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SunnyOctober 18, 2018



The U.S. Securities and Exchange Commission is launching a portal for engaging with companies using blockchain, artificial intelligence and more.

Available today, the new fintech hub, or FinHub for short, is designed to bring the SEC’s existing services to a single access point and provide an easier way to for companies to communicate with the public.

As startups building with blockchain increasingly come under the SEC’s attention, the new portal has the potential to streamline the process of building compliant platforms prior to launch.

The SEC’s FinHub will be led by Valerie A. Szczepanik, senior advisor for digital assets and innovation and associate director in the SEC’s Division of Corporation Finance.

“We’ve been doing these things for years,” Szczepanik told Forbes. “This is going to bring it all together.”

The FinHub will be staffed by representatives from the SEC’s divisions and offices who have expertise and involvement in fintech-related issues. 

In addition to asking questions of the SEC, those who use the site will be able to request meetings. To increase engagement, a binary code “Easter egg” message has been hidden on the page.

Over the past year the number of cases being publicly pursed by the SEC has increased. As a result the U.S securities regulator earlier this year published a webpage that spoofed scam websites as a way to educate potential investors and blockchain builders. The new portal appears to be an extension of that strategy.

In addition to serving entrepreneurs building with blockchain, the platform is designed to engage with those using artificial intelligence and other rapidly developing technologies.

“We’ve found it incredibly helpful to hear from folks, especially in fast-moving areas like DLT,” said Szczepanik.

The SEC also announced today that it will hold its second fintech forum—dedicated to blockchain and other forms of distributed ledger technology—in 2019.

In a statement provided to Forbes, SEC chairman Jay Clayton described the FinHub as “a central point of focus for our efforts to monitor and engage on innovations in the securities markets that hold promise, but which also require a flexible, prompt regulatory response.”  

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SunnyOctober 18, 2018


The head of Russia’s central bank, Elvira Nabiullina, believes that “crypto fever” is beginning to diminish, major Russian news agency RIA Novosti reports Thursday, Oct. 18.

Nabiullina, while speaking at finance innovation forum Finnopolis held in the South Russian city of Sochi, said that she believes cryptocurrencies and blockchain are now being treated more rationally:

“Fortunately, the crypto fever has begun to diminish. Technologies such as blockchain have inspired great enthusiasm, but now, as far as we can see, the approach to them is more sober.”

The central bank head also noted that entrepreneurs are now seeking ways to implement blockchain in their business. For instance, Nabiullina mentioned Initial Coin Offerings (ICO),  considering them to be “a perfect method to raise funds.” However, she added that the fundraising method is poorly protected from fraud.

As a conclusion, Nabiullina noted that digital financial technologies have finally gained mass adoption, explaining:

“Digital finance is no longer the world of the advanced consumer. It is the world of the mass consumer.”

Nabiullina is well-known for her gloomy approach to cryptocurrencies and the technologies behind them. Back in 2017, she compared the international interest in cryptocurrencies to “gold fever.”

This year, Nabiullina called coins, “money surrogates,” stating they would not be featured on Russian exchanges. Furthermore, she has said that the central bank was “categorically against” regulating cryptocurrency or equating it with foreign currency.

Despite the conservative stance taken by the central bank, major Russian banks are reportedly interested in working with crypto assets. According to local sources familiar with the matter, representatives from Russian banks even organized a private round-table to learn more about crypto-related legislation in Japan, Luxembourg, and Singapore and how to adapt it to the Russian space.

As Cointelegraph previously wrote in a review of the current legal situation for crypto in Russia, the country is struggling to pass legislation for cryptocurrencies.

The latest draft bill is rumored to eliminate a definition for “cryptocurrency,” while mining is defined as the “release of tokens to attract investment in capital.” In order to clarify the supposed contradictions in the existing bill, a lobby group, the Russian Union of Industrialists and Entrepreneurs (RSPP), has started working on an alternative crypto regulation draft.

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SunnyOctober 18, 2018



“Cryptocurrency is everything you don’t understand about money combined with everything you don’t understand about computers”- John Oliver.

Despite being shrouded in relative mystery, and being cracked down upon by the RBI, cryptocurrency is seemingly here to stay. Virtual currency exchange Unocoin has installed a currency deposit and dispensing ATM at Kemp Fort Mall, in Bengaluru, according to a Newsminute report.

The ATM allows customers to deposit and withdraw a minimum amount of Rs 1000, and transact in cryptocurrencies like Bitcoin, Ethereum and others. .

This is the first ATM of its kind in India, and it has played a clever card by circumventing RBI regulations.

