Report: Major South Korean Crypto Exchange Bithumb to Lay Off Up to 50% of Staff

Report: Major South Korean Crypto Exchange Bithumb to Lay Off Up to 50% of Staff

                                   

Major South Korean cryptocurrency exchange Bithumb

is reportedly cutting up to 50 percent of its workforce, a report from CoinDesk Korea stated on March 18. According to the report, an unnamed official has confirmed that the exchange will reduce its staff from 310 (at the start of March) to around 150, and is offering a voluntary redundancy plan and training

support to employees:

“Voluntary retirement is part of our support program for former employees and is intended to provide assistance and training for job placement. Apart from that, [Bithumb’s] trading volume has decreased compared to the previous year, [so] we are trying to provide internal measures. We will continue to add necessary personnel for various new businesses.”

To press time, Bithumb has not responded to Cointelegraph’s request for comment. Amid the crypto winter, Bithumb’s reported move to reduce its head count has been preceded by a host of other firms in the sector; mining giant Bitmain, blockchain software firm ConsenSys, decentralized social network Steemit and crypto exchanges Coinsquare and Huobi are among those to have made significant cuts in recent months.According to CoinMarketCap (CMC), Bithumb has seen roughly $1.3 billion in trades over the 24 hours before press time. The exchange was removed from CMC’s global exchange rankings in January 2018, due to the site’s concerns over reportedly “extreme divergence in prices from the rest of the world” on the platform and its fellow South Korean exchanges.

Article Produced By
Marie Huillet

Marie Huillet is an independent filmmaker, with a background in journalism and publishing. Nomadic by nature, she’s lived in five different countries this decade. She’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives.

https://cointelegraph.com/news/report-major-south-korean-crypto-exchange-bithumb-to-lay-off-up-to-50-of-staff

From Stablecoins to Blockchain Trials: Japanese Players Are Going Crypto as the Local Government Is Overseeing the Market

From Stablecoins to Blockchain Trials: Japanese Players Are Going Crypto as the Local Government Is Overseeing the Market

                                 

The beginning of the year was particularly eventful

for the Japanese crypto ecosystem, which is generally considered to be a major part of the industry. First of all, Japan’s Central Bank (BoJ) issued a study on the role of central bank digital currencies (CBDCs) in the current monetary system, a topic that was widely discussed by the country’s officials last year. Secondly, major domestic trading company and investment bank, Marubeni Corporation and Daiwa Securities Group, reported blockchain-related advancements in their businesses. Finally, local banking giant Mizuho Financial Group announced the launch of its custom stablecoin. Time to observe this news closer and see what has been happening with crypto in Japan.

It’s still unclear whether Japan will issue a CBDC

Japan’s authorities have been notably hesitant about the idea of introducing a CBDC, which might seem surprising at first, given that cryptocurrencies can be used as a legally accepted means of payment in the country (although they are not considered “legal tender”). CBDCs — just like Bitcoin (BTC) and altcoins — are also virtual currencies. The main difference is that they are issued and controlled by a federal regulator. Hence, CBDCs are not decentralized, unlike many digital assets. Basically, they represent fiat money, albeit in digital form. Each CBDC unit acts as a secure digital equivalent to a paper bill and can be powered with distributed ledger technology (DLT). Consequently, if central bank decides to issue a CBDC, it becomes not only its regulator, but an account holder as well, as people would have to store and access their digital money via this bank. That places CBDC-issuing central banks on a par with private banks.

CBDCs could be seen as central banks’ response to the growing popularity of cryptocurrencies, which bypass regulators’ purview due to their decentralized design. Federally-issued currencies, in turn, aim to take some of the main features from crypto — namely the convenience and security — and combine them with the proven attributes of the conventional banking system, in which money circulation is regulated and reserve-backed. At this point, the BoJ has publicly criticized the concept of CBDCs twice. First, in April 2018, its deputy governor, Masayoshi Amamiya, declared that such currencies can have a negative impact on the existing financial system. Specifically, he expressed his concern about taking on the role of private

banks:

“The issuance of central bank digital currencies for general use could be analogous to allowing households and firms to directly have accounts in the central bank. This may have a large impact on the aforementioned two-tiered currency system and private banks' financial intermediation.”

Then, on Oct. 20, Masayoshi Amamiya expressed his doubts regarding the effectiveness of CBDCs, adding that his agency won’t be issuing its digital currency in the near future. Specifically, Amamiya responded to a theory suggesting that CBDCs can help governments overcome the "zero lower bound" — a situation in which interest rates fall to zero and the central bank loses the capacity to stimulate the economy. According to this approach, a CBDC would enable central banks to charge more interest on deposits from individuals and firms, and hence motivate them to spend money and vitalize the financial system.

The deputy governor questioned that theory, claiming that charging interest on central bank-issued currencies would only work if central banks fully eliminate physical money from the local economy. Otherwise, the public would still continue converting digital currencies into cash in order to avoid paying interest. The elimination of fiat money in Japan is “not an option for us as a central bank,” since cash is a popular method of payment in the country, Amamiya added. Indeed, Japanese society is still mostly cash-based, as about 65 percent of transactions are reportedly done in paper money (which is more than double that of other developed economies).

The BOJ deputy governor continued that thought by stressing that his agency is not planning on creating a CBDC that can be widely used by the public for settlement and payment purposes. The shift to bank-issued crypto from the existing sovereign currencies seems to be "quite a high hurdle,” as crypto assets are often associated with speculative investments and do not represent a stable means of payment, he noted. Further, the central bank examined the role of CBDCs in the current monetary system in a report released on Feb. 19. The paper was written by representatives of the University of Tokyo and the BoJ. The report divided possible CBDCs into two categories, the first being those accessible to the general public for daily transactions instead of banknotes and the other as those limited for large-value settlements.

Interestingly, after explaining that CBDCs of the latter kind wouldn’t bring a lot of new features to the monetary system — as it has already been digitized — the report’s authors focused on the first category throughout most of the document. The report stressed that DLT could be applied to such token-based CBDCs. The working paper noted that blockchain-based CBDC could lower the level of anonymity of its users, as cash money cannot be tracked and hence is used for criminal activities. Here, the authors referenced the example of the People's Bank of China (PBoC), which announced its intent to issue a digital currency to curb tax evasion back in 2016. Notably, the document doesn’t necessarily reflect the official views of the BoJ and was published to stimulate further discussion on the topic, which suggests that Japanese officials have not given up on the idea of issuing a CBDC.

The FSA continues to apply scrutiny toward the local crypto industry

The Financial Services Agency (FSA), the national financial regulator, is known to have a tight grip on local digital asset exchanges. It comes as no surprise, given that the country has witnessed the two largest crypto hacks in history: namely, last year’s outlandish $532 million Coincheck hack and the notorious crash of Tokyo-based Mt. Gox. In the wake of those security breaches, the watchdog has introduced numerous precautions, including on-site inspections of exchanges’ offices and mandatory risk management system reports.

