Author: Erik Gibbs

Tether continues to lose market dominance

Tether may currently be stable and may have seen its value return to be even with the US dollar, but this may not last long. The stablecoin held 94% of the stablecoin market at the beginning of 2018 – with only two other stablecoin competitors – and continues to lose ground. Now with eight serious stablecoins in the market, Tether’s market dominance lies at only 74% and could fall even further.

It seems like everyone wants to launch a stablecoin these days. There is the USDCoin from Circle, Paxos, TrueUSD and even Gemini Dollars. Even the Huobi exchange has gotten in on the fun, launching its HUSD stablecoin. On the surface, they appear to be solid as they’re backed by physical assets such as dollars or gold, but we have already witnessed how easily it is to see a stablecoin come unglued. Not too long ago, Tether saw its price break free from the US dollar, falling at one point to $94.

This past October, the co-founder of CoinCorner, Danny Scott, showed how easy it was for the stablecoins to not hold their value. He said at the time, “This is because they are openly traded on exchanges based on the supply and demand, meaning their price can fluctuate if people are willing to pay less or more for the currency. For example, GUSD (Gemini dollar) was pegged at $1 and actually hit $1.18. Similarly, USDT (Tether) which is pegged at $1 has fluctuated over time and is currently trading at $0.96. So do we think stablecoins are here to stay? Only time will tell, but for now we are not committing to them.”

Tether has had to deal with a series of issues that may have contributed to its decline among stablecoins. It has repeatedly refused to release audits of its holdings, stating that it would be too difficult (even though other stablecoins readily acknowledge that they can provide the data). Its new banking partner, Deltec out of Brazil, is facing an investigation for its possible involvement in a money-laundering scheme. There have also been concerns raised that the stablecoin was used to manipulate Bitcoin Core (BTC) prices last year. 

The case for stablecoins is tenuous, at best. While all cryptocurrency options are still young and the industry needs to be developed, there isn’t much call for an option that can both show volatility on its own, as well as on the asset which backs it.

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The fallacy of the “crypto’s only good for money laundering” argument

We’ve all heard the lame excuses – cryptocurrency is only good for criminal activity, cryptocurrency is only useful for money laundering, cryptocurrency has no real purpose – in trying to derail crypto as a legitimate alternative to fiat. Of course, the statements need to always be taken with a grain of salt and the speaker needs to be identified. In every case, the person uttering the words was a definite fiat pundit who either didn’t understand crypto or who was too imbedded with fiat to be able to see the bigger picture. The truth has begun to surface, though, and none of those arguments stand up to scrutiny. Japan has just given us another good indication of the fallacy behind the arguments.

The Japan Times reports that, according to an “official police document,” the country has seen a total of 340,000 suspected cases of money laundering activity or abuse this year in all types of financial transactions. Of this amount, only 6,000 transactions were related to cryptocurrency. Quickly crunching numbers, that means that only about 2% of all the money-laundering activity was found in crypto.

6,000 is still a big number, for sure. However, given the fact that 334,000 cases of money laundering were recorded through fiat, it’s merely a drop in the bucket. Measures are already being undertaken to help reduce the number more, but the fact that money laundering can still be so prevalent in fiat after centuries of existence shows how difficult the activity is to control.

Japan is working diligently to provide better oversight of cryptocurrency entities and exchanges. It is introducing a number of measures that will help prevent tax evasion and control initial coin offerings (ICO) and the Japan Virtual Currency Exchange Association (JVCEA), a self-regulatory entities overseeing crypto exchanges, has authority to patrol the industry, as well.

Any system anywhere in the world can be used positively or negatively – nothing can escape this, not even cryptocurrency. However, it has already shown itself to be a viable option and one that allows users to take back control of their own money. It is not “that thing that criminals use” or “an environmental disaster.” It is a legitimate type of currency that continues to be accepted by more and more merchants every day.

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Breaking down the United American lawsuit against Bitmain, Roger Ver, et al

The cryptocurrency world was rocked Thursday by the announcement of a huge lawsuit that was launched by United American Corp. (UAC) against a large number of Bitcoin Cash BCH supporters, including Bitmain and its co-founder Jihan Wu, founder Roger Ver, Amaury Séchet of Bitcoin ABC, the Kraken exchange and its CEO, Jesse Powell, as well as a few others. The lawsuit contends egregious amounts of fraud and market manipulation on the part of all defendants and could forever change how BCH is viewed, MarketWatch first reported.  The lawsuit and all updates will be available on the website.

