Category Archives for eth price

Bull Reversal: Bitcoin Climbs Key Price Hurdle to Target $4K


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Bitcoin’s (BTC) price crossed key resistance yesterday, boosting the prospects of a stronger rally above $4,000.

The leading cryptocurrency by market value broke out of a bearish descending pattern and closed above key resistance at $3,633 yesterday. That came after picking up a strong bid on the anniversary of its 2017 all-time price high on Monday.

Tuesday’s close has also pushed up the probability of a bullish three-day close above $3,590 being confirmed on Thursday.

So, with the short-term picture looking bullish, the focus shifts to the next major resistance levels lined up at $4,000 (psychological hurdle) and $4,410 (Nov. 29 high).

BTC is currently trading at $3,750 on Bitstamp, having clocked a two-week high of $3,776 earlier today. The cryptocurrency has recovered 20 percent from the recent low of $3,122 but is still down 73 percent on a year-to-date basis.

Daily chart

BTC’s close above $3,633 on the daily chart bolstered the increasingly bullish technical setup, as represented by the positive divergence of the 14-day relative strength index (RSI) and the high-volume falling wedge breakout.

Further evidence that the bears have weakened is a bullish crossover between the 5- and 10-day exponential moving averages (EMAs).

Hourly chart

On the hourly chart, the bull flag breakout confirmed yesterday created room for a rally to $3,840 (pole height added to breakout price).

Both the rising trendline and the stacking order of the simple moving averages (SMAs) also favor an extension of the ongoing rally.

Monthly chart

The outlook as per the monthly chart would turn bullish if and when prices beat the former support-turned-resistance of the 21-month EMA, currently at $5,728.

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  • Tuesday’s close above $3,633 confirmed a short-term bearish-to-bullish trend change.
  • BTC will likely test the psychological level of $4,000 in the next 48 hours, with the next target being resistance at $4,410 (Nov. 29 high).
  • A daily close below $3,633 would weaken the bullish scenario, but is looking unlikely in the short-term

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; charts by Trading View

UK Tax Agency Publishes Detailed Guidance for Crypto Holders


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The United Kingdom’s tax agency has just released a comprehensive explanation of how it sees crypto assets and how individuals may be taxed on their holdings.

Her Majesty’s Revenue and Customs (HMRC), the government agency responsible for collecting taxes and overseeing other aspects of the nation’s coffers, explained that Wednesday’s report specifically focuses on how individuals possessing crypto assets might be taxed, but does not outline the tax scheme for tokens held by businesses or for business purposes. Guidance on that will be published at a later date.

The document follows on previous reports from the UK government, treating crypto assets more as property than as a form of money.

“HMRC does not consider crypto assets to be currency or money. This reflects the position previously set out by the report from the Cryptoasset Taskforce (CATF),” it explains, noting that the task force classified cryptocurrencies as either exchange tokens, utility tokens or security tokens.

Importantly, Wednesday’s report notes that how a token is treated for tax purposes depends on the token’s use case, rather than its definition.

“This paper considers the taxation of exchange tokens (like bitcoins) and does not specifically consider utility or security tokens. For utility and security tokens this guidance provides our starting principles but a different tax treatment may need to be adopted,” HMRC explains.

Investors who purchase tokens specifically in the hopes that their value will increase will be required to pay capital gains tax when they sell, while individuals who receive tokens from their employers as a form of payment, from mining, transaction fees or airdrops will have to pay income tax and national insurance contributions.

The report continues:

“As set out in more detail below, there may be cases where the individual is running a business which is carrying on a financial trade in cryptoassets and will therefore have taxable trading profits. This is likely to be unusual, but in such cases Income Tax would take priority over the Capital Gains Tax rules. HMRC will publish separate information for businesses in due course.”

Notably, HMRC will not consider the purchase and sale of cryptoassets to be the same as gambling.

The report goes into detail, explaining to UK residents just how and when their holdings – or transactions – may be classified as securities, providing examples to demonstrate.

To simplify the calculations required, individuals can “pool” different assets together. Rather than calculating the gains or losses on each asset individually, they can simply look at the total value when placed in the pool and compare that to the value at the end of the tax period.

Forks and losses

The new guidance later outlines how forks of a blockchain may impact taxation, specifically citing hard forks which cause the chain to split and new tokens to be formed.

The section details how forks occur, when a chain might split, and how the value for the subsequent coins would be determined, adding:

“New cryptoassets can only be disposed of if the exchange recognizes the new cryptoassets. If the exchange does not recognize the new cryptoasset it does not change the position for the blockchain, which will show an individual as owning units of the new cryptoasset. HMRC will consider cases of difficulty as they arise.”

Other provisions account for assets which have lost their value, if tokens are stolen or defrauded from the investor or even if the individual somehow loses their private keys.

