Switzerland Enacts ICO Guidelines

Switzerland Enacts World’s First ICO Guidelines

Just days before the tiny nation of Gibraltar was said to draft their first initial coin offering (ICO) regulations, Financial Market Supervisory Authority (FINMA) of Switzerland appears to have stolen its thunder in an eleven page document published today. It could be the standard by which developed countries look to install their own versions.

Also read: Citibank India Bans Bitcoin 

Switzerland Publishes ICO Guidelines

“The guidelines also define the information FINMA requires to deal with such enquiries and the principles upon which it will base its responses,” an agency press release began, “creating clarity for market participants.”

ICOs have bedeviled regulators the globe over since their inception Summer of 2013 as a creative way to crowdfund projects. They deliberately mirror initial public offerings, IPOs, which are famously used to bring traditional companies to market. However, IPOs have taken all the trappings that come with success: barriers to entry making them a very expensive proposition, requiring gaggles of lawyers and regulatory hoop-jumping. ICOs, due to their nascency, have gotten around all that to the tune of 6 billion USD in 2017 alone.

Switzerland Enacts World’s First ICO Guidelines

“FINMA has seen a sharp increase in the number of initial coin offerings (ICOs) planned or executed in Switzerland and a corresponding increase in the number of enquiries about the applicability of regulation,” the regulator insists. Following up on their Spring of last year Guidance document, “setting out how it intends to treat enquiries from ICO organisers,” FINMA wishes to solidify “transparency at this time” as it “is important given the dynamic market and the high level of demand.”

ICOs are a participatory token economy in the literal, digital sense. They usually focus upon a specific project, and combinations and permutations on this idea are as vast as the myriad of ICOs themselves: ownership in a company, payouts, tradeable coins, some of which are expected to appreciate beyond just being a digital stock certificate. They’re an adventuresome investment, and, as these pages have well-documented, slickly written white papers and website landing pages have often amounted to little more than exit scams.

Not All ICOs are Equal

A vast majority of ICOs rely upon the Ethereum platform and its Ethereum Request for Comments (ERC20), which is used for smart contracts. Something like over twenty one thousand such contracts exist, and estimates hold that ERC20 commands a supermajority ICO marketshare.

Swiss guidelines are “not applicable to all ICOs. Depending on the manner in which ICOs are designed, they may not in all cases be subject to regulatory requirements. Circumstances must be considered on a case-by-case basis […] At present, there is no ICO-specific regulation, nor is there relevant case law or consistent legal doctrine.” As such, “FINMA will focus on the economic function and purpose of the tokens (i.e. the blockchain-based units) issued by the ICO organiser. The key factors are the underlying purpose of the tokens and whether they are already tradeable or transferable.”

Switzerland Enacts World’s First ICO Guidelines

Swiss guidelines subdivide tokens into three classes: payment, utility, and asset. Payment tokens are basically cryptocurrencies as most understand them; utility tokens are access to services; asset tokens function more like derivatives, bonds, equities, and can serve as interest or dividend payments.

FINMA’s deepest worry involves anti-money laundering (AML) law subversion. “FINMA’s analysis indicates that money laundering and securities regulation are the most relevant to ICOs,” and as such guidelines contain “requirements for financial intermediaries including, for example, the need to establish the identity of beneficial owners.” Revealingly, the agency baldly asserts, “Money laundering risks are especially high in a decentralised blockchain-based system, in which assets can be transferred anonymously and without any regulated intermediaries.”

Switzerland Enacts World’s First ICO Guidelines

Supportive of Blockchain Technology

ICOs with payment token arrangements FINMA won’t be thought of as securities, and instead be required to comply with AML regulations already in place. Additionally, utility token ICOs “do not qualify as securities only if their sole purpose is to confer digital access rights to an application or service and if the utility token can already be used in this way at the point of issue.”

Asset token ICOs, however, “FINMA regards asset tokens as securities, which means that there are securities law requirements for trading in such tokens, as well as civil law requirements.” Where there are hybrids, it appears the most regulation applies rather than a default to a less regulated token.  

The Swiss body was careful to suggest it supports blockchain development, and it quotes FINMA head Mark Branson as insisting, “The application of blockchain technology has innovative potential within and far beyond the financial markets. However, blockchain-based projects conducted analogously to regulated activities cannot simply circumvent the tried and tested regulatory framework. Our balanced approach to handling ICO projects and enquiries allows legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system.”

Do you think FINMA’s guidelines will be the world standard? Let us know in the comments section.

Images courtesy of Pixabay, FINMA

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Steps towards Self-Regulation in Croatia and Slovenia

Steps towards Self-Regulation in Croatia and Slovenia

Communities in two countries, which share a border, history and perspectives, have expressed similar views about the future of the cryptocurrency sector. A new association in Croatia hopes to lay the foundations of self-regulation in the industry. In neighboring Slovenia, entrepreneurs and government officials have promised to work together to “educate the public” on the benefits of the blockchain technology.

Also read: Crypto Exchanges Launch P2P Platforms from Latvia and Bulgaria

Croatian Crypto Companies to Advise Regulators

Businesses and enthusiasts in Croatia have united their efforts to help authorities take informed decisions about the cryptocurrency sector. A new umbrella organization will be bringing suggestions and important matters to the attention of policy makers in Zagreb, Bitfalls reported this week. The Blockchain and Cryptocurrency Association will be advising regulators on anything from buying and selling cryptocurrencies, to crypto payments and salary payouts in bitcoin.

