Top Crypto News – 27/11/2017

$300 Billion: Bitcoin Price Boosts Crypto Market Value to Record High

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The total market capitalization for the cryptocurrency market has exceeded $300 billion for the first time.

Data from CoinMarketCap.com shows that the market capitalization for all cryptocurrencies is currently at roughly $300.5bn. Of that amount, bitcoin’s market cap represents the lion’s share, accounting for about $158 billion.

The move comes as the price of bitcoin continues its surge above $9,000, trading at roughly $9,482, according to the CoinDesk Bitcoin Price Index (BPI).

The push above $300 billion perhaps also showcases the pace at which the market has grown in recent weeks. On Nov. 3rd, the overall market capitalization rose above $200 billion for the first time. By contrast, the market crossed the $100 billion level back in June.

Other cryptocurrency market developments contributed to today’s market capitalization milestone, additional data reveals.

The world’s second-largest cryptocurrency, ethereum, has a press-time market capitalization of $46 billion and is currently trading at about $475, representing a price increase of more than 25% in the past week. Like bitcoin, ethereum also hit a new all-time high over the weekend.

Hot air balloon image via Shutterstock
Written by CoinDesk

Bitcoin heading for $10,000 as crypto market cracks $300 billion

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The Securities and Exchange Commission could be gearing up to drop major actions on issuers of initial coin offerings (ICOs).

According to Nicolas Morgan, a former lawyer for the U.S. government agency tasked with regulating the securities industry, the SEC is likely to roll out a sort of “assembly line” of enforcement actions against the nascent industry in the coming years.

While the SEC has issued guidance to the ICO industry, recently laying out why it classified tokens issued by The DAO (a now-defunct ethereum smart contract that sold its token to investors) as securities, the agency has yet to announce formal rules.

In response, the industry has moved in a different direction. Some, such as Overstock subsidiary tZERO, are deciding to get regulated, while others have moved to create utility for their tokens, thereby establishing it as a resource necessary for software products.

But according to Morgan, and others in the industry, the ever-expanding language and group of terms and techniques the industry uses could still expose entrepreneurs to a time-consuming SEC investigation and litigation.

“You might be right that your ICO is not a security, and some judge, at the end of the day, may agree with you, but is it worth the expense and distraction to get that answer from a judge?” he told CoinDesk, adding:

“It’s probably a better course of action if you’re anywhere close to being a security, to just assume that it is and go forward with that presumption in mind.”

Recently speaking at the ICO Forward Summit in New York City, Morgan, who served about seven years in the SEC’s enforcement division, spoke to CoinDesk about what to watch for in terms of SEC enforcement in the coming years.

This interview has been edited and condensed.

CoinDesk: At what point will the SEC and others weigh in more formally on ICOs? 

Morgan: You’re not going to get a satisfactory answer that [your token is] not a security until the end of the SEC investigation process, in litigation, when you might get a judge that agrees with you that your ICO is not a security.

But it doesn’t even necessarily have to be at trial; a trial happens at the end of a legal proceeding. For example, in the Zaslavskiy case – the diamonds and real estate ICO in Brooklyn, New York – the SEC had to go into court, they filed a complaint, they [effectively] said “this token is a security.”

Then they got a preliminary ruling from the judge in that case that indicated that it probably was a security. That’s as close as we’ve gotten to a ruling by a judge.

Or take the Tezos class action, as another example: private lawsuit, filed in San Francisco state court. Not the SEC.

The plaintiffs and their lawyers have alleged that [Tezo’s ICO] involves a security. I have a feeling the very first line of defense by the defendants will be, “This is not a security. These particular laws don’t apply.” But no judge has ruled on it.

We don’t have judicial rulings on this, and we won’t have them for probably several months.

What does a startup need to do if it wants to proceed as if its token is a security, then?

If you’re proceeding on the assumption that you have a security and you want to have an ICO, the first thing is to decide whether you’re going to offer the tokens on a registered basis or pursuant to an exemption to registration. That’s probably the first issue that needs to be confronted.

Then there is: How will your sales and efforts selling ICOs or tokens be judged in hindsight? Use of proceeds is probably the biggest single representation to potential investors that will be scrutinized by regulators or private plaintiffs after the fact.

The use of proceeds has to be accurate. So that’s step one.

