[co-author: Jordan R. Silversmith]
CFTC Approves Bitcoin DCM, New Bitcoin ETF Proposed, Crypto IRA and Blockchain Depository Receipts Introduced
By: Simone O. Otenaike
The Commodity Futures Trading Commission (CFTC) has announced approval of LedgerX’s registration as a designated contract market (DCM) under the Commodity Exchange Act and CFTC regulations. According to reports, LedgerX will allow consumers based in the U.S. or Singapore to trade on its bitcoin derivatives exchange starting in July. As a DCM, LedgerX will offer Bitcoin derivatives contracts, including options and futures, to retail clients of any size. Prior to approval, LedgerX was registered with the CFTC as a swap execution facility and derivatives clearing organization. Bitcoin derivatives exchanges are reportedly seeing record trading volumes in the market driven by institutional traders.
Also this week, the U.S. Securities and Exchange Commission (SEC) published a rule change proposal that would allow Wilshire Phoenix Funds to list shares of an exchange-traded fund (ETF) backed by bitcoin and Treasury bills on the NYSE Arca exchange. According to reports, a fund manager will manage the trust and invest exclusively in bitcoin and short-term U.S. Treasury securities. The SEC is currently seeking public comments on the proposed rule change and has 45-90 days from official publication in the Federal Register to approve, disapprove or take other action on the proposed rule.
Bitcoin IRA, in partnership with BitGo Trust, reportedly launched the first self-directed cryptocurrency Individual Retirement Account on Tuesday. The retirement account claims to offer $100 million in insurance protection, a 30% percent reduction on wallet fees and 12 different digital assets for customers to diversify their holdings. According to Bitcoin IRA’s CEO, the company exceeds regulators’ requirements for asset capitalization and insurance.
BlockState, a Swiss-based security token firm, recently announced plans to issue six ERC20 tokens from Ethereum, one of the largest public blockchains, on the private R3 Corda blockchain. The tokens will be secured in a smart contract on Ethereum, and “mirrored” versions of the tokens will run on Corda – the process is reportedly similar to that of global depository receipts, where shares of a company are held in custody in one country and a certificate representing ownership of the shares are traded in another country. The transfer or move will take place on R3’s network that is currently in development for the Swiss Digital Exchange (SDX), which is part of SIX, Switzerland’s national stock exchange and the world’s 13th-largest stock exchange.
Also this week, a Chicago-based financial services firm agreed to transfer its private equity asset blockchain platform to a US-based publicly traded corporate services firm. According to a press release, the corporate services firm will develop the platform as an industrywide private equity blockchain solution that provides data and analytics tools for the complex private equity lifecycle. The solution will be available to all private equity funds domiciled in Guernsey and Delaware.
For more information, please refer to the following links:
Fintech Companies Expand Cryptocurrency Gateways, Analysis of Kin Token Published
By: Diana J. Stern
This week, major cryptocurrency exchange Binance teamed up with financial technology and regulated trust company Paxos to launch a new deposit gateway that allows traders to wire fiat to Paxos and receive an equivalent amount of the Paxos stablecoin, PAX, directly in their Binance wallets. From there, the PAX can be exchanged for other cryptocurrencies on Binance’s exchange. In another recent event involving Binance, as part of an internal restructuring this week, the exchange reportedly transferred $1.2 billion in binance coin (BNB) from one wallet to another. According to Binance, the $1.2 billion transaction took 1.1 seconds and cost $0.015 in fees, highlighting some of the benefits of blockchain. In another payments headline, a U.S. fintech firm known for its mobile payments and point-of-sale products recently launched new bitcoin features for its Cash App, allowing users to deposit bitcoin from external wallets directly into their Cash App accounts.
A final notable report this week came from Coin Metrics, which published an analysis of blockchain activity of the Kin token, the token that is a subject of an ongoing SEC enforcement action against the token’s issuer, Kik. The Coin Metrics analysis indicates that some of Kik’s claims regarding the usage and adoption of the company’s Kin token may be inaccurate.