As per Japan’s Payment Services Act, amended in April 2017, all digital currency exchanges in the country are required to be registered with the FSA. The agency has granted the most compliant players with licenses. Currently, the pool of exchanges cleared to serve the Japanese market currently is represented by 17 platforms: Money Partners, Liquid (previously known as Quoine), Bitflyer, BitBank, SBI Virtual Currencies, GMO Coin, Btcbox, Bitpoint, Fisco Virtual Currency, Zaif, Tokyo Bitcoin Exchange, Bit Arg Exchange Tokyo, FTT Corporation, Xtheta Corporation, Huobi and Coincheck. The latter managed to secure its license just recently, almost a year after it suffered from a major hack.

Notably, the agency’s tough supervision has prompted some major players to quit the Japanese market. Thus, Binance, one of the world’s largest crypto exchanges that had once opened an office in the country, turned to Malta — the famously crypto-friendly country — after the Japanese regulator had slapped it with a warning in March 2018. Similarly, local social messaging app Line has also decided to exclude the domestic market prior to the launch of its cryptocurrency exchange, citing local regulatory difficulties.

Nevertheless, the FSA’s severity hasn’t scared everyone off. As many as 190 exchanges are reportedly pending the agency’s approval to enter the local market. Perhaps the most notable example here is United States-based Coinbase, which has made positive remarks about Japan’s crypto regulatory climate in the past, saying that the FSA’s intense focus on security is “good for us.” Given that Coinbase originally planned to establish its operation in Japan within 2018, the financial agency is likely to approve or decline its application at some point in the next few months. Moreover, the Japanese arm of the internet giant Yahoo will reportedly open their own crypto exchange “in April 2019 or later.” Other players that will potentially open a crypto exchange in Japan include Mitsubishi UFJ Financial Group, the largest domestic bank, and Money Forward, the company behind a popular financial management application.

In December 2018, the FSA published a draft report that introduced the new regulatory framework for cryptocurrencies and initial coin offerings (ICOs) in the country. In it, the agency continued to strengthen security requirements for local crypto exchanges, focusing on private keys management, among other things. Further, the FSA urged players to join the Japan Virtual Currency Exchange Association (JVCEA), a self-regulatory body comprised of domestic industry participants. Moreover, the financial watchdog suggested that ICOs might become subject to securities regulation in the future. Indeed, previously, local media reported that the agency was going to introduce new ICO regulations to protect investors from fraud.One of the FSA’s potential next steps is to regulate unregistered firms that solicit investments in cryptocurrencies. According to Cointelegraph Japan, there is a loophole in the country’s existing regulatory framework that allows unidentified companies that collect funds in crypto rather than fiat currencies to stay in a gray zone, and the watchdog intends to close it.

Industry players have asked to reduce the current tax rate

In February 2019, the Japan Association of New Economy (JANE), a business industry association led by Hiroshi Mikitani, the CEO of Japanese e-commerce giant Rakuten, asked the FSA to reduce the current tax rate for crypto trading income. Specifically, JANE inquired whether it was possible to tax crypto in compliance with progressive taxation instead of general taxation. According to Cointelegraph Japan, income from trading cryptocurrencies is currently taxed at 55 percent in Japan. Imposing progressive taxation on crypto gains would reduce it to 20 percent — the same rate that is applied to stocks and forex markets in the country. The association has also asked the FSA to impose no tax on crypto-to-crypto transactions.

Previously, in October 2018, local news agency Sankei reported that the Japanese National Tax Agency was planning to adjust the tax filing system for cryptocurrencies in order to corroborate that local traders report their gains. Currently, such profits are classified as “miscellaneous income” in the country. Basically, Japanese crypto holders have to pay between 15 and 55 percent on gains declared on their annual tax filings. The top amount applies to people who earn more than 40 million yen ($365,000) annually.

Stablecoins and bank-controlled digital currencies are on the rise in Japan

Over the past few months, at least two major digital currencies developed by Japan’s major banks and IT-industry players have received important updates, , the origins of which – as well as a detailing of related projects – was covered in a separate Cointelegraph article.

J-coin

Japanese banking giant Mizuho Financial Group, which has over $1.8 trillion in total assets, will reportedly launch its bespoke stablecoin for payments and remittance services as soon as March 1. Dubbed “J-Coin,” the new digital currency platform aims to directly link existing bank accounts with digital wallets. According to reports, the project is being developed in a partnership with around 60 counterpart financial institutions — which host around 56 million user accounts combined. The currency will reportedly be managed by a dedicated mobile app, J-Coin Pay, which uses QR codes at checkout to complete retail payments. As per local financial newspaper Nikkei Asian Review, the currency will resemble a stablecoin fixed at a price of 1 yen (~$0.01) per unit, while transfers between bank accounts and J-Coin wallets are set to be free of charge.

GYEN

In February, domestic IT giant GMO Internet confirmed its plans to launch a yen-backed stablecoin called GYEN this year. There are few details about the project at the moment. The company’s representatives has so far only revealed that the firm has set up a subsidiary and appointed a person responsible for GYEN operations to issue the stablecoin in 2019. The company had to shut down some of its other crypto-related operations, however. In late December, GMO announced it was quitting the Bitcoin mining hardware sector, citing “extraordinary loss” in Q4 last year. In Q3, GMO's cryptocurrency projects reportedly brought the company around 2.6 billion yen ($22.8 million) despite “the harsh external environment.”

Japan’s largest firms are actively tapping blockchain for their business

Numerous Japanese private firms — including banks, brokerages, trading giants and IT players — have announced blockchain-related news within the past few months, cementing Japan’s reputation as one of the most technology-focused countries. Here are the main companies, along with their projects:

Banks and brokerage

Sumitomo Mitsui Banking Corporation (SMBC), Japan’s second-largest bank

In February, SMBC completed a proof-of-concept (PoC) using blockchain consortium R3’s Marco Polo trade finance platform. Marco Polo is a Corda-powered venture developed by R3 and Irish tech firm TradeIX, connecting banks via a trade network. SMBC, which is currently the only Japanese bank participating in the Marco Polo scheme, said it had partnered with Mitsui & Co. — one of the largest “sogo shosha” (general trading companies) in Japan — to enhance efficiency in trade processes. “[The] PoC was conducted between SMBC and Mitsui & Co. which aims to improve productivity in its trade operations, by testing modules such as Receivable Finance and Payment Commitment (Payment Undertaking),” the press release explained,

adding:

“SMBC expects to commercialize Marco Polo in the first half of FY2019 [the financial year 2019] after verification of the PoC.”

Daiwa Securities Group, Japan’s second-largest securities brokerage

Daiwa Securities had also announced the completion of a blockchain PoC. The pilot project, dubbed “JPX Proof-of-Concept Testing for Utilization of Blockchain / DLT in Capital Market Infrastructure,” allegedly involved 26 companies, including financial institutions, system providers and institutional investors. The reported goal of the pilot was to increase the efficiency of blockchain tech in the post-trade process. According to the results of the trial, the blockchain system is expected to reduce operational costs and allow for the easier development of new products and services.

SBI Holdings, the first bank to own a cryptocurrency exchange in Japan

SBI Holdings has also struck an agreement with R3 to work in Japan, purportedly to develop local use of its Corda blockchain platform. According to the official announcement, the new joint venture will “support provision and introduction of the Corda license, arrange schemes for its actual use beforehand, as well as promote collaboration with overseas offices of R3 and other Corda partners.”