Bengaluru has India's first cryptocurrency ATM. Image Credit: Technical Champion Guruji
Bengaluru has India’s first cryptocurrency ATM. Image Credit: Technical Champion Guruji

Cryptocurrencies haven’t been banned outright; it is just that you can’t use them to buy anything. This ATM makes a more indirect crypto purchase possible, by converting coins to Indian currency right there in the mall, without any ties to the Indian banking system.

Quite a bold move, especially after the declaration by Finance Minister Arun Jaitley in the budget address earlier in February. Stomping on cryptocurrency and declaring them “not legal tender” Jaitley said, “The government does not recognise cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payments system,” according to IndiaTimes.

How does the crypto ATM work?

For deposits:

1. To deposit money into the ATM, KYC compliant customers need to enter a User ID and the OTP they will receive as an SMS on their registered mobile numbers.

2. Post that, the user will confirm account details, and deposit the funds into the machine.

3. The user’s Unocoin account will be updated with the deposited funds immediately. And these funds can be used to buy Bitcoin, Ethereum, or on Unodax, to place bid orders on 30 different crypto assets.

You may also like:– RBI Ban on Cryptocurrency Trade From Today: What Indian Bitcoin Holders can Do!

For withdrawals:-

1. Visit the Unocoin website, or go through the mobile platform, and specify the desired amount for withdrawal.

2. A 12-digit reference number from Unocoin is then sent to the user.

3. A user can visit the ATM, enter the reference number and the OTP received on the registered mobile number, to withdraw the cash.

While the Unocoin ATM was unveiled earlier this week, it is not operational yet. Unocoin also plans to eventually set up similar installations in Mumbai and Delhi!

So, transact Bitcoin, Ethereum and other virtual currencies at this one-of-a-kind ATM today!

(Edited by Gayatri Mishra)

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SunnyOctober 18, 2018


NEW YORK (Reuters) – When Peggy and Marco Lachmann-Anke learned in January that hackers cracked a 40-character password and cleaned out their cryptocurrency wallet, they did not go to the police or alert the tokens’ issuer, the Berlin-based technology group IOTA.

FILE PHOTO: Giant electronic billboards display adverts for crypto currency investment companies as commuters arrive at Canary Wharf tube station in London, Britain April 6, 2018. REUTERS/Simon Walker/File Photo

They bought more coins.

The Cyprus-based German couple, who describe themselves as financial educators, figured they had no chance of recovering the coins and it was not even clear who might take up their case. Yet they took the roughly $14,000 loss in stride – something that comes with the territory when one bets on a new, exciting technology in a yet unregulated market.

“We really believe in cryptocurrencies. We have studied this for about a year before investing, so we are aware of the risks,” Peggy Lachmann-Anke said. “There was nothing we could do.”

Far from unusual, the episode is emblematic for a market where few rules apply and where investors’ faith in the blockchain technology goes hand in hand with the belief that it also helps criminals cover their tracks so well that trying to catch them is a fool’s errand.

Patrick Wyman, FBI supervisory special agent at the financial crimes section of the agency’s anti-money laundering unit acknowledges cryptocurrencies pose some unique challenges.

“A decentralized currency system like bitcoin, or another form of virtual currency is not governed by any entity, suspicious reporting activity, and any anti-money laundering compliance,” Wyman told Reuters.

Various estimates show cryptocurrency crime is on the rise, keeping pace with the market’s rapid growth. That forces investigators to focus on high-profile cases, security professionals and officials say, effectively leaving small investors to their own devices.

“We do not pretend that every law enforcement agency is devoting resources to every single crime. That would not be possible,” said Jaroslav Jakubcek, an analyst at Europol, which serves as a center for the European Union’s law enforcement cooperation, expertise and intelligence.


Officials still encourage people to report cryptocurrency theft to local police like any other crime, saying failing to do so only emboldens criminals.

Yet because many victims simply do not see the point, cryptocurrency theft is far more common than any published estimates suggest, security professionals say.

According to financial research firm Autonomous NEXT and Crypto Aware, which works with investors affected by crypto scams, about 15 percent of cryptocurrencies have been stolen between 2012 and the first half of 2018, representing a cumulative $1.7 billion in value at the time of the theft and with a rising tendency. In the first half of this year alone, more than $800 million has already been stolen, according to the data. (Graphic:

Yet Lex Sokolin, a partner and global director of fintech strategy at the firm, estimates that as much as 85 percent of crimes go unreported and says the published statistics only represent publicly reported heists.

Reuters interviews with half a dozen victims paint a similar picture. Out of that group only two reported their losses to the authorities and one soured on cryptocurrency investments.

