Forbes Publishes Blockchain 50, Cryptocurrency Exchanges Expand Services
By: Joanna F. Wasick
This week, Forbes published its second annual Blockchain 50 list, recognizing the 50 largest companies with significant blockchain technology initiatives. To qualify, Blockchain 50 members must be generating no less than $1 billion in revenue annually or be valued at $1 billion or more. The world’s major financial and tech firms are well represented, and a number of blockchain startup companies appear as well. Along with the company’s name, description and key executives, the list provides the type of blockchain the company uses. Twenty-six use a Hyperledger solution in some capacity, with 22 using an Ethereum (ETH) offering. More than half of the listed companies use more than one type of blockchain.
Last week, Binance, a major cryptocurrency exchange, announced it was adding 15 new fiat currencies it would support, including the Swiss franc, the Korea won and the Australian dollar, as well as the Polish zloty and the South African rand. Binance also announced it would begin offering business services and lend out its technology and liquidity to help business clients and partners set up exchanges with the Binance infrastructure. This enterprise-oriented side of the Binance business runs through its cloud division, a part of the company that began running late last year and now operates with about 20 people.
This week, a major U.S. exchange announced that it is now a principal member of a major U.S. credit card provider. This will enable the exchange to issue debit cards without relying on third parties. Users of the debit card can reportedly spend their own bitcoin (BTC), ether and XRP anywhere the provider’s credit card is accepted. This is the first time a cryptocurrency-based entity has been granted this type of status.
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SEC Settles Charges Involving ICO, CFTC Takes Action Against Crypto Investment Firm
By: Jordan R. Silversmith
On Wednesday, the Securities and Exchange Commission (SEC) announced that it had settled charges against a blockchain technology startup, Enigma MPC, for violations of federal securities laws. The startup, based in San Francisco and Israel, was accused of conducting an unregistered offering of securities in the form of an initial coin offering. The company has agreed to return funds to harmed investors via a claims process, register its tokens as securities, file periodic reports with the SEC and pay a $500,000 penalty.
The Commodity Futures Trading Commission (CFTC) also announced recently that it had filed a civil enforcement action against a resident of Colorado and a Colorado LLC, Venture Capital Investments Ltd. The complaint charges that the defendants solicited U.S. residents to trade foreign currency contracts along with bitcoin and other digital assets through a commodity pool they operated. Rather than trade funds raised from approximately 72 individual investors, the defendants allegedly used at least $418,000 of the funds for personal expenses and to make Ponzi-type payments to other pool participants.
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Dutch Tax Authorities Make Arrests, IRS Summit to Address Cryptocurrencies
By: Jordan R. Silversmith
Earlier this week, the Joint Chiefs of Global Tax Enforcement – the leaders of tax enforcement authorities from Australia, Canada, France, the Netherlands and the United States, together known as the “J5” – announced that Dutch authorities had arrested two men in connection with two criminal investigations on suspicion of money laundering using cryptocurrencies. The arrests come as the IRS has reportedly invited cryptocurrency companies and advocates to a March 3 summit to discuss how the agency can “balance taxpayer service with regulatory enforcement.” The focus of the summit will be discussing the IRS’ existing approach to taxing cryptocurrencies and new enforcement efforts.
A recently published study by the U.S. Government Accountability Office (GAO) found that additional information reporting and clarified guidance could improve cryptocurrency tax compliance. Among other things, the report found that steps to increase third-party information reporting on virtual currency transactions could help the IRS provide taxpayers with useful information for completing tax returns and give the agency an additional tool to address noncompliance.
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Manipulation, Hacks and System Errors Lead to Losses for Cryptocurrency Users and Exchanges
By: Brian P. Bartish
Since Friday, Feb. 14, 2020, decentralized lending protocol bZx was twice exploited by attackers using a combination of methods involving flash loans and price manipulations to profit on cryptocurrency swaps, resulting in total losses of approximately $954,000. The first attack took place on Feb. 14 and resulted in the attacker pocketing 1,193 ETH (approximately $318,000) after a bug in the bZx’s smart contract code failed to run standard safety checks that should have prevented a highly leveraged position on ETH/BTC trading pairs. The second attack took place days later, resulting in losses of 2,388 ETH (approximately $636,000), perpetrated, in part, via oracle manipulation on the price of synthetic USD Coin stablecoins.
Last week, the IOTA Foundation shut down the entire IOTA cryptocurrency network after hackers exploited a vulnerability in Trinity, the mobile and desktop wallet app developed by the IOTA Foundation, and stole approximately $1.6 million from at least 10 high-value IOTA accounts. IOTA announced this week that it had released a “safe” version of Trinity in response.
Earlier this week, crypto exchange FCoin notified users that it was unable to process withdrawal requests, as it revealed a nearly $130 million shortage of assets, a result of system problems and “decision errors” made by exchange leadership. The exchange’s novel yet controversial model, called “trans-fee mining,” designed to incentivize trading by issuing exchange tokens, made FCoin one of the largest exchanges by volume.
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