Mitsubishi UFJ Financial Group (MUFG), the world’s fifth-largest bank

On Feb. 20, MUFG announced it will launch a new blockchain-based payment system in collaboration with U.S. content delivery network Akamai. Titled the “Global Open Network,” the platform aims to utilize MUFG’s payment industry reach to strengthen its position in the increasingly competitive blockchain payments market. The project is scheduled to launch in the first half of 2020. Previously, MUFG had revealed its initiative to establish a remittance corridor with Brazil using Ripple (XRP).

IT

Itochu, one of the five-largest companies in Japan

On Feb. 1, Itochu announced the start of a PoC aimed to develop a blockchain traceability system, in which buyers and sellers can record the date, time, location and other transaction details on blockchain through a mobile app. The press release stresses that the start of the new trial is contributing “to the achievement of the 17 Sustainable Development Goals listed in ‘The 2030 Agenda for Sustainable Development’ adopted by the United Nations.”

It also adds:

“The aim of developing a blockchain traceability system [is to ensure] stable procurement and supply of raw material for our investment companies and trading parties, improving the traceability of its distribution.”

Line, host of Japan’s major messenger app

As 2018 was drawing to a close, Line signed a memorandum of understanding with local financial player Nomura Holdings to form a blockchain alliance. Nomura — which provides investment, financing and related services to individual, institutional and government customers — Line and LVC Corporation — which oversees messenger's digital asset and blockchain business units — will reportedly sign a formal contract by the end of March 2019. More details will be announced closer to the date. As Cointelegraph previously reported, Line is actively involved in developing crypto products. For instance, in January 2018, the company announced it would launch its own crypto exchange and in-app trading space for its 200 million active monthly users.

Energy and utilities

Marubeni Corporation, Japanese trading company that has expanded into the U.S. and Europe In late February, Marubeni teamed up with U.S.-based blockchain startup LO3 Energy to use the technology to increase automation and efficiency in its renewable energy offerings. “The Japanese energy sector is in the midst of a drastic transition, and there are increasing numbers of private power producers and suppliers interested in developing new customer offerings particularly in the renewable energy space,” LO3 Energy CEO Lawrence Orsini commented in the press release: “Initially this project is internally focused, but it is very much driven by the desire from Marubeni to explore the opportunities that blockchain management systems can offer in the transaction of energy throughout Japan.”

Fujitsu, Japan’s IT firm, a Global 500 company

On Jan. 29, Fujitsu reported that it successfully tested a blockchain-based solution to address inefficiencies in electricity surplus management. Specifically, Fujitsu partnered with local power distribution company Eneres to use the technology to increase the success rates of power sharing, which is administered through a process known as Demand Response (DR). DR is an agreement between utility companies and consumers, aimed to anticipate periods of peak demand by ensuring surplus power is available to those who need it. Fujitsu claims that, in its current form, DR is an inefficient mechanism and blockchain has proven to improve it. “Fujitsu has now devised a system in which electricity consumers can efficiently exchange among themselves the electricity surpluses they have produced through their own electricity generation or power savings,” the press release reads, noting: “The result was an approximately 40% improvement to the DR success rate.”

Article Produced By
Stephen O'Neal

Stephen O'Neal is a Sociology major from Leeds. He's passionate about crypto and all the stuff you can spend it on.

https://cointelegraph.com/news/from-stablecoins-to-blockchain-trials-japanese-players-are-going-crypto-as-the-local-government-is-overseeing-the-market

Bitcoin Pioneer Jeff Garzik Subpoenaed in $4 Bln Lawsuit Against Craig Wright

Bitcoin Pioneer Jeff Garzik Subpoenaed in $4 Bln Lawsuit Against Craig Wright

            

Software engineer and Bitcoin (BTC) pioneer Jeff Garzik

has been subpoenaed by a United States District Court in connection with the $4 billion lawsuit against Craig Wright, according to a document Garzik posted in a tweet on March 15. The suit was initially filed last February with the U.S. District Court of the Southern District of Florida, with the family of David Kleiman —  a computer scientist, whom many suspect to have been one of the developers of Bitcoin and blockchain technology — alleging that Wright stole up to 1.1 million BTC after he passed away.

Following Kleiman’s death in 2013, Wright, who proclaimed himself to be Bitcoin creator Satoshi Nakamoto, contacted his estate, allegedly claiming to want to help dispose of the Bitcoin fortune. Kleiman’s family claims that Wright did not return the funds. The official complaint states that Wright “forged a series of contracts that purported to transfer Dave’s assets to Craig and/or companies controlled by him. Craig backdated these contracts and forged Dave’s signature on them.”

Wright subsequently requested the court to dismiss the lawsuit against him, however the court rejected the request. The court document confirms that “the Court finds that Plaintiffs have sufficiently alleged a claim for conversion.” Now, the subpoena calls Garzik to appear in court and reveal any evidence to the “personal theory” that Kleiman was Satoshi Nakamoto. The subpoena also requests to provide all communications, agreements and documents related to both Wright and Kleiman.

Additionally, the document asks Garzik to provide information concerning Bitcoin mining for the period between January 1, 2009 and April, 2013, and refers to the search for documents related to Silk Road, Liberty Reserve,  Mt. Gox, and the Prometheus Project. The subpoena also asks for any communications with financial cryptographer Ian Grigg, CEO of Centre for Strategic Cyberspace + Security Science, Richard Zaluski, and early Bitcoin investor Roger Ver, among others. Last November, commenting on various hypotheses as to the Bitcoin creator’s identity,

Garzik said:

"My personal theory is that it’s [Satoshi Nakamoto] Floridian Dave Kleiman. It matches his coding style, this gentleman was self taught. And the Bitcoin coder was someone who was very, very smart, but not a classically trained software engineer.”

Article Produced By
Ana Alexandre

Total change in her career took Anastasia into the world of analytics and business information as a researcher and translator in 2010. Some time later she got into FinTech, a dynamically developing segment at the intersection of the financial services and technology. Ana joined Cointelegraph in September 2017.

https://cointelegraph.com/news/bitcoin-pioneer-jeff-garzik-subpoenaed-in-4-bln-lawsuit-against-craig-wright

French Cybersecurity Agency Grants Security Certificate to Ledger Nano S Hardware Wallet

French Cybersecurity Agency Grants Security Certificate to Ledger Nano S Hardware Wallet

            

The Ledger Nano S from French crypto hardware wallet firm Ledger

has received a First Level Security Certificate (CPSN) from France’s national cybersecurity agency, ANSSI. The development was shared with Cointelegraph on March 18. The National Cybersecurity Agency of France (ANSSI) reports to the Secretariat-General for National Defence and Security (SGDSN) in order to assist the French Prime Minister in matters of defence and national security. According to their list of certified products, 122 out of 261 products that ANSSI has started evaluating since June 1, 2018, have been certified. Products aspiring to receive a CPSN certificate undergo a series of evaluations by an ANSSI lab, with testing for multiple attack scenarios that challenge the product’s security. Evaluations span “firewall, identification, authentication and access, secure communications, and embedded software.”

Claiming a crypto hardware wallet industry first, Ledger underscores the importance of receiving an independent third party certification to attest to the security of its offering, and says the CPSN for Ledger Nano S is the beginning of an overall effort to certify all of their products. The blog post outlines that Ledger also operates its own in-house security evaluation “Attack Lab,” dubbed Ledger Donjon, which tests products’ resilience for a variety of threat scenarios. The company has also reportedly developed a custom operating system, BOLOS (Blockchain Open Ledger Operating System), to couple software and hardware strategies that enhance security.  

