A small community money-lender in San Diego, by the name of Silvergate Bank, received a lot of attention during this year’s Consensus. According to reports, the bank has played a crucial part in crypto exchanges and several enterprises with which the Wall Street banks refused deal.
A small bank with a large impact
Although banks and financial institutions have lately started to consider working with cryptos, this was not always the situation and digital currencies have struggled to survive. However, in that difficult period, one bank decided to open its doors to cryptos and crypto exchanges as early as 2014.
The Silvergate Bank from San Diego was a tiny community bank, which decided to trust cryptos, despite accusations that the currencies were being used for illegal activities like money laundering. In only a few years, the bank’s increased to $1.9 billion, and it currently has over 250 clients from around the world.
The bank has been operating for around 30 years and has branches throughout California. The CEO of Silvergate, Alan Lane, stated that he saw an opportunity in opening the bank’s doors to crypto exchanges and he realized that cryptos might disrupt banking in the long run. However, the companies still needed banks, and he was happy to lend them a hand.
Lane even invested in Bitcoin himself, then quickly realized that everyone who started working with cryptos soon lost all privileges from banks on Wall Street. With a situation like that, Lane realized that opening up to cryptos could mean some serious profit for Silvergate.
The bank changed its business to help out exchanges
After talking to the exchanges back in 2013, Lane understood what they needed and how Silvergate could help them. He also realized that the bank would have to start conducting their business in a different way, as a state-chartered bank. Naturally, this meant that Silvergate needed California State Banking Department’s certification, as well as the one from San Francisco’s Federal Reserve Bank.
Despite the fact that this move was very risky at the time, Silvergate decided to go through with it anyway. They did not care about bucking the trend across the rest of the States, and the bank soon became a clearinghouse and facility for exchanges’ transactions in real time. The number of their customers increased, and the bank has been on the rise ever since.
The price of bitcoin fell sharply on Sunday and early Monday morning after Coinrail, South Korea’s 7th biggest exchange said it was hacked, possibly to the tune of over USD 37.3 million.
According to data from Coinbase, bitcoin dropped 10% to around USD 6,770 – the lowest level for the cryptocurrency since April 12. On Monday morning, the price was still hovering below the USD 6,800 level, after a slight increase during the early hours of the Asian trading session.
The sell-off on Sunday followed news reports about a hack at Coinrail. The exchange said it was the victim of a “dawn raid” on its wallets on June 10, with hackers active on its system for up to 40 minutes, where they succeeded in accessing Pundi X (NPXS), Aston (ATX) and NPER funds. Some media reports claim Tron funds were also affected, and that the total losses may actually exceed USD 40 million, but the company has not yet issued confirmation.
The company, which is the seventh biggest in the country by trading volume, says it has suspended all operations, and has safeguarded 70% of its customers’ funds. Also, Coinrail says it has successfully “frozen or recalled” some 66% of the hacked funds and stated that all of its assets are now in a cold wallet, where they will remain until the company’s network “has been stabilized.”
Per a company statement, Coinrail also said it was working in close collaboration with the police. While most media sources in South Korea are claiming that over USD 37 million was taken, Coinrail is yet to confirm or deny these estimates, stating, “The exact extent of the damage is currently being calculated, and this may take some time.”
The company said that it was unable to reveal many of the details of the hack as doing so “may interfere with the police investigation,” but added that it was in close talks with the coins’ developers.
Joongang Ilbo points out that Coinrail had run into trouble with the Fair Trade Commission this year over clauses in its terms and conditions that appeared to absolve the company of blame in the event of “damages.” As reported previously on Cryptonews.com, a total of 12 exchanges (of which Coinrail was one) were ordered to make significant changes to “unfair” customer policies in April.
The FTC claimed that exchanges’ terms “did not exempt them from liability” in the event of the loss or theft of customer funds.
Exchange hackings have become a major issue for the cryptocurrency market in recent years, and continues to shake the market every time they occur. It is estimated that since 2014, hackings on exchanges have cost investors at least USD 1.4 billion.