Regarding the latter, HMRC advises that an individual will likely have to claim that their cryptoassets now have “negligible value,” which could, if approved, allow them to claim a loss.

London image via skyearth/Shutterstock

Venezuela Isn’t the Crypto Use Case You Want It to Be


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Cryptocurrency enthusiasts love to talk about Venezuelan users – wracked by political oppression, economic collapse and food insecurity – as a prime example of bitcoin’s subversive potential. But the reality is far more complicated.

Venezuelan expat David Díaz of the Blockchain Academy in Buenos Aires told CoinDesk that many Venezuelans are learning about cryptocurrency through forced exposure to the state-issued petro, in addition to aggressive outreach strategies from projects like dash. Many don’t even know that bitcoin is useful itself, beyond its ability to ease the transfer of assets like dash or dollars.

That’s why Díaz is teaming up with fellow expat Jorge Farias of Panama-based startup Cryptobuyer to offer a free educational course about bitcoin to Venezuelans, including online programming and in-person classes in Argentina, Venezuela and Panama. News of the program was revealed exclusively to CoinDesk.

The course, which starts in February, will be very similar to the paid programs Díaz has already run for roughly 2,000 students in Buenos Aires, including a few hundred Venezuelan migrants. But now the focus will be on providing free information that is useful in a Venezuelan context, where cheap Android phones and censored internet access impact usability.

Díaz told CoinDesk:

“The main benefit for Venezuela is the knowledge, what to do with bitcoin, how to escape from the power the Venezuelan government has placed there, not only economically but also for information. There is a lot of censorship there.”

Fellow expat Eduardo Gomez, the head of support at the crypto startup Purse who recently moved to Argentina, now uses the peer-to-peer exchange LocalBitcoins to help his mother pay bills.

“The government has [told] the private banks and government-run banks that external IPs should not be able to access their bank accounts,” Gomez told CoinDesk. “The government wants to control remittance businesses.”

Díaz and Gomez are among the many Venezuelans connecting with their homeland through the bitcoin-centric diaspora. WhatsApp groups and Instagram communities help expats coordinate financial transactions on the ground. LocalBitcoins usage surged throughout the year and now facilitates weekly volumes worth billions of bolivars.

According to a recent report by the United Nations, a whopping 17 percent of the country’s population has fled Venezuela in recent years.

There are now many Venezuelan expats working on various projects to help their countrymen, including Alejandro Machado, co-founder of a San Francisco-based nonprofit called the Open Money Initiative that aims to create fintech products and tools for Venezuela. Machado has helped several Venezuelans use exchange platforms like LocalBitcions and AirTM, since the latter is blocked inside Venezuela.

The challenges Machado experienced helping crypto newbies highlights the discrepancy between the tech-savvy intelligentsia and low-income communities.

“They trust me and I can do it for them, but they don’t trust themselves doing it,” Machado said. “The level of technical sophistication among everyone [in Venezuela] is not the same, and it’s lower than you’d expect.”

Migration risks

Some Venezuelans fleeing the country do so with their assets held in bitcoin, to avoid being harassed at the airport or the border. Both Díaz, who moved to Argentina in 2015, and Gomez, who moved in September 2018, are among them.

“Carrying around cash is so risky, any valuables, jewelry, whatever, it’s so risky,” Gomez told CoinDesk. “Bitcoin helped a lot because we didn’t need to carry anything physical around. We came here to Argentina and all our savings were in crypto.”

Gomez was unbanked in Argentina for several months, until Tuesday, and relied entirely on the Buenos Aires bitcoin community to help him liquidate crypto assets as needed. (Bitcoin’s price volatility can feel negligible when compared to the Venezuelan bolivar, which the IMF predicted could hit an inflation rate of 1,000,000% by 2019.)

“This is a real use case, but it’s not something that a lot of people are doing because a lot of people don’t know it’s possible,” Machado said, adding that if crypto UX “doesn’t get any easier, we won’t see this operating at scale.”

Díaz said expats become more involved with the broader bitcoin ecosystem when they leave Venezuela. In part, this is due to fear that public association with crypto inside Venezuela could attract attention from corrupt government officials.

“There was a big community in Venezuela, but we were mostly underground,” Díaz said. “In Argentina, I could find a more open community. We could have regular meetups.”

Although some local projects like EOS Venezuela have so far managed to provide liquidity to small groups of local users without such conflicts, those use cases are both nuanced and nascent.

Borderland economy

Some migration experts compare the Venezuelan crisis to the Syrian civil war, a mass forced-migration movement that leaves many unbanked and desperate for basic necessities.

