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US Senate to Hold Debate on Crypto, Blockchain Regulatory Frameworks

The United States Senate Banking Committee is set to hold a broader debate on crypto and blockchain regulatory frameworks next week.

An official committee announcement indicates the hearing — entitled “Examining Regulatory Frameworks for Digital Currencies and Blockchain” — will take place on July 30. 

The planned witnesses will be Jeremy Allaire, co-founder and CEO of payments company Circle, who will speak on behalf of The Blockchain Association; Rebecca M. Nelson, a specialist in International Trade and Finance at “Congress’s think tank,” the Congressional Research Service; and Professor of Law Mehrsa Baradaran, from the Irvine School of Law at the University of California.

The hearing is scheduled for 10 a.m. EST and will be broadcast live. 

image: rewire.news

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New York Times Confirms It’s Using Blockchain to Combat Fake News

The New York Times Company has published new details regardin its ongoing blockchain publishing experiments. Published onTuesday, a new website for the publisher’s News Provenance Project explains how the storied newspaper’s Research and Development team plans to use Hyperledger Fabric’s permissioned blockchain to authenticate news photographs in partnership with IBM Garage, the tech giant’s accelerator program.

The project aims to combat misinformation and adulterated media, which it argues harms small and large publishers. “News consumers [who] are deceived and confused…eventually become fatigued and apathetic to news,” the website says.

The New York Times and partner companies will run a proof-of-concept from July until late 2019 to find a way to maintain trust in digital files. The project aims to store a news item’s “contextual metadata” on a blockchain, including when and where a photo or video was shot, who took it and information regarding how it was edited and published.

The idea is to create a “set of signals that can travel with published media anywhere that material is displayed,” the website says, including on social media, in group chats and in search results.

New York Times plans to publish updates on the project throughout the process, culminating in a full report following the pilot’s conclusion.

Additional confirmation came via a tweet from Civil Media CEO Vivian Schiller, who was formerly with the New York Times, and a lengthy Medium post from Sasha Koren, the program’s project lead.

image: bitcoinexchangeguide

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Bitcoin Is Property: Chinese Court Rules

Last week, Bitcoin (BTC) was legally recognized by a Chinese court, whereby it was concluded that the cryptocurrencies should now be considered as digital property. The decision that the Hangzhou Internet Court made in a ruling was met with enthusiasm from some community members, who assumed that Bitcoin is now legal in the People’s Republic of China (PRC) — famously one of the harshest jurisdictions for digital currencies in the world — and that the local government might soon ease its pressure on Bitcoin.

On July 18, the Hangzhou Internet Court, situated in the same city that houses the Blockchain Industry Park, was overseeing a dispute between a now-defunct exchange and one of its users, identified as Wu.

As local media reports, in 2013, Wu purchased 2.675 BTC for 20,000 RMB (around $2,900) from a platform called FXBTC via a store on online marketplace Taobao and stored them in a digital wallet on its website. According to the plaintiff, in May 2017, he tried to access his funds but discovered that the FXBTC’s website shut down back in 2014. Wu was unable to contact the platform’s administration and hence couldn’t retrieve his Bitcoin holdings.

Wu then filed a lawsuit against FXBTC, who allegedly did not give any notice prior to closing the platform. He also sued Taobao for allowing “banned items like cryptocurrency” to be listed on its market — even though Bitcoin trading in China was banned later in 2017. Wu demanded FXBTC and Taobao to pay around 76,300 RMB ($11,000) in compensation.

Although the bench rejected the plaintiff’s claims against FXBTC and Taobao due to a lack of evidence, it acknowledged Bitcoin as a commodity because it carries value, is scarce and can be used as a means of transferring value. However, digital currencies such as Bitcoin “do not have the legality of an official currency,” the Hangzhou Internet Court specified.

The arbitrator found that the contractual obligation under dispute did not fall under the relevant provisions as outlined in the 2017 prohibition. He declared:

“There is no law or regulation that explicitly prohibits parties from holding Bitcoin or private transactions in Bitcoin, but rather reminds the public about the investment risks. The contract in this case stipulates the obligation to return the Bitcoin between two natural persons, and does not belong to the ICO financing activities stipulated in the Announcement on Preventing the Risk of Subsidy Issuance Financing [i.e., the 2017 ban].”

