As a Reaction to Facebook's Libra, FedCoin Rises Again

Lawmakers and Federal Reserve officials are so concerned about Facebook’s plans to launch a new digital currency that they’re contemplating a novel response — having the central bank create a competitor.

Momentum is building for an idea that was once considered outlandish — a U.S. government-run virtual currency that would replace physical cash, a dramatic move that could discourage major companies like Facebook from creating their own digital coins.

link.

Bitfinex Accused of $850 Million Fraud

In the evolving story of a so-called "stablecoin" the office of New York Attorney General Letitia James accused iFinex Inc. -- operator of the Bitfinex exchange and the Tether cryptocurrency -- of trying to cover up "the apparent loss of $850 million dollars of co-mingled client and corporate funds." While researchers have tied Tether transactions to the spike in Bitcoin value that occurred between March 2017 and March 2018, this issue of the missing money is allegedly tied to a transfer of $850 million in funds to Crypto Capital Corp., a payment processor based in Panama.

The AG says Bitfinex lost access to funds it had transferred there after regular banks stopped handling its business and subsequently dipped into $900 million of Tether's cash reserves. According to the filing, Crypto Capital Corp. told Bitfinex the funds were "seized by governmental authorities in Portugal, Poland, and the United States" but the AG says Bitfinex doesn't believe that is true.

link.

China is Proposing Banning Bitcoin Mining as Wasteful

China’s bitcoin miners have long embodied a contradiction. Cryptocurrency trading is illegal in the country; initial coin offerings, used to fund new blockchain projects, are banned; and Chinese banks can hardly touch the stuff. And yet somehow the country has remained the epicenter of global cryptocurrency mining, home to more of the computing power used to mint new bitcoin than any other country.

Now the Chinese government has proposed to ban mining.

link.

JP Morgan Chase Announces its own Cryptocurrency

J.P. Morgan Chase CEO Jamie Dimon called bitcoin a fraud in September 2017 and said, “You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart,” By January 2018 he had walked the remarks back but said he still was “not interested that much in the subject at all.” In February 2018, J.P. Morgan called cryptocurrencies “risk factors” to its business, something it never previously said.

And now J.P. Morgan (JPM, +0.19%) has become the first bank to offer its own cryptocurrency, CNBC reported. But don’t expect it to become an investment vehicle—at least for now. The cryptocurrency, called “JPM Coin,” is intended for the bank’s wholesale payments business that moves $6 trillion around the world daily.

link.

Halfneum: a cryptocurrency thought experiment

I wrote this elsewhere originally, but it got very little reaction, so I am editing it a bit and posting this here.

Cryptocurrencies are something sorta new, since bitcoin is now almost ten years old. When envisioned they were meant to be currencies, used to buy and exchange value. However, they have become far more like securities, where people speculate for the value increases and then cash out. Or "hodl," as they say, and then cash out when the price is really really, high. I have wondered for a long time what it would take to make a real digital currency.

How could you change the dynamic such that you have a relatively stable (value wise) currency with low cost trading, high speed transactions and all the incentives for the 'miners' to still stay in the game. Likewise you want something that does not inflate ridiculously either. That breaks the whole rule about price stability.

No cost transactions have been attempted, (re: [Fcoin](https://steemit.com/life/@sogo/the-death-of-fcoin-a-tale-of-bad-token-design)). The problem was the wild inflation that took place. Likewise, it's backend in the ethereum network as a token, was badly broken and, at times, crippled the that network.

Others have tried to tackle took many coins in circulation by using a Proof of Stake, where you are rewarded for holding the coins rather than buying and selling. The problem is the price will still go up and it outright encourages hoarding, which is anathema to stability since it creates whales and those whales at some point will, in fact, cash out. Then, boom and doom.

One potential idea is something like a 'proof of transaction' where the more the coin is traded by someone, they will be rewarded. This would function something like a percent off or something like the Starbucks stars or rewards program. The more you spend, the more you get rewarded in more of the same coins. Now, there are two problems, IMO, with this. The first is then you fall into the bot trap. It'd be really easy for a bot system to be set up to ping-pong the coins around. This would generate the coins and cause inflation. The work around is to cripple the reward amount based on how often the transactions are taking place, but that would be, again, run against the whole idea of getting people to use it like money. The second problem is rewarding people with more coin for using the coin is inflationary still. Even if mildly so, it would cause the coin to lose value over time. From an economist, POV, this encourages the transactions: use it today or it will be worth less tomorrow! But from the POV of the crypto community, this would be really bad. Who wants to have a coin that will lose value. However, if this is meant to be a transactional item, this would not be a terrible solution.

