Top Crypto News – 24/01/2018

South Korean Card Companies Block Transactions to Overseas Cryptocurrency Exchanges

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Blocking Payments Overseas

South Korean Card Companies Block Transactions to Overseas Cryptocurrency ExchangesSouth Korean card companies have been working on blocking payments to overseas cryptocurrency exchanges, local media reported the Credit Finance Association of Korea revealing.

The association is a non-profit organization with 68 members: 8 credit card companies, 21 leasing companies, 21 installment financing companies, and 18 venture capital companies. An official of the association was quoted by Yonhap last week:

Credit [card] companies are voluntarily blocking payments to overseas virtual currency exchanges.

“We will continue to prevent transactions from being carried out if a foreign [cryptocurrency] exchange is registered as a merchant,” the news outlet further quoted the association.

8 Card Companies Onboard

South Korean Cards Block Transactions to Overseas Cryptocurrency ExchangesThe association explained that “eight domestic credit card companies are in the process of suspending credit / check card transactions so that they [users] cannot buy virtual currency at overseas virtual currency exchanges with domestic cards,” the publication noted.

There are exactly 8 members of the association that are card companies: BC Card, Hyundai Card, KB Kookmin Card, KEB Hana Card, Lotte Card, Samsung Card, Shinhan Card, and Woori Card.

“Card companies have adopted the system in line with the government’s efforts to tackle speculative investment in virtual currencies,” Business Korea reported. “However, they express concerns over the opposition from domestic investors. This is because it can lead to a legal dispute when a customer file a suit as there is no clear legal basis on banning the payment in foreign exchanges.”

The publication quoted the association on Monday:

Currently, only 20 major digital currency exchanges are blocked but we will confirm and share information about exchanges grasped by individual card issuers. An increasing number of exchanges will be continuously blocked in the future.

The news outlet also quoted industry sources clarifying, “Lotte Card and Shinhan Card have introduced systems blocking transactions by investors for the purchase of digital tokens from 20 overseas virtual currency exchanges using either debit or credit cards.” Woori Card reportedly did the same on January 18 while other card issuers, including Kookmin Card, are planning to complete the blockade by the end of this week.

Furthermore, the publication pointed out that there is a growing controversy over how effective this method to prevent investors from using overseas exchanges is, citing that “investors can purchase digital currencies through foreign simple payment systems, including Paypal.”

Last month, some Korean card companies discontinued their credit card points-to-cryptocurrency conversion services. Shinhan Card and KB Kookmin Card have discontinued their service to convert card points to bitcoin, as news.Bitcoin.com previously reported.

Written by Bitcoin.com

 

Stripe is Withdrawing Support for Bitcoin Payments

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Bitcoin Gets the Boot

Stripe is a $9 billion company run by Irish siblings and youthful entrepreneurs Patrick and John Collison. Stripe had been very receptive to cryptocurrency, and were it not for rising transaction fees, bitcoin would still be very much part of its plans. In a blog post published on Tuesday, project manager Tom Karlo explained the reasons for the volte-face:

Our hope was that Bitcoin could become a universal, decentralized substrate for online transactions and help our customers enable buyers in places that had less credit card penetration or use cases where credit card fees were prohibitive. Over the past year or two, as block size limits have been reached, Bitcoin has evolved to become better-suited to being an asset than being a means of exchange.

Karlo points to bitcoin’s current volatility, noting that by the time a transaction has been confirmed, BTC’s USD value has already changed, often discernibly. This is coupled with the fact that “For a regular bitcoin transaction, a fee of tens of U.S. dollars is common, making bitcoin transactions about as expensive as bank wires.”

Stripe is Withdrawing Support for Bitcoin PaymentsBack in 2014, Stripe had written that “Bitcoin has huge potential as a way to transport value. It’s surprisingly difficult to move money today, and the experience of paying for something online is just about the only part of the internet that hasn’t changed dramatically in the past twenty years….we can already start to see the shape of the potential impact of Bitcoin and other cryptocurrencies. If we get things right, life is going to be much better for billions of people.”

Stripe is Withdrawing Support for Bitcoin PaymentsIn halting bitcoin payments, Stripe follows on the heels of Microsoft, which halted and then restored BTC acceptance, and online gaming store Valve. Despite having to bid goodbye to bitcoin for the time being, the Stripe team remains bullish about cryptocurrencies. Tuesday’s blog post expresses enthusiasm for the Lightning Network, stellar, litecoin, bitcoin cash, ethereum, and omisego.

