The U.S. Commodity Futures Trading Commission (CFTC) wants to learn more about ethereum, its technology, and the markets that have built up around it.
In a “Request for Input” (RFI) published Tuesday, the regulator explains that it is looking for public feedback on different questions about ethereum, ranging from its technology to how it’s used. Respondents have 60 days from the RFI’s publication in the Federal Register to submit answers, either via email, mail or hand delivery.
“The CFTC expects the comments and information received will benefit LabCFTC, the CFTC’s FinTech initiative, and help to inform the Commission’s understanding of these emerging technologies,” a press release explains.
The RFI itself goes into further detail, explaining that its RFI will inform the agency’s oversight of the ethereum market, as well as any derivatives markets related to the cryptocurrency.
It goes on to say:
“The input from this request will advance the CFTC’s mission of ensuring the integrity of the derivatives markets as well as monitoring and reducing systemic risk by enhancing legal certainty in the markets. The RFI seeks to understand similarities and distinctions between certain virtual currencies, including here ether and bitcoin, as well as ether-specific opportunities, challenges, and risks.”
The document lists 25 different questions about ether and the network, divided into the network’s purpose, the technology behind it, its governance, markets and oversight and cybersecurity and custody.
The questions themselves touch on various issues and concerns discussed in the space, including ethereum’s upcoming move to proof-of-stake, scalability issues, how the network is being used specifically at present and how ether deposits may be audited, among others.
Notably, one question asks: “How would the introduction of derivative contracts on ether potentially change or modify the incentive structures that underlie a proof-of-stake model?”
A number of questions following this go further into detail about how the ether market might impact a derivatives market built on top of it – or vice versa.
The RFI was published through the regulator’s LabCFTC fintech initiative, which focuses on both educating the public about crypto assets, as well as acts as a way for participants in the space to interact with the regulator.
CFTC image via Mark Van Scyoc / Shutterstock
The U.S. Securities and Exchange Commission has ordered fund manager CoinAlpha Advisors LLC to pay a $50,000 fine following what it deemed to be an unregistered securities sale.
According to the order published Friday, CoinAlpha formed a fund in October 2017 with the goal of investing in digital assets. It reached out to possible investors, raising a bit more than $600,000 during the process.
While CoinAlpha did file a “Notice of Exempt Offering of Securities,” the company was not eligible for an exemption and did not otherwise register with the SEC. As such, it effectively solicited securities investors in breach of the law, the order says.
Further, the agency said that the company did not run adequate know-your-customer procedures to ensure that all of its investors were accredited, though it did hire a third-party to check accreditation status after the SEC first contacted it.
The order notes that CoinAlpha reimbursed all fees to its investors after being contacted by the SEC, saying:
“A total of 22 investors invested a total of $608,491 in the Fund. In October 2018, after being contacted by the Commission staff concerning the issues herein, CoinAlpha unwound the Fund, pursuant to the authority granted in the Fund’s Limited Partnership Agreement.”
Notably, the order highlights that CoinAlpha cooperated with the SEC, and the regulator in turn is only imposing sanctions that it negotiated with the company.
These sanctions include barring CoinAlpha from violating the Securities Act in the future and a $50,000 penalty paid to the SEC, on top of the reimbursements. According to the filing, CoinAlpha didn’t admit to or deny the allegations put forward by the agency.
The SEC’s response echoes similarly light repercussions for other entities in the space, including startups Airfox and Paragon and EtherDelta founder Zachary Coburn.
While each of those firms or individuals was found to have violated securities laws, the SEC in each case explained that they had cooperated with its investigation, and imposed relatively low penalties for each.
CoinAlpha did not respond to a request for comment by press time.
The Bitfury Group has recently announced a partnership with crypto payment processing system Paytomat, working to bring the Lightning Network to Paytomat’s participating merchants.
According to a recent Medium post made by LightningPeach, “Bitfury’s in-house specialized Lightning Network engineering team,” the Bitfury Group is pouring its resources into Paytomat’s wallet and vendor system, enabling “users and merchants on the Paytomat system to send and receive bitcoin payments over the Lightning Network almost instantly.”