UBIK [“Udruga za Blockchain i Kriptovalute”] intends to create “a focused and strong community of people involved with the blockchain technology and the domain of cryptocurrency in Croatia”, but also in the region. Providing relevant information, education and knowledge about the crypto economy is among its priorities. The Croatian crypto association plans to help authorities and its members with legal, financial, and technological support in the development of the regulatory framework and realizing strategic blockchain projects.

Steps towards Self-Regulation in Croatia and Slovenia

Interest in bitcoin, other cryptocurrencies and the underlying technology has grown significantly in Croatia in the past year that saw skyrocketing prices on crypto markets. The local community has expanded with new companies working with blockchain technologies and more businesses accepting crypto payments.

A comprehensive regulatory policy is yet to be adopted by Croatian authorities. During a discussion on digital currencies back in 2013 the Croatian National Bank reportedly stated that bitcoin was not illegal in the country. More recently, in 2017, HNB noted that cryptos were neither legal means of payment, nor electronic money under current law in Croatia. The country has appealed for common EU decisions in regards to cryptocurrencies.

Government and Businesses to Educate Slovenians about Blockchain

More positive signals came this month from Croatia’s neighbor Slovenia, another former Yugoslav republic and current member of the EU. Government officials and blockchain companies promised to work together to “educate the public on the benefits and the opportunities that the innovative technology brings”. They met to set up an open dialogue between authorities and entrepreneurs, necessary to clarify and address the challenges. Slovenian Prime Minister Miro Cerar also took part in the meeting hosted by Viberate, a startup developing a decentralized live music marketplace.

Steps towards Self-Regulation in Croatia and Slovenia“We have called for regulation that would assist blockchain projects with existing financial limitations and allow us easier recruitment processes. The government has agreed that it will provide us with more favorable conditions in due time”, Insurepal, one of the participating companies, said in a blog post. It expressed hope that similar public discussions will help Slovenia become one of the most advanced countries in the field of blockchain.

The companies, which took part in the meeting, also announced the establishment of the Blockchain Alliance CEE. It will focus their efforts on improving visibility and raising the reputation of the sector through unified communication.

The current government in Ljubljana has a positive attitude towards the crypto industry. Speaking at the Digital Slovenia 2020 conference last year Prime Minister Cerar acknowledged the progress made by local businesses and said his country could become a leader in blockchain-development in the European Union. Slovenia is also among countries that do not tax individuals on capital gains from bitcoin and other cryptocurrencies.

Do you think positive developments in Southeast Europe in regards to crypto regulation will influence decisions in the EU? Share your thoughts in the comments section below.

Images courtesy of Shutterstock. 

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Wendy McElroy: Privacy Prevents Violence and Crime

(Crypto) Privacy Prevents Violence and Crime

The Satoshi Revolution: A Revolution of Rising Expectations.
Section 2 : The Moral Imperative of Privacy
Chapter 6: Privacy is a Prerequisite of Human Rights
by Wendy McElroy

(Crypto) Privacy Prevents Violence and Crime (Chapter 6, Segment 1)

Unlike the communities traditionally associated with the word “anarchy”, in a crypto-anarchy the government is not temporarily destroyed but permanently forbidden and permanently unnecessary. It’s a community where the threat of violence is impotent because violence is impossible, and violence is impossible because its participants cannot be linked to their true names or physical locations.

Wei Dai

A February 6, 2018 headline in Reason magazine warned, “Governments Hate Bitcoin and Cash for the Same Reason: They Protect People’s Privacy.” The ensuing article spun off a quote from U.S. Treasury Secretary, Steve Mnuchin, “One of the things we will be working very closely with the G-20 on is making sure that this doesn’t become the Swiss numbered bank accounts.” Mnuchin rejects decentralized crypto as payment, investment, or savings systems because it cannot be easily tracked by government.

Privacy is the battleground upon which cryptocurrency will ultimately rise or fall.  The engine of crypto, the blockchain, is founded on the premise of anonymity or pseudonymity. The blockchain was specifically designed to obsolete “trusted third parties,” such as central banks, which act as data-collection centers for government.

Wei Dai and Mnuchin may seem to be polar opposites on privacy, but they are saying much the same thing, although their conclusions are antithetical. Privacy prevents violence.

For Wei Dai, this is a good thing. Privacy is overwhelmingly positive for individuals because it empowers and protects them against government. Privacy can cloak genuine acts of violence or fraud, of course, just as free speech can promote lies; every tool can be a weapon. More often than not, however, the violence prevented is wielded by government against those who flaunt authority: tax evaders, dissenters, regulation breakers, gray or black marketeers, drug dealers and users. Government punishes scofflaws, whether or not the laws are just or despite the fact that participants consented. To cryptoanarchists, like Wei Dai, no crime has occurred unless a person is injured or property is damaged. The violence occurs when a third party forcibly intervenes between consenting adults or people minding their own business.

For Mnuchin, privacy’s role in preventing violence is a bad thing because he administers government coercion against peaceful individuals. Of course, he does not call it violence; he calls it law enforcement. That doesn’t change the fact that government agents are pointing guns at peaceful scofflaws, not at the behest of any participant, but over their objections.

Otherwise stated: Wei Dai praises privacy for promoting a society of “anything that’s peaceful.” Mnuchin excoriates privacy for the same reason.

