It’s an interesting week for the cryptocurrency space in Africa this week. The continent has seen more governments profess their support for cryptocurrencies publicly, while others are planning to create a regulatory framework for the market.
Nigeria opposition leader promises to support blockchain, cryptos
Atiku Abubakar, the former Nigerian vice president and current opposition presidential candidate, promised his supporters that, when elected, he would work to create blockchain and cryptocurrency regulation for the country.
According to local reports, Abubakar made the announcement while launching his policy document ahead of the February 2019 elections. In the policy, he explains that he plans to use blockchain and cryptocurrencies to help improve the country’s economy.
In his policy document titled ‘Get Nigeria Working Again,’ Abubakar also explain that this government will, in addition, create a regulatory framework for the industry. He stated that regulation would help build the industry, in turn, creating thousands of employment opportunities as well as generating income for the government.
He asserted, “My mission is to make sure that Nigeria’s economy is reactive to the challenges of the 21st-century knowledge economy by keeping up with the amazingly dynamic in the technological pace.”
The crypto ecosystem in Nigeria has been on the rise in the last few years and the country is among the top crypto markets in Africa. If Abubakar gets elected as president, the crypto space in the country stands to see tremendous growth. Despite the current crypto prices and challenges, it seems that Abubakar is optimistic about the cryptocurrency industry.
Uganda has plans for new crypto regulations
The cryptocurrency market in Uganda has shown great promise ever since Binance set up shop in the country. Though not as active as South Africa, Nigeria or Kenya, the market is quickly picking up the pace. With this new development, the government in Uganda has decided to set up regulations to govern all crypto operations. According to reports, the government seeks to establish rules that will protect its citizens from illegal activities in the space.
Thousands of Ugandans have fallen victim to one crypto scam or another and many have lost vast sums of money in the process, local news outlets reported. The government fears the economy in the country might become unstable if this trend continues.
According to David Bahati from the Planning and Finance Ministry, his ministry has finished drafting the bill that pertains to national payments. The bill will be presented before Parliament next month for debate and approval. The bill has already been approved by the Cabinet in Uganda and is believed to shine a light on what citizens can do when they find themselves victims to fraudulent activities in the crypto space.
South Africa seeks to regulate crypto through taxation.
In April 2018, the South African Reserve Bank stated that cryptocurrency is not considered “legal tender” in South Africa. Later, authorities in the country imposed tax regulations on crypto owners that require them to declare their gains and losses concerning their transactions involving cryptocurrency.
In July, the National Treasury published the draft Taxation Laws Amendment Bill (the Bill) for the public, the Treasury’s first attempt to regulate the use of cryptocurrency in the country. It proposes changes to both the Income Tax Act and the VAT Act. One of the proposed changes is the inclusion of cryptocurrency in the definition of “financial instrument” in the Income Tax Act.
Experts claim that the new bill will not be favourable for the crypto space in the country. According to the reports, Section 22 and section 22(1)(a) of the Income Tax Act limits the benefits crypto traders get from valuing their undisputed cryptocurrency using the valuation method contemplated in section 22. In addition, Section 11 also represses investment in FinTech companies in South Africa.
The Treasury has also suggested that the “issue, acquisition, collection, buying or selling or transfer of ownership of any cryptocurrency” be added to the definition of “financial services” in Section 2 of the VAT Act.
While some countries seem to be content with not innovating in the crypto space, it is becoming more apparent that African nations see the true value of digital currency in global economies.
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Cryptocurrency mining firm Envion AG was reportedly shut down in Switzerland over allegations that it conducted an unauthorized initial coin offering (ICO). On Wednesday, German news outlet Handelsblatt Global reported that the Cantonal court of Zug ordered the company’s liquidation, noting that the Swiss firm lacked any auditing function or board.
Established by Michael Luckow and Matthias Woestmann, Envion is an off-grid mining company that boasts of using decentralized, clean energy such as solar and hydroelectric to power its mobile mining units. The Swiss company held an ICO in early 2018, raising around $100 million.
Luckow accused his partner of taking control of the majority of Envion shares shortly after the company held its crowdsale. Meanwhile, Woestmann claimed Luckow illegally generated another 40 million of Envion’s native tokens (EVN) without the knowledge of the board of directors. This, according to Woestmann, was in addition to the 86 million tokens that were initially agreed on.
In July, the Swiss Financial Market Supervisory Authority (FINMA) launched a probe into Envion’s ICO and found that the company accepted some 100 million francs (worth $100.01 million at the time) from 30,000 investors. The company reportedly gave investors the EVN tokens “in a bond-like form.”