Step two: If you’re going to tout the qualifications of your board of advisors, make sure they actually are advisors and have agreed to be listed as such. And make sure when you’re describing either your advisors or your management, that the descriptions are accurate, not exaggerated.

Those things will be scrutinized.

A third thing is how you’re describing what it is you’re going to do. Not in terms of how the money is going to be spent, but, “We have certain milestones. We are going to launch this platform by January.” Well, if you say that, and January comes and goes and no launch has happened, that may be an issue.

Be careful how you characterize what you do operationally.

In your “assembly line” reference – where the SEC assesses tokens and takes some into investigation on a rolling basis – how this would work? 

Models that might be a good analogy … one was a particular model in the PIPES market.

PIPES is an acronym for private investment in public equities, and it was a way for hedge funds and other investors to invest generally in small publicly traded companies through a private offering. It’s still around.

But the SEC latched on to a particular model, where the hedge funds would sometimes short the company’s stock simultaneously with purchasing in the PIPE.

The enforcement folks saw this going on. They didn’t like it; they thought it was a violation of law. And they sent these subpoenas out by the dozens.

The SEC developed a model where they saw the same fact pattern over and over again, where they would send out the subpoenas, check to see that fact pattern existed and then very quickly brought a lawsuit against companies. And so I can see that happening here.

We see an ICO, it pretty obviously falls into the realm of a security, in that they put out a white paper, they didn’t have a registration statement, they didn’t fit into an exemption to the registration requirements. So, let’s send out a subpoena.

And if the fact patterns recur over and over again, it makes it pretty easy for the SEC, that’s why I described it as an assembly line. Something that’s not automated, but it’s easily replicated on their side.

Do you think the SEC will come out with more formal guidance soon?

So, you see it a couple of different ways. You see it in something like the DAO report. That’s called a 21(a) report, because the report is issued under a certain section of the law.

The other way the SEC communicates is through speeches, public comments. We’re also going to see No Action letters, so you can go and basically ask a very specific question: “If we do this, will you agree not to recommend an action be brought against us?”

And then the absolute least effective way the SEC speaks is by bringing lawsuits. We’re going to see more of those.

You can tell what the SEC’s thinking because they allege it in a complaint they file in federal court or bring in an administrative proceeding. That’s a tough way to regulate, by litigation, but that’s going to happen too.

There are those in the ICO space who would prefer the SEC promulgate some regulations. I think that’s likely to happen also. They’ve got a lot on their plate that has nothing to do with ICOs, and the rulemaking process is a slow process.

So that’s why we may see the so-called regulation by litigation happen more immediately.

If rules came along, would the SEC grandfather in projects operating before those rules were formalized?

No. I don’t think they would.

Will all the fumbling with language, such as companies using “token” versus “coin” in their marketing, be effective?

The economic reality matters far more than the label. Tezos may be the test case on that, because they tried to call it a “donation.”

But it’s the economic reality, not the label, that’s the most critical issue.

How is the SEC doing, in your mind, investigating and regulating the industry? Does anything about the way regulation will be laid down worry you? 

The DAO was a pretty obvious call as far as whether it was a security or not. I think that was good that the SEC did that, but it doesn’t go far enough.

They should put out pronouncements about tokens that are a closer call. And they will. They’ll get there. It will be in the form of No Action letters and rule-making.

I don’t disagree with the SEC’s approach.

What I’m anticipating disagreeing with is that I think the enforcement division is going to bring some cases where they just assume it’s a security, but where the defense may have a legitimate argument that it’s not a security.

I fear that the SEC will, in an effort to really make a point, bring cases where the existence of a security does not get the consideration that it really deserves, because there will be other bad factors in these cases. Fraud, theft of money, whatever it is.

So we won’t get the development of the law that we should. There won’t be the nuanced thinking about whether a security exists, because there will be other facts that overshadow that issue.

Assembly line image via Shutterstock
Written by CoinDesk

Bitcoin Will Be Safe Haven During Next Stock Market Crash, Says Expert

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As Bitcoin powered ahead to a new high for a second week in a row, some have speculated that institutional investors could seek safe haven in the virtual currency in the future. The prevailing rhetoric over the past month has been more affirming than damning of cryptocurrencies, with the likes of Ronnie Moas and Max Keiser predicting new highs in 2018. Speaking to RT, eToro analyst Mikhail Mashchenko says financial institutions could look to Bitcoin if a major financial crash hits global markets.

