Established Firms Implement Cryptocurrency Payments, Blockchain Tracking and Data Management Systems
By: Diana J. Stern
Late last week, a major multinational telecommunications conglomerate announced it is the first major mobile carrier to accept online bill payments from customers in cryptocurrency through its deal with BitPay, a cryptocurrency payment processor. Also at the end of last week, a global consulting firm struck a deal to build a blockchain-based platform with Blockchain Wine Pte. Ltd. that will leverage the firm’s OpsChain Solution for tracking the authenticity, quality and provenance of vintage wines. On the high seas, a recent report announced that the world’s second- and fourth-largest container shipping companies are joining TradeLens to digitize maritime shipping. According to reports, paperwork accounts for 20% of the cost of shipping a container from one place to another, and by adding these two players to its platform, TradeLens will now track nearly half of all cargo being shipped by sea.
According to media outlets, three of the largest banks in Ireland are collaborating on a pilot with a major consulting firm to provide bank employees with digital wallets that hold their educational and regulatory credentials, which can be verified and tracked using blockchain technology to facilitate compliance. In other news, a leading cloud-based software provider recently released a blockchain product that enhances its CRM services. The tech giant reportedly has three clients already testing the product in different verticals. Another development of note this week emerged from the University of Surrey, which is using computer vision and a proof-of-authority blockchain to develop a solution for securing national digital video archives worldwide.
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Unlicensed Money Transmitter Sentenced, P2P Exchange Retreats From Iran and a Benevolent 51% Attack
By: Joanna F. Wasick
According to a press release published this week, Morgan Rockcoons of Las Vegas, Nevada, has been sentenced to 21 months in prison for wire fraud and operating a bitcoin exchange without registering with the U.S. Financial Crimes Enforcement Network (FinCEN). The press release states that Rockcoons advertised his exchange services on LocalBitcoins.com and conducted more than 1,000 bitcoin trades with more than 644 people. Late last week, the Financial Action Task Force, an intergovernmental organization, announced plans to finalize new global standards that aim to intensify anti-money laundering regulations of cryptocurrencies. Among other things, these regulations would require cryptocurrency exchanges to comply with the “travel rule” for funds transmittal by identifying and recording parties to virtual asset transactions, just as other financial institutions do with wire transfers.
According to a recent report, LocalBitcoins, a Helsinki-based peer-to-peer exchange, has shut off service for Iran-based users. The exchange did not publicly state a reason for the change, but most agree that U.S. sanctions were at the root of the decision. LocalBitcoins has been one of the most popular bitcoin trading websites among Iranian cryptocurrency users. The exchange did not require international credit card information, and allowed users to pay with their local bank accounts.
In what appears to be a first-of-its-kind event, two Bitcoin Cash mining pools recently carried out a “51% attack” on the blockchain in order to thwart another miner’s attempt to steal coins in the wake of a planned hard fork that occurred May 15. A 51% attack entails one group with a majority of the hash rate executing commands they are normally precluded from carrying out, such as rewriting the network’s transaction history. While the 51% attack is usually considered something done by wrongdoers, here it was apparently undertaken to do something beneficial.
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SEC Enforcement Actions Continue as New Cryptocurrency-Based Assets Launch
By: Marc D. Powers
The SEC has brought a civil injunctive action in federal court against a California man claiming to be selling instructional packages, which also provided “points” that could be converted into digital assets known as PRO Currency. The agency claims that the multilevel marketing companies offering the packages and digital tokens were involved in a fraudulent pyramid scheme which raised over $25 million between January 2017 and March 2018 in an unregistered securities offering. The SEC further alleges that Daniel Pacheco, the mastermind behind the companies providing the instructional packages and tokens, which traded on several cryptocurrency exchanges, used a portion of the funds raised to purchase a new home for $2.5 million and to buy a Rolls-Royce for himself. The SEC also seeks the return of the proceeds from various relief defendants, apart from Pacheco.
The messaging app Kik, which raised $100 million in 2017 in an ICO of the Kin token, and which was recently told by the SEC that it is likely to be sued by the agency for an unregistered securities offering, appears to be preparing financially for its defense and a long fight. It recently set up a crowdfunding campaign, complete with a podcast explaining its proposed defense, to raise $5 million.
For several years, Grayscale Investments has been offering to accredited investors the opportunity to purchase interests in Bitcoin, Ethereum and several other large-cap cryptocurrencies through its trust structure, with the hope and expectation that after a one-year holding period, the trust interests would be available for sale legally in a secondary market. This has previously been the case for Bitcoin under the symbol GBTC, which has been available for trading in the over-the-counter market since early last year. Within the past two months, that also became true for Ethereum Classic. Late last week, Grayscale announced that FINRA had approved the secondary market trading of its Ethereum Trust shares, each of which is the equivalent of about 1/10th of an ether. Once trading begins, all investors, not just those whom are deemed accredited, will be able to purchase interests in this digital asset in their traditional and IRA brokerage accounts.
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