The difficulty low-income families have in buying food is precisely what the nonprofit GiveCrypto sought to address with its campaign to distribute EOS tokens to 100 families living in the Venezuelan border town of Santa Elena de Uairen.

GiveCrypto’s executive director, Joe Waltman, told CoinDesk that EOS Venezuela provides fiat liquidity to a local merchant while participants use the EOS wallet Bonnum, which does not support bitcoin nor offer users their private keys.

On one hand, this allows several families to use the same phone to access EOS donations. Plus, Bonnum CEO Edmilson Rodrigues told CoinDesk from Brazil that the startup aims to someday offer a blockchain-agnostic wallet.

However, for now, Venezuelan merchants appear to be more interested in using EOS to access fiat than holding crypto itself.

Waltman explained:

“You go to this person and say this dumb foreigner is going to be dropping a bunch of money into this town and it’s only going to be redeemable in a couple of locations. Do you want to be one of those locations?… It hasn’t been a hard sell.”

This experiment originally grew out of Bonnum’s closed beta in Brazil, where the startup discovered a few dozen families were using EOS to buy necessities from a local merchant close to the border who accepts EOS. Those families then routinely trekked across the Venezuelan border, delivering goods to Santa Elena de Uairen. This type of crypto-fueled borderland economy is increasingly widespread.

Jose Antonio Lanz, a Venezuela-based reporter at EtherWorldNews, told CoinDesk he used Facebook and Telegram groups to learn about cryptocurrency. Then he sent bitcoin to a Colombian black market dealer who brought medicine across the border for Lanz’s mother, who was battling cancer.

“Now I can say that my mom is alive thanks to bitcoin,” Lanz said, adding that he tried local hospitals and pharmacies but in the end was forced to turn to the black market.

“The important thing is to be able to give the sellers the money as they want. Some wanted bolivars, some wanted PayPal,” he continued.

Crypto limitations

All things considered, there is still a long way to go until crypto is used for its own merits in Venezuela. At the moment, it’s often used as a tool for acquiring or liquidating fiat.

Machado, of the Open Money Initiative, told CoinDesk that daily crypto usage is “not a widespread phenomena” on the ground. Waltman agreed, saying:

“There’s a sad irony. The poorer you are, the less you can actually use cryptocurrency.”

Díaz disagreed, saying that almost every Venezuelan he knows now uses bitcoin for remittance and international transfers. He conceded, however, that most are using it as a tool to get goods delivered to Venezuela or acquire and then store dollars in an offshore bank account.

Dash and EOS may have more merchant adoption inside Venezuela, according to Díaz, but they rely on sponsored liquidity networks and local ambassadors converting new users who often lack a basic understanding of cryptocurrency.

As such, Open Money Initiative co-founder Jill Carlson said that there’s a dire need for more research on the ground in Venezuela. Otherwise, cryptocurrency distribution initiatives run the risk of becoming mere marketing stunts.

“Maybe we find that cryptocurrency is actually, in its current form, not suitable at all for a situation like the one inside Venezuela,” Carlson said. Waltman agreed that GiveCrypto is still figuring out what a long-term strategy in Venezuela would look like.

Speaking to how middle-class households use crypto to store value and buy basic goods like shampoo, Carlson added:

“It’s not just a single experience or situation. And then for us, as entrepreneurs working with technology and crypto, we need to recognize that the person who is worrying about shampoo and the person worrying about how they are going to feed their kids tonight are so, so different.”

As Carlson’s and Rodrigues’ respective projects collect data, Díaz’s upcoming Blockchain Academy program aims to bridge the knowledge gap inside Venezuelan so that newbies can choose which cryptocurrency and storage solutions work best for them.

Meanwhile, the underground migration network continues to spread.

“I know other projects that are helping people to get out of the country with bitcoin,” Díaz said.

Venezuela protesters image vi Edgloris Marys/Shutterstock

Bitcoin Surges 18% in 3 Days as it Nears $3,800: What’s Next For the Market?

Since December 17, within less than three days, the Bitcoin price has surged from $3,181 to $3,776 against the U.S. dollar, by more than 18 percent.

On cryptocurrency-to-fiat exchanges like Coinbase and Bitstamp, Bitcoin (BTC) has slightly corrected to $3,700 but the breakout of the dominant cryptocurrency above the $3,700 mark has led analysts to consider the possibility of the asset testing major resistance levels in the $3,800 to $4,200 range.

Where is Bitcoin Heading to Next?

On Monday, when the Bitcoin price was hovering at around $3,500, a cryptocurrency trader with the online alias “The Crypto Dog” said that BTC could either drop below the $3,400 mark if it loses momentum or potentially rise to $3,800.

The analyst said:

BTC consolidation below resistance. If we lose strength I look at $3,400 for support. Below there I am concerned. A break out and I’m eyeing $3,800.