Armin Fischer, a Vienna-based IT specialist said he lost about $5,300 in ether coins in a phishing scam in the summer of 2017 and immediately alerted the local police just to find out that the duty officer had no idea what he was talking about.

He said it took many months of knocking on doors to get his case ultimately taken up by Vienna prosecutors’ office, but it is still pending. Fisher says by now he has had enough.

FILE PHOTO: Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 13, 2018. Picture taken February 13, 2018. REUTERS/Dado Ruvic/Illustration/File Photo

“I have seen firsthand how big the security leaks are.”

Others are more philosophical.

Dave Appleton, a blockchain developer for HelloGold, a gold trading app company in Kuala Lumpur, said he lost about $3,000 of ether coins when scammed by a fake site touting a startup’s token pre-sale. He said he just moved on, glad he did not lose more.

“The point is there’s no one to report the crime to,” Appleton said. “I am not sure what country or jurisdiction it would come under.”

According ICO tracker Coinschedule a record $21.3 billion flowed into new tokens so far this year as investors keep snapping up “initial coin offerings,” undeterred by high-profile heists, bitcoin’s and other currencies’ slide from late 2017 peaks, and government warnings of widespread fraud and theft.


David Jevans, chief executive of cybersecurity firm CipherTrace in Menlo Park, California, estimates that even when exchanges or trading platforms get hacked, perhaps only a fifth of stolen coins is recovered because of the ease with which digital tokens can move across several borders.

“You have to get law enforcement in five countries interested enough, have time enough, and have evidence enough to open a case,” he said. “By the time they agree, get the information, do all the paperwork, the money has been moved.”

Security experts say in most cases millions need to be at stake to justify such an effort.

U.S. entrepreneur and long-time cryptocurrency investor Michael Terpin, who says he got robbed twice, learned firsthand that not all hacks are created equal.

He said first time when criminals accessed his cellphone with stolen SIM card credentials, emptied a wallet connected to it, and tricked his friends into sending money by impersonating him on Skype, he contacted a friend at the FBI.

But once she learned that only $60,000 got stolen, she advised him to file a report via the FBI’s internet crime center website. Terpin said he did, but never heard back.

Then, when last January he lost almost $24 million in tokens from his mobile account, he went straight after the service provider AT&T, filing a $224 million lawsuit accusing it of negligence that allowed “digital identity theft,” a claim AT&T denies.

Undeterred, Terpin says he remains committed to blockchain comparing it to the early days of Inc when the online retailer faced much skepticism and even derision.

“That’s similar to today’s narrative that all ICOs (initial coin offerings) are scams and nothing will ever be developed of value because they’re not already fully deployed,” he said.

Steadfast commitment to the new technology and belief that it gives sophisticated criminals the upper hand mean that even some multimillion heists go unreported.

For example, when hackers stole about $9 million worth of ether tokens from a Zug, Switzerland-based company Swarm City in July 2017, the peer-to-peer digital platform did not report the theft to the police, business leader Bernd Lapp said.

“It’s impossible to track and return the funds. We live and die with this technology.”

Reporting by Gertrude Chavez-Dreyfuss; Editing by Tomasz Janowski

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SunnyOctober 18, 2018


Cryptocurrency–Along with the security offered through blockchain projects and the improved efficiency of digital payments, one of the core features of cryptocurrency has always been in the decentralized governance of the technology.

Compared to traditional routes of money, such as government fiat which are wholly run and influenced by authorities and figures of power, cryptocurrency functions from a vantage of being governed by the masses. In addition to being a feature of the technology, decentralization in cryptocurrency has become as much ethos for the industry, drawing a large swath of overlap with the politics of libertarians and other citizens repelled by the centralized hold of most governments.  

Now, a new study out of cryptocurrency tracking resource CryptoCompare has found significant fault with the both the state of decentralization across the industry as well as the ability for many developers to directly alter their crypto platforms. In a report published on October 17, the website shows that 85 percent of cryptocurrency assets allow development teams to alter their platforms, extending while past the period of coin creation. Of the hundreds of cryptocurrency and blockchain projects surveyed in the study and vetted by experts over their level of centralization and ability to function separate of direct developer influence, CryptoCompare found that 85 percent had a process for developer to alter projects protocols at any time.

Classified as “taxonomies,” the report examined a number of different features for the majority of cryptocurrencies across the market,

The methodology of this taxonomy is not purely theoretical, but instead the result of bottomup
analysis across a number of parameters for hundreds of cryptoassets. We analyse the
classification of cryptoassets based on a variety of attributes, including: regulatory, level
of decentralisation, supply issuance, economic incentive, industrial classification, supply
concentration to name but a few.