CFTC Investigating Bitcoin Price Manipulation
Other cryptocurrencies such as ethereum, ripple XRP and bitcoin cash all dropped more than 11 percent on Sunday.
The sharp declines in crypto prices on Sunday also followed news that the US regulator known as the Commodity Futures Trading Commission (CFTC) has launched an investigation into potential price manipulation at four major cryptocurrency exchanges: Bitstamp, Coinbase, itBit and Kraken.
According to news reports, the CFTC has subpoenaed the exchanges to hand over sensitive trading data to help in the investigation.
The wall street titan is now all in when it comes to allowing clients to trade Bitcoin futures via one of its New York desks. Goldman Sachs becomes the first regulated financial institution to offer such a service. Part of the reason the firm decided to go this route is due to several inquiries received from hedge funds, foundations and endowments which had received donations from Bitcoin millionaires. Will Goldman Sachs cosign of Bitcoin increase confidence in the digital currency?
The Breakdown You Need to Know
The legitimacy bar for digital currencies has been raised now that Goldman Sachs is going to facilitate the institutional trading of Bitcoin. They’re proceeding cautiously and will not trade actual Bitcoin initially. Instead, the bank will use its own money to trade Bitcoin futures contracts for clients. It will also trade non-deliverable forward futures where trades will be settled in the regulated currency it’s quoted in.
Bitcoin had been on a rebound the past couple of months. Interest in the currency increased over the course of 2017, which also caused volatility to skyrocket. The price of the digital currency tripled in the second half of last year, topping out at $20,000 before dropping to $8,000 in February of 2018. The cryptocurrency traded as high as $9,300 before South Korean officials raided South Korea’s largest cryptocurrency exchange, sending prices to $8,650.
While Goldman Sachs dips its toes in the cryptocurrency markets, CultureBanx found BitMEX is way ahead of the game. CEO Arthur Hayes helms this leading cryptocurrency derivative exchange. The company offers derivative products to retail investors and has a daily trading volume approaching $3 billion. BitMEX made revenue of $83 million in 2017 and posted $21 million in revenue during January of this year. The company is on track to exceed its 2018 performance. “This is the best thing you could ever have. We make more money when the market goes down. We love this volatility,” Hayes said to Bloomberg.
As institutional investors engage in these derivatives, they’ll be looking to ease their cautiousness by having a reliable benchmark for their performance. Goldman Sachs alumnus and billionaire cryptocurrency advocate Mike Novogratz announced a partnership with Bloomberg to launch the Bloomberg Galaxy Crypto Index. It will track the performance of the 10 most liquid cryptocurrencies. “This is just one more building block in the foundation which will get, at one point, pension funds and family offices and sovereign wealth funds all participating in the crypto economy,” Novogratz told Business Insider.
Bitcoin had a rough start to the year and suffered a major loss during the first quarter causing the price to plummet down 48%. Hayes noted we should be on the lookout for increased volatility in Bitcoin prices as more players enter the derivatives market for the cryptocurrency. “People have been lulled into complacency with a market that keeps going up every day,” Hayes said on the Flux Podcast. The market got a taste of this volatility in December 2017 when the Chicago Mercantile Exchange (CME) launched Bitcoin futures trading. The Federal Reserve Bank of San Francisco went on to confirm this volatility relationship. “It is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset,” the bank said. It will be interesting to see just how much volatility institutional investors are willing to stomach as more players enter the cryptocurrency derivatives market.
Could a move to limit cash purchases in Australia give cryptocurrency and blockchain a boost?
The Australian government has banned cash for all purchases over $10,000 (€4,728) in a bid to curb tax evasion and money-laundering.
The hard limit comes into force on 1 July 2019. It was announced by the country’s Liberal Party Treasury spokesman Scott Morrison on 8 May. It means that any payment totalling over $10,000 Australian dollars will have to be made by credit card, debit card or cheque. But opinion is split as to whether this represents a real trend of a move to a cashless society.
Australians are still fond of cash – it makes up 37% of all transactions in the country – and this is perhaps why person-to-person and person-to-bank transactions are excluded from the legislation.