UAC points out in its lawsuit, filed in U.S. District Court for the Southern District of Florida, that the group of individuals colluded to manipulate the BCH network and take control of its functions. The company asserts that BCH has become centralized, which violates “all accepted distributed and decentralized standards and protocols associated with Bitcoin since its inception.” The Florida-based blockchain company further asserts that Ver, Wu, et al worked in conjunction with the Chinese government in order to lead a hostile takeover of the cryptocurrency.

Breaking News: Lawsuit links Bitmain, Ver camp to ‘premeditated takeover’ of Bitcoin Cash network

The blockchain is meant to be a decentralized solution. To maintain this decentralization, the network operates on a consensus basis that prevents a single person or group from being able to control the majority of the hash, or mining power. If someone is able to control 51% of the network, they can effectively and autonomously decide the blockchain’s fate and this is what the defendants have been able to achieve.

Bitmain publicly acknowledged its support of Bitcoin ABC during the hash wars and launched efforts to force the BCH network to follow ABC during the hash wars. It rented hash power and even deployed 90,000 of its own mining rigs in favor of ABC mining operations, a move that can be seen as an attempt to centralize and control ABC. There were also speculations that Bitmain’s Jihan Wu was unloading BTC to fund the ABC mining operations, which, in turn, drove the prices of crypto down. Now, people are wondering if Wu is just cashing out amid the hash war.

Meanwhile, the U.S. Department of Justice is also allegedly looking to get involved in the case against Bitmain and Ver’s group through the FBI Cybercrimes Division.

Who are the defendants?

Roger Ver is a “crypto anarchist” and has also directed the mining operations of his mining pool to ABC. In addition, was a recipient of some of the hashing power that was rented by Bitmain in order to support ABC.

Ver has direct links to the Kraken crypto exchange through its founder, Jesse Powell. They are friends with a history that dates back to their high school days and Kraken was one of the first exchanges to show favoritism for ABC. It was also the first exchange to declare that ABC was offering the true version of BCH.

The lawsuit explains that Bitcoin ABC, the development and mining group that favored moving BCH away from its original design, has now forced changes on the blockchain without regard to what the community wanted. It introduced arbitrary checkpoints that can allow Bitcoin ABC to take over the network. UAC explains, “Combining this change with the hashing power of Bitcoin ABC backers amounts to centralization.  They will be able to override any consensus reached by the rest of the network, forcing other to conform or create an unwanted hard fork.”

UAC also asserts that the entities were fundamental in directing hash power—including through the renting of additional mining equipment—during the BCH “hash wars” this month that saw them force the direction the BCH blockchain was headed. The action resulted in an unprecedented amount of hash being processed by Bitcoin ABC backers and further disintegrated the integrity of the BCH network.

UAC has been involved in blockchain innovation since 2017 and has invested more than $4 million in the space. It argues that the selfish manipulation of the blockchain is not consistent with BCH’s design, and that it has completely altered the “fundamental economics of the business.” In simple terms, it can be viewed as ordering a Filet Mignon in a restaurant and being delivered a burnt hamburger, while still paying for the Filet Mignon.

For a deeper narrative about the scheme, visit the Bitcoin Cash Litigation website.

The full filing can be found here.

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Bitcoin SV continues to rise in the ranks

Markets are down all across the globe. Wall Street has seen significant declines in its prices, futures trading was temporarily suspended and the general sentiment has been somewhat bleak. According to CoinMarketCap, even Bitcoin Core (BTC) is down, dropping 2.81% in the past 24 hours. In fact, all of the top five cryptocurrencies have seen declines of as much as 13%. In all of the chaos, though, there is a beacon that is shining bright. As of this writing, Bitcoin SV (BSV) has climbed 24.80%.