Similarly, the United States Internal Revenue Service (IRS) also views cryptocurrencies as property, meaning those who sell their cryptocurrencies for a profit are subject to a capital gains tax

source: cointelegraph

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Virgin Bitcoin: A dilemma for regulatory bodies?

Crypto world currently facing growing number of regulatory hurdles, in this context the term “Virgin Bitcoin” has become more common among regulatory bodies and digital currency enthusiasts, but the question is what does this word even convey? lets dig into it.

Definition

Dave Jevans, the CEO of CipherTrace describes, “Virgin Bitcoins” are essentially BTC tokens that do not have a transaction record associated. As a consequence, coins lack a defined attribution history, making them extremely useful for money launderers as well as other adversaries looking to disguise the source of their illegally procured funds, even the recipient of the funds typically has no means of verifying the origin of the funds in question since “Virgin BTC” cannot be linked with any wallet or other cold storage entity.

Virgin Bitcoins: G-20 agenda

With all of the aforementioned information in mind, it is important to consider that, at the recently concluded G-20 summit that took place in Osaka, Japan, the core governing committee agreed to adopt the standards of the Financial Action Task Force (FATF) — which are conventionally used in relation to fiat currencies — even for digital assets.Flex Yang, CEO of Babel Finance, shared his thoughts on the issue at hand:

“When these standards go into effect, interexchange transactions will require transparency regarding senders and receivers of cryptocurrency. This opens doors to a wide berth of scrutiny as regulators probe different ledgers to determine what wallets participated in illicit crypto exchanges, hacks, etc. Bitcoin remains of interest to institutional investors, but their threshold for risk is much lower. With uncertainty as to how the crypto world will conform to the FATF standards, many traditional investors feel it best to air on the side of caution.”

Virgin Bitcoin Data Misused

  • As per CipherTrace’s crypto intelligence team, over 75% of all transactions taking place on the black market are facilitated using Bitcoin.
  • A large number of cyber criminals make use of techniques such as coin mixing to try and sever the path attached to a particular digital currency. And while it may still be possible to view the transaction history of a given token using advanced cryptographic methods, coin mixing makes the process extremely complicated.
  • Russian conspirators involved with the alleged 2016 election hack in the U.S. were presumed to have funded their operations in part via a host of different Bitcoin mining operations based across the globe.
  • CipherTrace’s studies have revealed that the recent crackdown carried out by the Iranian government on its mining sector were premeditated. Not only that, there are strong indicators suggesting that the local regime is currently making use of the confiscated mining gear for its personal gains.

photo: mensxp.com

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Libra: Not a Cryptocurrency

The Chief Strategy Officer (CSO) CoinShare appeared before the House Financial Services Committee, She explained the difference between Bitcoin and thousands of cryptocurrency projects that takes inspirations from it. Putting Libra in the same bag of imitators, Demirors attempted to decouple bitcoin from it, focusing on how the cryptocurrency technology is entirely different from Facebook’s version of global payment service.

“We are seeing a wave of interest in cryptocurrencies and countless imitators which borrow some features but – decidedly – are not cryptocurrencies,” she said in her address. “Libra is not a cryptocurrency.”

Demirors touched upon the various factors that separate Bitcoin from Libra, such as decentralization. The fact that no single entity or person could block or censor transactions on the bitcoin network undermined Libra, which is an entity controlled by a group of companies with the ability to practice censorship.

The CoinShares executive also stressed on the underlying value of Libra and Bitcoin. She highlighted that Libra would be pegged to a pool of fiat and other reserves. On the other hand, Bitcoin remains its own asset, backed by its own scarcity and demand for it.

“There is no entity that holds assets that give Bitcoin value,” Demirors clarified.

Third and last, Bitcoin is permissionless, meaning anybody can enter or exit its network without anybody’s permission. On the other hand, people will require to seek permission from Facebook to access Libra, which does not adhere to the idea of bitcoin.

Further more, She told the Congress:

“I urge you to view Bitcoin as an open public network that enables innovation and growth. And to treat Libra and its future imitators in the context of the facts: private efforts led by corporations holding billions of dollars of the public money. These things are not Bitcoin and not cryptocurrencies.”