“It is very unlikely that cash will become obsolete,” says Sasha Ivanov, CEO of Waves, a blockchain platform that features a multiple-currency wallet and decentralised exchange.
“It will stay, but you won’t be able to use it as freely as you can now.”
Bitcoin and other crypto tokens were supposed to represent a democratisation of money – levelling the playing field for users with the lowest financial capital. It hasn’t quite worked out like this, but “current fintech is unable to provide ease of use, transparency and security for users and governments,” says Ivanov.
Are we moving towards a cashless society? Blockchain enthusiasts seem to think so, but opinion is split on how long it will take, and what the benefits to society at large will be.
Where cash goes we follow
Australia is certainly not the first country to limit large purchases using cash. Most governments recognise that large cash purchases – for deposits on houses or buying cars – are an easy way to wash dirty money.
In 2012’s Monti reforms, lawmakers in Italy forced through a cap on cash payments over €1,000, ostensibly to make it easier for authorities to track payments made to retailers. Italy also has very high levels of tax evasion. The cap didn’t last. In an attempt to boost consumer spending in 2016, former prime minister Matteo Renzi relaxed this hard limitto €3,000.
Elsewhere in Europe the picture is similarly mixed.
Romania limited cash payments to €1000 a day in 2015, but the law only specifies payments between a person and a company. Spain’s limit is €2,500. In Denmark, the limit on cash transactions is 50,000 krone (€6,700) and again was introduced ostensibly to curb money-laundering.
Germany is a relative outlier. It has the highest GDP in Europe at 4.2 trillion US dollars but unlike other high-performing states, its citizens still keep large amounts of cash on them.
German plans to introduce a €5,000 cap on cash transactions in 2016 sparked furious protests. 80% of transactions in the country are still made with physical notes rather than using NFC ‘tapping’ with debit cards, or mobile apps like Apple Pay and Samsung Pay.
As economist Max Otte told Bloomberg, asking ‘Why do Germans like cash?’ is “the wrong question,” he says. Instead we should be asking: “Why have others shifted to a cashless society so quickly?”
In second place in terms of GDP in Europe is the UK. The country is set to reach ‘peak cash’ in 2018, according to the Guardian, as cash payments fall to just 40% of total transactions. This number could fall as low as 21% by 2026.
The cash gap
At the moment, governments are stuck between piecemeal but positive regulation on blockchain and a general distrust of cryptocurrencies. Without the support of legislators, Bitcoin can not yet fill this cash gap.
Sasha Ivanov explains: “Restrictions on using cash are mainly aimed at making the financial system more transparent. While measures like [Australia’s] should not be punitive [to the average citizen] unfortunately in many cases that is what they are.”
It would be short-sighted not to expect more governments to follow suit and restrict cash usage over the next three to five years, Ivanov says, predicting that peak digitisation of money will happen some time between 2025 and 2035.
“That’s where blockchain kicks in, since it covers the need for security and transparency for everyone involved. Over the next 15-20 years blockchain will positively change today’s financial and governmental landscape.”
Cryptocurrency advertising will be absent from Bing by the end of July…
Following the lead set by Google, Facebook and Twitter, the search service Bing has confirmed that it’s now set to ban cryptocurrency advertising too.
The announcement came on the Bing Ads blog, where advertiser policy manager Melissa Alsoszatai-Petheo said that “because cryptocurrency and related products are not regulated, we have found them to present a possible elevated risk to our users with the potential for bad actors to participate in predatory behaviours, or otherwise scam consumers”.
She added that “to help protect our users from this risk, we have made the decision to disallow advertising for cryptocurrency, cryptocurrency related products, and un-regulated binary options”.
The policy change will be implemented across the Bing Ads network starting in June, with full rollout expected in late June and early July. It’ll be completed by the end of July.