Since then, Bitcoin has shown strong signs of breaking out of the $3,800 resistance level, which it has not been able to test since the first week of December.

Bitcoin likely experienced a substantial increase in price over the last week due to severely oversold conditions. From November 28, the value of BTC has continuously fallen against the USD, experiencing a steep sell-off without high sell pressure.

As the market started to show extremely oversold conditions, many major crypto assets started to initiate a corrective rally, eventually pushing the entire market to surge in valuation.

Traders that shorted Bitcoin from the top, at around $19,500, have also started to cash out their positions estimating the mid-term bottom of BTC to be in the $3,000 to $4,000 range.

Speaking to Bloomberg, Mark Dow, a trader who called the top of BTC, said:

“I’m done. I don’t want to try to ride this thing to zero. I don’t want to try to squeeze more out of the lemon. I don’t want to think about it. It seemed like the right time. They just saw it was going up and wanted a piece of it.”

What Price Surge of Other Crypto Assets Show

Analysts have generally attributed the intensified decline in the value of Ethereum (ETH), Bitcoin Cash (BCH), and other major crypto assets to the lack of fundamentals. Ethereum has not been able to show a high level of user activity in decentralized applications (dApps) while Bitcoin Cash struggled to gain merchant adoption.

The surge in the price of ETH, BCH, and other protocols like EOS show that traders are more comfortable in entering high-risk positions and confident in the short-term trend of the market.

Whether both major cryptocurrencies and small ERC20 tokens can maintain their momentum throughout the weeks to come and sustain the price range achieved in the past few days remain uncertain. But, the recent corrective rally allowed the crypto market to obtain some breathing room and avoid a large drop below the $100 billion valuation mark.

Click here for a real-time bitcoin price chart or here to review our latest crypto market coverage.

Featured Image from Shutterstock. Charts from TradingView.

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Australian Tax Office Warns Traders About Declaring Cryptocurrency Profits

The Australian Taxation Office (ATO) has reissued a warning to traders to ensure they declare their cryptocurrency profits when reporting their annual revenues. The ATO has warned Aussie crypto traders numerous times in the past but the issue is now reaching fever pitch.

Cryptocurrency regulatory requirements across Western nations tend to be quite lax when compared to their Asian counterparts, but times are changing, especially in Australia.

Aussie Tax Office Wants their Cut of Cryptocurrency Profits

The ATO have warned Aussie crypto traders and exchanges that they must declare their cryptocurrency profits as the tax regulators are looking to enforce greater transparency. Reading between the lines, it means they want their cut and are hell-bent on getting it.

Australia Bitcoin tax
Australia’s taxation authority has reminded crypto adopters to disclose their profits.

Digital asset exchanges across Australia must now verify the identity of their users and will need to report any transactions over $10,000 that are deemed ‘suspicious’. Although the ATO have cited this is linked to Aussie anti-money laundering and anti-terrorism finance laws, many crypto users will see this differently.

A spokesperson for the ATO recently made a statement reported in the Australian Financial Review that said:

While there is no specific label on the capital gains schedule or income tax return to identify how many people have invested in cryptocurrency we are still looking at lodgment activity this year to determine any significant impact of cryptocurrencies.

Are the ATO Reacting to Increased Tax Questions?

Although to the laymen it would appear that the ATO is simply trying to enforce greater transparency so they can get their taste of the action, they are apparently just reacting to an increase of queries in regards to the tax obligations on those making cryptocurrency profits by saying:

We have observed through our ATO community channel and advice areas an increase in questions relating to tax obligations of cryptocurrency activity, which we see as a positive in people wanting to do the right thing in meeting their obligations.

It’s all about people doing the right thing. Of course!

If you are an Aussie crypto trader and you want to ensure you meet the ATO’s taxation laws on cryptocurrency profits, you will have to keep records and dates of your crypto transactions. You will have to show the amount in Aussie dollars and name the purpose of your transactions and other parties involved in the trade.

Although many will cite that such transparency is essential if crypto is to evolve, most crypto supports will believe this goes against the whole ethos of cryptocurrency.

Featured image from Shutterstock.

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Bitcoin Futures Manipulation: How it Works and How to Reduce It

The markets were euphoric. The community was cheer-leading the imminent launch of Bitcoin futures first on the CBOE and then on the CME. Bitcoin reached its all time high.

They saw this as an indication that institutional investors were just around the corner and that Bitcoin was about to “moon.” Fast forward to today and the feeling is quite the opposite: hodlers are left scratching their heads and licking their wounds.

So, what happened?

While there were a number of factors that drove Bitcoin into one of its worst bear markets to date, one cannot ignore the potential negative impact that these futures had on the market.