In addition to the failure to segregate from developer influence, 55 percent of the existing cryptocurrency market can be classified as “centralized” with another 30 percent falling into the category of “semi-decentralized” as opposed to being a legitimate decentralized project. According to the research conducted for the study, only 16 percent of existing cryptocurrencies can be classified as a fully decentralized platform–a dismally low figure for an industry that has prided and built itself upon the tenet of decentralization. The level of decentralization failed to improve when surveying tokens used solely as a source of payment, with 41 percent of projects being identified as centralized.

In an interesting addendum to the examination of decentralization in the industry, CryptoCompare also examined whether cryptocurrencies could be classified. By applying the guidelines established by the Swiss Financial Market Supervisory Authority (FINMA), 55 percent of cryptocurrency assets would fall under the definition of being a security which would require them to be regulated under current conditions. Bitcoin and Ethereum, the two largest cryptocurrencies by market capitalization, managed to skate around being classified as securities due to their high level of decentralization and lack of a clearly identifiable common enterprise.

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SunnyOctober 17, 2018


G4S, the UK security company, has launched its first foray into the nascent crypto sector with a new digital currency storage service.

The FTSE 250 company, which runs prisons and detention centres and also stores cash for large companies, said on Wednesday that it had developed a custody service for cryptocurrencies that would protect the assets from criminals.

A lack of secure storage options is considered one of the main barriers to the institutional adoption of cryptocurrencies, which have long been the target of hackers. 

G4S said it had already started providing the service to an unnamed cryptocurrency exchange based in Europe. 

“The [crypto] sector has attracted the same old threats for financial systems including robbers, scammers, market manipulators and many others,” Dominic MacIver, senior risk analyst at G4S’s risk consulting division, said in a statement

“Our innovative security solution helps protect against some of those threats by taking the assets offline and storing them in high-security vaults.”

Carbon Black, the US cyber security company, estimated that about $1.1bn worth of cryptocurrency was stolen in the first half of this year. That includes the $500m hack of Japanese exchange Coincheck in January. Tracing stolen coins is difficult because most cryptocurrencies are held anonymously. 

Criminals have also kidnapped individuals in order to extort their crypto wealth from them. 

The crypto custody sector has begun to flourish recently, with traditional players entering the space alongside specialised outfits. 

US investment giant Fidelity this week announced plans to offer “enterprise-quality custody” of cryptos to institutional investors, as well crypto trading services. In May, Nomura said it was developing custody services, while Goldman Sachs, Northern Trust and JPMorgan Chase have said they are exploring similar services. 

Cryptocurrency holders access their funds using a unique “private key”, a long alphanumeric password that serves a similar purpose to a bank card PIN. It is this key that must be protected from thieves. 

Tuesday, 25 September, 2018

Many of the digital coins stolen to date have been kept in so-called “hot wallets”, online customer accounts that are connected to the web and therefore more vulnerable to hacks. But custodians are increasingly developing so-called “cold storage” services, where private keys are kept on a hard drive, separated from the internet. 

The new G4S “secure vault storage” service, which will be available globally, uses technology to break up the digits of a private key into fragments. They can then be put on storage devices in closely-guarded vaults in undisclosed locations. 

Mr MacIver said this meant they would be “out of reach of cyber criminals and armed robbers alike”.

G4S said it would charge clients based on how many different offline storage devices they wanted to use to store their private keys, and that it would use its own existing vaults for the service, rather than building new facilities.

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SunnyOctober 17, 2018


Bitcoin law paragraph judge gavel 3d-illustration

Stable coins, the rise of custodial solutions and the recent announcement of Fidelity launching an institutional platform for Bitcoin and Ethereum are all designed to make it easier for institutional investors to partake in the cryptocurrency market.

Yet a number of questions arise as the cryptocurrency ecosystem continues to expand its reach to traditional financial markets. Trust must be built among new market participants, countries leading innovation need to respond to legal concerns and actions should to be taken to pave the way for both accredited and non-accredited investors to step foot into the cryptocurrency market.  

As a result, lawyers specializing in cryptocurrency related matters have become key players for ensuring the success of the global adoption of digital assets. Three women lawyers in particular are taking action to help define legal uncertainties currently facing the evolving crypto ecosystem.

Establishing Trust Among Market Participants: Sydney Schaub

First and foremost, trust is required as new market participants enter the crypto market. The licensed digital asset exchange and custodian founded by the Winklevoss brothers, Gemini Trust Company, LLC (Gemini), recently announced that Sydney Schaub has joined as General Counsel. Ms. Schaub will focus on tackling new jurisdiction expansion, product initiatives and building Gemini’s in-house legal team, reporting directly to Gemini’s President, Cameron Winklevoss.