“Both Bitfury and Paytomat participated in the Blockchain Expo in Amsterdam in June, and, after meeting, we began discussing our potential partnership opportunities,” Pavel Prikhodko, the head of LightningPeach, told Bitcoin Magazine.
The partnership between the two companies seems like a natural fit. Bitfury specializes in building blockchain hardware and tools (such as mining chips), and Paytomat has a large base of customers and merchants already lined up.
Per the partnership, Bitfury will be incorporating Lightning directly into Paytomat’s platform. As Prikhodko described it, “Bitfury’s LightningPeach team integrated Lightning Network in Paytomat. Bitcoin Lightning payments are now built in to Paytomat’s merchant dashboard, allowing users to make instant and low-fee payments in Bitcoin.”
The Lightning Network has generated a great deal of fame in the cryptocurrency space for its promise of instant and feeless microtransactions, but, as with many promising technologies, adoption can become a major hurdle. Prikhodko seems fully confident, though, in Paytomat’s ability to give Lightning and bitcoin sufficient exposure to its network of merchants.
“You can find a list of merchants that are already working with Paytomat in their partnership section. Bitcoin Lightning payments on Paytomat will be made available to more than 300 merchants around the world.”
On the aforementioned partnership section of Paytomat’s website, the company lists a wide range of vendors across Europe from the Iberian Peninsula to the Lower Countries and even as far as Ukraine. In addition to the wide geographic range of vendors, Prikhodko also said there is a diversity of these vendors themselves, stating that “Paytomat works with many kinds of merchants, including restaurants/cafes and clinics.”
With this partnership introducing the Lightning Network to a hitherto unexposed audience, it could open up the payment solution to an entirely new user base and provide a use-case with real worldwide leverage. To date, Lightning’s main implementations and use cases have been limited to web activity and online merchants, though the network has grown significantly in the latter half of 2018.
The chairman of the U.S. Securities and Exchange Commission (SEC) Jay Clayton reiterated the regulator’s strict stance on Initial Coin Offering (ICO) compliance in fresh comments to CNBC Nov. 26.
Speaking in an interview with CNBC, during which presenters mentioned the recent enforcement deals with ICOs Paragon and Airfox, Clayton underlined the need to conduct public token sales with U.S. consumers in line with SEC guidelines.
“We’ve had no ICOs register [with the SEC],” he told reporters, adding:
“To the extent that an ICO is being conducted offshore or pursuant to a private placement exemption, fine; to the extent that you’ve conducted a public offering in an ICO, it’s non-compliant.”
Both the SEC and fellow regulator the Commodity Futures Trading Commission (CFTC) have adopted the perspective that while Bitcoin (BTC) is not considered a security, various ICO tokens are, subject to individual scrutiny.
“I think we’ve been clear that Bitcoin isn’t a security, but many of the ICOs that you see and talk about – they are securities,” Clayton added.
Continuing, the conversation touched on other pertinent issues affecting the cryptocurrency industry this year such as the pending decision on whether to allow Bitcoin exchange-traded funds (ETFs) to launch.
On all topics, Clayton remained tight lipped, repeating aspects of the SEC’s stance already known to the wider community.
“I’m not going to comment on timing or anything like that, but we’ve been clear on some of the issues that are of concern to us,” he said.
Paragon and Airfox, which in 2017 raised around $27 million from their ICOs, must now repay millions of dollars to investors in addition to fines after regulators found them guilty of selling unregistered securities.
Retail giant Carrefour, headquartered in France and operating in more than 30 countries, is deploying a blockchain food tracking platform based on Hyperledger in its Spanish network, a press release states Tuesday, Nov. 20.
The food tracking solution, initially developed by U.S. tech corporation IBM, will be used to track free-range chickens branded as “Calidad y Origen” (“Quality and Origin”) that were raised in the northern region of Galicia without antibiotic treatment. Each package in the Spanish network will be marked by a QR code providing detailed info on the chicken’s date of birth, type of nutrition, packing date, and more.
In the press release, Carrefour writes that blockchain is a key technology for supply chains, as it provides greater transparency and allows customers to review the entire distribution process. In the nearest future, the company is planning to extend the use of decentralized technologies, implementing them to all food from the “Calidad y Origen” line.