Whilst some have found (temporary) ways around the ad bans on other platforms, it does add to the growing feeling that some kind of cryptocurrency regulation is needed. In lieu of it, more and more big platforms are taking the easier way out, and simply implementing blanket bans. Bing is unlikely to be the last to do so.
red Smith, chairman and CEO of FedEx, told an audience this week that those who don’t embrace blockchain technology will be left behind and disrupted.
The head of the logistics company sees great potential in blockchain technology to improve cross-border transfers, and relayed these thoughts to the crowd at CoinDesk’s Consensus 2018 conference in New York.
“Blockchain has the potential to completely revolutionise what’s across the border, ” he said. “For cross-border shipments, ‘trust’ is legal requirement for every transaction. What blockchain has is a potential for the first time ever to make the information available for everybody.
“If you are not operating at the edge of new technologies, you will surely be disrupted. If you are not willing to embrace new technologies like the internet of things and blockchain to face those new threats, you are, maybe subtly, at some point… going to extinction.”
In February, FedEx joined the Blockchain in Transportation Alliance (BiTA) in order to explore how best to utilise blockchain in its business.
CIO Robert Carter, also speaking at the event, added: “We move easily 12 millionshipments a day and that moer than doubles during the peak seasons. While we absolutely believe this technology is going to scale, right now it makes sense for us to do this in our freight world.
“The application of these custody chains… is so critical to the information aspect. We’re operating on this place between the physical world and the digital world.”
Secure messaging service Telegram is canceling its initial coin offering (ICO), an anonymous source told The Wall Street Journal today, and it won’t be opening up its digital coins for public sale. The cancellation is a blow to public investors who hoped to get in on the ground floor of one of the largest cryptocurrency investment opportunities in history, with an estimated $1.7 billion already raised.
Another source cited in the Journal partially attributed the shutdown to increasingly tight regulations that the Securities and Exchange Commission, Commodity Futures Trading Commission, and other lawmakers have proposed since Telegram initially began planning an ICO.
Much has changed in the regulatory environment since January when rumors swirled that Telegram was contemplating an ICO. In February, SEC chairman Jay Clayton had harsh words for ICOs that dodged registering with the SEC. “Many ICOs are being conducted illegally,” Clayton said, testifying before Congress. “Their promoters and other participants are not following our security laws.” In March, reports surfaced that the SEC sent subpoenasto dozens of cryptocurrency companies including tech companies that had launched ICOs.
It could also be the case that Telegram has simply raised enough money in private sales that it no longer needed an ICO. Telegram’s first presale in February raised $850 million from 81 investors; in March, the company said it had successfully raised another $850 million from 94 investors in a second round. In total, Telegram raked in $1.7 billion from fewer than 200 private investors.
The money is supposedly going toward Telegram’s Open Network project that will continue to fund its messaging platform and develop new features. The network would be built with a public ledger that would eventually serve as an alternative to Visa or Mastercard, Telegrampromised.
Regarding cryptocurrencies and their stability, there’s always plenty of debate, creating an opinion matrix on the subject. Some experts believe the potential growth of virtual coins is undeniable and secure, and on the other hand, others sustain that what happens behind the curtains with cryptos is just a trend with a limited future.
American company Bloomberg, that offers financial software, data, and news, recently deployed a study to determine how the future for cryptocurrencies looks and how comparable virtual coins are with traditional asset classes.
Bloomberg’s research on cryptocurrencies
To complete the study, Bloomberg collected information related to the trading activity of cryptocurrencies over 16 months and observed the volatility of virtual coins to establish how close or far are cryptocurrencies to acting like a traditional asset.
The study was published last Wednesday, May 3rd, on their website. Among other things it firmly concluded that, even though cryptocurrencies have shown a bullish behavior despite its volatility, this doesn’t give assurance that the new form of money will continue this behavior into the future.
An important factor mentioned in the study is that cryptocurrencies are so volatile that they are unlikely to be used as a payment method while purchasing goods or services, and even less so for paying salaries. In fact, during the timeframe of the study, only two out of the thousands of investments not related to cryptos had similar fluctuation.
Similarly, Bloomberg established that cryptocurrencies are not comparable with traditional assets and that if there were to be a relation between these two, it would be very remote.