At this important moment for the global adoption of digital assets, establishing trust among market participants will be critical for success. Gemini’s leading market surveillance technology and digital asset insurance, coupled with its thoughtful approach to growth and regulation, are essential for creating this trust. I am looking forward to working with my new colleagues at Gemini to build the future of money, Schaub told me.

Gemini Trust Company, LLC (Gemini) announced that Sydney Schaub has joined as General Counsel.Gemini Trust Company, LLC

Schaub joins at a time of incredible growth for Gemini, which recently received approval for the Gemini Dollar, the world’s first licensed and regulated stablecoin. Gemini also recently became the first licensed exchange in the world to offer ZCash upon obtaining approval from the New York State Department of Financial Services (NYDFS).

Ms. Schaub brings tremendous experience working with industry-disrupting, high-growth start-ups to her role as General Counsel for Gemini, said Tyler Winklevoss, Chief Executive Officer of Gemini. Sydney’s reputation as a trusted advisor to business, product and engineering teams precedes her, and that, along with her proven ability of successfully navigating complex deals and strategic partnerships, will prove invaluable to Gemini as our organization continues to expand.

Bringing More Investors To The Crypto Market: Joshua Ashley Klayman

According to Joshua Ashley Klayman, Founder and Managing Member of Klayman LLC, a boutique blockchain-focused law firm based in New York City, certain steps should be taken from a legal standpoint to get more investors involved in the crypto market. While a key focus has been on bringing institutional investors in, Klayman believes that an increasing number of investors from around the world will soon enter the crypto market.

As regulators, the media and the general public become more familiar with digital tokens, my view is that increasing numbers of investors from around the world will enter the crypto market. A few steps that could be taken to promote the involvement of additional investors in the crypto market may include enhanced disclosure in connection with token sales, including use of proceeds, lock-ups, percentage of tokens held by founders, discounts, etc, Klayman told me.

Joshua Ashley Klayman, Founder and Managing Member of Klayman LLCJoshua Ashley Klayman

Additionally, Klayman mentioned that clarity concerning how the existing securities laws apply to digital tokens is needed.

We now know that the SEC’s view is that present day sales of Ether are not deemed to be sales of securities, due, among other things, to sufficient decentralization. But, we do not yet know at what point sufficient decentralization is achieved or how, as a practical matter, a token seller would be able to remove itself from reporting and other securities law requirements when its tokens originally were sold as securities. We also need greater clarity, in the form of no-action letters and other guidance, regarding legally permissible approaches where compliance requirements may be less clear.

Navigating Malta’s Cryptocurrency Ecosystem: Veronique Dalli

Finally, countries innovating in the cryptocurrency space also need lawyers to help navigate the evolving ecosystem. Malta in particular has become one of the most innovative countries for cryptocurrency and blockchain related projects. Yet while Malta’s recently passed cryptocurrency, blockchain and distributed ledger technology (DLT) laws have created a sense of legal certainty, grey areas still remain.

Veronique Dalli is a cryptocurrency lawyer based in Malta. Dalli started studying crypto law at the end of 2015, when her law firm, Dalli Advocates, began to receive inquires about cryptocurrency and blockchain applications. According to Dalli, the questions she typically receives deals with licensing requirements in Malta.

Veronique Dalli, a cryptocurrency lawyer based in Malta and Founder of Dalli AdvocatesVeronique Dalli

It is required to bring all crypto projects to jurisdiction in Malta. It must be understood that the Maltese Government is a sound legal system that doesn’t come up with any surprises once an initial coin offering (ICO) is launched. It has been made very clear in Malta as to what jurisdictions will be at the receiving end of the token generating events issued here. For example, there are jurisdictions where by residents are not allowed to participate in crowd funding. As for investors, I would say that one needs to be careful in the sense of looking at the way ICOs are being advertised – if it sounds too good to be true, then it probably is. When someone comes to Malta to launch an ICO, we look at the white paper very carefully. We see what is proposed in the white paper and then determine if that is being seen in their ICO, Dalli told me.

Other Legal Questions To Consider: Utility Vs. Security Tokens

Security tokens are another area crypto lawyers are finding of interest. In a recent article, it is stated that 2017 was the year of the utility token and that 2018 was the year of realizing the mistake of the utility token. As a result,  2019 will be the year for tokenized securities and the rise of Security Token offerings (STOs).

Yet according to Klayman, there are still many grey areas to consider when it comes to security tokens.