In this article, I will take a look at how futures contracts could have been used to skew the markets and why contract delivery is such an important distinction for a futures contract. But first, let’s start with a bit of futures theory.

Cash vs. Physical Delivery

When it comes to futures contracts, there are two main types that exist on the financial markets currently. These are cash settled futures and those that involve physical delivery of the underlying asset.

When you enter into a cash future, you are merely placing a “side bet” on the price of an underlying asset. You will post a certain amount of collateral for the futures contract which will be adjusted based on the profit / loss of the contract going forward.

Cash vs. Physical Futures Settled
Cash vs. Physical Futures. Source

On the expiry of the contract, the exchange will settle the futures trade purely with cash. There will be no exchange of any of the underlying asset. This is mostly used in cases where the underlying asset is hard or impracticable to deliver.

Cash futures are often used in the Equities futures markets when the traders are taking positions on an equity index such as the S&P500. In this case, it is much simpler to just settle the trade with cash.

This is in stark contrast to the physically settled futures contracts where the counter-parties are agreeing to exchange the asset at the end of the contract. The long party will take delivery of the asset from the short party on the expiry of the contract.

The delivery location and terms will be stipulated in the contract and the exchange will enforce the underlying rules. This is mainly used in the commodities markets as well as the forex markets.

So why is deliverability of the contract important for the underlying market?

Cash Future Manipulation

Given that a cash settled future involves no transaction on the underlying asset itself, there are no parameters that are set as to how the futures contracts will be used. The only variables that are stipulated in the contract are the expiry price and time.

This basically means that anyone with a large enough position in the underlying asset can impact on the price in the futures market by buying and selling in the physical market.

How do we know that this can happen?

It is a well-known market manipulation tactic that is called “banging the close”. There has been research done on the potential for this manipulation. There is also precedent of it being used in the past by some firms.

Banging the Close CFTC definitions
CFTC Definitions of “Banging the Close”. Image Source

Hedge funds with large positions in the underlying asset could create activity in the price prior to future expiry dates. They will try to use their position as well as other tactics such as negative marketing campaigns to drive the price down. You can read more about some of the tactics that were used on Herbalife shares in the past.

Of course, this is very risky in the transparent and very public equities markets. People can see in the order books who is trading what and when. Regulators such as the SEC and CFTC have actively pursued market manipulation cases.

But what about in the unregulated and opaque cryptocurrency markets?

BTC Futures Manipulation

Even before the launch of the CBOE and CME futures there were many investors who were looking for a method to short Bitcoin. The introduction of an exchange listed futures contract was an open invitation.

Moreover, given that these futures were cash settled, hedge funds and crypto whales saw a lucrative opportunity for dubious tactics. This was even postulated prior to the launch by the Wall Street Journal as they talked about the risk of manipulation.

Indeed, it seemed quite suspicious that the price of Bitcoin reached its all-time highs just prior to the CME launch. It is entirely feasible that large investors were accumulating physical Bitcoin thereby increasing the Spot price and, subsequently, the future price.

Banging the “open” so to speak.

Bitcoin Price Collapse
Collapse of Global Bitocin Markets After CME Futures. Image via Tradingview

As the contracts opened up for trade, those same individuals started accumulating short positions in the cash futures market. They locked in futures expiry prices of close to $20,000 for contracts ending in January.

Then, they start banging down the price on the way to the close.

Those who had accumulated their Bitcoin holdings in the run up the futures open could now start selling them in the spot market. They locked in higher price levels on these physical holdings while tanking the price and profiteering in cash on the futures market.

Cash in, buy again. Rinse, repeat.

The CBOE and CME were aware of these risks and hence they decided to use exchanges that did full KYC as the reference point for the futures prices. For example, the CME referenced a collection of 5 reputable exchanges including Coinbase, Bitstamp and Kraken. The CBOE referenced the Gemini Exchange.

However, there is no way to contain a large and opaque global market. Most of the Bitcoin trading volume was being done on offshore exchanges where there were less thorough KYC practices. If global prices start falling, so will those on the reference exchanges.

In theory, it sounds plausible. But did it actually happen?

Correlation or Causation?

If one were to take a look at the Bitcoin peak and then fall, it seems to perfectly map the introduction of the contracts. While there was not an explosion in futures open interest when the CBOE contracts went live, volume steadily picked up when the CME futures started trading.

We need look no further than the comments by the Federal reserve bank of San Francisco. They feel confident enough in their assertions that the futures markets had a significant impact on the Bitcoin markets. The piece states that:

“The new investment opportunity led to a fall in demand in the spot bitcoin market and therefore a drop in price. With falling prices, pessimists started to make money on their bets, fueling further short selling and further downward pressure on prices.”