There is another potential solution. Another alternative 'proof of transaction' might be to have a 'timer' in the coin. If the coin sits in a wallet for more than a set time frame, ie is not used or is in 'hodl,' half the value of that coin is deleted. Call it a 'half life' for a coin. When the coin is transacted, the 'timer' is reset for that coin. The deduction or deletion, when it happens, is then sent to the miners. The short fall between coins deducted and the value of the mining, is awarded with newly generated coins. Given the half life algorithm, the miners are then encouraged to sell those coins or use it to buy, say, Starbucks, asap. There would be some inflation still, but so long as the coin is adopted and used in brick and mortar and popular websites, then it ought to be relatively easy to keep the use rate up.

That's the rub though: it has been really hard to get many companies to adopt using cryptocurrencies. Another problem is this could be abused. Some nontrivial thought needs to go into the security of the coin so that no one could trigger a mass 'decay' and swipe all the coins. Likewise, getting the decay algorithm right, or at least the period for the decay algorithm right is equally important. A year might be too long. A day is 1000% too short.

At any rate, I am curious what others think. I know many people - potentially most! - in the crypto community view the coins as investments rather than transactional money. My attempt here was not so much to try to create a new coin as examine a potential method to turn a cryptocurrency into a transactional currency rather than just an investment.

I would appreciate some thought and feedback from the community.   I am sure I am going to be mocked here, since everyone is talking about the 'next coin to the moon,' but, here we are.  

SEC Starting to Regulate Cryptocurrency Exchanges, Warns Investors

The SEC has been zeroing in on cryptocurrency since the beginning of the year. The agency announced it would scrutinize companies generating hype by pivoting to crypto before delving deeper into initial coin offerings with subpeonas. But today the agency turned its attention to people buying cryptocurrencies, warning consumers against trusting so-called 'exchanges' that state or imply that they're protected by federal law. Spoiler: They aren't, because the cryptocurrency world remains an unregulated mess.

It comes down to semantic wording. Whether or not these online trading platforms consider the 'digital asset' cryptocoins they're trafficking to be 'securities' under federal law, the SEC likely does. That means they satisfy the agency's definition of 'national security exchanges' and should register with the SEC. If they don't, they remain outside of government scrutiny and regulation, meaning the agency can't protect individuals from any manipulative or fraudulent practices.

"Many platforms refer to themselves as "exchanges," which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange. Although some of these platforms claim to use strict standards to pick only high-quality digital assets to trade, the SEC does not review these standards or the digital assets that the platforms select, and the so-called standards should not be equated to the listing standards of national securities exchanges," the SEC stated in a post.

link.

Twitter may ban Cryptocurrency, ICO ads

Twitter may soon join Facebook and Google in cracking down on ads for cryptocurrency-related products. Sky sources have claimed the social network will institute worldwide ban against ads for initial coin offerings, cryptocurrency wallets and token sales within the next two weeks. It might also ban ads for cryptocurrency exchanges with "some limited exceptions," according to the apparent leak.

The company told Engadget it had no comment at the moment.

link.

Google is Banning Cryptocurrency Ads in June

Google is cracking down on cryptocurrency-related advertising.

The company is updating its financial services-related ad policies to ban any advertising about cryptocurrency-related content, including initial coin offerings (ICOs), wallets, and trading advice, Google's director of sustainable ads, Scott Spencer, told CNBC.

That means that even companies with legitimate cryptocurrency offerings won't be allowed to serve ads through any of Google's ad products, which place advertising on its own sites as well as third-party websites.

This update will go into effect in June 2018, according to a company post.

link.

A US City Banned Cryptocurrency Mining

The city of Plattsburgh, New York announced on Thursday that it is temporarily banning the commercial mining of cryptocurrency for 18 months. 

The official reasoning for the moratorium is to "protect and enhance the City's natural, historic, cultural and electrical resources." 

Plattsburgh residents have seen skyrocketing electrical bills — as much as $100 to $200 increases — as a result of commercial cryptomining operations that mine for cryptocurrencies like bitcoin, according to Plattsburgh Mayor Colin Read, who spoke with Motherboard. The city is taking action to protect its citizens from those rising electrical bills that the city of Plattsburgh says is caused by cryptomining operations.

link.

Does Bank of America View Cryptocurrencies as a Threat to its Business?

One of the world’s largest financial institutions admitted in its annual report that cryptocurrency is a looming threat to its business model.

According to a report filed with the SEC by Bank of America:

Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies. Increased competition may negatively affect our earnings by creating pressure to lower prices or credit standards on our products and services requiring additional investment to improve the quality and delivery of our technology and/or reducing our market share, or affecting the willingness of clients to do business with us.

Still on the fringes of the mainstream, cryptocurrencies have gained notoriety in recent months — particularly after a strong December that saw Bitcoin reach new heights of almost $20,000 per coin, and the addition of futures contracts on two major exchanges.

link.