It ends: “We will continue to pay close attention to the ecosystem and to look for opportunities to help our customers by adding support for cryptocurrencies and new distributed protocols in the future.”

Written by Bitcoin.com

 

MakerDAO and More: The Quest for a Stable Stablecoin Continues

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Usually, no one bats an eye when a cryptocurrency’s price drops 30 percent over the course of a week. This is the Wild West, after all.

But when it happened to DAI this month, heads turned, primarily because the token was designed specifically to hold its peg with the U.S. dollar.

One of a growing number of crypto tokens referred to as “stablecoins,” these cryptocurrencies are engineered to adjust their supply as the market shifts, issuing when prices rise and retracting when they drop, in an effort to keep their prices steady.

Called the “holy grail” of cryptocurrency, stablecoins have been heralded as a way to strengthen the commercial case for blockchains, since many businesses shy away from the volatility associated with the sector.

Case in point: An increasing number of decentralized apps (Dapps) rely on ether, and on internal crypto tokens dependent on ether, as a way to distribute value. As a result, unpredictable market shifts in the price of ether could cause chaos in the system.

Dapp users would be less likely to spend their tokens if they believed the value might double overnight; conversely. should potential users suspect the value of the Dapp tokens will plummet, that could discourage them from participating at all.

For this reason, Rune Christensen, the founder of MakerDAO, the company behind the DAI stablecoin, which was launched in December, told CoinDesk:

“[Stablecoins] are the first step before you actually see anything else interesting happening. I would argue that the reason why the blockchain world is so vapor-wary … is basically because you just cannot do business in an unstable environment.”

And in this pursuit of stability, interest in refining the stablecoin technology seems to be on the rise moving into 2018.

Not only did an all-star group of investors, including Andreessen Horowitz and Pantera Capital, back a stablecoin project called basecoin in October, but CoinDesk has heard more such projects are on their way.

Plus the popularity in China of BitCNY – which is pegged to the Chinese renminbi and has entirely replaced renminbi trading pairs due to strict regulation of fiat/crypto trading in the country – led Christensen to describe stablecoins as “pretty much the best example of blockchain done right at the moment.”

Yet, according to critics, DAI’s brief spell of trading for around 72 cents only foreshadows impending doom that the market has seen several times already with stablecoins.

An inauspicious start

While stablecoins see trading in the tens of billions of dollars per day, many crypto enthusiasts have called the technology the “single point of failure” for the entire crypto industry.

Preston Byrne, an independent consultant and the former chief operating officer and legal counsel of Monax Industries, has even gone so far as to call stablecoins the “single dumbest creature in the entire universe,” alluding to the Bugblatter Beast from “The Hitchhiker’s Guide to the Galaxy.”

And such criticisms are not entirely unfounded.

Perhaps the most well known of the stablecoins is USDT (U.S. dollar tether), which acts as a stand-in for the dollar on some of the world’s largest cryptocurrency exchanges. And while that function seems to validate its existence, the company behind the coin, Tether Limited, has seen its fair share of controversy.

For instance, last year, Tether Limited was allegedly hacked for $30 million in USDT.

And in a wave of recent accusations, the relationship between Tether Limited and the Bitfinex exchange has been harshly criticized.

While Tether’s U.S. dollar-pegged crypto has been around since July 2014, formerly under the name Realcoin, Bitfinex, under immense pressure after losing banking relationships and the ability to send fiat wire transfers, ushered in broader use of the Tether stablecoin in 2015. USDT is widely seen as a substitute for traditional banking services, allowing users to withdraw and deposit dollar amounts quickly.

But since then, there has been much scrutiny of the close ties between Bitfinex and Tether (the companies have common ownership and management) and accusations of mismanagement. Some, most prominently the pseudonymous blogger “Bitfinexed,” have gone as far as to claim that USDT has no material basis, and is instead steadily pumped into the marketplace to move the price of bitcoin upward.

Contacted this week, Tether representatives did not respond to a request for comment by press time. In December, a spokesman for Bitfinex and Tether said a forthcoming audit would show that tether tokens were fully backed. The company has also threatened legal action against its online critics.

Similar issues also haunted NuShares after its distribution of the NuBits stablecoin in 2016.

Even though the project set out to maintain the stability of the currency through economic incentives, following a wave of hacks and alleged manipulation of the peg by stakeholders, the stablecoin traded for as low as 10 cents the same year.