BSV now sits in the number five spot in the cryptocurrency rankings by market cap. Its current price sits at $110.94 and doesn’t show any signs of slowing down. This makes BSV more valuable than Ether, which is trading at just $97.57. Bitcoin Cash (BCH), which includes the controversial Bitcoin ABC version of BCH following the hard fork earlier this month, has dropped by 18.32% in the same period and now sits in seventh place by market cap – below Tether.

One of the reasons BSV is gaining ground is because of miners. They have remained loyal to BSV and their loyalty is beginning to show signs of paying off. It has been a difficult road, but one that has been well worth it in order to continue to develop the only cryptocurrency that follows the original definition of what a digital currency should be.

BSV has seen increases of almost 40% over the past week. While it’s difficult to determine exactly why it continues to climb, there are educated conclusions that can be made. BCH was running solid when it was still being rightfully viewed as the original Bitcoin as defined by Satoshi. As soon as chatter began that there were discrepancies in the direction the blockchain would take, the wobbling began. That wobbling continued through the hard fork, leading to the unprecedented drops seen in the price of BCH.

BSV is moving forward with a model that will ensure that Bitcoin lives on. This is being recognized by crypto enthusiasts who are beginning to understand that BSV and its supporters were right all along. Of course, a lawsuit against everything Bitcoin ABC stood for doesn’t help BCH’s cause, either.

There’s no way to know whether or not this bullish trend will continue. However, things are certainly looking up for BSV.

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Poloniex exchange launches institutional trading platform

The Poloniex cryptocurrency exchange is looking for big money. It announced in a Medium post this past Tuesday that it is moving forward with a plan to offering support for institutional accounts that will be made available for a number of trading pairs and APIs (application programming interface).

The post reads, in part, “We are excited to announce that institutional accounts are now available on Poloniex! Institutions large and small can enjoy the benefits of our large curated selection of crypto asset trading pairs, dedicated support and robust API services. Poloniex customers also enjoy no fees on BTC/USDC trades in the month of December.”

Poloniex was acquired by Goldman Sachs-backed Circle this past February for $400 million. With the new accounts, Circle will give investors the ability to conduct over-the-counter (OTC) trades using its Circle Trade platform, provided they’re ready to make an investment of at least $250,000. In addition, Circle will offer institutional services through Poloniex, as well as trading pairs with the Circle-created USDC stablecoin.

When 2018 kicked off, everyone expected to see a lot of institutional investors joining the crypto space. The rollout has been extremely slow, with only Coinbase being the major exchange to go after the investment class this past May. Coinbase is also looking to introduce an OTC crypto desk, but that isn’t expected to be introduced until sometime next year.

Poloniex has had a rough year. It has seen the exchange shuffle around its services a number of times and announced in October that it would be removing margin trading and lending products for U.S. customers by the end of the year. This past summer, it received a lot of backlash from users who had become locked out of their accounts after the exchange introduced new verification procedures. It had to deal with mounting pressure at the end of last year as users began flocking to the platform in response to the meteoric rise of Bitcoin Core’s (BTC) price, and wasn’t able to keep up with the load.

Poloniex is still in a solid position, despite the bumps in the road. This past October, a report by DRW Holdings Inc. showed that institutional investors now make up the largest segment of crypto buyers for transactions of more than $100,000, displacing high net worth individuals at the top of the list.

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NASDAQ confirms Bitcoin futures launch coming early next year

There has been a lot of talk by several mainstream financial entities in the past two years that they could be considering launching different cryptocurrency products. While some, such as the CME Group and CBOE exchanges, have already taken the step, many others are still trying to get the ball rolling. One, the NASDAQ exchange, has had plans in the works for a while and has now confirmed that it hopes to launch its platform beginning sometime early next year and that it will start with Bitcoin Core (BTC) futures.

In a recent interview with news outlet The Express in the UK, NASDAQ VP of Communications Joseph Christinat reiterated the company’s position that it is still moving forward, despite the current market slump. He said that there’s been “more than enough work dedicated into the endeavor to make remove the question of regulatory approval. We will do this, and it is definitely happening.” Christinat added that the biggest challenge now is to receive approval by the U.S. Commodity Futures Trading Commission (CFTC).