The ongoing crack-down on privacy is legitimized to the public by the faux claim that only criminals want “concealment.” (The Satoshi Revolution debunks this claim in the segment entitled “What Do You Have to Hide? Everything!”

Defenders of privacy usually give weak-tea arguments. Instead, they should straighten their spines, stand tall, and argue from high ground. The high ground: privacy and human rights are, and always have been, intimately connected concepts that enable individual freedom. Government wants people to abandon privacy because they would be abandoning a powerful threat to its authority.

Privacy, qua privacy, is so essential to human rights that it is indistinguishable from them.

The History of Privacy and Rights

(Here, privacy means “an individual’s right to control unrevealed personal data.” If someone voluntarily fills out a government form or otherwise broadcasts personal information, then he loses the right and the power to control its future distribution. But unrevealed data can be externally demanded only through violence; people can be coerced into revealing the contents of their mind; homes can be ransacked and computers can be hacked. Crypto-privacy, as epitomized by private keys, is unrevealed information, after which the government hungers.)

History can be viewed as a long social and intellectual experiment.

Pretend you are God. You perch attentively above the time-space continuum in order to watch the flow and impact of concepts upon human development through the centuries. The American Revolution feeds into and inspires the French one. The British Empire begins in the 16th century as Britain establishes its first colonies that, in turn, encourage mercantilism; after World War II, what remains of the Empire collapses in the face of independence movements based on an anti-colonialism that favors communism. From the mid-16th century, the British drove the Transatlantic Slave Trade until confronted by anti-slavery voices that said “every human being is a self-owner.” History is a laboratory in which the social and political affect of concepts can be charted, including the effect of privacy. Admittedly, the results are not as measurable as those produced by science, but broad outlines and conclusions are clear.

Arguing from history provides powerful advantages. To those who value facts, concrete examples can be compelling and persuasive. Moreover, drawing on history allows the cryptocurrency community to correct a fatal mistake; namely, it is defensive about privacy, when it should be on the offense because crypto stands on the moral high ground.

Financial independence is not the place to begin to demonstrate the link between privacy and human rights because anything to do with money arouses immediate cynicism. Money produced by work and through merit is the root of all good; it feeds families, fuels invention, and raises prosperity for all. Wealth from honest effort is to be celebrated, emulated, and protected from looters.

But money has been demonized as “the root of all evil” by those who never seem reluctant to accept it as donations, payment, taxes, or other forms of theft. The pervasiveness of plunder is a testament to the incredible power of wealth. But  plunder must be justified, or else it will be seen to be the outright money-grab it is. Thus, money and anyone who resists the theft of it are demonized as criminals or otherwise morally corrupt.

A better place to begin to link privacy and human rights is freedom of religion and due process. A pivotal insurrection in the 16th century defined the evolution of both within Western society. It revolved around a person’s right to keep his religious beliefs private so they could not be used against him in a court of law. A current version of this right is called “taking the fifth” — invoking the due process right against self-incrimination. Although this mainstay of due process is often portrayed as the last legal recourse of a guilty man, the intended and overwhelming beneficiary is the man in the street who, whether he realizes it or not, is protected against the exercise of arbitrary power.

The insurrection has background. In 1534, Henry VIII denied papal authority and established the Church of England, which maintained most of the traditional Catholic rites. Thus Protestants, called dissenters, were often tried for heresy; torture commonly accompanied trial. In the late 1530s the Protestant John Lambert was burnt alive for heresy. During his trial Lambert became the first known Englishman to proclaim it was illegal under God and the common law to compel a man to accuse himself. He appealed to the privacy of conscience.

The right to not bear witness against oneself had precedent in common law, but it was not enforced in English courts until in the late sixteenth and early seventeenth century. Its roots are deep in the history of religious persecution. Courts of the day required a defendant to answer a barrage of questions based on evidence gleaned from witnesses or informants, without informing the accused of the charges being brought. The interrogation aimed at trapping a defendant into a confession. People were tried on mere suspicion and, if found guilty, they were required to name other heretics. Silence was deemed a confession.

In 1563, John Foxe published the immensely influential Book of Martyrs, which has been called a “libertarian primer” on procedural rights. He argued for the right to remain silent. The right to keep personal information private.

Famously, the Leveller and libertarian John Lilburne employed Foxe’s procedures in 1637, when he was brought before the Court of Star Chamber for circulating Puritan books. Rather than being charged, Lilburne was asked how he pled. Refusing to take the customary oath, he declined to answer questions that bore witness against himself. Lilburne was fined, whipped, pilloried, and sentenced to prison until he complied. While in prison he penned an account of his brutal treatment entitled The Work of the Beast. In 1641, when the much-hated Star Chamber was abolished and the right to remain silent established in religious courts, Lilburne was widely credited.

Puritans who escaped religious prosecution to the New World carried Lilburne’s ideals, even though various colonial courts used torture to elicit confessions and required defendants to testify against themselves. By the time the colonies were states, however, six had clauses in their Constitutions against self-incrimination, and several others verged on including them. The right of a defendant against physical compulsion to speak was established at the national level in the Bill of Rights’ Fifth Amendment: “No person … shall be compelled in any criminal case to be a witness against himself….”

The right against self-incrimination – the privacy of personal information —  lies at the core of due process. It is historically anchored in the quest for religious freedom. It served as the strongest single protection against the use of torture by state authorities.