At the time, NuBits core developer Jordan Lee blamed the blunders on “suicidal tendencies” in the community.

Small numbers, big mistakes?

Similarly cited by critics of the concept is the suspension of trading of BitUSD, what is perhaps the first stablecoin, on the BitShares exchange in 2014 after a security bug was found in the code.

Yet remarkably, in the four years since that happened, BitUSD has mostly maintained its parity – although “mostly” is still problematic.

Last week, BitUSD hit $1.10 per coin, according to CoinMarketCap. Small deviations of this type could incentivize traders to take advantage.

Or as Christensen said, “If you’re buying DAI at slightly lower than one dollar and selling DAI at slightly above one dollar, in a dollar-denominated market, it’s just like a really easy way to essentially arbitrage the inefficiencies of the market.”

However, Christensen said, the tiny price fluctuations these stablecoins appear to have on CoinMarketCap don’t translate to the price of the currencies on individual exchanges.

Rather, due to how CoinMarketCap calculates the average price of cryptocurrencies, “there’s always going to be this volatility effect apparent on the price charts,” he said.

To him, it doesn’t make sense to claim the technology isn’t working just because it’s seen a few pitfalls, since there are stablecoins operating successfully in the market today.

“BitUSD is one of the first really good examples of a smart contract or blockchain 2.0 technology actually working really well and in particular, providing real world utility in a way that almost no other blockchain stuff has done before,” Christensen said.

Crude infrastructure

Still, according to Christensen, discrepancies between CoinMarketCap and the exchanges where DAI is traded weren’t at fault for that coin’s drop last week.

Rather, those price fluctuations, Christensen speculated, were due to a market-making trading bot gone awol on the Chinese exchange, Bibox. When that market maker went down, another high-frequency trading bot started skewing the price, he suggested. Underscoring his point, DAI traded for $1.10 on another exchange, Gatecoin, the same day it went for 72 cents on Bibox.

And this volatility spooks crypto enthusiasts, who are worried about a potential “black swan event” or a “death spiral.” In such a scenario, the asset a stablecoin is pegged to suddenly falls, and in turn pushes the stablecoin down and with it the whole multi-billion dollar crypto market.

But as these technologies advance, stablecoin creators are building in precautions.

For instance, the team behind MakerDAO said it has mitigated the possibility of a death spiral by pegging DAI to a diverse array of supporting assets.

“So [a black swan event] is highly theoretical and should only happen in conditions of extreme negligence. And with proper diversification it should, in theory, be possible to prevent with 99.9 percent certainty,” Christensen told CoinDesk.

And all these instances just seem to display that the technology, and the surrounding crypto infrastructure, is still so new that hiccups should be expected.

“Really early-stage markets for a new stablecoin are definitely some of the weirdest market conditions,” Christensen said.

He compared DAI’s dip to BitUSD’s price drop following its launch, explaining that before these stablecoins become widely traded on a particular market, they’re vulnerable to bots and bugs.

As Andy Milenius, a developer at MakerDAO, told CoinDesk:

“When DAI volume is the tens of millions and then it demonstrates volatility, we will have something interesting to talk about.”

Colorful Jenga blocks image via Shutterstock
Written by CoinDesk.com

 

US Government Implements Blockchain Programs to Improve Transparency and Efficiency: Expert Blog

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Cryptocurrencies and the Blockchain will be front and center at this year’s World Economic Forum in Davos with several cryptocurrency and Blockchain-related panels on the agenda.

The US government have been evaluating Blockchain technology since they have funded, collaborated and partnered with business, other countries as well as educational institutions in fostering and continuously developing innovative technologies and science. Contracts, transactions and the records of intellectual property (IP) are among the defining structures of the US economic, legal and political system. And the government agencies formed to manage them need to keep up with the economy’s digital transformation. Accordingly, Blockchain technology is under evaluation or is being implemented by several US government agencies to improve transparency, efficiency and trust in information sharing in:

  •       Financial management
  •       Procurement
  •       IT asset and supply chain management
  •       Smart contracts
  •       Patents, Trademarks Copyrights, Royalties
  •       Government-issued credentials like visas, passports, SSN and birth certificates
  •       Federal personnel workforce data
  •       Appropriated funds
  •       Federal assistance and foreign aid delivery

The General Services Administration (GSA)

GSA’s Emerging Citizen Technology Office launched the US Federal Blockchain program for federal agencies and US businesses that are interested in exploring Blockchain technology and its implementation within the US government. So far, GSA has used Blockchain to automate and speed up contracts review for its FASt Lane program.