Nearly Half of 2017's Cryptocurrencies are Reported to Have Already Failed

The surging price of bitcoin (among others) in 2017 led more than a few companies to hop on the cryptocurrency bandwagon with hopes of striking it rich almost overnight. Many of their initial coin offerings seemed dodgy from the outset... and it turns out they were. Bitcoin.com has conducted a study of ICOs tracked by Tokendata, and a whopping 46 percent of the 902 crowdsale-based virtual currencies have already failed. Of these, 142 never got enough funding; another 276 have either slowly faded away or were out and out scams.

The number of casualties might be higher in practice. Another 113 ICOs have either stopped talking on social networks (a good sign interest has died) or have so few adopters that success is very unlikely. And the survivors aren't necessarily doing much better. Only a "handful" raised over $10 million, which left an uphill battle for the rest.

It doesn't take much divination to understand why many of these virtual coins fell flat. Excluding the scams, a large chunk of them were targeted at niches like dentistry, freight trucking or real estate -- they were never going to attract broad audiences. Others, meanwhile, were me-too efforts that had no real advantage over pouring money into an established format, where prices were more likely to climb.

link.

Is Poland's Central Bank Running a Smear Campaign on Youtube Against Cryptocurrencies?

A bizarre battle is emerging in the world of cryptocurrencies after Poland's central bank was accused of hiring YouTubers to "start a smear campaign" against cryptocurrencies in the country.

According to Business Insider Poland, the Narodowy Bank Polski (NFB) spent around 91,000 zloty (£19,430; $27,300) on a marketing campaign designed to attack the legitimacy of cryptocurrencies. The money was spent on platforms including Google and Facebook, but was also used to pay a Polish Youtube partner network called Gamellon.

link.

South Korea Will NOT ban Cryptocurrencies After all?

South Korea has been flirting with banning cryptocurrency trading for some time now. However, now it appears the country is backtracking. Bloomberg reports that South Korea's regulators have indicated that they will continue to support "normal" trading of the cryptocurrency.

In late 2017, South Korea, which is the third largest market for cryptocurrency, began cracking down on Bitcoin traders. It banned initial coin offerings and stopped allowing anonymous cryptocurrency accounts. At the beginning of this year, South Korean officials announced an outright ban on cryptocurrency trading was in the works. Many cryptocurrencies were priced higher on South Korea's exchanges than in the rest of the world, and officials in the country thought of it as gambling. There was also the fear that cryptocurrency trading could lead to tax evasion.

Apparently, South Korean regulators have worked out their concerns, because Choe Heungsik, the governor of South Korea's Financial Supervisory Service, has said that his organization is trying to normalize cryptocurrency trading. This is a big shift in rhetoric against digital currencies.

link.

Congress is Eying Regulations for the Cryptocurrencies

Jolted by the global investment craze over bitcoin and other cryptocurrencies, U.S. lawmakers are moving to consider new rules that could impose stricter federal oversight on the emerging asset class, several top lawmakers told Reuters.

Bipartisan momentum is growing in the Senate and House of Representatives for action to address the risks posed by virtual currencies to investors and the financial system, they said.

Even free-market Republican conservatives, normally wary of government red tape, said regulation could be needed if cryptocurrencies threaten the U.S. economy.

“There’s no question about the fact that there is a need for a regulatory framework,” said Republican Senator Mike Rounds, a Senate Banking Committee member.

Digital assets currently fall into a jurisdictional gray area between the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Treasury Department, the Federal Reserve and individual states.

Much of the concern on Capitol Hill is focused on speculative trading and investing in cryptocurrencies, leading some lawmakers to push for digital assets to be regulated as securities and subject to the SEC’s investor protection rules.

“The SEC is properly the lead on the issue,” said Republican Representative Bill Huizenga, chairman of the House Financial Services Subcommittee on Capital Markets which will hold hearings on the issue in coming weeks.

link.

Ukraine Might Separate Cryptocurrency Mining From Cryptocurrency Use...Legally

Ukrainian legislators should separate the regulation of crypto mining from the legal status of cryptocurrencies. The new approach was proposed by the chairman of an important parliamentary committee who criticized law enforcement agencies for cracking down on crypto miners. Police confiscated mining equipment in a series of raids this week. Authorities claim that coins have been used to finance pro-Russian separatists.

link.

Most Cryptocurrencies Will Collapse According to Goldman Research Head

The tumble in cryptocurrencies that erased nearly $500 billion of market value over the past month could get a lot worse, according to Goldman Sachs Group Inc.’s global head of investment research.

ost digital currencies are unlikely to survive in their current form, and investors should prepare for coins to lose all their value as they’re replaced by a small set of future competitors, Goldman’s Steve Strongin said in a report dated Feb. 5. While he didn’t posit a timeframe for losses in existing coins, he said recent price swings indicated a bubble and that the tendency for different tokens to move in lockstep wasn’t rational for a “few-winners-take-most” market.