Privacy Under Attack Means Rights Are Under Attack

The human right against self-incrimination is currently under concerted attack by those who pit it against “security” or other governement interests, such as preventing tax evasion. The shrill demand for encryption keys and private crypto keys are two examples of government’s onslaught against privacy.

Privacy – the right to shut your front door, the right to be silent — has been protected for so long that it is taken for granted. People forget; privacy was established by those willing to be tortured and killed rather than to surrender  intimate information to enemies. The great wrongs of past governments were corrected and prevented by the blood of stubborn dissenters. The great wrongs are destined to be repeated unless privacy, like wealth, is celebrated, not demonized.

[To be continued next week, with how privacy was a core concept of the American Revolution.]

Reprints of this article should credit bitcoin.com and include a link back to the original.

Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

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Ellen DeGeneres Is Down with Bitcoin

Ellen DeGeneres is Down with Bitcoin

US daytime television chat show queen, Ellen DeGeneres, featured bitcoin in a recent segment, wondering aloud about its fundamental mysteries with her enthused audience. And while it was a funny look at the cryptocurrency, she managed to expose an often missed demographic to cryptocurrency: baby goat loving moms.

Also read: Citibank India Bans Bitcoin 

Ellen DeGeneres Pokes Fun at Bitcoin

“One thing I am down with right now, that I think everybody is learning about, is bitcoin. Who’s heard of bitcoin? Who can explain what bitcoin is? Liar. Nobody knows how it works. Nobody,” host Ellen DeGeneres, 60, said incredulously during her eponymously named program.   

The Ellen DeGeneres Show is enjoying its 15th year as a daily entertainment talk show. And with over 2,500 episodes under its belt, the Warner Brothers Television distributed program has racked up 59 Daytime Emmy Awards, eclipsing the mighty Oprah. Ellen kicks so much ass, Telepictures signed the show through 2020, even launching a game show component.

Ellen DeGeneres is Down with Bitcoin

“Everybody is talking about bitcoin; nobody understands it,” Ms. DeGeneres continued. “It’s like a plot twist in a confusing movie. When you’re watching a movie and your friends act like they know what’s going on, and you’re like, ‘Yeah, I do too!’ And then you’re like, ‘What the hell is every … I have no idea!’ All I know is that bitcoin is either worth twenty thousand dollars or nothing; that’s what I know. It’s like a digital Antiques Roadshow. You’re just standing in line, and you have no idea until you get there.”

Though she now commands a daily audience nearing 3 million, Ms. DeGeneres has earned her spot among comedy greats. She began in the 1980s as that rather rare bird, a female stand up comedian. In 1990s she had the chance in two situation comedies, neither of which went as well as her present gig, but she forged new ground by publicly announcing her sexual orientation. In 2008 she married girlfriend Portia de Rossi. She is now considered a leading advocate for sexual minorities. She is also famous for her voice work in the Pixar franchises Finding Nemo and Finding Dory, and for having hosted the Emmys, Grammy Awards, and the Academy Awards. She was awarded the Presidential Medal of Freedom by President Obama.  

Ellen DeGeneres is Down with Bitcoin

Economics Ellen

The self-effacing comedian explained, “But they didn’t call me ‘Economics Ellen’ in high school for nothing. They called me that because I failed economics. So I did a little research, and I am going, to the best of my ability, explain how bitcoin works. Okay, first, the article I read said bitcoin is a decentralized digital currency. Now, to be honest, I don’t know what that means. But here’s what I am going to do. I am going to explain it and I think we’re all going to get this. Pretend like bitcoin is a goat. Now, it’s adorable, right? Everyone agrees it’s adorable. And you want to pick it up and you want to pet it, right? But you can’t because it’s not there. It doesn’t exist for except on that internet right there … just like bitcoin is digital currency,” and a visual of a baby goat appeared on a large screen behind her.

“You’re probably thinking: ‘Ellen, if I cannot physically touch it, where do I keep my bitcoin? In a digital purse? Which is a funny idea, but it’s kinda true. You keep it in a digital wallet, okay,” Ms. DeGeneres said, showing pictures of the popular Toast wallet. “And the digital wallet can either be apps on your phone or tiny hard drives like this,” she elaborated, and what appears to be a cold storage product from Ledger flashes on the same screen. “Which is a really good idea because who wouldn’t feel safe with their life savings on a piece of plastic that could go into the washing machine. And it sounds like a Jimmy Kimmel prank, but it’s not. A digital wallet holds all of your bitcoin, unlike your real wallet which holds receipts and punch cards for free Jamba Juice.”

Ellen DeGeneres is Down with Bitcoin

Teasing is certainly welcome in the bitcoin space, especially after the last few months. Though its price is bouncing back, many bitcoiners were starting wonder what would become of the asset. It would be hard to beat 2017’s success. However, if popular acceptance and acknowledgement from the likes of 50 Cent, Jay-Z, and now Ellen are any indication, the ecosystem might be in for another crazy ride.

Ms. DeGeneres ended the segment by suggesting, “I also found out bitcoin operates sorta like the stock market, so say you own one bitcoin and when you bought it it was worth ten thousand dollars, okay? And then for some reason bitcoin becomes worth twenty thousand dollars; you just doubled your money. Personally I’d rather own a baby goat. But that’s just me. Basically if you invest in bitcoin you’ll either be a millionaire or totally broke.”