According to the blog post, the CPSN certificate covers a gamut of core embedded security functions, including a true random number generator, which is created via hardware and then post-processed through BOLOS, in compliance with security guidelines established in France’s Security General Referential. Other CPSN-certified security functions include a root of trust — which ensures that a given Nano S is authentically issued by Ledger — end-user verification measures, such as mandatory PIN numbers for accessing services, and post-issuance capability, which occurs over a secure channel.

As Cointelegraph reported last December, researchers have claimed they were able to hack the Ledger Nano S, as well as crypto hardware wallet Trezor One, and Ledger’s most expensive hardware wallet offering, the Ledger Blue. The day after the report, Ledger argued that the reported vulnerabilities in its hardware wallets were not critical. This February, Ledger apologized for — and pledged to remedy —  issues with a recent firmware update for Nano S, which had inadvertently decreased the device’s storage capacity.

Article Produced By
Marie Huillet

Marie Huillet is an independent filmmaker, with a background in journalism and publishing. Nomadic by nature, she’s lived in five different countries this decade. She’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives.

https://cointelegraph.com/news/french-cybersecurity-agency-grants-security-certificate-to-ledger-nano-s-hardware-wallet

Coinbase Pro Increases Fees, Updates Market Structure ‘to Increase Liquidity’

Coinbase Pro Increases Fees, Updates Market Structure ‘to Increase Liquidity’

            

Major United States-based cryptocurrency exchange Coinbase

announced a new market structure for its professional trading platform, Coinbase Pro, in a blog post published on March 15. Per the announcement, the changes aim to increase liquidity, enhance price discovery and ensure smoother price movements. The changes include a new fee structure, reportedly designed to increase liquidity, updated order maximums, new order increment sizes, the turning off of stop market orders and added market order protection points.

According to the post, Coinbase Pro and Coinbase Prime — the firm’s institutional trading platform — will cease their support for stop market orders. The announcement further explains that all stop orders must now be submitted as limit orders and include a limit price. On the other hand, the market protection points that will be introduced both to Coinbase Prime and Coinbase Pro users will amount to 10 percent for all market orders. The statement explains that market orders that move the price more than 10 percent will stop executing and return a partial fill.

Lastly, the post warns the exchange’s user base that the platform will be offline on March 22 from 6:00 p.m. to 6:30 p.m. PDT. The changes were met with some skepticism and negativity from the crypto community on social media. Economist and trader Alex Krüger complained on Twitter about “Coinbase Pro raising fees for smaller clients by 33% while lowering fees for larger clients.” The same user also further commented that “in a rational world, most Coinbase users would now move to Binance.”

In the same Twitter thread, Krüger also questioned Coinbase’s decision to disable stop market orders, claiming that stop-limit orders sometimes fail to execute because of slippage, suggesting using far off limits on limit orders as a workaround. Still, Krüger also admitted that those changes should lead to increased liquidity and trading activity. Another crypto trader on Twitter suggested that the new fee structure is seemingly targeting new users entering the cryptocurrency space,

concluding:

“Pretty random day to hike all the fees up, Coinbase anticipating a new bull run perhaps?”

As Cointelegraph recently reported, Coinbase Pro announced support for altcoin Stellar Lumens (XLM). Just yesterday news broke that publicly traded U.S.-based company Riot Blockchain has filed with the Securities and Exchanges Commission to launch a new regulated cryptocurrency exchange, called RiotX, in the U.S. by the end of Q2 2019.

Article Produced By
Adrian Zmudzinski

Adrian is a newswriter based out of Pisa, Italy. He's passionate about cryptocurrency, digital rights, IT, tech and futurology and likes to think about the future in a positive way.

https://cointelegraph.com/news/coinbase-pro-increases-fees-updates-market-structure-to-increase-liquidity

The SEC’s Guidelines and Statements Show That It’s Slowly Learning to Accept ICOs

The SEC’s Guidelines and Statements Show That It’s Slowly Learning to Accept ICOs

             

Initial coin offerings (ICOs) may be less fashionable

than security token offerings (STOs) right now, but that hasn't stopped the United States Securities and Exchange Commission (SEC) from keeping its beady eye trained firmly on them. Ever since it published its investigation into the decentralized autonomous organization (DAO) in July 2017 and declared that ICO tokens can be (and often are) securities, it has been producing a variety of guidelines and warnings on ICOs for investors.

Initially, its notices were used to emphasize the potentially fraudulent or dangerous nature of initial coin offerings, with its first-ever Investor Bulletin on ICOs concluding with a summary of "potential warning signs of investment fraud." However, even if it followed this up with a number of investor "alerts,” its current guidelines have taken a more balanced tone, treating ICOs as an established feature of the financial landscape that may nonetheless require a certain degree of diligence on the part of investors.

And on the whole, the industry welcomes this newfound balance, as well as the more measured approach the SEC has taken to crypto. That said, certain industry groups are calling for additional and clearer guidance from the SEC, since there's a feeling that certain grey areas still exist in the commission's classification of cryptocurrencies, with the Blockchain Association speaking of a "growing sense of urgency" that such questions be soon resolved.

Current guidelines

Even though the SEC's updated guidelines have reportedly been available since last March, it only recently began promoting them on social media, with tweets from February and the end of November inviting the public to learn five things it needs to know about initial coin offerings. For the most part, these five points don't present any radically new information, even if they might prove useful to ICO newcomers. Nonetheless, their presentation as digestible nuggets of info — rather than as sections of longer reports or statements — reveals an appreciation on the SEC's part that cryptocurrencies are being sought out by “regular” consumers, as well as by experienced traders interested in alternative financial instruments. And such a realization is borne out in the basic, easy-to-understand format of the five guidelines, as shown and explained below:

  • "ICOs can be securities offerings."
    This is essentially a warning that cryptos offered in a token sale may fall under the jurisdiction of the SEC, and may therefore need to be registered with the commission.
  • "They may need to be registered."
    Once again, another warning that some tokens may need to be registered with the SEC.
  • "Tokens sold in ICOs can be called many things."
    A warning that simply having a different or unusual name won't stop a token from being classified by the SEC as a security.
  • "ICOs may pose substantial risks."
    A warning that some ICOs may be scams. This point also includes a warning that, even if an ICO isn't fraudulent, sold tokens are at risk of being lost, hacked or having their prices manipulated.
  • "Ask questions before investing."
    Advice urging consumers to obtain clear answers to any questions or concerns they might have before buying any tokens.

The SEC's guidelines also include four additional pointers each for investors and "market professionals" (i.e., exchanges, brokers). With regard to the extra investor advice, this expands upon the points made in the five warnings above. For example, investors are encouraged to research how tokens will be traded, to research the individuals and companies offering the tokens, to be aware that tokens may be traded internationally (and may therefore escape the SEC's enforcement), and to be suspicious of offerings that are "too good to be true.”