 

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US Senate Committee Approves the BlockChain Promotion Act

Finally the BlockChain Promotion Act is approved by the United States Senate Committee of Commerce, Science and Transportation on Tuesday, tech news outlet CNET reports.

The Bill, published by the outlet, moves the U.S. closer to a blockchain definition at the federal level. It also encompasses establishment of a blockchain working group within the Department of Commerce. Members of the working group would be representatives of federal agencies that could use blockchain and non-governmental stakeholders. Non-governmental participants will include information and communication technology manufacturers, suppliers, software providers, service providers and experts

What to Expect from the Working Group?

Within one year from its establishment, the working group should submit to Congress a report recommending a definition of blockchain.

Furthermore, the report should also recommend research to be conducted on Distributed Ledger Technology’s (DLT) impact on electromagnetic spectrum policy, other potential applications, and specifically possible uses by the federal agencies.

As reported earlier today in one of our posts, United States President Donald Trump voiced his opposition to cryptocurrencies, citing Bitcoin and Libra specifically, in a series of tweets published yesterday.

It has been announced last month that the United States House Financial Services Committee will be holding a hearing on the social media giant Facebook’s proposed virtual currency Libra on July 17.

image: govtech.com

 

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China’s Central Bank: Developing its Own Cryptocurrency in response to Facebook’s Libra

China’s Central Bank is reportedly in process of Research and Development for a state controlled cryptocurrency in response to the Facbook’s Libra Association. Libra poses a risk to the country’s financial system reported by the Director of People’s bank of China (PBoC).

Wang said that the bank decided to create its own digital currency specifically because of the unclear role of the United States dollar once Libra is issued:

“If the digital currency is closely associated with the U.S. dollar, it could create a scenario under which sovereign currencies would coexist with U.S. dollar-centric digital currencies. But there would be in essence one boss, that is the U.S. dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences.”

PBoC purportedly received approval from the Chief Chinese Administrative authority, the State Council, to begin work with other market participants and institutions on a central bank digital currency. Academics have also reportedly launched a committed initiative on digital finance which includes resources from Peking University, Renmin University, Zhejiang University and Shanghai Jiao Tong University.

Interestingly, PBoC’s plans to develop its a national digital currency come at a time when China has taken a hard line toward cryptocurrency trading, with financial institutions banning bitcoin (BTC) trading, initial coin offerings and crypto exchanges.

image: chinadaily.com

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KuCoin: Launch Of Crypto-Derivatives with 20x leverage

IDG-backed cryptocurrency exchange KuCoin  just launched a platform offering crypto-derivatives trading platform. On Monday, the KuMEX trading venue went live in public beta and will offer initially a bitcoin perpetual contract (XBTUSDM), quoted in U.S. dollars, with up to 20x leverage.

Aimed to make pricing “more fair and rigorous,” KuCoin said, KuMEX uses a bitcoin spot index pricing, providing a volume-weighted average of the U.S. dollar price of bitcoin across six exchanges: Coinbase Pro, Bitstamp, Kraken, Gemini, Liquid and Bittrex. Pricing based on spot index also avoids a contract being liquidated “because of the low liquidity of the trading platform or the large price fluctuations of one or two spot exchanges,” said the exchange.

KuMEX offers some protection from risk with an insurance fund it says is “fully transparent,” with the balance to be disclosed on the platform each day.

“This fund ensures that investors who are forced to close their positions will not lose money that exceeds their position margin,” 

KuCoin CEO Michael Gan said:

“Compared to the spot market, derivatives are much riskier due to the leverage used, so we are more cautious in providing such services. KuMEX is a derivative trading platform independently developed by our team, and from its inception, we have positioned it as a genuine and advanced financial product, so that all users can trust the platform and trade on it freely, without worrying about the loss caused by any form of manipulation. ”

image: icoreign.com

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All Global Crypto Exchanges Must Now Share Customer Data, FATF Rules

Financial Action Task Force (FATF) devoted to combating money laundering and terrorism financing has finally drafted its recommendations on regulating cryptocurrencies for its 37 member countries.