Is this the year bitcoin moves fully into the mainstream? Let us know in the comments section below.

Images courtesy of Pixabay, Ellen DeGeneres Show, Twitter

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Trader at Chicago Firm Stole Millions in BTC – Faces 20 Year Sentence

Bitcoin Trader Facing 20 Year Prison Sentence in $2 Million Caper

Late 2017 will long be remembered as the time when bitcoin went mainstream. Prices were mooning, and the general atmosphere was one of fear of missing out. That sentiment was especially true in trading circles, and more traditional outlets were experimenting with cryptocurrency divisions in order to take advantage. One such experiment went sour, as a trader attempted to play upon relative company ignorance by shorting bitcoin and covering personal margin calls, with the affair ending in million dollar losses and a first of its kind federal prosecution.

Also read: Citibank India Bans Bitcoin 

Bitcoin Trader Faces 20 Years in Prison

Consolidated Trading, LLC’s Joseph Kim, according to federal authorities, emailed, “Until the end I was perversely trying to fix what I had already done. I can’t believe I did not stop myself when I had the money to give back, and I will live with that for the rest of my life. You have every apology I have to give, I am sorry to betray you all like this.”

John R. Lausch Jr, United States Attorney for the Northern District of Illinois in conjunction with the Federal Bureau of Investigation (FBI), insists Mr. Kim “worked as an assistant trader for…a Chicago trading firm that recently formed a cryptocurrency group to engage in cryptocurrency trading…Over a two-month period in the Fall of last year, Kim misappropriated at least $2 million of the firm’s Bitcoin and Litecoin cryptocurrency for his own personal benefit, and he made false statements and representations to the company’s management in order to conceal the theft.”

Bitcoin Trader Facing 20 Year Prison Sentence in $2 Million Caper
Mr. Kim

According to reports, Mr. Kim had previous experience in cryptocurrency by way of working in South Korea for a time after graduating from the prestigious University of Chicago. He joined Consolidated in the Summer of 2016 as an assistant bond trader. Employees describe him as having gone by the online name “degen,” as in ‘degenerative gambler’.

It’s the first federal criminal prosecution of its kind in Chicago, and Mr. Kim, 24, is being charged with one count of wire fraud punishable by up to 20 years in prison. U.S. v. Kim, 18-cr-107, states “from September through November 2017, Kim transferred more than $2 million of the trading firm’s Bitcoin and Litecoin to personal accounts to cover his own trading losses, which had been incurred while trading cryptocurrency futures on foreign exchanges.”

Attempting to Cover Tracks

By Fall of 2017, Mr. Kim was made part of a cryptocurrency wing of Consolidated, moving from its bond division. That was a heady time for crypto, especially bitcoin, and price action steeped to unheard of highs. Mainstream trading outlets were itching to be part of the market. Shortly after, the complaint alleges, Mr. Kim moved nearly 1,000 litecoin from company coffers to his own, an “intermediary holding space” he reportedly offered as excuse for the unorthodox maneuver due to Bitfinex exchange issues. Something like that, according to prosecutors, was also done with bitcoin, to the tune of 3.2 million USD, as a way to cover personal losses (1.2 million USD was eventually returned).  

When questioned at the time by company officials, Mr. Kim is reported to have claimed he returned at least the litecoin (his alleged dealings in bitcoin hadn’t been discovered). When Mr. Kim was suspected of mishandling bitcoin, he again offered excuses that the company increasingly worried were not adding up, though Mr. Kim seemed to assure all was well. By late November, 280 bitcoin were suspected missing.

Bitcoin Trader Facing 20 Year Prison Sentence in $2 Million Caper
John R. Lausch, Jr., United States Attorney

What seems to be clear is Mr. Kim used bitcoin for personal trading, and Consolidated and federal authorities believe he stole over 280 bitcoin at one time or another. Though he did manage to transfer some back, inevitably losses began to add up. Mr. Kim reportedly admitted to the company he indeed transferred 55 bitcoin from the company to his personal wallet. He also allegedly came forward to explain he was trying to short bitcoin, at times converting litecoin for that purpose. There are also allegations he used company bitcoin accounts to help cover margin losses.

As it stands, Consolidated was able to recover some 144 bitcoin, but claims to have lost as much as 600,000 USD as a result of Mr. Kim’s doings. Mr. Kim and his attorney have not been made available for comment. He is expected to face a federal judge today, 16 February 2018, in order to enter a plea.

What are your thoughts on this federal case? Let us know in the comments section below.

Images courtesy of Pixabay, LinkedIn, DOJ

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US Regulator Warns Against Pump-and-Dumps and Advises How to Buy Crypto

US Regulator Warns Against Pump-and-Dumps and Advises How to Buy Crypto

The U.S. Commodity Futures Trading Commission (CFTC) has issued its first warning against pump-and-dump schemes involving cryptocurrencies while giving advice on how to buy crypto. This warning follows previous warnings by two other U.S. regulators.

Also read: Japan’s DMM Bitcoin Exchange Opens for Business With 7 Cryptocurrencies

CFTC’s Warning

US Regulator Warns Against Pump-and-Dumps and Advises How to Buy CryptoThe CFTC issued a Customer Protection Advisory on Thursday to warn the public to “beware of and avoid pump-and-dump schemes that can occur in thinly traded or new ‘alternative’ virtual currencies, digital coins or tokens.”