Even if you launch a token sale to U.S. persons and presume that such token sale is a sale of securities, unanswered questions remain.  This is because applying the existing U.S. federal securities laws to digital tokens is an imperfect fit. Among other things, security token sales raise important issues relating to flowback of tokens into the United States from regulated and unregulated exchanges worldwide – even if initially tokens were sold only to non-U.S. persons; requirements to file periodic reports with the SEC under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); risks of inadvertently becoming an investment company under the Investment Company Act of 1940, as amended (the “40 Act”); and compliance with transfer agent and broker-dealer registration requirements.

While security tokens seem to be a growing trend in the U.S., countries like Mata, where regulations are in place, are still seeing a great deal of ICOs. However, according to Dalli, there are still legal uncertainties.

“The concept of utility tokens is still in its initial stages. There could be situations, which are left without a solution. I think it is easier to regulate security tokens than utility tokens. If the asset is introduced as an access to a company’s product, financial authorities are unlikely to investigate it,” Dalli said.

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SunnyOctober 17, 2018


If you’re among the “criminals, idealists and speculators” trading in the notoriously volatile cryptocurrency market, you might have experienced a time when you wished for a fast, satisfying way to sell off all your assets in exchange for some real-life dollars during a price crash.

Ilker Dagli—a system and network administrator at Near East University in North Cyprus and creator of a literal valve that throttles internet access—made a physical button you can smash to sell off all your cryptocurrency at once.

“I decided to invent this button because I saw lots of investors of cryptocurrency [with] complaints about exchange issues, especially when the price falls very quick,” Dagli told me in an email. “As you know, cryptocurrency markets are so volatile.”

When the price dips fast, investors often can’t manually close their orders and sell all their assets fast enough to stop their losses. Because of this, some exchanges—like GDAX—have a feature that lets traders set a rule where if the price drops to a specified value, the system places an order that sells the trader’s assets.

Clearly, what this process is missing is a big, red button. When you press Dagli’s button, it cancels all of your orders and sells off your coins at market price. Daglit demonstrated it working on his Binance stash in a video.

“I had some coins and orders on my Binance account, when I pressed the button it immediately cancelled all my orders and sold all my coins” he said. “So I became ‘safe’. Hassle free. No need to login to exchange, cancel all orders manually then sell all my coins one by one… Just press the emergency button!

Dagli designed the button for Binance, but says it would work with any exchange that has an open API. Not that the coin you’re holding will ever need it.

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SunnyOctober 17, 2018


Cryptocurrency markets could increase ten times over from 2020, blockchain investment firm and hedge fund Pantera Capital’s co-CIO told Bloomberg Tuesday, Oct. 16.

Speaking in an interview, co-CIO Joey Krug said that scalability improvements for Bitcoin (BTC) were essential to spark a shift in the deflated prices seen throughout this year. He told the network:

“These are all markets, and so if you don’t have scalability, you don’t have market makers.”

The comments came days after new developments on the institutional trading side of Bitcoin markets, with Fidelity Investments revealing it was testing a regulated custody solution for investors and hedge funds.

While reactions from finance figures such as Galaxy Digital’s Michael Novogratz were positive, the news failed to shift market sentiment or prices in Bitcoin.

For Krug, this is because sentiment requires signs of adoption of Bitcoin in the current climate, which in turn depends on capacity improving. To that end, however, the executive voiced doubts about Bitcoin itself “ever” being able to compete with payment networks Visa and MasterCard.

“I don’t know if that will ever happen for Bitcoin, but I do think we’ll see blockchains as fast as Visa or MasterCard within the next couple of years,” he continued, adding that such improvements could nonetheless spark “10x” price increases in two years’ time.

Developers continue to work on improvements for the number of transactions Bitcoin can handle, principally through off-chain solutions such as the Lightning Network.

The downturn in crypto markets since January 2018 has meanwhile meant Pantera has seen its fortunes tested in recent months, earlier in October releasing statistics showing its Digital Asset Fund was down over 40 percent since its inception.

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SunnyOctober 16, 2018


Credit: Getty / Royalty Free

In the words of our country’s Founding Fathers, all [people] are created equal. But, in the world of fiat and monies, not all currencies are valued equally.

Influenced by market inflation, debt, interest rates, trading agreements, and of course, political stability, the balance between any two currencies is in a state of constant fluctuation, directly impacting its exchange rate. An “exchange rate” is the price of a nation’s currency in terms of another currency. For purposes of this article, they are quoted in values against the U.S. dollar (USD).

The Gateway To The Crypto World

There are two types of currency exchange rates—the spot exchange rate, or interbank rate, and the nominal exchange rate. From a consumer and traveler’s perspective, we often refer to the latter. The way in which we read and define an exchange rate is similar to how we measure cryptocurrency values against our own currency.