Department of Treasury

The Treasury Department is running a pilot program to determine whether Blockchain technology can be utilized for supply chain management, which has accelerated, processing times, created efficiencies and strengthened financial controls in the private sector.

The Treasury Secretary Steven Mnuchin, who sits on a Davos Blockchain panel, believes that forming public-private partnerships (PPP) with foreign investors to fund Trump’s public infrastructure plan without incurring additional debt will be key to fulfilling the promise to upgrade US roads, bridges, airports and other public works. It will stimulate the economic growth with the aim of passing on substantial risk of funding to the private sector.

PPPs typically involve a government agency identifying a potential project, determining that there is sufficient revenue potential from the project to attract investor interest, soliciting competitive bids, and then selecting one or more private sector entities to design, finance, build, operate and maintain the project. In a PPP, the government generally owns the project but grants the private sector significant authority over its development and operation.

“Working with foreign investors is going to be a critical part of any plan we put forward and public-private partnerships are crucial to ensuring that the American taxpayer does not bear the full cost of any proposed program,” Mnuchin explained.

The Treasury Department has also undertaken initiatives to improve the “anti-money laundering/combating the financing of terrorism (AML/CFT)” laws for Blockchain based cryptocurrencies and formed PPPs with financial institutions, to share information.

US State Department

The US State Department underscores the importance of innovation in world economic development and encourages dialogue with the private sector partners currently using Blockchain technology.

“The State Department supports public-private-partnerships. For example, in maximizing the impact and accountability of foreign development/assistance, Blockchain technology by bringing transparency, may address corruption, fraud or misappropriation of funds and inefficiencies within the public procurement funding process itself,” explained Deputy Secretary John J. Sullivan.

Government procurement accounts for a substantial part of the global economy 20 percent of GDP or around $9.5 tln of public money. According to an OECD study, corruption drains off between 20 and 25 percent or around $2 tln annually.  It accounts for a substantial portion of the taxpayers’ money and remains the government activity most vulnerable to waste, fraud and corruption due to the size of the financial flows involved. Corruption distorts the fair awarding of contracts, reduces the quality of basic public services, limits opportunities to develop a competitive private sector and undermines trust in public institutions.

Countries around the world are putting technological innovation at the heart of public procurement, to reshape procurement into a strategic tool for income growth, national competitiveness and improvements in the health, economic well-being and overall quality of life.  More than four-dozen countries have created national innovation strategies and/or launched national innovation foundations. These countries are relaxing foreign direct investment constraints, providing funding, financing, using public-private collaborations, tax breaks and asking the private sector from outside their borders for commitments to their countries. In maximizing the impact and accountability of foreign development/assistance, Blockchain technology may address corruption, fraud or misappropriation of funds and inefficiencies within the funding process.

Department of Defense (DoD)

As reflected in the 2018 National Defense Authorization Act (H.R. 2810) as signed into law on Dec. 12, 2017, the US federal government and its agencies are exploring the adoption of Blockchain technology in various areas, after carefully studying the risks posed by this new distributed ledger technology. This evaluation will shed light on the Blockchain technology capabilities to both the Federal Government and Department of Defense IT environments.

Department of Homeland Security (DHS)

DHS is awarding Small Business Innovation Research grants to develop a use case for Blockchain technology’s role in border security.

National Aeronautics and Space Administration (NASA)

Efficient communications systems and effective computing techniques are crucial to ensure the success of each NASA mission. Greater accessibility of digital information and cost-effective technologies of manned and unmanned space flights are expected to become much better integrated via Blockchain technology. A new grant from NASA to the University of Akron in Ohio will fund research to use deep-learning artificial intelligence that works over an Ethereum Blockchain network to develop a resilient networking and computing paradigm in various space communication environments.

Conclusion

Blockchain is not a silver bullet for digital government, but as this technology is more widely implemented, it could represent the future of smart, legal contracts and how entire industries in partnership with the US government conduct themselves in a transparent and streamlined manner.

Selva Ozelli, Esq., CPA is an international tax attorney and CPA who frequently writes about tax, legal and accounting issues for TaxNotes, Bloomberg BNA, other publications and the OECD.

Selva Ozelli, Esq., CPA is an international tax attorney and CPA who frequently writes about tax, legal and accounting issues for TaxNotes, Bloomberg BNA, other publications and the OECD.

Written by CoinTelegram

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