So, while they are not laying out a case for any sort of coordinated manipulation, they are explaining the exact dynamic that would take place if it were happening.

One can also observe the large uptick in the volatility of the spot market on the expiry dates of the futures markets. As noted by Tom Lee of Fundstrat Global Advisors, this shows that traders could have been actively trading the physical market to impact on the cash futures market.

So while this is not decisive evidence of manipulation, it does paint a dire picture for the listing of Nasdaq cash futures and the impact that this could have to further drive unnecessary volatility.

So what can be done about this?

Physical Delivery

Bitcoin is an asset that is incredibly easy to transfer. It is easier to transfer than shares, commodities and even fiat currency.

Hence, it seems to be an ideal candidate for physically delivered Bitcoin futures. The counter-parties to the derivative contract will enter a futures contract as it was intended. They will agree to physically buy or sell the asset on expiry.

This will also mean that the individual who is shorting (selling) the Bitcoin in the future will have to place the Bitcoin into storage to physically send it to the buyer on the expiry of the contract. They cannot use that Bitcoin separately to create buying pressure in the physical market.

More transparency, more certainty, less volatility. Physically delivered Bitcoin futures could actually contribute to a reduction of volatility as businesses and investors secure guaranteed future prices for their eventual transaction.

So, when can we expect to see physically settled contracts?

You will no doubt have heard of the exciting products and technology that is being developed by Bakkt. This is a digital currency initiative that is being backed by ICE (Intercontinental Exchange).

One of the most important things that they will be launching is their physically delivered Bakkt Bitcoin (USD) Daily Futures Contract. These call for delivery of one bitcoin held in a Bakkt Warehouse.

Bakkt Futures Terms
The Bakkt Futures Contract Terms. Image via ICE Exchange

This means that counterparties will store their physical Bitcoin at Bakkt which will be held in fully transparent manner prior to the expiry. The future seller cannot use that Bitcoin in any capacity in the physical market before termination of the contract.

These contracts will allow for block trades and will take advantage of ICE’s proven financial market infrastructure and technology.

The Bakkt Bitcoin futures are set to launch on the 24th of January next year. It will be interesting to see whether these products will be able to tame any of the volatility that the cash futures helped spurn.

Conclusion

It has no doubt been a tough year for cryptocurrency markets. The community was hailing any sort of potential institutional adoption without consideration to the impact that it could have on the markets.

Cash futures were one of those products.

The markets are comprised of some really smart hedge funds, crypto whales and algorithmic traders. They knew the exact dynamics that cash futures could bring to the still nascent Bitcoin markets.

Whether they actively took advantage of this to enrich themselves, no one can really tell. What is clear though is that cash futures didn’t bring the avalanche of institutional adoption many were hoping for.

So, as we usher in the new year, let’s focus our attention on the types of financial products that actually bring value to the ecosystem and aid adoption.

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Chinese Internet Court Uses Blockchain To Combat Online Plagiarism

An Internet Court launched in Eastern Chinese City Hangzhou will now use blockchain to fight plagiarism for online writers, local Chinese news outlet China.org.cn reported. China launched its first internet court in the city of Hangzhou to deal with internet related cases, save time and reduce overhead costs of getting justice out of the system.

At the time of the launch, the court was expected to accept court filings and cases electronically and given the mandate to rule online cases via live stream. Plaintiffs may verify their identity with a government-issued ID or through their Alipay account.

The Hangzhou Internet Court operates as an incubator for the governance of the internet space in China to settle “diversified Internet disputes, and a ‘first mover’ for the transformation of Internet trials.”

Hangzhou has a large percentage of online writers in China. The Binjiang District of the city has a “writers’ village,” which is home to over a hundred popular online writers. These writers have had issues with piracy over the years, and it has become increasingly challenging for them to prove their ownership of any piece of work. The report stated that while these writers used to resort to downloaded content and screenshots as proof of ownership, these pieces of ‘proof’ can easily be forged, making them ineffective as evidence.

From netcourt.gov.cn

Court To Use Blockchain Evidence in Copyright Infringement Cases

The expense of legal services and notary fees also make it difficult for writers to pursue justice against those who infringe on their copyright, the report argued. However, the Hangzhou Internet Court believes that it is nearly impossible to tamper with evidence that is logged on a distributed ledger or blockchain, “due to its decentralized and open distributed ledger technology.”

Wang Jiangqiao, who works as a judge at the court, was of the opinion that blockchain is beneficial to writers due to its tamper-proof nature, which gives it the ability to “track “authorship, time of creation, content, and evidence of infringement.”

A few weeks ago, the Hangzhou Internet Court became the first court in China to recognize blockchain technology as a means of storing evidence. The decision stemmed from a case in which the plaintiff, a company based in Hangzhou, sued the defendant, a Shenzhen-based tech firm, or making publications of the plaintiff’s copyrighted material on its official website.