Lesson #1: Why Are You Entering Into This World?

For the novice, diving into crypto can be both exciting and overwhelming. Not only is there a need to decode the complexities of the technologies behind the currencies, but also a need in recognizing the difficulties associated with investing, trading, and monitoring them.

But, if you are entering the crypto world for the first time, there is one thing that is certain—you must understand how to trade and purchase.  Why? Not all coins are able to be purchased through fiat. Thus, you have to resort to using cryptocurrency exchanges.

If you are getting into the space to make a quick buck, you better know how to earn that quick buck. If, on the other hand, you are in it for a long-term gain (and most likely some loss), you need to understand how the market works, especially as it pertains to exchanges.

Lesson #2: What Are Crypto Exchanges?

With over 1,600 cryptocurrencies in existence, there are only a select few exchanges available, allowing holders to convert their fiat or paper currency into the crypto-base currency (“base currency”) they desire (Bitcoin, Ether, or Litecoin). Consequently, some coins can only be purchased by using these bases, and cannot be bought using a domestic currency, such as the USD.

It is for this reason that these three currencies (BTC, ETC, and LTC) are considered to be the “gateway” to the crypto world, and are identified as base currencies for cryptos.

In its most basic definition, cryptocurrency exchanges allow an individual to do three things:

  1. To exchange one cryptocurrency for another cryptocurrency;
  2. To purchase and sell a particular crypto coin(s); and/or
  3. To exchange and convert your fiat into another cryptocurrency.

Types of Cryptocurrency Exchanges

Before choosing an exchange, it is important to look at what it offers. There are three main cryptocurrency exchanges to be aware of:

#1 –Centralized Cryptocurrency Exchanges (“CEX”)

Similar to a traditional stock exchange, a centralized cryptocurrency exchange, or CEX, operates as the middle-man as between two parties. A “centralized” system means that one party is trusting another with some type of information, in this case, handling their money.

The exchange, upon receiving a user’s money, holds onto it as a bank normally would. As an investor monitors market prices of available crypto on a particular exchange, he or she may want to trade their fiat for another crypto (trading pair), and eventually place an order.

At this point, the exchange will find a seller(s) to match the buy, if they are selling, eventually, finding a buyer and completing the exchange. When the world of crypto exploded last year, platforms such as Coinbase, Robinhood, Kraken, and Gemini became extremely popular because it made it easy for fiat/crypto pairings.

There are also exchanges out there that only provide crypto to crypto pairingspurchasing or acquiring one crypto, by trading in another crypto. Examples include the popular Binance, Huobo, and Bitfinex.

But, more about trading pairs later on.

Maintaining Your Security

Since 2011, there have been over 60 cyberattacks aimed at cryptocurrency exchanges and other digital currency platforms. Renowned attacks including Mt. Gox (Japan, 2014), Bitfinex (Hong Kong, 2016), Coincheck (Japan, 2018), Coinrail (South Korea, 2018), and Bithumb (South Korea, 2018) continue to present a high potential for system crashes. But, what did each of these attacks have in common? The attacks were all targeted towards CEXs, attracting the attention of black hat hackers galore.

Taking into consideration the security vulnerabilities these centralized systems contain, the idea of decentralized projects and ventures has exploded with two goals in mindmaintaining security and removing intermediaries so as to provide for efficient, direct transactions.

On-Boarding the Novice

Looking at such a cyberattack such as Hong Kong’s Bitfinex exchange, I decided to take a look and see how the Hong Kong (HK) market is responding to the space since I last traveled there. One company, Coinsuper, recognizes the seriousness of maintaining strong internal security, operating in the heart of central HK.

Functioning as a “fiat to crypto” exchange, the platform allows for deposit and withdrawal in addition to BTC, ETC, LTC, and other popular token offerings. It has been consistently listed in the top fifteen exchanges by daily volume, globally, according to CoinMarketCap data.

With less than 2% of the Hong Kong population involved in the crypto space, I learned that there aren’t too many major “fiat to crypto” exchanges based in the Hong Kong/APAC region. Coinsuper aims to be the “on-ramp” for those individuals looking to on-board the space.

“As an exchange, in order to successfully utilize “fiat to crypto” conversions, you have to be prepared for regulatory scrutiny,” said Kenny Shih, Executive Director of Coinsuper.

“We pride ourselves on having this level of self-compliance within our framework; our head of the anti-money laundering (AML) division was also the former head of AML at HSBC Private Banking.”

But, the company’s team is worth bragging about. Its CEO, Karen Chen, is the former president of UBS (China) Ltd. and its COO, Dr. Anthony Ng, a former Managing Director of CITIC Futures International, Morgan Stanley, and JP Morgan.