CFTC Director of Public Affairs Erica Elliott Richardson explained, “As with many online frauds, this type of scam is not new – it simply deploys an emerging technology to capitalize on public interest in digital assets,” adding that:

Pump-and-dump schemes long pre-date the invention of virtual currencies…The CFTC encourages all customers to thoroughly research potential investments, stay informed about tactics commonly used in investment fraud, and avoid investment opportunities they don’t fully understand.

Common Pump-and-Dump Tactics

The agency explained that “the organizers of the scheme will commonly spread rumors and urge immediate buying,” often through social media, noting that:

Some pump and dumps use false news reports, typically about a famous high-tech business leader or investor who plans to pour millions of dollars into a small, lesser known virtual currency or coin. Other fake news stories have featured major retailers, banks, or credit card companies, announcing plans to partner with one virtual currency or another.

After a certain length of time following the pump, the Commission states, the dump will begin. “The price falls and victims are left with currency or tokens that are worth much less than what they expected. From beginning to end, these scams can be over in just a few minutes,” the agency describes and immediately advises: “Customers should avoid purchasing virtual currency or tokens based on tips shared over social media.”

What Crypto Buyers Should Do

US Regulator Warns Against Pump-and-Dumps and Advises How to Buy CryptoCiting that its job is to maintain “general anti-fraud and manipulation enforcement authority over virtual currency cash markets as a commodity in interstate commerce,” the CFTC revealed that it has received complaints from customers who have lost money to pump-and-dump schemes. Emphasizing that ultimately, “Customers should not purchase virtual currencies, digital coins, or tokens based on social media tips or sudden price spikes,” the Commission stated:

Customers can best protect themselves by purchasing only alternative virtual currencies, digital coins, or tokens that have been thoroughly researched – to separate hype from facts.

Last month, the CFTC took action against three cryptocurrency operators and their founders for commodity fraud and misappropriation.

CFTC Joins SEC and Finra in Warnings

US Regulator Warns Against Pump-and-Dumps and Advises How to Buy CryptoThe U.S. Securities and Exchange Commission (SEC) has repeatedly warned against pump-and-dump schemes as well as market manipulations involving any financial instruments that can be classified as securities. In August, the agency issued a statement alerting investors of pump-and-dump schemes involving initial coin offerings (ICOs).

SEC Chairman Jay Clayton made a statement in December cautioning investors against “promoting or touting the offer and sale of coins without first determining whether the US Regulator Warns Against Pump-and-Dumps and Advises How to Buy Cryptosecurities laws apply to those actions,” specifically those related to cryptocurrencies and ICOs. “Selling securities generally requires a license, and experience shows that excessive touting in thinly traded and volatile markets can be an indicator of ‘scalping,’ ‘pump and dump’ and other manipulations and frauds,” he described. The chairman then reiterated the same message last week.

In December, the U.S. Financial Industry Regulatory Authority (Finra) also issued a statement warning investors not to fall for crypto-related stock scams including pump-and-dump frauds, advising them to:

Do your research before purchasing shares of any company offering investment opportunities in cryptocurrency…Don’t be fooled by unrealistic predictions of returns and claims made through press releases, spam email, telemarketing calls or posted online or in social media threads. These actions may be signs of a classic ‘pump and dump’ fraud.

What do you think of the CFTC’s guidance? Let us know in the comments section below.

Images courtesy of Shutterstock, CFTC, SEC, and Finra.

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GPU Shortage Hinders Scientific Research – Cryptocurrency Miners Blamed

GPU Shortage Hinders Scientific Research – Cryptocurrency Miners Blamed

After gamers, scientists have now raised the alarm about the deficit of video cards caused by excessive demand in the crypto mining industry. Researchers trying to pick up radio signals from stars and extraterrestrials say they need more of the latest GPU chips for their data processing equipment. According to media reports, a leading manufacturer may soon offer a graphics card dedicated for mining to mitigate shortages.

Also read: AMD Increases GPU Production to Match Crypto Mining Demand

Efforts to Eavesdrop on ETs Impeded

Radio-astronomers working on SETI (Search for Extraterrestrial Intelligence) projects said they need more GPUs to upgrade their equipment. The scientists want to expand operations at two observatories but cannot find enough of the new powerful chips, BBC reported. Some telescopes need about 100 graphics cards to process data from large listening arrays. They are used to detect signals from space, some of which may be emitted by other civilizations.

Demand for graphics processing units has soared in recent months and cryptocurrency miners have been blamed for the shortages. Investors buy in bulk the latest GPUs on the market, which can process more crypto transactions and return higher profits. Cards are used in mining rigs mainly for altcoins like ethereum and monero. Bitcoin mining requires a certain processing capacity and is performed by specialized hardware.

GPU Shortage Hinders Alien Search – Cryptocurrency Miners Blamed“We’d like to use the latest GPUs, and we can’t get them”, said Dan Werthimer, chief scientist at the University of California, Berkeley SETI Research Center. “We want to look at as many frequency channels as we possibly can. We don’t know what frequency ET will be broadcasting on – is it AM or FM, what communication are they using? That takes a lot of computing power”, Dr Werthimer explained.

The scientists have been trying to improve the analyzing capacity of equipment installed at two SETI observatories – Green Bank in West Virginia and Parkes in Australia. However, their efforts have been impeded by the GPU shortages. “We’ve got the money, we have contacted the vendors, and they say they just don’t have them”, Dan Werthimer told the BBC. Telescopes used by radio-astronomers are able to pick up the faintest of radio frequencies in the universe. SETI scientists are constantly listening out for broadcasts by aliens, but the arrays are also detecting signals emitted by natural phenomena.