As expected, the Financial Action Task Force (FATF) standards released on Friday include a controversial requirement that “virtual asset service providers” (VASPs), including crypto exchanges, should exchange information about their customers  when transferring funds between exchanges.

The final recommendation makes official the contentious part of FATF’s February proposal, saying countries should make sure that when crypto businesses transfer money, they:

“… obtain and hold required and accurate originator [sender] information and required beneficiary [receipient] information and submit the information to beneficiary institutions … if any. Further, countries should ensure that beneficiary institutions … obtain and hold required (not necessarily accurate) originator information and required and accurate beneficiary information …”

Under the new guidance, the required information for each transfer includes:

  • (i) originator’s name (i.e., the sending customer);
  • (ii) originator’s account number where such an account is used to process the transaction (e.g., the VA wallet);
  • (iii) originator’s physical (geographical) address, or national identity number, or customer identification number (i.e., not a transaction number) that uniquely identifies the originator to the ordering institution, or date and place of birth;
  • (iv) beneficiary’s name; and
  • (v) beneficiary account number where such an account is used to process the transaction (e.g., the VA wallet).
image by: criterion-quarterly.com

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BIS Chief: Central Banks May Issue Digital Currencies ‘Sooner Than We Think’

After issuing comments and reports heavily criticizing cryptocurrencies over the last few years, Agustin Carstens, Chief of the Bank for International Settlements (BIS), has acknowledged that central banks will likely soon need to issue their own digital currencies.

Speaking to the Financial Times on Sunday, Carstens said that BIS – which acts like a central bank for central banks – is supporting global central banks’ efforts for their  research and development of  digital currencies based on national fiat currencies.

A number of central banks are engaged in such work and “we are working on it, supporting them,” Carstens said. Further, the arrival of such products might just around the corner if there is clear evidence of demand from the public.

According to Carstens:

“It might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.”

image by bis.org

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Libra: US Congress asks Facebook to pause Development

US lawmakers ordered Facebook to “immediately cease implementation plans” of its Libra cryptocurrency. Before it proceeds any further, the House Financial Services Committee, led by Democrat Maxine Waters, wants to analyse the risks around cyber security, global financial markets and national security concerns, it said in a letter to Facebook.

“We write to request that Facebook and its partners immediately agree to a moratorium on any movement forward on Libra — its proposed cryptocurrency and Calibra — its proposed digital wallet,” the committee wrote. “It appears that these products may lend themselves to an entirely new global financial system that is based out of Switzerland and intends to rival US monetary currency and the dollar. This raises serious privacy, trading, national security and monetary policy concerns for not only Facebook’s over 2 billion users, but also for investors, consumers and the global economy.”

However, the launch of the Libra and Calibra was immediately met with extreme skepticism and criticism, especially considering the Cambridge Analytica scandal and other user privacy issues. Critics pointed out that Calibra’s terms of service indicate that Facebook could use it to share user information and account data in certain circumstances. And given Facebook’s billions of users, it could make the company a key player in digital payments, increasing its already enormous sway in society.

Facebook said that Libra “will be regulated like other payment service providers” and fire-walled off from Facebook itself. However, neither the House Financial Services Committee, led by Democrats, nor the Republican controlled Senate Banking Committee, are convinced.

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South Korean Banks to adopt BlockChain

While big tech firms Facebook and Samsung have stolen the limelight, several big financial institutions have quietly launched their own cryptocurrency initiatives. The action is led by South Korea, where regulatory authorities have gradually shifted in favor of the new technology stack. This came to a head at a Seoul press conference on June 11th when the country’s largest bank Kookmin announced that it had signed an agreement with blockchain specialist Atomrigs Lab to explore crypto asset management.

Together, the companies will combine blockchain expertise with financial infrastructure to create a digital asset management service — that could potentially bridge legacy banking and crypto services to provide South Korean institutional investors with a credible entry point.

The agreement comes as part of a broader digital transformation initiative for the bank, which includes plans for using Artificial Intelligence, cloud computing, and big data to improve services.

Korea’s oldest financial institution, Shinhan Bank, is ahead of the pack. It has launched a blockchain-based lending platform that speeds up the application process with an encrypted password to grant instant access to the data needed for approving loans, enabling the public to apply online and receive credit without face-to-face interaction.

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