When I asked Shih about the frequency of regulatory communication, he told me that they are in constant communication with both Hong Kong and Chinese regulators. “We want to be considered the model exchange out here, and thus, we are doing everything we can to follow the rules.”

While self-funded, they have since entered into strategic equity partnerships with ventures such as Pantera Capital and 8 Decimal Group. In its 7-month life span, the exchange currently offers over 50 tokens and is heavily focused on the “know your customer” (KYC) approach, providing 24/7 customer service. It previously hosted a successful initial public sale for the Metadium project, helping it to raise over 5,900 ETH over a period of five days.

Shih also told me that for young millennial investors, it’s important for them to embrace the online space as we all enter into what some call the “Web 3.0” phase of the net.

#2 –Decentralized Cryptocurrency Exchanges (“DEX”)

The introduction of blockchain technology and cryptocurrencies into our markets is the result of society expressing its view that transactions should be decentralized, or more closely connected to the transacting parties, without the need for intermediaries.

Decentralized crypto exchanges, or DEXs, are created for the sole purpose of removing the middle man to any transaction. It is a marketplace where buyers and sellers come together and engage in transactions directly.

These peer-to-peer (P2P) systems such as Stellar DEX and Waves DEX, are much harder to exploit and/or hack. From what we’ve seen, more often than not, it’s the user who inadvertently locks themselves out of their account.

While these seem to be a much better alternative to CEXs, popularity is still weaning. The reasoning behind this is the lack of commodity and overall user support, which would help to attract a mainstream user base. Until this happens, DEXs will continue to offer low volume and low liquidity. Personally, I would like to see this continue to gain popularity.

#3 –Hybrids

Lastly, the hybrid crypto exchanges are designed to combine the benefits from both CEXs and DEXs. The focus on this is to provide privacy and security of a DEX. While the first hybrid exchange, Qurrex, was launched earlier this year, the space is still looking to tighten functionality up with both systems.

Lesson #3: Finding A Local Crypto Exchange That Accepts Your Domestic Currency

The number of available exchanges that accept fiat currency are limited in the number of coins readily available for purchase.

That is why a platform like Coinbase has become one of the most popular exchanges in the world, allowing investors to purchase Bitcoin, Bitcoin Cash, Litecoin, and Ethereum—all with their fiat. Other examples include Robinhood, Gemini, and Kraken.

Keeping in mind the limited options most local exchanges provide, investors instead, look to purchase a base currency (BTC, LTC, ETH) in order to then purchase other crypto, or altcoins.

Lesson #4: Going From One Crypto To Another

Since a user cannot purchase altcoins directly from an exchange that accepts fiat, more likely than not, the user will not be able to determine the value of the altcoin based off their domestic currency.

The term “trading pairs” describes a trade between one type of crypto and another. For example, if you were to look at the trading pair ETH/BTC, you’re looking at the potential to either buy or sell one for the other. A user can either buy Ethereum with Bitcoin, or sell Ethereum for Bitcoin, or vice-versa.

When trading crypto for crypto, it is extremely important to understand how these trading pairs work.

While not an economics lesson, be mindful of the potential tax implications associated whenever you convert one crypto to another crypto, or convert cash into crypto. Understanding why you are choosing to utilize one trading pair over another could be the difference between gaining and losing everything. Literally.

Lesson #5: Regulation

When utilizing exchanges, take note of where the platform is licensed to exchange in money transmission. For example, Coinbase, is licensed to engage in money transmissions in most U.S. jurisdictions. Additionally, it is registered as a “money services” business with FinCen. This is worth mentioning because late last year, the IRS entered into an agreement with Coinbase to share user account information with it.

The level of regulation differs with each exchange, so users should conduct their own due diligence when determining which platform may be best suited for their transacting needs.

We have already seen platforms like Binance and Kraken finding its way into the New York Attorney General’s Office for potential regulation violations. Back in February, U.S. Commodity Futures Trading Commission (CFTC) Commissioner, Brian Quintenz, expressed favor towards operators adopting self-regulatory standards to help police the space.

“I think a self-regulatory organization, or SRO, for cryptocurrency exchanges could spur the development of standards around cybersecurity policies, data retention, protection of customer accounts, trading practices and other issues.”

At the end of the day, it is still extremely important to take appropriate safeguards to ensure your wallet, key, and any other associated information are stored in a safe place. Additionally, be mindful of where you are going to purchase and/or sell crypto.

This space is a playground for black hatters looking to take you for a run for your money, so be smart and educate yourself first.

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