What about Star Gazing?

The tight GPU market has hit other radio-astronomers, too. A team of scientists looking for evidence of the earliest stars in the universe was recently shocked by the doubled prices of graphics cards. Researchers operating the Hydrogen Epoch of Reionisation Array (Hera) in South Africa have received a grant from the US National Science Foundation to upgrade the telescope but found they could afford fewer units.

Hera is a joint project between the US, the UK and the Republic of South Africa. Its equipment uses GPUs to combine data from many small radio telescopes to offer a much wider field of view. The price of the processing units has doubled in just three months to $1,000 USD. “We are buying a lot of these things, it’s going to end up costing about $32,000 extra”, said Aaron Parsons, professor at the UC Berkeley. The team will have to use some of its contingency budget to acquire all the cards it needs.

GPU Shortage Blamed on Crypto Miners Hinders Alien Search

Addressing the Deficit

Major graphics cards manufacturers Nvidia and Advanced Micro Devices have recognized the shortages and taken steps to address the issue. AMD announced plans to increase production after the recently launched RX Vega GPUs virtually disappeared from store shelves. The company said its Radeon cards were in short supply and acknowledged that demand for mining applications was responsible for the shortfall. AMD promised to produce more of the powerful chips to satisfy all of its customers.

GPU Shortage Blamed on Crypto Miners Hinders Alien SearchNvidia, AMD’s main competitor, has moved to ensure video gamers have a chance to get hold of its video processors asking retailers to limit the number of cards purchased at a time. The company admitted that cryptocurrency mining demand had exceeded its expectations in the last quarter of 2017. It has been reported that Nvidia may reveal a new card aimed at the crypto mining market in March. According to media speculations, the GPU is codenamed “Turing” after the British computer scientist and cryptanalyst Alan Turing. He was working on breaking coded German messages during World War II.

Both companies have recorded rising revenues in Q4 of last year. AMD announced $1.48 billion USD of revenue with $958 million coming from its Computing and Graphics division. Sales of graphics cards like Vega 56 and Vega 64 have played a major role in reaching a 60% year-on-year increase there. Nvidia has reported revenue of $2.91 billion, up 34% from $2.17 billion a year earlier. Strong demand from cryptocurrency miners has been mentioned as an important factor.

Do you think manufacturers will manage to satisfy growing demand for GPUs in different sectors? Tell us in the comments section below.

Images courtesy of Shutterstock. 

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Berkshire Hathaway: Bitcoin Is Disgusting, Detestable, Noxious Poison

Berkshire Hathaway: Bitcoin is Disgusting, Detestable, Noxious Poison

Daily Journal’s annual shareholder meeting usually involves Berkshire Hathaway’s vice chairman, Charlie Munger, giving his overview of things economic. This Valentine’s Day, the 94-year-old right-hand man of Warren Buffett took the opportunity to savage the world’s most popular cryptocurrency, bitcoin.

Also read: Citibank India Bans Bitcoin 

Berkshire Hathaway Wants Cops Unleashed on Bitcoin

If it’s not a religious affair, it sure has that feel. The grand cardinal of retail finance, Charlie Munger, was plopped into a chair, and assembled hordes gathered to hear investment wisdom from the Oracle of Omaha’s saintly priest. To say Mr. Munger is a successful investor is to place too general praise on the man: arguably he is among the most bankable gurus of all time.

From Los Angeles, Mr. Munger came right out with it: “I never considered for one second having anything to do with [bitcoin], I detested it the minute it had been raised. The more popular it got, the more I hated it. It’s just disgusting that people have been taken in by this.”

Berkshire Hathaway: Bitcoin is Disgusting, Detestable, Noxious Poison

The focus of his remarks was not bitcoin per se, as the question and answer period, interview style, lasted over two hours. He discussed a myriad of economy related questions and subjects, including regulating banks such as Wells Fargo, Berkshire Hathaway’s large stock holding of nearly 30 billion dollars. There, Mr. Munger came to the embattled bank’s defense, suggesting government regulators had gone far enough in efforts to get it to right past wrongs; indeed, Mr. Munger suggested regulators had done too much. Wells Fargo was accused of creating fake accounts to buttress numbers, adding automobile insurance charges to customers who didn’t ask, and monkeying with mortgage extensions.

Tension Between Old and New

When it came to bitcoin, however, “Our more relaxed approach is wrong”, he spat. “The right answer is to step on it hard. It’s the government’s job,” he urged, characterizing it as a “noxious poison.” He seemed to approve of alternative payment systems such as We Chat, the popular smartphone application based in China. But bitcoin, he said, was an affliction of “everyone [wanting] easy money,” and “[hoped] to God” the future generation doesn’t embrace it, as it is “totally asinine.”

Berkshire Hathaway: Bitcoin is Disgusting, Detestable, Noxious Poison
Charlie Munger

Berkshire Hathaway’s stock price trades routinely at over $300,000, and that’s not a misprint. The firm is notoriously tech-phobic, having sat out plenty of the technology boom over the last quarter century. Mr. Munger has been involved with the company for over four decades, championing value investing – looking long term at good companies an investor can understand. 