Conversely, market professionals (i.e., exchanges) are advised in the additional guidelines specifically for them to uphold securities laws, to register if they sell securities, and to ensure that they protect the interests of investors and their customers. As with the guidelines for investors and the general public, most of the emphasis is placed on the fact that tokens can be — and frequently are — securities, given that they often promise future returns (one of the key components of the Howey Test). And while there are still certain issues left to be resolved (see below), this emphasis on the applicability of securities law is welcomed by the Blockchain Association’s Kristin Smith, with the director of external affairs for the Washington D.C.-based lobbying group telling Cointelegraph that the SEC's latest guidelines are a

positive step for the industry.

"It’s helpful that the SEC has been clear that organizations using tokens to raise funds must comply with securities laws, but the nature of these projects means that there is still a grey area for some tokens. We think that makes a lot of sense that some tokens be treated as securities because it helps close the information gap between investors and creators of a project. It’s a complex environment, so having some clarity on that issue is key."

Softening up

Despite containing plenty of warnings about the risks of ICOs, the SEC's latest guidelines appear to represent a tangible step forward in terms of treating crypto as a legitimate area of investment. Back in the first half of 2018, SEC Chairman Jay Clayton was talking about being "shocked" by the level of fraud the commission had encountered in the ICO space, while at the same time, announcing and applauding efforts by Canadian and American securities officials to crack down on ICO-related scams. He said in April at a

conference in Chicago:

"The fraudsters flocked to the new and attractive space. I guess that shouldn’t surprise me, but it does."

Such public remarks gave the impression that the SEC regarded ICOs as a mostly illegitimate vacuum in which opportunists were effectively robbing the gullible. And even though some of Clayton's early remarks indicate that the SEC saw genuine potential in token sales, official statements and bulletins from the commission reinforced this impression. In July 2017, for instance, the SEC issued an Investor Bulletin, which contained many of the same pieces of advices as those given in the latest guidelines, yet the two concluding sections of the

statement focused exclusively on fraud.

"If fraud or theft results in you or the organization that issued the virtual tokens or coins losing virtual tokens, virtual currency, or fiat currency, you may have limited recovery options. Third-party wallet services, payment processors, and virtual currency exchanges that play important roles in the use of virtual currencies may be located overseas or be operating unlawfully."

Similarly, in August 2017, it published another Investor Alert that not only concentrated on ICO scams, but also apprised would-be investors about the danger that sold tokens would be subject to "pump-and-dump" and market manipulation frauds.

The alert declared:

"The SEC’s Office of Investor Education and Advocacy is warning investors about potential scams involving stock of companies claiming to be related to, or asserting they are engaging in, Initial Coin Offerings (or ICOs). These frauds include ‘pump-and-dump’ and market manipulation schemes involving publicly traded companies that claim to provide exposure to these new technologies."

Over the course of 2018, the SEC adopted a gradually less stringent and suspicious attitude toward ICOs and crypto, even if the commission reported in November that it investigated dozens of token sales in the previous 12 months, and even if it closed down a handful of coin offerings. This relative softening is apparent in its latest guidelines, but it's also apparent in some of the recent speeches and pronouncements given by SEC officials, as

highlighted by Smith.

"In general, the SEC has taken a measured approach as they assess how to regulate crypto tokens. As an industry, we think a couple of recent speeches set the right tone: Director Bill Hinman spoke on the topic of decentralization last June and Commissioner Hester Peirce gave a general assessment of regulatory issues earlier this month."

The assessment Smith is alluding to here was when Peirce stated that the SEC's delay in coming out with clear, decisive regulation should give the crypto industry more leeway to mature according to its own internal dynamics and logic. While Peirce — or “Crypto Mom,” as she's often referred to — is one of the more crypto-friendly individuals at the SEC, her comments at least offer indication that there are now people at the commission who view the industry positively, and don't want to restrict or warn against it.

It's likely that such a softening of the SEC's sentiment goes hand-in-hand with two things. First of all, having taken a harder line on ICOs towards the end of 2017 and through 2018, the Commission can now feel assured that it has a better handle on coin offerings, and that it can be more moderate and measured in its declarations.

Secondly, the fact that the ICO and wider crypto markets have settled down over the past few months has also helped to relax the SEC's attitude, even if it still prefers to highlight the risks rather than the benefits of ICOs. This is something that has happened with United Kingdom regulators, for example, and it's also something that has been helped by exchanges and token issuers, which have eagerly sought to gain either licensing or exemption status from the SEC.

For instance, research published by MarketWatch in January found that there had been a 550 percent increase in 2018 in companies seeking authorization from the SEC to hold token sales. If nothing else, this rise has shown the SEC that, even if there are scammers out there, the industry is, on the whole, a very serious one.

More detail please

But even though the SEC has, over time, placed less emphasis in its notices on the potentially fraudulent aspects of ICOs, the crypto industry still isn't entirely satisfied with its current guidelines and with its current approach. The Blockchain Association, for one, is satisfied that the commission's latest advice on ICOs has been simplified and made more accessible, yet Smith reports that the trade association is calling for greater clarity from the SEC on just when exactly tokens

are and aren't securities.

"We do urgently need additional, detailed guidance on how tokens that we used in decentralized networks should be classified. There’s a strong argument that they shouldn’t be considered securities. This is the biggest question that the industry and regulators are grappling with today."

So far, the SEC has acknowledged that at least some cryptocurrencies (e.g., Bitcoin and Ethereum) aren't securities, while recent speeches have taken a more favorable stance toward crypto. However, Smith asserts that this doesn't go far enough for the industry and doesn't provide it with

enough certainty for the future.

"These speeches are not formal guidance and there remains a growing sense of urgency that we need to answer the outstanding questions soon, because that lack of clarity is preventing developers from pursuing projects here in the United States. The questions before the SEC are very complex. Their position has become clearer over time, but there are still outstanding questions that need to be answered."

It isn't entirely clear when the outstanding questions will be answered, something that may be disconcerting for any startup or company flirting with the idea of having a token sale. Still, other industry voices agree with the Blockchain Association in affirming that the SEC nonetheless has a more or less balanced approach to ICOs and to crypto, and hasn't tried to be too restrictive. This is the view taken by Iqbal V. Gandam, the

chairman of CryptoUK:

"I think the approach is balanced. They [the SEC] have not said that they are a poor/risky investment, but simply stated that the investor needs to be cautious – as is true with other investments. I also do not feel they view all crypto to be securities. They have linked to a recent hearing/article which highlights a particular crypto [the 2017 DAO investigation] and how it was deemed to be a security. So again being cautious but at the same time giving freedom to token creators."

The SEC may not have issued formal guidelines or rulings on ICOs, but Gandam's comments support the idea that it has, despite the initial wariness of ICOs, given them space to operate and grow. Of course, it's still arguable that crypto could grow even faster if the SEC produced detailed formal guidelines, but for now, its current advice shows that it has reached a grudging acceptance of token sales, since otherwise it would have warned investors and consumers away from them altogether.

Article Produced By
Simon Chandler

Simon Chandler is a journalist based in Hove, UK. He writes mostly about technology, with his specialties including cryptocurrencies, AI, VR, and social media. He also occasionally writes about politics, culture and music, and has contributed to the likes of Wired, the Daily Dot, the Verge, Computer Weekly, Techcrunch, Bandcamp Daily, the New Internationalist, the Kenyon Review, and Tiny Mix Tapes

https://cointelegraph.com/news/the-secs-guidelines-and-statements-show-that-its-slowly-learning-to-accept-icos

Riot Blockchain Plans Launch of Regulated Cryptocurrency Exchange in the US

Riot Blockchain Plans Launch of Regulated Cryptocurrency Exchange in the US

            

Publicly traded United States-based company Riot Blockchain

has filed with the Securities and Exchanges Commission (SEC) to launch a new regulated cryptocurrency exchange called RiotX in the U.S. by the end of Q2 2019. The regulator published the documents on March 14. The company declares in the filing that its subsidiary, RiotX Holdings Inc, would operate the new exchange. Furthermore, the exchange’s banking services would be handled by an Application Programming Interface (API) created by software company SynapseFi.