According to reports, FINMA was investigating “possible breaches of banking law resulting from the potentially unauthorized acceptance of public deposits” during the token sale.
Since the dispute between the two, Luckow has been fighting for the firm in a bid to save the original concept. In a Medium post, Envion stated, “The founding team now faces the challenge of responding to fallacious allegations as they make their case against Woestmann. Though Woestmann can produce no evidence supporting his allegations, envion’s founders have begun a campaign to publish the necessary proof to allow investors to determine the truth based on verifiable documentation.”
Financial supervisors have already appointed an investigator to ensure the liquidation process is “unavoidable.”
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California-based cryptocurrency company Coinbase is looking to attract more institutional investors. According to live-streaming site Cheddar, the crypto wallet and exchange company has introduced an over-the-counter (OTC) trading desk specifically for the investment class in response to customer demand. It’s just one step in the company’s plans to be a versatile platform that is regulated by U.S. authorities.
Coinbase Director of Institutional Sales Christine Sandler explained of the new offering, “We launched our OTC business as a complement to our exchange business because we found a lot of institutions were using OTC as an on-ramp for crypto trading.” She adds that the platform will allow clients to leverage Coinbase’s exchange and OTC service and explains that the OTC desk could soon be combined with its custody platform, Coinbase Custody.
It will compete against other OTC services, including Goldman Sachs-backed Circle and the Gemini exchange. However, Sandler points out that Coinbase’s solution will be unique. She states, “Circle and a number of others have complementary products, but they also trade on a proprietary basis, so they are the counterparty to each transaction, while we, in fact, are matching client orders.”
The current market slump may have scared off some investors, but they weren’t true believers in crypto’s capabilities. Those that see the potential of digital currency are in for the long haul. Sandler adds, “From our crypto first clients, we’re hearing that nothing has changed with respect to technology, and they’re still absolutely committed to crypto … to the technology. I think that there’s one small silver lining to this volatility … [it’s] that crypto’s been front and center of the mainstream financial media for the last few weeks. I think that has driven … forced a lot of institutions to think, really, is this an opportunistic investment point for crypto at this point.”
Coinbase is hoping to be a fully regulated platform. It is working with the Securities and Exchange Commission (SEC) to become a licensed broker-dealer. It hopes to be able to introduce a range of crypto-related solutions, such as crypto securities and margin trades, as well as new data products not yet identified. Coinbase has also received authorization from the New York State Department of Financial Services to establish a regulated custody solution in the state.
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Another scammer targeting the cryptocurrency space has been taken out. In a press release by the U.S. Department of Justice (DOJ) from this past Wednesday, the agency announced that the Federal Bureau of Investigation has arrested the co-founder of a crypto platform following his indictment on charges that resulted in millions of dollars in losses to a number of investors.
30-year-old Jared Rice Sr., co-founder of AriseBank, scammed investors out of more than $4 million, enticing them to invest in the “first decentralized banking platform” in the U.S. He concocted a story that the institution would offer bank accounts insured by the FDIC (Federal Deposit Insurance Corporation), as well as credit and debit cards backed by Visa. He also claimed that he had raised “$600 million within just a few weeks” through an initial coin offering (ICO). Unfortunately, everything he said was a lie.
None of the money he collected was used for its stated purpose. Instead, Rice used it to buy clothes, eat in fancy restaurants and take luxury vacations.
Rice has been charged with three counts of wire fraud and three counts of securities fraud. The U.S. Attorney for the Northern District of Texas, Erin Nealy Cox, asserts, “My office is committed to enforcing the rule of law in the cryptocurrency space. The Northern District of Texas will not tolerate this sort of flagrant deception – online or off.”
This isn’t the first time that regulators have had a run-in with Rice. This past January, he, along with the company’s co-founder, Stanley Ford, was sued by the U.S. Securities and Exchange Commission (SEC) for fraud and unlawfully issuing securities. He was also served with a cease-and-desist order from the Texas Department of Banking in relation to his activities. The SEC has also indicated, in February, that he had been on probation after being indicted in 2015 for charges related to theft and tampering with government records. A separate felony indictment also hangs over the crook in Dallas County, Texas for assault.
His next trip will be to a court to find out if he is to be convicted on all charges. If that happens, he could be sentenced to up to 120 years in federal prison.