For seasoned investors such as Mr. Munger, bitcoin is too abstract. Its lack of fundamentals as Mr. Munger understands them – no corporate offices, no accountable board, no large regulatory apparatus, etc. – can only spell bitcoin’s doom. It’s a classic division among investors these days, between those who’re stuck in old world success enough to fail in appreciation of what just might be a real changing of the financial guard.

What do you think of Mr. Munger’s comments? Let us know in the comments section below.

Images courtesy of Pixabay, Berkshire Hathaway.

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Citibank India to Not Permit Card Customers Purchasing or Trading Crypto

Citibank India to Not Permit Card Customers Purchasing or Trading Crypto

Citibank India notified debit card and credit card clients via email on the 13:th of February they would no longer be able to participate in cryptocurrencies such as bitcoin. Citing regional and global concerns from regulators, the over a century old institution is following a growing number of traditional banks in cutting off access to the decentralized currency.  

Also read: Internet Pioneer Who Influenced Assange & Snowden Dead at 70

Citibank India Bans Bitcoin

“Given concerns,” Citibank India informed its customers in an email Tuesday, “both globally and locally including from the Reserve Bank of India, cautioning members of the public regarding the potential economic, financial, operational, legal, customer protection and security related risks associated in dealing with bitcoins, cryptocurrencies and virtual currencies, Citi India has decided to not permit usage of its credit and debit cards towards purchase or trading of such bitcoins, cryptocurrencies and virtual currencies.”

Bank of America, Lloyds Banking Group, JP Morgan Chase have also forbade cryptocurrency purchase for their customers, though they haven’t a retail presence in India. Recently, Visa pulled its European support for crypto, and Mastercard has elected to treat crypto purchases as cash advances. Citibank India has been around since 1902, and is counted among the largest foreign investors while operating over thirty brick and mortar outlets and over 500 automatic teller machines in the region. Among the top five cards, it is the only multinational bank.  

Citibank India to Not Permit Card Customers Purchasing or Trading Crypto

Last month, banks in India such as HDFC, Axis, Yes Bank, SBI, and ICICI Bank pulled their support of bitcoin and crypto exchanges for customers. Combined with Arun Jaitley, Indian Finance Minister, delivering a budget speech where it was reiterated cryptocurrencies will not be recognized as legal tender, and it’s easy to see why Citibank India might’ve been spooked.

Mr. Jaitley warned, “The Government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system.”

Citibank India Bans Bitcoin

Kotak Mahindra Bank Drops Bitcoin as Well

Kotak Mahindra Bank has also announced it will not allow its customers to dabble in crypto. It has over a thousand branches in India, with over two thousand ATMs, making it the fourth largest bank in the country.

The bank warned any type of crypto activity noticed on accounts would be immediate grounds for closure.

What do you think of Citibank India’s move? Let us know in the comments section below.

Images courtesy of Pixabay.

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Korean Government Answers Petition Against Unfair Cryptocurrency Regulations

Korean Government Answers Petition Against Unfair Cryptocurrency Regulations

The South Korean government has officially responded to the popular petition, with over 20,000 signers, against unfair cryptocurrency regulations. The regulators defended their crypto measures and outlined additional regulatory plans.

Also read: Japan’s DMM Bitcoin Exchange Opens for Business With 7 Cryptocurrencies

Popular Petition Answered

South Korea has answered the petition entitled “Has the government ever dreamed a happy dream for the people?” Filed on December 28, the one-month petition asks the government to avoid excessive regulations for cryptocurrencies in the country and “not make unfair regulations on virtual currency investment.”

According to the rules set by the Blue House, the government will respond to any petition with over 200,000 signatures within a month. On January 16, the above petition surpassed that threshold, as news.Bitcoin.com previously reported. By January 27, a total of 228,295 people had signed and the government subsequently responded to it on Wednesday.

Korean Government Answers Petition Against Unfair Cryptocurrency Regulations
“Has the government ever dreamed a happy dream for the people?” petition which ended on January 27.

Hong Nam-ki, Minister of the Office for Government Policy Coordination (OPC) said in his response:

It is the basic policy of the government to prevent illegal acts and uncertainties in the process of virtual currency transactions, and actively nurture blockchain technology…Transparency of virtual currency transactions within the framework of the current law is a top priority…We have been attentive and careful, keeping an open eye on market conditions, international trends, and all means”

Government Still Divided on Regulations

Korean Government Answers Petition Against Unfair Cryptocurrency Regulations
Hong Nam-ki.

The Korean government started announcing regulatory measures for cryptocurrencies in the middle of December. Since then, the regulators have considered a wide range of measures to curb speculation of the crypto market. They implemented the real-name system on January 30, ending anonymous crypto trading via virtual accounts.

The most extreme measures have been proposed by the Korean Ministry of Justice, including an outright ban on cryptocurrency trading and closing down crypto exchanges. However, other financial regulators in the country did not support these proposals. Last week, the Korean prime minister stated that closing down crypto exchanges is not a serious consideration.

Hong was quoted by Reuters on Wednesday:

The government is still divided with many opinions ranging from an outright ban on cryptocurrency trading to bringing the institutions that handle the currency into the system.

In addition, he explained that the regulators will “develop ways to tax virtual currencies, led by the finance ministry, and should announce measures within the first half of the year to develop the blockchain industry.”

What do you think of the South Korean Government’s response to the petition? Let us know in the comments section below.

Images courtesy of Shutterstock and the Korean government.

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