“The high correlation between the different cryptocurrencies worries me,” Strongin said. “Because of the lack of intrinsic value, the currencies that don’t survive will most likely trade to zero.”

link.

Man Suing Tmobile for "Hackers" Stealing his Bitcoins Through Social Engineering

A man sued T-Mobile on Sunday, claiming that the company’s lack of security allowed hackers to enter his wireless account last fall and steal cryptocoins worth thousands of dollars.

Carlos Tapang of Washington state accuses T-Mobile of having “improperly allowed wrongdoers to access” his wireless account on November 7th last year. The hackers then cancelled his number and transferred it to an AT&T account under their control. “T-Mobile was unable to contain this security breach until the next day,” when it finally got the number back from AT&T, Tapang alleges in the suit, first spotted by Law360.

After gaining control of his phone number, the hackers were able to change the password on one of Tapang’s cryptocurrency accounts and steal 1,000 OmiseGo (OMG) tokens and 19.6 BitConnect coins, Tapang claims.

The hackers then exchanged the coins for 2.875 Bitcoin and transferred it out of his account, the suit states. On November 7th, the price of Bitcoin was $7,118.80, so had the hackers cashed out then, they would have netted a profit of $20,466.55.

Tapang goes on to say, “After the incident, BTC price reached more than $17,000.00 per coin,” but given the volatility of bitcoin prices, the hackers may not have benefited from the soar.

The suit alleges T-Mobile is at fault partly because the carrier said it would add a PIN code to Tapang’s account prior to the incident, but didn’t actually implement it. Tapang also states that hackers are able to call T-Mobile’s customer support multiple times to gain access to customer accounts, until they’re able to get an agent on the line that would grant them access without requiring further identity verification. The complaint also lists several anonymous internet users who have posted about similar security breaches to their own T-Mobile accounts.

link.

Cryptocurrencies Affect One Another, but not Other Asset Classes

A sharp fall in the value of Bitcoin may cause other cryptocurrencies to crash, but is unlikely to have a significant impact on traditional assets, according to new research published in the journal Economics Letters.

Researchers from Anglia Ruskin University, Dublin City University and Trinity College Dublin examined the performance of three established cryptocurrencies - Bitcoin, Litecoin and Ripple - and analysed their relationship with a variety of other financial assets such as gold, bonds and stocks.

The study found that Bitcoin prices affect Ripple, with a spillover of 28.37%, and Litecoin (42.3%), while the highest spillover from a cryptocurrency to a "traditional" asset was Bitcoin to Forex (FX), at 15.25%. In reverse, the highest price spillover from traditional assets to a cryptocurrency - Forex (FX) to Bitcoin - is only 4.18%.

The study also found that the volatility of cryptocurrencies is significantly higher than that of other assets, and that Ripple and Litecoin have limited influence on Bitcoin, proving that Bitcoin is the clear leader in the cryptocurrency market. The research also suggests that Ripple and Litecoin have seen their values increased thanks to the rapid growth of Bitcoin.

Co-author Dr Larisa Yarovaya, Lecturer in Accounting and Finance at Anglia Ruskin University, said: "We identified that cryptocurrencies are relatively isolated from other financial assets, but are interlinked with each other.

"This means a decrease in the price of Bitcoin is unlikely to decrease the price of gold, or negatively affect the stock market of US, but the strong links between Bitcoin and other cryptocurrencies mean that those markets will fall.

link.

US Regulators Believe Cryptocurrencies Need Special Oversight

Digital currencies such as bitcoin demand increased oversight and may require a new federal regulatory framework, the top U.S. markets regulators will tell lawmakers at a congressional hearing on Tuesday.

Christopher Giancarlo, chairman of the Commodity Futures Trading Commission (CFTC), and Jay Clayton, chairman of the Securities and Exchange Commission (SEC), will provide testimony to the Senate Banking Committee amid growing global concerns over the risks virtual currencies pose to investors and the financial system.

Giancarlo and Clayton will say a patchwork of rules for cryptocurrency exchanges may need to be reviewed in favor of a rationalized federal framework, according to prepared testimony published on Monday.

link.

India Interested in Blockchain Tech, NOT Cryptocurrencies

The Indian government is getting more serious about using blockchain technology into the growing digital economy of the country. But this does not mean it is going soft on cryptocurrencies.

“Distributed ledger system or the block chain technology allows organization of any chain of records or transactions without the need of intermediaries,” said finance minister Arun Jaitely while presenting the Union Budget 2018-19 in Parliament on Thursday.

“The Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system. The government will explore use of block chain technology proactively for ushering in digital economy.”

link.