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The CoinGeek Week conference is in full swing in London and all of those who are in attendance are experiencing an exciting chance to see what is going on with Bitcoin SV and the entire crypto ecosystem. There is a lot of activity on the agenda and a lot to discuss, but CoinGeek founder Calvin Ayre took a few minutes out of his schedule to sit down with Bitstocks, the UK’s first crypto market advisory firm, to discuss what is happening with Bitcoin SV and where things are headed.
In the podcast, which is available on YouTube, Ayre talks about how he began to dabble in cryptocurrencies in 2010, but didn’t get really involved until 2015 when he met Dr. Craig Wright. They shared a lot of the same opinions regarding what cryptocurrency is and what it can be, leading Ayre to jump in completely to help build the space.
As is the case with many, when it was obvious that Bitcoin Core (BTC) was veering off the original path of what cryptocurrency was meant to be, Ayre played a role in ensuring that the path was kept alive through Bitcoin Cash (BCH), the only cryptocurrency that maintained the original Satoshi Vision. He adds that cryptocurrency was already mature when it was created and didn’t need to be constantly tweaked, a premise that was designed to be followed with BCH.
Just as BCH was initially intended to keep cryptocurrency moving forward as a true peer-to-peer currency, once it became obvious that certain developers were once again intent on changing the business model, Bitcoin SV came about to ensure that the original cryptocurrency model would continue.
Ayre also points out the recent stress test of Bitcoin SV, which proved what many have been asserting all along – on-chain scaling not only works, but it works well. The stress test saw 1,500 transactions per second, which is higher than what has been seen with Segwit, Ethereum and Ripple combined.
Within a year, 8,000 transactions are anticipated by allowing blocks that are two gigabytes in size. As Ayre points out, Bitcoin SV is the “only trustless, decentralized public blockchain,” and this is what is going to help drive adoption. It’s obvious that the consumer market needs to be educated on the merits of cryptocurrency in general, but this is coming and this education will allow everyone to see why Bitcoin SV is the original Bitcoin.
If you have a restaurant and you advertise all you can eat crab meat dinners and you serve a type of white fish pressed into crab sticks this would be considered a type of fraud. I cannot understand how exchanges, wallets and payment processors can get away with calling Segwit BTC and ABC BCH a form of Bitcoin and not also be committing a type of consumer fraud as the general public does not know that these platform no longer use the Bitcoin technology or economic model.
Bitcoin was born an adult. Satoshi Nakamoto himself said this when he posted this in 2010, early in Bitcoin’s life:
“The nature of Bitcoin is such that once version 0.1 was released, the core design was set in stone for the rest of its lifetime.”
The thing that makes Bitcoin Bitcoin is its amazingly genius economic model enforced by the core design of its technology. If you change the core technological design, this changes the economic rules and what you have is not bitcoin. This has now happened a number of times and there are all sorts of charlatans out there using the Bitcoin name and not being bitcoin. The exchanges who then sell the unsuspecting public a token as bitcoin when it’s not really bitcoin are responsible for the losses that they are all now suffering as the world starts to understand that there is only one bitcoin and that is the only platform that uses the oritional economic model and technical enforcement and that is what is now called Bitcoin SV.
I think someone in the US who has suffered losses from this kind of exchange fraud should consult with lawyers and see what remedies are available to them in law.
In the mean time the original bitcoin, now named Bitcoin SV for Satoshi Vision, is the only platform that scales and therefor has utility as sound money and is the best place to retreat to to preserve value in your crypto portfolio.
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The Texas Securities Commissioner has issued an emergency cease and desist order against My Crypto Mine and Mark Royer, an individual involved with the company, in the latest wave of enforcement action against illegal initial coin offerings (ICOs).
Royer is accused of acting on a behalf of a disbarred attorney, Samuel Mendez, and a “white collar criminal” Bruce Bise, in offer crypto tokens known as bitqy through a company, BitQyck. Urging investors who missed out on BTC to back BitQyck, the bitqy tokens have subsequently turned out to be near worthless.
At the time of selling tokens to investors, Royer said they were available for $0.02, with the implication that prices would rise to $3 per token. In reality, the tokens are now worthless, with most of those who invested having lost the entirety of their invested principal.
The filing identifies Royer as working for a new firm, My Crypto Mine, without disclosing his prior affiliation with BitQyck and bitqy. My Crypto Mine appeals to investors in Texas and elsewhere to invest in the company, with the promise of significant returns from crypto mining—ironically at a time when some of the world’s largest crypto mining companies are filing for bankruptcy.
The cease and desist order says My Crypto Mine is issuing unregistered securities, and that the respondents are not registered with the Securities Commissioner as agents or dealers, a position that is in breach of securities laws.