“The demand for Bitcoin is growing as the crypto market has become less volatile, and an increasing number of professional investors see it as insurance.”

Second-oldest bull market

The current bull market in stocks is the second-longest in history, according to Fortune, having lasted 104 months so far. The longest bull market in history ended in 2000 after an impressive 113 month run. With the current rally getting a bit long in the tooth, many on Wall Street are making contingency plans for the stock market’s inevitable turn. If Mashchenko is right, Bitcoin will have a role in some of these plans.

Shifting opinions

Mashchenko’s statements come on the back of changing sentiment in the mainstream financial sector. Last week, JP Morgan Chase announced plans to offer Bitcoin futures on the Chicago Mercantile Exchange – an important move by one of the biggest banking and financial services providers in America. Even more satisfying, this moves comes only months after Chase CEO Jamie Dimon condemned Bitcoin as a scam.

Online banking service providers and exchange operators LedgerX and Revolut are also adopting Bitcoin support. The former was recently cleared to offer Bitcoin derivatives as people look to do more than just trade the cryptocurrency.

“LedgerX launched its first long-term options for Bitcoin, with an expiration date of December 28, 2018. In the coming months, we will continue to see the ‘domestication’ of Bitcoin: the Chicago Board Options Exchange and the Chicago Mercantile Exchange are planning to launch tools based on the cryptocurrency in the near future.”

Big money

If and when a stream of institutional investors start investing large amounts of capital into cryptocurrencies, some of the stunning predictions made by Bitcoin bulls could well be realised. However, Mashchenko’s prediction was quite conservative, suggesting that Bitcoin reaching a $10,000 high by the end of 2017 would be driven by emotion rather than fundamentals:

“We could see a Bitcoin at $10,000 in a month or so. However, such a surge will be based on emotions, not on fundamental factors. So, further growth of the cryptocurrency will require something more than euphoria.”

Having hit the $8,000 mark last week, Bitcoin surged another $1,000 dollars in just a few days, breaching the $9,000 level during the Thanksgiving weekend. At press time, the price of Bitcoin sits at $9,500, just $500 below Mashcenko’s predicted level.

Written by CoinTelegraph

 

Xapo Touts Former Military Bunker in Alps As Bitcoin Vault

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Bitcoin wallet Xapo has allowed a journalist to visit a secret former military bunker in the Swiss Alps that the company uses to store Bitcoin for its private clients. The bunker, which was constructed in 1947, is claimed to be a secret headquarters of the Swiss army during the Cold War.

In his recent article for Quartz and the World Economic Forum, reporter Joon Ian Wong discussed in detail his trip to the secret military bunker located in a granite mountain in the Swiss Alps. As of late November 2017, the 10,000 square-foot bunker is being operated by the firm Deltalis as a data center.

Detailed features of the Bitcoin vault

In his account, Wong revealed that the first barrier toward the bunker is a 10-foot-high gate. At the entrance, visitors are required to be photographed and fingerprinted after entering the lobby. After which, a visitor is required to enter a “man trap,” which is a bullet-proof glass cylinder that shuts an individual in until an operator opens the door on the opposite side toward the bunker’s main spaces.

The bunker also has a pair of steel revolving doors that require identification (ID) cards to allow access. The doors lead to a 100-meter long corridor. Two red-colored steel doors that can withstand a nuclear blast are located at the end of the corridor.

Behind the doors is another “man trap” leading to a white door where a room the size of a closet is located. The room contains a cooling unit and another door. The door leads to two more rooms, namely, the operator’s room and the “cold room” where the Bitcoin wallet keys are kept. To maintain the security of the keys, the cold room is enclosed with steel slabs to form a Faraday cage to prevent even an electromagnetic pulse (EMP) attack.

According to Xapo’s head of security, they are guarding the vault 24/7 because they are under constant assault by both hackers and terrorists, so they need to implement very tight security precautions to thwart the threats.

“We are under attack 24/7. This is not a race. It is a chess game. You have to think about the opponent’s next movement. You can never relax.”

Written by CoinTelegraph

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