NASDAQ, the world’s second largest stock exchange, has been developing its crypto portfolio for the past several years. It had hoped to launch one or more products this past summer, but revealed that it would postpone the launch in order to develop a platform that would be “unique enough” to attract a large following.

Christinat added, “We have put in plenty of financial resources and energy into delivering the capability to make this operational, and we’ve been on it for quite some time. Long before the market turbulence. The current atmosphere won’t affect our timeline in any way. We are going to do this no matter what comes.”

NASDAQ is joined by companies such as Fidelity Investments and the Intercontinental Exchange (ICE) that are preparing to introduce cryptocurrency trading products. Fidelity has said that it is still on target for a December launch for its offerings, while ICE, which is developing the Bakkt platform, has had to delay its launch from December to next January at the earliest.

What is still not known is how the BTC futures will operate. When CME and CBOE introduced their futures products last year, they were offered as cash-backed futures. Bakkt has said that it anticipates being the first to offer futures that are physically settled and would more than likely maintain those bragging rights even if NASDAQ decided to go the same route.

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US Congressman introduces federal crypto regulations

The U.S. could be inching closer to creating a regulatory framework for cryptocurrencies and initial coin offerings (ICO). Representative Warren Davidson from Ohio has been working on a new bill that is designed to pave the way for crypto and ICO regulations, according to media outlet, and would clarify the definition of cryptocurrencies.

The bill will be presented to the House of Representatives for discussion. It looks to create a new and unique asset class that would cover crypto and ICOs, allowing the government to regulate the crypto space more thoroughly. The legislation is designed to prevent digital assets from being classified as securities and would allow the federal government to maintain complete regulatory oversight of token offerings.

There is a lot of confusion in the U.S. regarding how to define cryptocurrencies. The Securities and Exchange Commission (SEC) has said that, with the exception of Bitcoin Core (BTC) and Ether (ETH), the majority of cryptocurrencies are securities. On the other hand, the Commodities Futures Trading Commission (CFTC) asserts that they are commodities.

Two additional agencies, the U.S. Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN), both say that crypto is money. Without a central definition in place, standard regulations cannot be created.

Davidson is somewhat of a proponent of cryptocurrencies, or at least of the space in general. He has been pushing for regulation of crypto and assisted in the writing of a letter to the SEC this past September in which he asked that the commission speed up its introduction of legislation in order to prevent tech companies from leaving the U.S. The letter read, in part, “Current uncertainty surrounding the treatment of offers and sales of digital tokens is hindering innovation in the United States and will ultimately drive business elsewhere. We believe that the SEC could do more to clarify its position.”

Even if the bill were to pass through the House, it would still need to be considered by the Senate. Ultimately, this means that regulations shouldn’t be expected to come anytime soon. Perhaps they’ll be implemented sometime next year, but there’s still a long road ahead.

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Bitmain IPO reportedly in “death spiral” as losses increase

To be or not to be – that is the question. In the case of the Bitmain initial public offering (IPO), it’s looking every day that it isn’t to be. A new revelation uncovered by a Twitter user that follows the company almost religiously has shown that the once mighty cryptocurrency mining equipment manufacturer is teetering more toward crashing into the ground in a thunderous explosion.

BTCKING555 tweeted a few days ago that Bitmain’s losses in the third quarter of the year could have been as much as $740 million. If accurate, it would mark the worst quarter in the company’s history, but continues a slide that Bitmain has been experiencing since before the beginning of March.

The tweet reads, “We got leak of Bitmain Q3 numbers! COMPLETE DISASTER. The company lost $740 Million including losses on inventory and bitcoin cash! And this is not accounting for hash war costs!”

BTCKING555 alludes to possible additional losses that could top $1 billion due to Bitmain having a large investment in Bitcoin BCH. Since the digital currency’s value has been cut by more than half its recent value, Bitmain is out a substantial amount of cash.

Bitmain would have no one to blame but itself if it were to fizzle. In preparation of an IPO that was expected to launch this past September, the company falsely claimed to have received backing by a number of international companies. It also ran up substantial debt with a chip supplier – to the tune of $1 billion. It finally paid just over two-thirds of the debt, but there hasn’t been word on whether it has made good on the outstanding portion.

The company has been accused of using customer equipment for its own mining purposes. It faces a class-action lawsuit in California over the allegations, only adding to the uncertain future of its operations.