The order also alleges that My Crypto Mine has failed to disclose material details to investors, both about the business and about Royer’s past affiliations with potentially fraudulent cryptocurrency schemes.
There has also been a failure to disclose risks to investors appropriately, including notices that government actions could ultimately affect the value of any investment in the company.
The respondents have been ordered to cease and desist from offering securities in Texas, and from acting as dealers and agents in the offer of these securities. It comes as the latest example of a securities regulator cracking down on fraudulent ICOs and token sales, which continue to exploit unsuspecting investors globally.
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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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The Malaysian government has yet to release its regulations for the cryptocurrency industry, but plans to enforce these as soon as the first quarter of next year.
Finance Minister Lim Guan Eng said that he had been informed by the country’s Securities Commission (SC) that it would use the new regulations to help provide fundraising to companies via alternative means.
He said, “We are keen on the continued development of such alternative financing avenues for these businesses beyond the traditional channels of financing,” according to local outlet The Star. He was speaking at a conference organized by the SC.
Lim noted persistent skepticism about the industry, but said, “[T]here can be no doubt that we need appropriate regulations to be put in place and enforced to safeguard the interest of investors.”
The regulations would cover not just initial coin offerings (ICOs), wherein numerous scams such as Ponzi schemes are prevalent, but cryptocurrency exchanges, which elsewhere in the world have been targets of thefts by hacking.
According to Lim, the proposed legislation will have the SC and the Bank Negara Malaysia, the country’s central bank, forming part of a committee headed by the Finance Ministry.
Already, the government has budgeted a Co-Investment Fund for MYR50 million ($11.9 million) involving equity crowdfunding and peer-to-peer financing, which appear compatible with blockchain and cryptocurrency firms. The fund will have the government matching one-fourth of private investors’ contributions.
The SC has long been considering a regulatory framework that would adequately guide growth of the local industry. Late last year, the drafting of rules was being discussed. Shortly before this, some officials had seemed less inclined to even allow blockchain businesses in the country, suggesting an outright ban.
Last September, the government formed a task force, the Malaysian Industry-Government Group for High Technology (MIGHT), to look into adopting blockchain for the country’s major industries, namely renewable energy, palm oil, and Islamic finance.
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Cryptocurrency merchant bank Galaxy Digital Holdings reported a loss of $76.65 million for the third quarter, as it was weighed down by persistently low digital asset prices over the past year.
“The current quarter loss was largely a result of realized loss on digital assets, unrealized loss on investments, an impairment loss on goodwill and equity based compensation accruals,” the latest report read.
For the first nine months of the year, the company’s losses amounted to $175.68 million.
Galaxy Digital, formed on November 30 last year, has cryptocurrency investments primarily in BTC and ETH, whose prices are down 54.6% and 82.1% respectively since January 9. Adding to difficulties was increased competition in the trading business, which has led to narrower spreads for arbitrage activity, according to the company.
“While we continue to improve and strengthen our trading business, lack of overall trading volume in cryptocurrencies has been a headwind for the business,” the report read.
The trading segment was responsible for $47.47 million of the third-quarter loss. Over the first nine months of 2018, trading losses amounted to $150.74 million.
Total net realized loss on digital assets for the quarter was $38.1 million, with $22.1 million of this coming from ETH, $9.7 million from BTC, and $2.6 million from Ripple. These losses were partially offset by $1.9 million worth of gains from Ethereum Classic.
The previous quarters had smaller net realized losses, partly because of gains from short selling, of $33 million and $21.9 million in the first and second quarters, respectively.
Total assets as of September 30 were $435.50 million, compared to $54.75 million as of December 31, 2017. Total liabilities, on the other hand, were at $48.99 million as of September 30, lower than the $151.40 million as of June 30 and the $53 million as of December 31 of last year.
Galaxy Digital CEO Mike Novogratz, in a Bloomberg interview, expressed optimism that the cryptocurrency market will be picking up soon, saying that come next year, “Q1, Q2, if the institutions start coming in, [cryptocurrencies] will put in new highs.”
The report pointed to increase use of cryptocurrencies and blockchain in recent months, including with Fidelity Investments, which launched its digital assets company last October. Such advances, the company said, “lead to wider adoption of blockchain and cryptocurrencies. This adoption should lead to increased volumes and prices, which should benefit all of our businesses.”
With many cryptocurrency prices down, now is a time to look for underpriced assets in the sector. Calvin Ayre recently said that Bitcoin SV, maintaining the original vision of Bitcoin as a global digital ledger, is “seriously undervalued now, and the token best positioned to grow in value.”
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