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FATF Releases New Cryptocurrency Guidance, International Arrests in Crypto Crimes
By: Robert A. Musiala Jr. and Joanna F. Wasick
Late last week, the Financial Action Task Force (FATF), an intergovernmental body that sets standards for combating money laundering, terrorist financing and other threats to the integrity of the international financial system, released landmark Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers). The 57-page guidance document provides examples of risk indicators for virtual assets (VAs), discusses the type of activities that will be deemed virtual asset service providers (VASPs) and clarifies that VASPs have the same level of anti-money laundering obligations as do financial institutions. One of the more notable requirements in the guidance is the obligation for VASPs “to obtain, hold, and transmit required originator and beneficiary information, immediately and securely, when conducting VA transfers.” Some other notable requirements include those related to automated transaction monitoring, risk assessments, information sharing procedures and requirements related to new products such as anonymity-enhanced cryptocurrencies. FATF member countries are expected to use the new guidance to design and implement their own regulations, which will eventually be assessed through FATF’s mutual evaluation process.
In enforcement news, this week, U.K. and Dutch law enforcement, together with Europol and Eurojust, arrested six individuals in Europe after a 14-month investigation into a €24 million cryptocurrency theft. The six individuals allegedly cloned a well-known online cryptocurrency exchange to access the victims’ Bitcoin wallets, and then stole their funds and login details. The theft reportedly affected at least 4,000 victims in 12 countries. Last week, Israeli police arrested two brothers, Eli and Assaf Gigi, for a similar type of crime. The brothers allegedly created credential-stealing clones of major online cryptocurrency exchanges and wallets, and sent links to phishing sites enabling them to steal victims’ funds. Reports of how much money was stolen ranges from tens of millions of dollars to nearly $100 million. According to reports, the two may also be responsible for the 2016 Bitfinex hack, in which 120,000 bitcoins were stolen.
Finally, late last week, Patrick McDonnell pleaded guilty in Brooklyn to wire fraud in connection with a cryptocurrency investment scheme. For more than three years, McDonnell used social media to solicit investors, promising to invest their money on their behalf, but instead used the funds for his own purposes. At least 10 victims were purportedly defrauded of about $194,000 worth of various cryptocurrencies. McDonnell faces up to 20 years in prison plus forfeiture of his illicit gains.
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Exchange Hacks, US City Pays Bitcoin Ransom, Fraudulent Libra Sites Emerge
By: Jordan R. Silversmith
On June 27, Singapore-based cryptocurrency exchange Bitrue reported that it had been hacked for around $4.2 million in user assets, consisting of 9.3 million XRP worth $4.01 million and 2.5 million cardano (ADA) worth $231,800. The hacker reportedly exploited a vulnerability in Bitrue’s risk review process. According to Bitrue, user funds are insured, and those who lost cryptocurrency will be refunded.
In news closer to home, the city council of Riviera Beach, Florida, recently agreed to pay a ransom of $600,000 in bitcoin to hackers who targeted the city’s computer systems. The attack reportedly began on May 29 when a police department employee opened an email attachment containing malware, which rapidly spread through the city’s computer systems, crippling its email system and, crucially, the city’s 911 dispatch operations. On June 17, the city council unanimously agreed to have its insurance carrier pay the hackers the ransom of 65 bitcoins.
Late last week, a new cryptocurrency mining malware was reported. The malware, called LoudMiner, operates within pirated applications that are bundled together with virtualization software, an image file and additional files. When downloaded, LoudMiner is installed before the desired software itself, concealing itself and only becoming persistent after reboot.
After the world’s largest social media company published details last week on the launch of Libra, a new cryptocurrency that would be backed by a basket of fiat currencies and other traditional assets, scammers are already trying to cash in. According to reports, this week a website emerged that is a mirror image of the company’s legitimate Libra website, except for a slight change to a single character in the URL. The false site reportedly offers “Pre-Sale Libra Currency” ahead of the official launch – which, pointedly, the social media giant has not itself announced. According to reports, prices include 600 “LBR” for 2 ETH and 8,000 LBR for 20 ETH.
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