Bloomberg concludes their study by saying that potential notable returns within the crypto market through Initial Coin Offerings could actually be dwarfed and put at risk with by the government entities designed to keep an eye on virtual coins, such as the US Securities and Exchange Commission’s (SEC).
The insights of the study deployed by Bloomberg are somehow discouraging in relation to what’s the ‘actual’ future of cryptocurrencies.
While there isn’t good reason to disregard Bloomberg’s opinion, it is also true that cryptocurrencies are still new, and their long-term behavior has not been deciphered yet.
So, even when many may think they have it all discovered, the new form of money could strike back and surprise them in the near future. In fact, Goldman Sachs, the giant of the banking industry has recently declared that is opening up a crypto trading desk as many of its users were calling for it.
Bank of Russia may be ready to use blockchain technology for sending and receiving payments. The information released by the news outlet Izvestiya on My the 4th. According to the reports, Bank of Russia could be using the Ethereum platform to speed up payments.
Different companies, banks and governments all over the world are working with blockchain technology so as to improve transaction speeds and reduce costs. This time, the Bank of Russia may be the next in the list of institutions working with this technology. According to banking sources the plans for using Ethereum have been confirmed.
The main purpose of the central bank of Russia is to transfer payments on SPFS – a local version of the SWIFT system. If the integration turns out to be successful, then, the system could potentially become ‘more reliable’ than SWIFT itself, which had several issues, hacks and security concerns in the last years.This is not the first time that blockchain technology sees adoption in Russia. At UseTheBitcoin we have reported many times that Russia is a country very interested in exploiting distributed ledger technology. Indeed, it has even explained its plans to create its own virtual currency known as CryptoRuble.
A senior official at fellow bank BKF said:
“Implementing blockchain technology undoubtedly raises the level of protection for SPFS in relation to hacker attacks. This is especially pertinent given the slew of banks, including Russia’s Globeks, which have fallen victim to hacker attacks via SWIFT.”
The size of the savings by switching to blockchain technology are not specified and yet unknown. What is important to mark is that the current costs of using SPFS is around ($0.03) per transaction. Moreover, the reduction of costs should also be linked with the increased security. Banks will be losing less money from problems in the network, hacks, security issues or other circumstances.
Back in February, we wrote that Russia’s largest state bank, Sberbank, was going to launch a virtual currency exchange in Europe, showing that the interest for virtual currencies is growing.
A new idea from Singapore has arrived at the bitcoin market. There is a new platform that launched pilot sales of bitcoin banknotes. These new bitcoin notes range between 0.01 and 0.05 BTC and would facilitate the use of bitcoin as a means of payment.
It is known that Bitcoin is changing the way we live. There are many useful things that we can do with this virtual currency. But some people may find it difficult to buy and sell digital assets on online exchanges.
In order to simplify the overall experience, Tangem, a Switzerland platform developer, launched the first smart banknote at the Megafash Suntec City store in Singapore. The banknotes have NFC technology included and they would make easier day to day payments with Bitcoin.
The company said that the banknotes are certified to the Common Criteria EAL6+ and EMVCo security standards. With the new S3D350A chips developed by Samsung, Tangem is the first hardware storage solution on the market that has these security standards.
With this development, users wold be able to use virtual currencies with no transaction fees and in an offline setting. That has the power to allow more traditional users to try this new method to use bitcoin.
The new banknotes radically improve the simplicity and security of acquiring, owning, selling, and circulating Bitcoin. Moreover, it is not necessary to know anything about how virtual currencies work in order to use the sophisticated notes.
At the moment, there will be a first shipment of 10.000 notes that will be delivered to prospective partners and other businesses around the world. The intention is to try commercial pilots and decide whether they have good reception or not, find possible complications, and improve the overall experience.
Tangem operates from Switzerland and Singapore, and performs manufacturing activities in South Korea, Southern China with research and development in Taiwan, Russia and Israel. Tangem is developing different software platforms to foster mass adoption of blockchain technologies.