The company also presented an IPO prospectus with the Hong Kong Stock Exchange that had blatant errors. The ability of Bitmain to completely disregard regulations and present data that has been verified as false should be enough to make any investor skeptical about giving the company any money. Add this to its mounting financial issues are cringe-worthy and should not only make investors say “No, thanks,” but should make them run away screaming.

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Japan to introduce new reporting system to prevent crypto tax evasion

It’s no secret that Japanese authorities are looking to take control over tax money it feels is lost in the crypto space. The country is behind an effort being developed by the G20 to implement a global crypto tax strategy that could see governments receive millions of dollars in payments. Back home in Japan, regulators are now looking to introduce a new system that will report significant profits from crypto-based transactions, helping the country recover even more funds.

According to the Japanese media outlet Mainichi Shimbun, the new system to be implemented will give the National Tax Agency (NTA) the ability to gather data from transaction intermediaries, which include crypto exchanges. The NTA will have the authority to request information – such as names, addresses and personal ID numbers – on customers that it suspects of tax evasion. If everything goes according to plan, the system will be developed next year, with an anticipated implementation for the new fiscal year beginning in April 2020.

Not all individuals would be targeted by the new system. The media outlet quotes several sources who said that only those who earn over 10 million yen ($88,700) through crypto transactions would be held accountable.

Currently, crypto exchanges and other companies that are deemed intermediaries only give up data voluntarily. They have the legal ability to refuse to hand over information, but this could change with the new legislation. The exchanges could be forced to adhere to the requests, but would still maintain the right to appeal any request it feels is unwarranted.

The impact won’t be felt widespread, at least not initially. According to a recent survey conducted by the NTA, only just over 300 people indicated that they earned more than 100 million yen through crypto last year. Given the current market slide, the number has probably dropped significantly.

Japan is also ready to come down hard on initial coin offerings (ICO). The Japanese Financial Services Authority (FSA) announced this week that it would introduce stricter regulations on the offering in order to protect investors from fraud. Going forward, any entity wishing to launch an ICO would have to first register with the FSA.

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US-based payment processor expands into crypto

A payment processor with a significant footprint in the U.S. has joined forces with tech company Vaultbank to bring crypto payments to retail customers. SpotOn, which provides a payment processing solution to more than 100,000 merchants in the country, will soon include crypto payment transactions to its platform, allowing retailers to accept a number of digital currencies, including Bitcoin Core, Ripple, Ether and Stellar.

According to a company press release, customers will now be able to pay in the currency of their choice and merchants can choose whether or not to almost instantaneously convert crypto payments to fiat, or to hold them in their original form. SpotOn also has additional developments in the pipeline, including the introduction of a crypto-based loyalty rewards program and the ability to buy and sell crypto directly on its platform.

SpotOn President RJ Horsely states, “Today’s ever-evolving digital market demands that merchants need a payment service capable of accepting a wider diversity of currencies including virtual currencies. Our new technology will allow thousands of SpotOn merchants to accept cryptocurrency without having to onboard to another payment processor or manually convert cryptocurrency funds into fiat.”

Vaultbank is a firm that creates, issues and trades financial instruments using the blockchain. SpotOn invested in a seed-funding round held by the company, which is developing a platform that will allow users to buy, sell and spend their crypto assets on a single solution. The Vaultbank website indicates, “The Vaultbank Platform plans to tokenize securities like Mutual Funds, and will be a securities compliant platform that performs KYC [Know Your Customer], AML [anti-money laundering], FATCA [Foreign Account Tax Compliance Act] and Accreditation. Users will be able to buy and sell security tokens and top utility tokens at industry competitive rates.”

Vaultbank Chief Operating Officer Aaron Travis added in the press release, “This partnership empowers the customer to pay in whatever digital currency they want, while the merchant gets paid in what they want, dollars.”

By giving merchants an easy-to-use crypto payments solution, coupled with the ability to convert the funds into fiat, can go a long way to helping crypto be accepted as an alternative payment solution. The market volatility has kept many retailers away, concerned about losing revenue. However, transferring funds to fiat – until the markets stabilize – helps to counter this issue.

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