The plaintiff captured the webpage of the defendant as well as the source code, and uploaded them to the Bitcoin blockchain. After investigations were concluded, the Hangzhou Internet Court maintained that this form of electronic data would henceforth serve as a form of evidence in copyright infringement cases.

China has used the blockchain in other areas of law enforcement in recent times.

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Op-Ed: Defrauded Municipalities Demonstrate Use Case For Smart Contracts

In June, Galveston County (Texas) discovered that it had paid over $525,000 to someone it didn’t owe money to, a scam artist posing as a representative of a firm doing work for the county. The author contends this would be nearly impossible in a system of smart contracts described herein.

The scammer used social engineering to talk his way into a small fortune. According to the most recent reporting, the funds have never been recovered, prompting a local judge to call for the resignation of the two parties he feels most responsible.

Note: the author’s opinions are his own and do not reflect the views of CCN or its other staff.

Chron.com’s Nick Powell writes:

While the stolen funds are a tiny fraction of Galveston County’s $149 million budget, similar cyber attacks have raised the alarm in other Texas localities, including in Harris County, where $888,000 was nearly stolen by a person posing as an accountant with a Hurricane Harvey contractor. The city of El Paso was also robbed of $3 million in 2016 from a phony vendor.

Human error beats all in the rock, paper, scissors of life. Police entrusted with law and order frequently misapply it. People forget their passwords or lose their two-factor authentication devices. And occasionally clerks part ways with hundreds of thousands of dollars of their constituency’s money.

If only there were a technology that could prevent such nonsense. Something secure, with built-in authentication and protocols to prevent both fraud and default. If only – ah, wait. There is such a thing. The very technology we cover most frequently here at CCN: blockchains and smart contracts.

Galveston Beach, Galveston County, Texas

How A Smart Contract Could Have Prevented The Fraud In Galveston County

One thing ought to be made clear here: the situation of a municipality paying and offering contracts does not necessarily present a use case for a fully decentralized blockchain. Nor does it exactly refute the need of one, but hear the author out.

Instead, let’s talk about a distributed, permissioned ledger. Not only because it’s easier for local mandarins to stomach if they know they have the ability to override mistakes, but also because ultimately the immutable rules of cryptographic smart contracts have to be cognizant of the ebb and flow of laws and regulations.

This is to say, a real value in such a smart contract would be its ability to provide reversibility, something cryptonaughts have often lamented about the existing financial system but which in this case did not work out for Galveston County.

This idea might be unpopular, so why not elaborate some?

First of all, reversibility would be far less necessary in a system where users are required to authenticate themselves in order to receive payment, not simply convince a few clerks that they were the real McCoy. Secondly, contractors would be incentivized to protect their authentication credentials, because if the system were properly designed, the funds would only be allocated to such contracts once. Meaning that if by some means an attacker compromised the credentials of the contractor and eventually got away with the money, it’s coming out of the contractor’s payment, not the taxpayer’s pockets.

Transparency and AML-Friendly Stablecoins To The Rescue

But smart contracts provide other important benefits for municipal contracting systems.

For one, the strict implementation of milestones would become possible. A contractor is paid based on progress, an agreed-upon amount at a time. This would open competition and save taxpayers money. Some contractors are more efficient than others. Those who can bid shorter times and lower prices across the board will win, while those who actually perform will win future bids. A separate bid on each milestone of a project can be made.

Of course, the most important part of this for the public would be that the important details of the transactions would become publicly available. Deadlines on specific aspects of projects, who is doing the work, and how much it is costing the taxpayer would create a degree of accountability not available in the opaque systems of present day. There is a chance it would make civic participation interesting to more citizens, as they can now gather facts without nearly the effort.

As to the actual payment mechanism, well, that’s the trickiest part. The author doesn’t advocate that suddenly contractors must be paid in Bitcoin, but perhaps stablecoins could be considered as the tokens that would be locked in the smart contracts, with the payer footing the cost of transaction fees and compensating for tax liabilities incurred. The system would have to project enough savings overall to be viable.

But one thing that would be less likely, if even possible, in a system where code backed by laws was the final arbiter: the theft of many thousands of dollars with a few phone calls and falsified documents. A much greater effort would be required to conduct such theft, and ultimately if stablecoins were used, the realization of such proceeds would be far harder to achieve than with regular old fiat cash.

Images from Shutterstock.

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Irish High Court Ruling ‘Breaks New Legal Ground,’ Reports Local Media

Ireland’s High Court has ruled that 25,000 euro in cryptocurrency held by a man in prison is considered “the proceeds of a crime,” the Irish Times reported on Tuesday, Dec. 18.