As Cointelegraph reported earlier, Carrefour already tested blockchain tracking for French poultry in early 2018, expressing its commitment to decentralized solutions.
In October, the retail giant announced it was joining IBM’s blockchain-based Food Trust that had been created back in 2016. Since the launch of the trials in August, the program has been joined by major retailers and companies, such as Nestle SA, Unilever NV, and Walmart.
Other firms with large supply chains have often applied blockchain in order to increase transparency, cut costs, and reduce time spent on food delivery. For instance, Walmart uses a farm-to-store blockchain tracking system for its leafy greens, while U.S. fast-casual salad chain Sweetgreen is planning to trace its salads in the same way.
As well, the world’s four largest agriculture companies, mostly known as ABCD, use blockchain and artificial intelligence (AI) to automate grain and oilseed post-trade execution processes, considered to be a highly manual and costly part of the supply chain.
E-commerce giant Amazon has won two patents related to methods for protecting the integrity of digital signatures and improving distributed data storage. The two patents were published by by the U.S. Patent and Trademark Office (USPTO) today, Nov. 13.
The first patent document, first filed in April of this year, outlines a “signature delegation” method for “protecting the integrity of digital signatures and encrypted communications,” by allowing for the generation, distribution, validation, and revocation of one-time-use cryptographic keys.
In the proposed system, these keys are arranged in what is known in cryptography as a “Merkle Tree” structure, which is a binary tree of hashes constructed from the bottom up.
As tech media platform Hackernoon outlines, Merkle Trees are a “fundamental part” of blockchain systems, as they allow for a large body of data to be efficiently and securely verified:
“The Merkle Root summarizes all of the data in the related transactions, and is stored in the block header. It maintains the integrity of the data. If a single detail in any of the transactions or the order of the transactions changes, so does the Merkle Root. Using a Merkle tree allows for a quick and simple test of whether a specific transaction is included in the set or not.”
According to the newly published patent document, Amazon’s proposed Merkle Tree-structured, encrypted system aims to tackle how to delegate signing authority from a central entity to the various subordinates that are authorized to sign on its behalf.
As the patent filing reads: “the signature authority provides a key-distribution service that distributes blocks of cryptographic keys to authorized signing delegates. An authorized signing delegate contacts the key-distribution service and requests a block of cryptographic keys.”
In cases where a given cryptographic key is “marked as invalid,” after a “key revocation service queries the Merkle tree of delegable keys,” then the service “provides the verifying entity with a revocation value associated with the revoked cryptographic key.” Amazon outlines that in some cases, the key revocation database may be implemented using blockchain.
Amazon’s second patent, released today and first filed mid-Dec. 2015, relates to issues pertaining to distributed data storage.
Amazon’s filing proposes a “grid encoding technique,” using groups of collected “shards,” where each shard represents a logical distribution of data items stored in a given grid. The patent filing suggests this method can help to minimize storage redundancy, while allowing for maximum availability, durability, and means of recovery.
Notably, several tech startups, such as Filecoin, Sia, Storj, and Swarm have all attempted to tackle similar issues with distributed data storage using blockchain technology, often combined with cloud storage solutions.
Beyond pursuing blockchain, cryptography and distributed data storage-related patents to expand its technological arsenal, Amazon has also filed for cryptocurrency-specific inventions. In April, Amazon Technologies was awarded a patent for a streaming data marketplace that would enable users to receive real-time crypto transaction data.
Two-thirds of The Ledger team—including me and Robert Hackett—were in Lisbon, Portugal last week for the massive Web Summit conference, where we spent much of our time talking blockchain and fintech (in between samplings of the city’s delicious egg tarts, pasteis de nata).
I had the opportunity to interview two people who made some of the boldest predictions about cryptocurrency prices over the past year: Tim Draper, the DFJ venture capitalist, who predicted that the Bitcoin price would hit $250,000 by 2022, and Peter Smith, the CEO and cofounder of wallet company Blockchain, who thought the total market value of cryptocurrencies would reach $1 trillion in 2018 (the current figure stands at about $212 billion).