The API is planned to, among other functions, serve as a security enhancement by tracking user location in order to prevent fraudulent use of the service. For instance, improper use would include the use of the exchange in U.S. member states where it is not allowed, more precisely Wyoming and Hawaii. RiotX users would be allowed to create accounts connected to accredited banking institutions in the U.S., and transfer and hold both fiat and cryptocurrencies. Per the filing, the exchange will also be collaborating with exchange software provider Shift Markets.

As Cointelegraph reported in August last year, the SEC had intensified its investigation into crypto mining firm Blockchain Riot, which first came to the regulator’s attention in April 2018. The SEC’s investigation and subpoena information request began after Riot Blockchain changed its name to include blockchain at the peak of industry hype, and shifted their focus from biotechnology to mining. The regulator had previously noted that firms that changed their name to include blockchain would face increased scrutiny.

More recently, a dedicated analysis by Cointelegraph provides details about another similar instance: Long Blockchain Corp., previously known as Long Island Iced Tea, a publicly traded company that shifted from its beverage production business to mining. As of the beginning of March, Long Blockchain Corp. sold their beverage business, more than a year after their name change.

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Adrian Zmudzinski

Adrian is a newswriter based out of Pisa, Italy. He's passionate about cryptocurrency, digital rights, IT, tech and futurology and likes to think about the future in a positive way.

https://cointelegraph.com/news/riot-blockchain-plans-launch-of-regulated-cryptocurrency-exchange-in-the-us

The Tipping Point: Kroger, Starbucks May Ignite Retail Crypto

The Tipping Point: Kroger, Starbucks May Ignite Retail Crypto

            

It's no secret that cryptocurrencies don't receive many plaudits

in the mainstream media as reliable means of payment. Critics have even claimed that Bitcoin "sucks" as a payment mechanism. Yet, despite that blinkered skepticism, cryptocurrency payments actually grew last year. Payment processor BitPay reported a "record" $1 billion in transaction revenue in 2018, with its business-to-business (B2B) operations increasing by 255 percent compared to the previous year. Meanwhile, the use of cryptocurrencies in such economically unstable countries as Venezuela and India has surged, as people turn to the likes of Bitcoin and Dash to escape from increasingly worthless national currencies.

These are all encouraging developments, and they've become more encouraging in recent months, with growing interest in crypto payments from major retailers. From Kroger to Starbucks and Rakuten, big corporate names have begun flirting with Bitcoin and the Lightning Network as a payment channel, as well as with other cryptocurrencies. Their interest comes amid rising disenchantment with legacy payment systems, stoking hopes that a few more big converts to crypto payments could provide an all-important tipping point toward widespread adoption.

However, while events appear to be moving in the right direction for crypto payments, experts agree that it will take more than a few isolated use cases before the industry will see adoption on a larger scale. Added to this, payment interfaces need to be improved and made more consumer-friendly. It's only with the combination of technological effectiveness and corporate adoption that the global public will begin using crypto as money.

Kroger struck by lightning?

At the beginning of March, supermarkets giant Kroger — the 17th-largest company in the United States — revealed that it would stop accepting Visa credit cards at over 250 of its stores. "Visa has been misusing its position and charging retailers excessive fees for a long time," said Kroger executive VP Mike Schlotman in a statement, with the retailing giant also explaining that Visa’s fees were the highest of any of the credit cards it accepted.

What's interesting about this episode is that members of the crypto community quickly swooped in to make the case for Kroger to accept Lightning Network payments. On Twitter, Morgan Creek Digital founder Anthony “Pomp” Pompliano reached out on March 2 to the retailer's leadership team, stating that the "Morgan Creek Digital team will fly to meet them and get them hooked up with the Lightning Network nationwide." Even more interesting, Pomp followed this up on March 3 with a tweet announcing that he had just "finished up first call with someone on Kroger Digital team," and that his followers should "stay tuned" for more updates.

It's hard to say just how far Kroger will run with Pompliano's offer, yet industry figures are more or less unanimous in their views that adoption of Bitcoin payments by a giant like Kroger would be a watershed moment for the industry. "Adoption of Lightning Network by a major retailer would definitely be a big deal for the entire crypto space," says Vilius Semenas, the chief commercial officer at crypto-payment processor CoinGate. "For bitcoin, exposure to real consumers on such a scale could only do good and pave the way toward another level of adoption."

According to Semenas, there's certainly an appetite among major retailers for a new payment network to replace legacy systems. "The card payments industry is unique in that Visa and MasterCard control the lion’s share of the consumer base," he told Cointelegraph. "At the same time, innovation adoption in this space takes a long time because the market is two-sided and needs adoption from both consumers and retailers. Retailers are naturally frustrated, because they have little-to-no ability to affect card payments, and they would probably turn to alternative payment rails if they could."

CoinGate isn't the only crypto-payment processor who suspects that such retailers as Kroger would prefer to move to more efficient and cost-effective payment systems. BitPay's director of product, Sean Rolland, also told Cointelegraph much the same thing, even if he suspects that it will be a long time before existing systems are replaced by crypto-based alternatives. "No business enjoys high fees," he said. "Legacy payment systems are not going completely away anytime soon, but retailers should always be evaluating better solutions."

Starbucks, Rakuten, Birks Group dip their toes

Aside from Kroger, there are signs that other big players are entertaining the idea of moving to the Lightning Network and crypto payments. Most notably, Starbucks will begin accepting Bitcoin payments at its U.S. outlets by the end of 2019, according to industry rumors. This acceptance comes as part of an equity deal with Bakkt, a cryptocurrency exchange and payments platform being launched later this year by Intercontinental Exchange (ICE), the operator of the New York Stock Exchange (NYSE).

Back in August, the coffee giant was revealed as one of Bakkt's key partners, alongside Microsoft and consultancy BCG. According to the press release announcing Bakkt and its partnerships, Starbucks would not only be working with Bakkt to create its platform, but it would also be using the platform to accept crypto payments. In other words, even though the latest reports regarding Starbucks' imminent acceptance of Bitcoin payments are unconfirmed, the company itself had already confirmed that it will be doing this sooner or later, as explained in August by its VP of partnerships and payments, Maria Smith.

"As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted and regulated applications for consumers to convert their digital assets into US dollars for use at Starbucks," Smith said on the occasion of Bakkt's announcement. “As a leader in Mobile Pay to our more than 15 million Starbucks Rewards members, Starbucks is committed to innovation for expanding payment options for our customers."

