupled with the significant loss of processing power, mean this is far from a victimless crime.

According to a post by McAfee Labs, the costs for mining a single BTC can run into the tens of thousands of dollars. The report noted, “Coin mining malware is difficult to detect. Once a machine is compromised, a malicious app runs silently in the background with just one sign: performance degradation. As the malware increases power consumption, the machine slows down, leaving the owner with a headache and an unwelcome bill, as the energy it takes to mine a single bitcoin can cost from $531 to $26,170…”

The researchers said, “We believe this threat arrives via rogue PUP installers. We have observed it across the globe, with the highest number of infections in Brazil, South Africa, and the United States.”

These types of crypto mining scams have risen by as much as 500% in 2018 so far, leading to an intervention from Google to block obfuscated code from its Chrome Web Store, in a bid to stem the tide of attacks.

As crypto mining malware like WebCobra continues to become more sophisticated, it is likely that more systems will be unwittingly compromised by this type of cryptojacking attack.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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