Naturally, I wanted to know if they were standing by their predictions some eleven months into the cryptocurrency bear market, with Bitcoin’s price hovering around $6,400, nearly 70% below its peak.
Here’s how they responded during a panel on Web Summit’s centre stage—plus a few other predictions:
Draper: Well of course! Because there is $86 trillion worth of [fiat] currency out there in the world. We’re talking about getting to about 5% market share to get to $250,000 [per Bitcoin], and that seems like a drop in the bucket. And all we need to really do is make it so Bitcoin can be used to buy Starbucks coffee, and all of a sudden the world just opens up.
Smith: The other side of the prediction was that I expected the crypto markets to cool off for most of the next year….That said, the crypto market is so nascent today and so a quarter of a trillion, a half a trillion, a trillion—it’s still very small relative to the global financial services market….It means that there’s a lot of growth ahead.
WILL THE PRICE OF BITCOIN BE HIGHER OR LOWER IN A YEAR?
Smith: I am still really optimistic about the future of Bitcoin, and still personally allocating into Bitcoin. Higher.
Draper: So my prediction at $250,000 for 2022, maybe 2023 but in that range, is absolutely solid, but I’m not so sure how we’re going to get there, because it’s getting manipulated. A year from now, it’s higher.
ON COINBASE’S FUTURE
Draper: What’s the point of going public? Coinbase should probably stay private for as long as they possibly can….that said, I think Coinbase will be a trillion dollar business.
Smith: My guess is the only crypto companies that will go public are crypto companies that either have a high need of capital—so you’re looking at mining companies—or companies that have a cap table that’s at least 50% investors. I think a lot of those early companies are going to be put under a lot of pressure to go public despite the fact that it won’t make a lot of sense.
ON WHETHER BANKS WILL BUY CRYPTO COMPANIES
Smith: So I’ve talked to these institutions for years now and we work with some of them. The challenge for them is by the time they realize they need to go all in on the strategy, they probably won’t be able to afford one of the large crypto companies.
Draper: I would agree that Goldman [Sachs]—they’re going to be too late to buy these companies. And all they’re going to have is fiat currency to buy the company with. They better start buying Bitcoin if they’re going to try to buy one….If Goldman recognizes that they can only buy Coinbase with Bitcoin and they can’t use that fiat junk, then this won’t work for them and they’re going to have to buy it up and then the price will go up.
Major oil companies BP, Shell, and Equinor have united with large banks and trading houses to launch a blockchain-driven platform Vakt for energy commodity trading. The partnership was reported by independent news agency covering energy and commodities markets S&P Global Platts Monday, Nov. 12.
Apart from the three oil companies mentioned above, Vakt includes banks ABN Amro, ING, and Societe Generale, along with trading houses Gunvor, Koch Supply & Trading, and Mercuria. The blockchain solution, first announced in November 2017, will enable major industry players to move from “cumbersome” paperwork to smart contracts, thereby helping to reduce time spent on operations and make trading more efficient.
While participating in the S&P Global Platts Digital Commodities Summit in London today, Nov. 12, Lyon Hardgrave, product development vice president of Vakt, stated that the platform will launch by the end of November in the North Sea oil market. Hardgrave has also hinted about Vakt’s future plans for 2019:
"In 2019 we will look at ARA barges, waterborne markets and US crude pipelines. And by January we expect the first licensees will come on board, in addition to our shareholders."
Hardgrave also added that Vakt is receiving requests to look at petrochemicals and U.S. gas. He further stresses that the blockchain-driven platform, once fully operational, could cut up to 40 percent of costs in the post-trade resolution.
In addition, S&P Global Platts has conducted a poll throughout the summit, finding that a vast majority of participants expect blockchain applications to have reached mass retail market adoption by 2025.
S&P Global Platts itself has previously trialed blockchain solutions for oil industry. In February 2018, the company announced it was launching a decentralized platform that would “allow market participants to submit weekly inventory oil storage data.” The platform to track oil storage was deployed in the UAE’s Fujairah Oil Industry Zone (FOIZ).