            

This is precisely the arrangement that's now rumored to be launching

toward the end of the year. Reports indicate Starbucks will accept Bitcoin payments at its American outlets, but it will immediately convert these to fiat, as indicated by its initial press release from August. So even though the exact launch date hasn't been confirmed, this will prove a massive boost to Bitcoin and crypto payments, and it's hard to imagine that other big companies won't follow Starbucks' lead. Right now, there are no firm signs that other retailers as big as Starbucks or Kroger will begin accepting crypto payments anytime soon. However, there are a steady supply of slightly less high-profile companies (less high-profile in the U.S., at least) that have begun accepting such payments, or which will do so soon.

In November, Birks Group — one of Canada's largest and oldest jewellery retailers — announced that it had begun accepting Bitcoin at eight of its 30 stores in Canada. And in January and February, it became increasingly likely that Rakuten — Japan's largest e-commerce website — would begin accepting crypto, after it established a new payments subsidiary and announced an update to its Rakuten Pay app that would feature support for cryptocurrency payments. You can still count such companies on one or two hands. However, given their size and clout, their movements into crypto payments are likely to put greater pressure on their rivals to act similarly. As BitPay’s Rolland affirms, "The more retailers that accept bitcoin, the better."

The path has hurdles

Despite this early movement in the direction of crypto payments, there are still a number of significant obstacles in the way of widespread adoption. Perhaps most difficult of all, there's the chicken and the egg problem: How can big companies adopt crypto payments if not enough consumers hold and use crypto, and how can most consumers come to hold and use crypto if not enough big companies adopt crypto payments? Acknowledging that many retailers are looking for new payment channels, CoinGate's Vilius Semenas nonetheless warns they're not likely to adopt any channel that doesn't already boast a critical mass of users. "The problem is that there isn’t a payment system adopted widely enough by consumers," he said. "And it is virtually impossible to get consumers to effectively switch to another payment form other than cash."

This is arguably why there aren't more retailers like Kroger, Starbucks and Rakuten, since only around 5 percent of Americans own at least one kind of cryptocurrency. It's also why it might be unwise to get too excited about Kroger or Starbucks providing a “tipping point” for crypto payments, since without mass ownership of cryptocurrencies, other companies aren't likely to be swayed too much by the examples these pioneers set. Again, this is a point made by Semenas, who notes that other instances of adoption haven't resulted (at least, not yet) in waves of copycat behavior:

"Whether this could become a ‘tipping point’ leading to a cascade of other merchants starting to accept bitcoin is uncertain. A few months ago, Ohio adopted bitcoin payments for taxes, for example. But it didn’t lead to other states doing the same yet. It would likely depend on the results of the experiment." There's also the issue that systems like Lightning Network aren't quite ready yet for large-scale deployment. Lightning Network is currently in beta, so the idea that Kroger will drop such processors as Visa in favor of Bitcoin still remains a little fanciful. And as Vilius Semenas notes, many crypto-based payment channels like Lightning Network currently lack the kind of simple-to-use, streamlined interface that would lend them to massive consumer adoption:

"In an ideal world, for a retailer like Kroger, Lightning Network would be the perfect solution to accept consumer payments in a secure, cost-efficient way. Actually, it might be even the only solution that would enable worldwide payments on a scale that Visa and MasterCard currently provide. The major barriers to this would be consumer-friendly technology and convenient interfaces to transact money at the point of sale, rather than capacity constraints of the Lightning Network technology itself." These words of caution aside, Semenas nonetheless believes that "it is most probably just a matter of time for user-friendly applications to get developed." And given that Lightning Network was conceived as recently as 2016 and launched in beta only last March, it has already come a long way. There's no reason to think that it, Bitcoin and other cryptocurrencies won't go even further in the future.

Article Produced By
Simon Chandler

Simon Chandler is a journalist based in Hove, UK. He writes mostly about technology, with his specialties including cryptocurrencies, AI, VR, and social media. He also occasionally writes about politics, culture and music, and has contributed to the likes of Wired, the Daily Dot, the Verge, Computer Weekly, Techcrunch, Bandcamp Daily, the New Internationalist, the Kenyon Review, and Tiny Mix Tapes

https://cointelegraph.com/news/tipping-point-kroger-starbucks-may-ignite-retail-crypto

SEC Chairman Highlights Investor Protection in Regard to Bitcoin ETF

SEC Chairman Highlights Investor Protection in Regard to Bitcoin ETF

            

United States Securities and Exchanges Commission (SEC) Chairman Jay Clayton

is still concerned about investor protection when it comes to the commission approving a Bitcoin (BTC) Exchange-Traded Fund (ETF). The SEC chairman spoke about crypto in an interview with FOX Business on March 14.

In the interview, Clayton claimed to be neutral toward digital currencies, saying that he is not a spokesperson against the asset. The SEC chairman explained that he is concerned with the potential for manipulation associated with the space, and wants to

guarantee investor protection:

“What I’m concerned about at the moment is if it can be reasonably demonstrated that the underlying trading is generally not manipulated, it’s happening on reliable venues with good rules and that custody is something we can feel comfortable about.”

While Clayton declined to comment on any specific Bitcoin ETF application, he still noted that there “may be a case where a Bitcoin ETF could satisfy our rules.”

The chairman elaborated:

“I think this technology has and is already demonstrating pretty significant promise, but it’s demonstrating significant promise in the places where it’s consistent with our approach to capital raising in the past.”

Recently, the SEC announced it will soon start the countdown period to approve or disapprove the VanEck/SolidX Bitcoin ETF. After withdrawing the ETF application due to the U.S. government shutdown in late January, the Chicago Board Options Exchange (CBOE) re-submitted the application a week later. Earlier this week, Jay Clayton confirmed his previous statement that Ethereum (ETH) and similar cryptocurrencies are not securities under U.S. law. However, Clayton stipulated that he meant that a digital asset’s definition as a security can change over time.

Article Produced By

https://cointelegraph.com/news/sec-chairman-highlights-investor-protection-in-regard-to-bitcoin-etf

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Ledger Client Address Issue and Fake Deposits: Community Spots Two Vulnerabilities Related to Monero

Ledger Client Address Issue and Fake Deposits: Community Spots Two Vulnerabilities Related to Monero

             

This week, at least two seperate bugs related to Monero (XMR)

were reported by crypto community members. The first one allegedly lead to a Ledger hardware wallet user losing around 1,680 XMR (nearly $80,000, as of press time) of his funds after making a transaction. The other vulnerability allowed hackers to make fake XMR deposits to cryptocurrency exchanges.

Anonymity above all: What is Monero and how it works

Monero is a cryptocurrency with an additional focus on anonymity. It was launched in April 2014, when Bitcointalk.org user thankful_for_today forked the codebase of Bytecoin into the name BitMonero. To create the new coin, he relied on the ideas that were first outlined in a 2013 white paper dubbed “Cryptonote” written by anonymous personality Nicolas van Saberhagen. Ironically, BitMonero was soon forked itself by open-source developers and named “Monero” (which means “coin” in Esperanto). It has remained to be an open-source project ever since.

Indeed, Monero has considerably more privacy features compared to conventional cryptocurrencies like Bitcoin (BTC): On top of being a decentralized coin, Monero is designed to be fully anonymous and virtually untraceable. Specifically, it is based on the CryptoNight proof-of-work (PoW) hash algorithm, which allows it to use “ring signatures” (which mix the spender's address with a group of others, making it more difficult to trace transactions), “stealth addresses” (which are generated for each transaction and make it impossible to discover the actual destination of a transaction by anyone else other than the sender and the receiver), and “ring confidential transactions” (which hide the transferred amount). In 2016, XMR experienced more growth in market capitalization and transaction volume than any other cryptocurrency, undergoing almost a 2,800 percent increase, as per CoinMarketCap.