The court “broke new legal ground”, the Irish Times states, while considering the case of Neil Mannion — a man reportedly serving a six-and-a-half year prison sentence at Wheatfield Prison in Dublin for drugs offences since 2014.

Mannion had reportedly admitted to selling drugs on the darknet, specifically on Silk Road and Agora. He was jailed at the Dublin Circuit Criminal Court in 2015 after purportedly pleading guilty to charges of possession and intent to distribute various controlled substances.

The Irish Criminal Assets Bureau (CAB) withdrew his Bitcoin (BTC) revenues along with funds from banking accounts and credit cards in proceedings which where purportedly settled in February 2016.

Following further investigation, CAB found an online crypto wallet holding Ethereum (ETH) worth approximately 25,000 euro. Since Ethereum had not “started operating as a trading currency” at the time of the first proceedings, it was not considered in the initial investigation, states the Irish Times.

CAB submitted an application seeking to obtain the Ethereum in July 2016. Mannion opposed the application, reportedly stating that Irish authorities no longer had rights to his computer system or any copies of it, as the investigation had been concluded.

Justice Carmel Stewart ruled that his rights had not been breached. Moreover, she stated that the initial investigation was potentially undermined by the “intricacies of data privacy rights” used by cryptocurrency exchanges. Stewart purportedly noted that, while the details of the investigative process raised serious questions, they did not constitute a breach of Mannion’s constitutional rights.

Irish courts, which are part of a common-law system, observe and are bound by precedents set in higher courts.

In June, the co-founder of Irish BTC broker Eircoin accused the Banking and Payments Federation of Ireland (BPFI) of discriminating against crypto-related accounts. He also claimed that the banks would avoid opening new accounts for crypto businesses, following undisclosed official guidelines not to deal with illegal activities associated with crypto trading.

However, the BPFI, along with other major Irish bank AIB, denied the allegations and stated that they had not discriminated against crypto-related firms.

Bankers Raise Concerns Over Robinhood’s New Saving Accounts

Sarah Grano

Robinhood launched its 3% interest “checking and savings” accounts last week. With 3% well over the average rate offered by conventional banks and some key differentials in the insurance that protects investors in Robinhood’s new products, U.S banking organizations are speaking out.

The new accounts from the trading platform, at first glance, appear to be like conventional savings accounts, with higher returns. However, savings accounts are normally protected by the Federal Deposit Insurance Corporation (FDIC). Robinhood’s accounts are instead protected by the Securities Investor Protection Corporation (SIPC).

Chris Cole, the senior regulatory counsel for the Independent Community Bankers of America (ICBA), told American Banker yesterday that Robinhood’s use of the terms banking, checking, and saving could be “deceptive.” Cole added:

This is supposed to be a brokerage account, but they’re running around making it look like a banking account.

Unlike FDIC coverage, SIPC coverage only guarantees an account holders balance to the value of their funds on the day of any insolvency. Cole said Robinhood:

Does not sufficiently explain the difference between SIPC protection and FDIC insurance.

Concerns Raised with Regulators

Stephen Harbeck, CEO of the SIPC, has already raised his concerns, telling news outlets he simply had not been consulted, and that he has already filed a complaint with the U.S Securities and Exchange Commission (SEC) over the matter. Harbeck told CNBC:

We want to make sure that investors know there’s some risk there.

Robinhood has yet to respond to the concerns raised. Its website FAQ’s for the new products outlined:

Your cash and securities in Robinhood are protected up to a total of $500,000 by the SIPC, $250,000 of which can be in cash, the rest in securities…Similar to FDIC insurance, SIPC protects cash in your account if the financial firm fails.

Sarah Grano, a spokesperson for the American Bankers Association, appears to also be taking note of this and told American Banker in an email that:

We appreciate any effort by regulators to clarify when deposits are fully insured and when they are not, and the need to respond quickly to misrepresentations.

An attorney, Brian Hester, said Robinhood is at risk of being classed as an “unlicensed banking business” if the new savings products are not viewed as “incidental” to its securities trading business by regulators. Hester explained:

Many state laws will have an exception for a registered broker-dealer to engage in banking activities, but only if it’s incidental to their brokerage business.

Robinhood is a broker-dealer and not a registered conventional bank. As such it hasn’t had to demonstrate the liquidity and risk management processes that regulated banks have to. It also does not have access to FDIC protection for its customers.

This combined with offering a rate far exceeding the average of 0.08% for checking accounts and 0.1% for U.S savings accounts is likely to continue to cause uproar amongst banks, associations, and likely regulators. Any resulting action by the U.S SEC or the SIPC could impact both the new products and Robinhood’s existing trading business.

Featured image from Shutterstock. Sarah Grano headshot from LinkedIn.

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