A platform similar to Vakt already exists in Switzerland, where a group of major global banks, trading firms, and a leading energy company launched a joint venture, dubbed komgo SA, to oversee a new blockchain-based platform for financing the trading of commodities. The initiatives share some of the same participants, including ABN AMRO, ING, Koch Supply & Trading, Mercuria, Shell, and Societe Generale.
Central Bank of Nigeria (CBN), which doesn’t recognize cryptos as legal tender are getting requests from the country’s Fintech startups to provide legal guidelines for the cryptocurrency and blockchain industry. The Electronic Payment Practitioners Association of Nigeria (E-ppan) say that these lack of regulations are driving potential investments away from the continent.
E-ppan is a broad-based fintech industry representative body with ties to the Nigerian central bank, particularly “on regulations that govern the electronic payments industry.” Ade Atobatele, a member of the entity says:
“Investments in blockchain-based financial services such as cryptocurrency are today going to Rwanda and Malta, which have provided regulatory frameworks that guide operators of the technology.”
Even though the governor of CBN, Godwin Emifiele is not a big supporter of cryptos, the country’s parliament has probed an inquiry to figure the pros and cons of crypto-based payment. The population of the country accounts for the world’s third largest holdings of bitcoin, as a percentage of GDP, after Russia and New Zealand.
African Central Bank In Crypto-Phobia
As the use of cryptocurrencies gains momentum, African central banks, gripped by crypto-phobia, are pressing panic buttons, with some taking the easy way out by banning the use and trading in cryptocurrencies in their territories.They do not recognize cryptocurrencies as money, mediums of exchange or legal tender. They link cryptocurrencies to price volatility, fraud, money laundering, tax evasion, exchange control circumventions, terrorism financing and other criminal activities fueling illicit financial transactions.
African central banks have convulsed, issuing a plethora of warnings against the use of cryptocurrencies while others have gone to extremes, outright banning trading in them – an easier way out of what they perceive as the ‘crypto-quagmire’. According to a public notice issued by Adikwu Igoche, Manager, Research Development at Nigeria Deposit Insurance Corporation (NDIC), cryptocurrencies are not recognized as currency in Nigeria as they do not belong to the category of currencies or coins issued by the Central Bank of Nigeria (CBN).
Africans are becoming attracted to cryptocurrencies not only as speculative investments but as an alternative and cheaper payment and settlement methods, conduits for capital investments and options for savings and storing value as most African fiat currencies are very volatile and unstable and do not hold value against major currencies such as the US dollar.
The South Korean government has agreed to invest $35 million in next year’s budget to develop blockchain technology and industry related to distributed ledger technology (DLT), South Korea's largest economic information service company Korea Economic Daily reported Nov. 8.
South Korea’s government has held a meeting on industry related to DLT and blockchain technology with the participation of the Ministry of Science and ICT, the Ministry of Information and Communication, the Democratic Party of Korea, and others. The Vice Minister of Health and Welfare announced during the meeting that the ministries agreed to increase the budget for the next year by three times, approximately to $35 million.
This year, the Ministry of Science and ICT received 72 blockchain project applications from 41 institutions, and selected six final projects for their development in the public sector. For 2019, the Ministry is set to double the number of selected projects to 12, with three to four “private-led” blockchain projects as well.
The Ministry of Information and Communication will be responsible for providing technical, verificational, and consulting services for the blockchain startups for the next year, Korea Economic Daily reports.
The second vice minister of the Ministry of Science and ICT noted that “everyone agrees that the blockchain is a technology [that will] change the future,” continuing:
“We basically need to grow in the market [...] We will also need institutional and legislative support from the National Assembly [Korean parliament]. I look forward [...] for the development of the blockchain industry in Korea.”
Previously this fall, a sub-organization of the South Korean Ministry of Science and ICT, the Korea Internet and Security Agency (KISA), had already made an announcement about the government's plans to to spend about $9 million to spread blockchain projects throughout public and private sectors, Cointelegraph reported Sep. 4.
Back in October, South Korea’s Financial Services Commission (FSC), the national watchdog, warned that investing in cryptocurrency funds could violate the country’s Capital Markets Act.
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