Notably, a lot of that gain could have come from the underground economy. Being an altcoin that is tailor-made for fully private transactions, Monero eventually became accepted as a form of currency on darknet markets like Alphabay and Oasis, according to Wired. Specifically, after being integrated on those trading platforms in the summer of 2016, Monero’s value “immediately increased around sixfold. "That uptick among people who really need to be private is interesting," Riccardo “Fluffypony” Spagni, one of the Monero core developers,

told Wired in January 2017.

"If it’s good enough for a drug dealer, it’s good enough for everyone else."

Currently, XMR is the 13th-biggest cryptocurrency by market cap, with equivalent of over $800 million, according to CoinMarketCap data. Monero’s alleged privacy remains to be a controversial topic, as some suggest that the coin is not, in fact, fully anonymous. In an interview with Bloomberg, United States Drug Enforcement Administration (DEA) Special Agent Lilita Infante noted that, although privacy-focused currencies are less liquid and more anonymous than BTC, the DEA “still has ways of tracking” altcoins such as Monero and Zcash.

Infante concluded:

“The blockchain actually gives us a lot of tools to be able to identify people. I actually want them to keep using them [cryptocurrencies].”

Moreover, as previously reported by Cointelegraph, Monero has been endorsed as “The Official Currency of the Alt Right” by white supremacists like Christopher Cantwell for its focus on anonymity. The privacy-focused nature of Monero has also driven compliance-oriented crypto exchanges to turn the coin down. For instance, in June 2018, Japan-based Coincheck delisted XMR and three other anonymity-focused altcoins to follow Counter-Terrorist Financing (CTF) and Anti-Money Laundering (AML) procedures issued by the local financial regulator.

Bug #1: change address bug with Ledger

Status: pending

On March 3, user MoneroDontCheeseMe started a Reddit thread, claiming that he or she believes to “have just lost ~1680 Monero [around $80,000] due to a bug” while using the Monero app with his or her Ledger hardware wallet. According to the post, the user transferred about 0.000001 XMR from his or her wallet to a view-only wallet, sent another 10, 200 and then 141.9 XMR. Allegedly, before sending the last transaction, MoneroDontCheeseMe had about 1,690 XMR in the wallet and 141.95 XMR in an unlocked balance, which is why he or she decided to send 141.9 XMR. However, after the transaction had been sent, the user’s wallet is reportedly showing a balance of 0 XMR.

Furthermore, according to the Reddit user, the amounts sent and the transactions recorded on the blockchain “don’t line up.” MoneroDontCheeseMe wrote that the 200 XMR transaction actually deducted 1691.001 XMR from the Ledger Wallet, and also that the amounts reported for the 10 XMR transaction are incongruous. Monero core developer nicknamed

binaryfate told Cointelegraph over email:

“My understanding is that the Ledger may have sent the ‘change’ amount to an erroneous one-time destination that the user did not control. For more details you should ask the Ledger team directly, they are working on it and already identified and fixed the bug as far as I know, so it should be pushed shortly.”

Initially, in the comments to the post, Nicolas Bacca, chief technical officer at Ledger, said that their app has been extensively tested, suggesting that could be a synchronization issue. However, several hours later, Ledger developers published a warning on the Monero subreddit, advising users not to use the Nano S Monero app because

“it seems there is a bug with the change address.”

“The change seems to not be correctly send. Do not use Ledger Nano S with client 0.14 until more information is provided.”

The official Monero Twitter account has since retweeted Ledger’s tweet containing a link to the warning. Thus, according to Monero’s binaryfate, the Ledger team has prepared a patch to fix the issue, and is expected to release it in the near future. Cointelegraph reached out to MoneroDontCheeseMe to ask him or her whether this issue is being fixed by Monero or Ledger developers, but he or she appeared hesitant to answer straight away and requested more time. Cointelegraph has also contacted Ledger developers for further comment, but they have not prepared any statement as of press time.

Bug #2: wallet bug enabling hackers to make fake deposits to crypto exchanges

Status: fixed

On March 3, the official account of the Ryo (RYO) cryptocurrency published a Medium post, highlighting a bug in the XMR wallet software that could allow for sending fake deposits to crypto exchanges. According to the post, an email reportedly sent to the Monero Announce mailing list warned platforms using the coin that the Monero Vulnerability Response team received a disclosure concerning a vulnerability. The bug was reportedly related to coinbase transactions (the first transaction in a block, created by miners).

“This essentially means that the attacker can make it appear as if he deposited any sum of his choosing to an exchange,” the post read. The mentioned email also contained the patch preventing the vulnerability from being exploitable. As binaryfate explained to Cointelegraph, first, somebody made a responsible disclosure following the Monero Vulnerability Response Process. Then, an email was sent to the Monero Announce mailing list “warning in advance that both a patch and details of the bug would be released together on the 6th of March.” After that, the Monero developer added that

Ryo published details “right away”:

“Due to this article, the details had been made public and delaying would have caused unnecessary risk. Hence a patch was publicly merged on github, and a new version of Monero tagged right away.”

Indeed, a few hours later, the official Monero account tweeted that the fix for the vulnerability had been written and was awaiting review. As per the GitHub page dedicated to the patch, it appears that the code has been already merged with the main branch, which means that the fix is ready and only needs the new release to be published. Ryo is a code fork of Monero, as per its website. According to the Medium entry, its team fixed the same vulnerability seven months ago. The post also notes that they avoided making a responsible disclosure to the Monero team earlier because of Monero’s “long history of toxic behaviour towards security researchers.”

Furthermore, the post also claims that when discussing the exploit in the Ryo public channel, the author of the post accidentally disclosed another vulnerability, concluding that “Monero might want to get that one patched too.” When asked whether they knew anything about such a bug, the Monero representative answered by saying “you would have to ask the author of the article.” Ryo has not returned Cointelegraph’s request for comment as of press time.

Previous Monero bugs and cryptojacking problems

Monero, being an open-source project, tends to collaborate with its community members to tackle security breaches. Thus, in September 2018, Monero developers successfully eliminated at least two bugs that were reported on its subreddit page. First, there was a burning bug, which Monero promptly fixed and notified “as many exchanges, services and merchants as possible,” to apply the new patch. Secondly, the XMR community reported that the Mega Chrome extension was compromised, leading to its quick removal from the Chrome webstore.

Further, Monero’s privacy features have made it popular among cryptojackers. Thus, last year, more than 526,000 computers were reportedly infected with a cryptocurrency botnet malware called Smominru, which allowed hackers to mine more than $2 million worth of XMR. In February 2019, tech corporation Microsoft removed eight Windows 10 applications from its official app store after cybersecurity firm Symantec identified the presence of hidden XMR coin mining code. The firm’s analysis identified the strain of mining malware enclosed in the apps as being the web browser-based Coinhive XMR mining code. Later that month, Coinhive announced it will stop all its operations on March 8, saying that the project is not “economically viable anymore.”

Article Produced By
Stephen O'Neal

Stephen O'Neal is a Sociology major from Leeds. He's passionate about crypto and all the stuff you can spend it on.

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